Life Insurance Policy Types Flashcards
This is a form of insurance that provides benefits in the event of accidental death; the accidental loss of sight, speech, or hearing; loss of use of limbs (i.e., paralysis); or loss of a member(s), such as the loss of an arm or a leg.
Accidental Death and Dismemberment Insurance (AD&D):
The ADB provides a lump-sum payment for loss of life due to an accident that was the direct cause of death. The cause of the death must be accidental for a benefit to be payable under the policy.
Accidental Death Benefit (ADB):
This provision is used in Universal Life Policies. Additional premiums can be paid into the policy account in an amount above the target premium. Current tax laws limit the amount of excess cash value that can be accumulated in a life insurance policy. The insurance company may not accept the additional premium if it nears this limit without increasing the limit of life insurance (subject to underwriting).
Additional Premium:
This is the age that a person or an insured has attained as of a given date. For life insurance purposes, the age is based on either the nearest birthday or the last birthday, depending on the practices of the insurance company involved. Attained age is also referred to as “current age.”
Attained Age:
This is a type of policy that combines permanent, whole life, and temporary term life into a single plan that provides the policy owner with the flexibility to adjust premiums throughout the life of the policy.
Adjustable Life Insurance:
This is the amount that’s available in cash upon the surrender of a policy by the owner before or after the policy matures (as a death claim or otherwise). This value is also simply referred to as surrender value.
Cash Surrender Value:
This is the equity portion of a whole life policy that increases with each subsequent premium payment. The insurer pays interest on the cash value, which is tax-deferred. In a whole life policy, the cash value is designed to equal the policy’s death benefit at age
100. Traditional whole life insurance policies are considered to mature when the insured attains the age of 100.
Cash Value:
This is insurance that’s designed to pay the balance of a loan if the insured dies or becomes permanently disabled before the loan has been repaid in full. Generally, credit insurance is sold by a lender or finance company.
Credit Insurance:
This is temporary life insurance that provides the policy owner with the right to exchange an existing policy for other policies that are offered by the insurance company. This conversion may be the conversion of individual term insurance to an individual permanent plan that a company sells or the conversion of group disability, life, or health to an individual plan.
Convertible Term Life Insurance:
This is a type of temporary or pure protection that’s characterized by a reducing face amount each year and the cost of this coverage remains constant. Decreasing term insurance may be referred to as mortgage redemption or mortgage protection insurance since it’s primarily used in conjunction with a debt or loan.
Decreasing Term Insurance:
This contract pays a face amount after a fixed time period, at a specific age, or upon the death of the insured if it occurs before the end of the period.
Endowment Contract:
This involves an insurance applicant establishing the fact that they meet the insurance company’s health requirements. Statements of good health, attending physician statements, health history, and an applicant’s current health can all be used as evidence of insurability.
Evidence of Insurability:
This is a non-forfeiture option that’s available when a policy is surrendered and the same face amount of the policy is continued in force for a specified additional period; however, the coverage has changed from permanent to level term protection.
Extended term insurance is the non-forfeiture option that provides the policy owner with the highest face amount of coverage.
Extended Term Insurance:
This is another name for the death benefit of a life insurance policy.
Face Amount:
This is a policy that combines a whole life policy with a decreasing term rider to provide a death benefit together with monthly income payments to the beneficiary. Monthly income payments are made only from the date of death until the maturity date of the contract. Thereafter, the lump sum part of the whole life coverage is paid.
Family Income Policy:
This is a type of policy that combines whole life insurance and a level term rider. It provides for the payment of a monthly income during a stated period of years once the insured dies. The monthly income is payable from the date of death to the end of the pre-selected period. The payment of the face amount of the policy is payable at the end of the pre-selected period.
Family Maintenance Policy:
This is a policy that covers an entire family. Whole life insurance covers the primary insured (i.e., breadwinner) with varying amounts of level term insurance on the remainder of the family.
Family Policy:
This represents the maximum premium that can be paid into universal life policies and still have the benefit qualify as life insurance under federal tax laws. If a guideline premium is paid regularly, there may be little margin for any additional premium payments into a universal life insurance policy account.
Guideline Premium:
These are contracts in which the policy holder can share in a percentage of the growth of an indexed investment (e.g.. a mutual fund tied to the Standard & Poor’s Index). The principle (benefit) is guaranteed, and in many cases, a minimum interest is guaranteed. These products are not considered securities.
Indexed Contracts:
This is term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.
Increasing Term Life Insurance:
