UNIT 6 Flashcards
INTEREST INCOME ONLY
SETTLEMENT OPTION
The insurer retains the death benefit and pays a stated amount of interest on the money. The interest is paid to the beneficiary at regular intervals.
This could be a good choice for those who do no need the life insurance proceeds until a later date, perhaps to be used for a child’s future education expenses.
FIXED PERIOD
SETTLEMENT OPTION
Will pay both an amount of principal and interest to the beneficiary over a certain stated period of time.
Should the beneficiary die before all of the proceeds are paid out, the remainder of the money will be paid to the contingent beneficiary.
FIXED AMOUNT
SETTLEMENT OPTION
The proceeds will be paid out in a fixed amount over time until both the principal and interest have been completely paid to the beneficiary.
The recipient of the payments has the ability to either increase or decrease the payment amount and if they choose, they could also even change to a different settlement option altogether.
LIFE INCOME OPTION
This option is similar to an annuity; the policy beneficiary will be guaranteed to receive an income for the rest of their life, regardless of how long that may be. The actual amount of the income depends on the policy death benefit and life expectancy of the beneficiary; their age and gender.
The beneficiary can select to receive the entire annuity payout until they die or share it with another individual
LIFE ONLY OPTION
OR straight life option will pay the largest amount to the beneficiary for as long as they live, regardless of how long that may be. Upon their death no further payments are made.
LIFE WITH PERIOD CERTAIN
Pays an income for as long as the beneficiary is alive. However, the beneficiary selects a payment period, typically 5,10,20 years can be chosen, and payments are guaranteed to be made for at least that number of years. If the beneficiary dies before the end of the selected period, payments continue to another person for the rest of the payment period.
LIFE WITH REFUND
Pays an income for as long as the beneficiary is alive, but also guarantees total payments will be at least the amount of the death benefit. IF the beneficiary dies before the total of payments reaches the death benefit, the balance is paid to another person. The payment to the other person is EITHER the remainder of the death benefit or installments.
JOINT AND SURVIVOR LIFE
Continues paying a benefit for as long as either beneficiary lives. This option is often used when a married couple will be receiving the payments.
After death of the first beneficiary, the same or a reduced payment amount is paid to the survivor. Selecting a reduced payment for the second beneficiary will allow a larger payment while both beneficiaries are alive.
POLICY LOAN PROVISIONS
Advantages
- There is no credit check
- The interest rate is usually much lower
- Policyholder can pay back loan according to any repayment schedule
- Policyholder not legally obligated to payback loan
- The value of the life insurance policy is reduced while the load is outstanding
- If death occurs while loan is outstanding, insurance proceeds are reduced by the amount of the loan outstanding plus interest.
AUTOMATIC PREMIUM LOAN PROVISION
If the insured fails to pay the policy premium by the end of the grace period, then the insurer will pay the premium with a policy loan and will continue to do so until the cash value of the policy falls below the premium amount, in which case the policy will lapse.
* Not all policies have this provision*
POLICY DIVIDENDS
They are a refund of a portion of the premium. They are based on the difference between the gross premium charged and the actual experience of the insurer. They are NOT guaranteed and they are NOT taxable.
NONFORFEITURE CLAUSE
Allows for the insured to receive all or a portion of the benefits of a partial refund on the premiums paid if the insured misses premium payments, causing the policy to lapse.
CASH SURRENDER
The policy is canceled and the policyowner receives the current cash value.
REDUCED PAID-UP INSURANCE
Under this option, the policyowner obtains a reduced amount of paid-up whole life insurance based on the insureds attained age and the amount of guaranteed cash value available to buy a single premium policy. The policy with pay the reduced death benefit whenever the insured dies.
EXTENDED TERM INSURANCE
The net cash surrender value is used to buy a term insurance policy with a death benefit the same as the original whole life policy and is based on the insured’s attained age. The policy will terminate after a stated number of years found in the non-forfeiture table.
If the policy owner fails to select one of the non-forfeiture options when premium payments cease, this option generally goes into effect automatically.
