Specialized Life Insurance Flashcards
Joint Life Insurance (First-to-Die)
Who uses it, when does it payout and what are the surviving spouses rights?
What’s the main appeal of this type of policy?
And how do businesses use it?
Joint life insurance is permanent coverage that insures two persons under one policy.
The policy pays the death benefit when the first insured dies.
The main appeal of this policy approach is cost, the premium is less than it would be for two separate policies providing the same death benefit.
- Surviving insured has a conversion right.
- Surviving insured does not have to prove insurability.
- Businesses, particularly partnerships use to provide funds for the surviving partner to buy out the deceased partner’s shares
Survivorship Life Insurance (Second-to-Die)
List 3 characteristics
Another form of dual-insured life insurance is appropriately called survivorship life insurance (or second-to-die life insurance)
- As with joint life, survivorship life premiums are lower than they would be for two comparable single-life policies.
- Popular in the estate planning market when the second spouse dies (which is when estate taxes and other estate settlement costs are due).
- Estate planning involves large numbers, second-to-die policies are issued in high amounts, often for as much as $1 million face value or more.
List 4 characteristics of Juvenile Life Insurance
A special type of whole life insurance has been created for the juvenile market. Known as jumping juvenile life insurance (or juvenile estate builder).
- Kids under 15 (16 in CA) must have adult applicant
- Low premiums that remain level
- Purchased as $1000 per unit, death benefit jumps to $5,000 per unit when the insured child reaches age 21.
- Paid up at age 65
List 4 characteristics of Family Income Policies
WHOLE LIFE + DECREASING TERM
Provides the beneficiary with an amount of money equal to the policyholder’s monthly income if the policyholder dies.
- Combines both whole life with a decreasing term rider
- Death benefit is paid at the end of the income period.
- The specific income term period starts when the policy is issued (10 year term, dies at 5, pays out for 5).
- If the insured is alive at the end of the term life period, the monthly income portion of the benefit vanishes.
What the 3 main differences with a Family Maintenance Policy compared to a family income policy?
WHOLE + LEVEL TERM
A family maintenance policy provides income benefits in addition to the face amount
- Big difference is in the length of time the income benefit is provided.
- Uses level term insurance to maintain level income for a longer period from the time of death.
- The whole life death benefit is paid immediately (not at the end of the income period).
- Specific income period begins when the insured dies
List the 3 most common characteristics of a Family (Family Protection) Policy?
A family protection policy is one in which the entire family receives life insurance coverage under a single policy.
Slightly different variations exist, but a family policy generally provides
- whole life insurance coverage on the principal insured;
- term life insurance coverage on the spouse to age 65; and
- term life insurance coverage on each child to age 21.
The typical family policy providing one unit of coverage provides
- $5,000 of whole life insurance coverage on the principal insured;
- $2,000 of term life insurance coverage on the spouse; and
- $1,000 of term life insurance coverage on each child.
