Unit 4: Types of Life Insurance Policies Flashcards
Level term
equals the face amount throughout the term of coverage
premium remains level during the term
decreasing term
death benefit decreases
premium remains level
increasing term
death benefit increase
premium increases
return of premium
premium is higher than a regular term policy
premium paid by the insured is paid back if the insured is alive at the end of the term
term life insurance
renewable:
- no new application required
- new premium based upon attained age
convertible:
- can be changed to permanent insurance
- no new application required
- new premium based upon attained age or original age
LOW initial cost
coverage for a short period of time
traditional whole life
-fixed premium
-fixed and level death benefit
-cash values :
+guaranteed interest
+may be surrendered
+may be borrowed
+endows at age 100
interest will be taxed
whole life
permanent insurance policy which is guaranteed to remain in force for the insured’s entire life provided the required premiums are paid, or to the policy maturity date
designed to remain in force for the whole life of the insured and the premiums will never increase
fixed premium schedule
level premium
this can be a monthly payment schedule or another mode
If a premium is not paid when it is due, the policy will go out of force, or lapse
death benefit
amount at risk to the company
plus cash values
single premium whole life
one payment made at the time of purchase
amount of this single premium along with the interest earnings will cover all future costs of maintain the policy
single premium policies create immediate cash value
modified premium whole life
have lower premiums during the first three to five years compared to a continuous premium
in earlier years ____ have a lower cost similar to term insurance however after the initial period, premiums increase to a certain amount and then are level for the life of the policy, making them higher in cost than a continuous premium whole life policy
graded premium whole life
lower premium than modified
increases every year for 5-10 years until leveling off for as long as it’s in force
indeterminate premium
company will charge a current premium based on it’s current estimate of investment earnings, mortality, and expense costs
life these estimates change in later years, and the company will adjust the premium accordingly but never ale the maximum guaranteed premium state in the policy
interest sensitive
has a current interest rate
guaranteed interest rate
Flexible Policies
adjustable life
- policy owner
- adjusts the death benefit
- increase requires proof of insurability
- adjusts the premium
universal life -flexible premium -cash account \+cost of insurance withdrawn monthly \+fees withdrawn monthly \+current or guaranteed interest
Equity indexed universal life
-current interest on cash account
+up or down based upon a stock market index
+account still guaranteed by the company
