Life and Health Insurance Flashcards
Level Term Insurance
Most common Level death benefit Annually renewable term (ART) Purest form of insurance Premium increases each year renewed Highest premiums
Level Premium Term
Premium remains the same
Decreasing Term
Level premium with a decreasing death benefit
Used primarily when amount of protection is time sensitive
Commonly purchased for mortgage and other debts
Increasing Term
Level premium with a death benefit that increase each year
Used by insurance companies to fund riders that provide a refund of premiums
Whole Life
Permanent protection
Death benefit guaranteed, remains level, level premium
Builds cash value (living benefits)
Cash value (nonforfeiture value) grows tax deferred and accumulates third year
Cash value scheduled to equal face amount at insured age of 100
Participating policies - may be a return of dividends $$$
Non-participating - no returns in dividends $
Ordinary (Straight) Life - Whole Life
Continuous Premium Whole Life
Level annual premium and guaranteed level death benefit
Builds cash value
Lowest annual premium of the three common whole life policies
Limited Payment Whole Life
Similar to Straight Life but; Designed so that premiums are well paid before insured reaches age 100 2 common versions -20-pay life - coverage paid in 20 years -Life paid up at 65 Builds cash value quicker
Single Premium Whole Life (SPWL)
Level death benefit
Paid with one lump sum payment
Generate immediate cash value
Has surrender charge
Adjustable/Flexible Life
Provides policy owner with best of both worlds (Term and Permanent coverage)
Insured determines how much coverage needed and affordable amount of premium
Policy owner may
-Increase/decrease premium and or face amount
-Change premium paying period
-Change protection period
Modified Whole Life
Charges lower premium for first few years then a higher premium for the remainder of insured life
Higher than straight life
Graded Premium Life
Premium starts lower then gradually increase for 5-10 years then remains level
Indeterminate Premium Whole Life
Premium rate may vary each year
Policy specifies two premium rates
-guaranteed maximum
-non-guaranteed lower premium
Interest-sensitive Life
Varied premiums
Cash value can be greater than whats guaranteed in policy
First years, premium remains the same
These products pay current interest rates - accumulate cash more quickly
Endowments (Whole Life Insurance)
Permanent, level death protection
Cash value builds quicker since funds are intended to be used while insured is alive
Endowment matures (endows) at an earlier age before 100
Higher premiums
Universal Life (Adjustable Life)
Goes by Flexible Premium Adjustable Life
Death benefit (face amount) can be increased/decreased
May increase or decrease premium
May skip premium as long as there is sufficient cash value
Insurance offers a minimum premium
-amount needed to keep policy in force for a year
-Target premium keeps the policy in force for a life time
Partial withdrawals
Universal Life (Adjustable Life)
Option of two benefits
-Option A is level death benefit while cash value increases. Pure insurance decreases over time.
Death benefit increases overtime in later years. Must be a “corridor” between cash value and death benefit
-Option B is increasing death benefit annually as well as cash value
Pure insurance remains level so more expensive
Interest Sensitive Whole Life
Current Assumption Life
Fixed premium with guaranteed death benefit
Credits cash value with non guaranteed interest rates
Benefit of greater cash value with shorter premium paying period
Policy owner may take risks
Variable Life
Permanent protection
Guaranteed minimum death benefit
Cash value accumulates on specific portfolios. No guarantees
Invested in companies separate accounts
Death benefit may increase or decreases. Always a minimum
Dependent Group Term Life
Voluntarily life insurance to employees entire family
- up to $15,000 for spouse
- $2,500 for each child
Dependent Life
Payment of a specific amount for death of an employees insured dependent
Employer pays premiums/tax deductible
Tax free for employee
Group Survivor Income Benefit Insurance
Provides monthly income to qualified family members of the death of employee with fixed % rate of employees monthly earnings
Payments ends for surviving child turns 19
Group Universal Coverage
Allows employees and spouses to contribute to cash value fund to accumulate cash
Usually for employers with 1000+ employees
Employees pay premiums which are flexible
State Group Life Insurance
Employer pays entire cost
Employee may convert
Must be within 31 days of termination
Supplemental Group Term Life
Employers with 50+ employees
Additional life insurance
Must have employee participation of at least 65%
Annuity
Contract that provides income for a specified period of years
Protect against outliving ones money
Vehicle for cash accumulation and liquidation of an estate
If policy owner withdrawals during surrender charge period (first 10 years of contract) surrender charge
Usually purchased for retirement income or to help fund college education
Individual Retirement Annuities (IRS’s)
Tax qualified annuity used to accumulate funds on tax deferred basis in Individual Retirement Account (IRA)
Equity Indexed Annuity
Invests aggressively to aim for higher returns
Guaranteed minimum interest rate
Straight Pure Life Annuities
Pays specific amount for annuitants life
Provides highest monthly income benefits
Policy Riders
Added to policies to add, modify, or delete policy provisions
Used to customize ones policy to meet needs
Riders that delete coverage are called exclusions
Most riders are additional premium
Waiver of Premium (Rider)
Waives policies premium if insured becomes totally disabled
waived until insured goes back to work
Insurers impose a 6 month waiting period from time of disability until first premium waived
-If still disabled after 6 months then a refund of those premiums are paid back
Not required to pay back waived premiums
Total disability defined as ability to not perform work for first 2 years of policy
Waiver of Stipulated Premium
Designed to waive specific amount of premium
Required proof of total disability
Guaranteed Insurability
Rider allows insured to purchase additional coverage at specified future dates (usually every 3 years)
Usually expires at age 40
Accidental Death Rider
Pays some multiple (2x or 3x) of base face amount if death is result of accident
Death must occur 90 days from accident
Accidental Death and Dismemberment
Pays principle (face amount) & pays % of that amount for additional dismemberment
Term Riders
allow for additional temp insurance
Variable Annuity
Invested in securities
Hedge against inflation
Premiums placed in separate account
Need securities license to sell these
Immediate Annuity
Purchased with single lump sum
income payments begin within one year
Deferred annutiy
Single premium deferred annutiy - purchased with lump sum
Flexible premium deferred annutiy - periodic payments
Income payments become after one year
