Premium Rates, Basic Plans, Riders Flashcards
Is a sum of money paid by the insured as consideration for the insured’s promise to pay or replace the loss.
Premium
Is a company officer who determines the premium rates with respect to the principal elements of the life insurance.
Actuary
Is the first premium paid by the policyowner. Settlement of the initial premiums ensures that the policyowners receive the protection the insurance policy promises to provide. This puts the policy in force. Keeping it in force is contingent on the payment of subsequent premiums.
Initial premium
Provides an opportunity for people to buy specific amounts of additional life insurance coverage at stated future intervals without the need to show evidence of insurability. This means that the insured will automatically pay the standard rate since there would be minimal underwriting requirements.
Guaranteed Insurability Option (GIO)
Provides an additional amount of coverage for a minimal cost.
The rider has its own face amount separate from the coverage of the basic policy, but cost of coverage is lesser since it is a term coverage.
Term Insurance Rider
Is a type of decreasing term insurance that may be attached as a rider to a permanent plan. It generally provides a monthly allowance in addition to the face amount up to the end of the decreasing term period.
Family Income Rider
Provides protection only as death benefit. It does not offer living benefits because it has no savings or cash values.
Temporary or Term Plan
A plan that offer longer period of protection, usually during the insured’s lifetime. This type of plan combines protection, and savings made from build- up of cash values, which are a part of the premiums paid by the policyowner.
It uses the level premium system, where premiums do not increase over time but remain at the same level when it was purchased at inception. This lets permanent plans to offer protection at the least annual cost over the period of protection, but generally higher than Term Plans.
Permanent Plan or Whole Life Plan
A type of term plan in which the death benefit starts at the set face amount and then decreases over the term of the coverage, by the end of the term period the death benefit is reduced to zero.
Decreasing Term
Ideal for those who want their life insurance cash values to grow very rapidly to build a fund that will be available at a certain time for a definite purpose - retirement, for example, or at a time a child enters college or when an obligation becomes due.
Endowment Plan
Are also called renewal premiums. These may be paid on the Annual, Semi-Annual, Quarterly, or in some cases, Monthly modes. However, since interest is lost by not having the full premium in advance the total of 12 monthly premiums, 4 quarterly premiums, or 2 semi-annual premiums are higher than that of the annual premium.
Subsequent Premium
To get the policy’s net premium, actuaries add Mortality and Interest.
Mortality + Interest = Net Premium
To get the loading rate, add expense and the Safety Margin Requirement determined by the company, if any.
Expense + (Safety Margin Requirement) = Loading
To get the gross premium, add the net premium and loading rates. Gross premium is the amount of money charged to the applicant.
Net Premium + Loading = Gross Premium
Are premiums which increase yearly with the rising rate of mortality. If insurance is to be continued, it must be renewed every year. This type of premium may be relatively inexpensive at the onset, however the mortality in later years results in very high premium.
Natural Premiums
Premiums that remain at a constant level from the beginning to the end of the policy in effect for a number of years.
Level Premiums
Are supplemental benefits attached to the Basic Plan to expand the features of the plan at a minimal additional cost. These can cover uncertainties that basic plans cannot cover on their own, like accidents, disability, hospitalization and illnesses.
Riders
Pays an additional amount which in most cases is equal to the basic plans face amount in case the cause of the insured’s death is accidental in nature.
Accidental Death Benefit (ADB)
Is a rider which waives the premiums payable under the policy in case the insured becomes totally and permanently disabled.
Waiver of Premium due to Disability
This rider is attached to a juvenile policy and is a type of Waiver of Premium rider. When the Policyowner or Payor dies or becomes totally and permanently disabled, the premiums of the policy will be waived until the child reaches a specified age when he can earn and pay for the premiums of the policy on his own.
Payor’s Benefit
