Life Insurance Policy Options Flashcards
Settlement option
Used to determine how the proceeds will be distributed to the beneficiary
Interest income
Insurer retains the death benefit and pays a stated amount of interest on the money
Death benefit paid at later date
Fixed period option
Will pay both an amount of interest and principal to the beneficiary over a stated period of time.
If interest is greater than guaranteed rate, final payment will be larger
Fixed amount
Proceeds will be paid out in a fixed amount over time until both the principal and interest have been completely paid to the beneficiary
Interest earnings will affect the payment period timeframe
Life income
Policy beneficiary will be guaranteed to receive an income for the rest of their life, reguardless of how long that might be
Life only (straight life)
Based on beneficiary’s life expectancy
Guaranteed for life
Payments stop upon death of beneficiary
Life with period certain
Life income to beneficiary
Guaranteed for a minimum amount of time (even if beneficiary dies before that time)
Life with refund
Pays income for as long as beneficiary is alive, but also guarantees total payments will be at least the amount of death benefit
Pays someone else balance of death benefit if the beneficiary doesn’t live long enough
Joint and survivor life settlement option
Pays 2 beneficiaries an income for life
The survivor receive the same or a reduced payment
Participating parties
Pay policy dividends
Nonparticipating policies do not
Policy dividend
Refund a portion of the premium
Dividend options
Cash Accumulation at interest Reduced Premium Paid up additions Paid up insurance One year term insurance at attained age
Non forfeiture clause
An insurance policy allows for the insured to receive all or a portion of the benefits or a partial refund on the premiums paid if the insured misses premium payments causing policy to lapse
Nonforfeiture options
Cash surrender (policy is cancelled. Policy owner gets cash value)
Reduced paid-up insurance (policy owner obtains a reduced amount of paid up whole life insurance based on insureds age, and amount of guaranteed cash value)
Extended term (net cash surrender value is used to buy a term insurance policy with a death benefit the same as whole life policy and is based on insured’s attained age)
