Life Insurance Policies Flashcards
Accumulate
Build up
The insured’s age at the time the policy is renewed or replaced
Attained age
A policy’s savings element or living benefit
Cash Value
Deferred
Withheld or postponed until a specified time or event in the future
To have cash value of a whole life policy reach the contractual face amount
Endow
The amount of benefit stated in the life insurance policy
Face amount
Contracts that offer guaranteed minimum or fixed benefits
Fixed life insurance products
Policy termination due to nonpayment of premium
Lapse
The premium that does not change throughout the life of a policy
Level premium
Nonforfeiture Values
Benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses.
In life polices, the time when the face value is paid out
Policy Maturity
Contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance
Variable life insurance products
Financial instruments that may trade for value (e.g., stocks, bonds, options)
Securities
Temporary protection AKA pure life insurance that provides the greatest amount of coverage for the lowest premium. Also has no cash value
Term insurance
3 types of term insurance
- Level
- Increasing
- Decreasing
Level in level term insurance refers to the death benefit, which does;
NOT change
Provides a level death benefit and level premium during the policy term. However, if the policy renews after the term, the new premium will increase based on the person attained age.
Level premium
ART: the purest form of term insurance. Death benefit remains the same, no proof of insurability needed upon renewable but premium increases with attained age upon each renewal.
Annually renewable term
Commonly used to insure payment of mortgage or other debts if the insured dies prematurely. Premium remains the same but death benefit decreases each year.
Decreasing Term
Often used by insurance companies to fund certain riders that provide a refund of premiums or a gradual increase in total coverage, such as the cost of living or return of premium riders.
Premium remains the same but death benefit increases each year.
Increasing Term
Provides lifetime (permanent) protection and accumulates cash value.
Endow at the insured’s age of 100
Whole life insurance
3 basic types of whole life insurance
- Straight life (Continuous Premium)
- Limited Pay
- Single Premium
Has the lowest annual pemium out of the 3 whole life policies.
The policyowner pays the premium from the time the policy is issued until the insured’s death or age 100 (whichever occurs first).
AKA: Ordinary life or Continuous Premium Whole Life)
Straight life
Shorter period = higher premium payments
For the insureds who do not want to be paying premiums beyond a certain point in time.
Limited Payment
SPWL: designed to provide a level death benefit to the insured’s age 100 for a one-time, lump-sum payment. Paid-up after one premium and generates immediate cash.
Single premium whole life
Best policy for individuals who do not have the financial resources starting out, but will have them in the future.
It charges a lower premium similar to term rates in the first few years usually 3-5 years and then the higher premium kicks in for the remainder of the insured’s life.
Modified life
Somewhat similar to modified life it starts out with premiums that are approximately 50% or lower than the premium of a straight life and then gradually increases each year for a period of 5 or 10 years and then remains level therafter.
Graded-premium whole life
Referred to as Current Assumption
A whole life policy that provides a guaranteed death benefit to age 100. The insurer sets the initial based on current assumptions about risk, interest and expense.
Interest-sensitive whole life
Equity index whole life insurance where the cash value is dependent upon the performance of the equity index , such as S&P 500 although there is a guaranteed minimum interest rate. Policy face amount increases annually to keep pace with inflation ( Consumer Price Index increases) without requiring evidence of insurability.
Indexed whole life
Created to provide the best of both worlds for the policyowner (term and whole) can convert to either one but insurability is required for death benefit increases and lower premium type policies
Policy owner can change premium, face amount or period of protection
Cash value only develops when the premiums paid are more than the cost of the policy.
Adjustable life
AKA: Flexible Premium Adjustable life: meaning the owner has the flexibility to increase the amount of premium paid into the policy and to later decrease it again.
Universal life
The amount needed to keep the policy in force for the current year. Paying this way will make the policy perform as an annually renewable term product
Minimum premium
A recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
Target Premium
If an insurer skips a premium payment on a _______ _________ policy, the missing premium may be deducted from the policy’s cash value. The policy will NOT lapse.
Universal life
Death Benefit Options in a Universal policy
- Option A: level death benefit option where death benefit remains the same and cash value increases.
- Option B: increasing death benefit meaning death benefit gradually increases each year by the amount that the cash value increases.
Sometimes referred as Variable whole life insurance; is a level, fixed premium investment-grade product
Variable life
Variable life insurance products are dually regulated by which state and federal government agencies:
- SEC: securities and exchange commission
- FINRA/NASD
Agents selling variable life products must be:
Registered with FINRA
Licensed by state to sell life insurance
Recieve a securities license
Also required to take the Michigan Variable annuities exam
Written as annually renewable term insurance
The master contract is for the employer, and certificates of insurance are for the individual insureds.
Group insurance
When converting from group life insurance to individual life insurance:
Evidence of insurability is not required
