Life Insurance Policies Flashcards
Industrial life insurance
issues very small face amounts, such as $1,000 or $2,000.
Premiums are paid weekly and collected by debit agents.
They were designed for burial coverage.
Ordinary Life Insurance
life insurance of commercial companies not issued on the weekly premium basis.
made up of several types of individual life insurance, such as temporary (term), permanent (whole).
Group Life Insurance
insurance written for members of a group, such as a place of employment, association, or a union.
Coverage is provided to the members of that group under one master contract.
The group is underwritten as a whole, not on each individual member.
One of the benefits of group life coverage is usually there is no evidence of insurability required.
Term life insurance
gives you the greatest amount of coverage for a limited period of time.
Term insurance is only good for a limited period of time because it has a Termination date.
Term insurance is an inexpensive type of insurance, making it an attractive option for large policies.
Term life is the CHEAPEST type of pure life insurance, and due to having a termination date and not having any cash value, it will ALWAYS be cheaper than a whole life policy with the same face value.
It provides a pure death protection since it only pays a death benefit if the insured dies during the policy term
Level term
called level premium level term, has a level face amount and level premiums.
premiums tend to be higher than annual renewable term because they are level throughout the policy period.
However, the premiums will increase at each renewal.
Level Term Insurance
Life insurance written to cover a need for a specified period of time at the lowest premium
provides a fixed, low premium in exchange for coverage which lasts a specified time period.
Decreasing term
provides an annually decreasing face amount over time with level premiums.
used for mortgage protection
Decreasing term policies are usually written for a mortgage or other debt that typically decreases over time until it is paid off.
Credit policies
typically purchased using a decreasing term life insurance policy, with the term matched to the length of the loan period and the decreasing insurance amount matched to the declining loan balance.
e, if you wanted an insurance policy to protect a $20,000, 5-year auto loan, you would use a 5-year decreasing term life insurance policy with an initial face value of $20,000. You will pay the same level premium every month for the 5-year term of the policy. The face value will start out at $20,000 and change according to a schedule (the decreasing balance of the auto loan). After 5 years, the car will be paid for and the insurance policy will no longer be needed.
Increasing term
is term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.
Convertible term
allows policyowners to convert their term insurance into permanent policies without showing proof of insurability.
Convertible Term provides temporary coverage that may be changed to permanent coverage without evidence of insurability. For example, if you take out a term insurance policy when you are young to take advantage of your good health and the policy’s lower premium, but want the option convert the policy to a permanent one for final expense benefits once your finances improve, you would want a convertible term life policy. The conversion privilege of a group term life policy allows an individual to leave the group term (temporary) plan and convert his or her insurance to an individual (permanent) policy without providing evidence of insurability.
- Renewable term
guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability.
, if you have a 10-year renewable and convertible term; After the 10 years are up, the policy terminates or you can renew it. If you renew it the premium price will go up, and you will have the policy for another 10 years. This cycle continues until you are too old to renew or it’s too expensive. All TERM insurance has a final TERMINATION date where you can no longer renew it.
Annual renewable term
provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.
Term Rider
is a type of life insurance product which covers children under their parent’s policy.
A term rider is always level term.
This is cheaper than every family member getting their own policy. For example, the main policy may be on Dad, then mom and the children are riding on (attached to) dad’s policy as term riders.
Whole life insurance
provides death benefits for the entire life of the insured.
It also provides living benefits in the form of cash values. It matures at age 100 and normally has a level premium.
All whole life lasts until death or age 100, has a fixed premium, and level benefit with cash value accumulation, regardless of how it is paid. Whole life is often compared to BUYING; like BUYING a house.
With Whole Life - Straight Life insurance
premiums are payable throughout the insured’s lifetime, and coverage continues until the insured’s death.
straight whole life provides fixed premiums, a level death benefit, and cash value. Whole life also requires the face amount to be paid out to the insured at age 100 (when the policy matures), provided a death benefit has not already been paid.