Life Insurance Lecture Notes

Comprehensive vocabulary flashcards covering life insurance terminology, policy types, features, riders, and regulatory requirements based on the lecture transcript.

Attained Age

The insured's age at the time the policy is renewed or replaced.

Deferred

Withheld or postponed until a specified time or event in the future.

Face Amount

The amount of benefit stated in the life insurance policy.

Fixed Life Insurance Products

Contracts that offer guaranteed minimum or fixed benefits stated in the contract.

Lapse

Policy termination due to nonpayment of premium.

Level Premium

The premium that does not change throughout the life of the policy.

Nonforfeiture Values

Benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses.

Policy Maturity

In life policies, the time when the face value is paid out.

Securities

Financial instruments that may trade for value, such as stocks, bonds, and options.

Variable Life Products

Contracts in which cash values accumulate based upon a specific portfolio of stocks without guarantees of performance.

Term Insurance

Temporary protection, also known as pure life, that only provides coverage for a specific period of time and provides the greatest amount of coverage for the lowest premium as compared to any other form of protection.

Pure Death Protection

A characteristic of term insurance where the policy pays the death benefit to the beneficiary if the insured dies, but pays nothing if the policy is canceled or expires prior to death, offering no cash value or living benefits.

Level Term

The most common type of temporary protection purchased, where the death benefit (face amount) does not change throughout the duration of the policy.

Annually Renewable Term (ART)

The purest form of term insurance where the death benefit remains level and may be guaranteed renewable each year without proof of insurability, but the premium increases annually according to the attained age.

Decreasing Term

Term insurance featuring a level premium and a death benefit that decreases each year over the duration of the policy term, commonly purchased to insure payment of a mortgage or debts.

Increasing Term

Term insurance featuring level premiums and a death benefit that increases each year over the duration of the policy term, commonly used to fund cost of living or return of premium riders.

Return of Premium (Term)

An increasing term life insurance policy that pays an additional nontaxable death benefit to the beneficiary equal to the amount of the premiums paid.

Renewable Provision

A provision that allows the policyowner the right to renew term coverage at the expiration date without evidence of insurability, with the premium based on the insured's attained age.

Convertible Provision

A provision that provides the policyowner with the right to convert a term policy to a permanent insurance policy without evidence of insurability, with the premium based on the insured's attained age at the time of conversion.

Whole Life Insurance

A permanent life insurance policy providing lifetime protection with a savings element (cash value) that endows at the insured's age 100, when the accumulated cash value equals the policy face amount.

Living Benefits

Features of whole life insurance allowing the policyowner to borrow against cash value or receive it upon surrender; cash value typically begins accumulating by the third policy year and grows tax-deferred.

Straight Life

The basic whole life policy, also known as ordinary life or continuous premium whole life, where the policyowner pays a level premium until the insured's death or age 100, offering the lowest annual premium among common whole life policies.

Limited Payment

A whole life policy designed so premiums are completely paid-up well before age 100 (such as 20-pay life or life paid-up at 65), featuring a shorter premium-paying period, higher premiums, and faster cash value build-up.

Single Premium Whole Life

A whole life policy providing a level death benefit to age 100 for a one-time lump-sum payment, completely paid-up after one premium and generating immediate cash value.

Interest-Sensitive Whole Life

Also known as current assumption whole life, a policy that provides a guaranteed death benefit to age 100, credits cash value with current interest rates comparable to money market rates, and allows the insurer to raise or lower premiums at designated intervals based on risk, interest, and expense assumptions.

Modified Premium Whole Life

A whole life policy charging a lower premium in the first 3 to 5 years, followed by a higher level premium for the remainder of the insured's life that is higher than a straight life premium.

Graded Premium Whole Life

A whole life policy starting with a premium about 50% or lower than straight life, which slowly increases each year for 5 to 10 years before remaining level for the remainder of the policy.

Indeterminate Premium Whole Life

A whole life policy where the premium rate varies from year to year, specifying two premium rates: a guaranteed maximum level premium rate and a nonguaranteed lower premium rate.

Mortgage Redemption

A provision that insures borrowers for an amount equal to their mortgages, where the insurer assumes responsibility for paying the outstanding loan balance to the insured creditor upon the borrower's death.

Family Protection Policy

A policy providing whole life insurance on the breadwinner and convertible term insurance on other family members, allowing the spouse to convert to permanent coverage up until age 65 and covering children for 30 to 31 days after birth with conversion allowed at age 21.

Family Term Rider

A rider that combines the spouse term rider and children's term rider ($\text{Family term} = \text{Spouse term} + \text{Children's term}$) into a single rider added to a whole life policy to provide level term life insurance benefits.

Joint Life Policy

A single policy insuring two or more lives based on a joint average age, where the death benefit is paid upon the first death only.

Survivorship Life Policy

Also known as second-to-die or last survivor policy, a policy insuring two lives that pays the death benefit upon the last death rather than the first, offering lower premiums and commonly used to offset estate tax liability.

Juvenile Policies

Life insurance policies written on the life of a minor where the face amount increases at age 21 while the premium remains level.

Payor Rider

A rider used with juvenile policies where the insurer waives premiums until the minor reaches age 21 if the premium payor dies or becomes disabled for at least 6 months.

Return of Premium Rider (Whole Life)

An increasing term rider added to a whole life policy providing that if the insured dies prior to a given age, the beneficiary receives the original face amount plus an amount equal to all previously paid premiums.

Indexed Life Policy

A policy where cash value depends upon the performance of an equity index (such as the S&P 500) with a guaranteed minimum interest rate, and the face amount increases annually to keep pace with inflation as the CPI increases.

Adjustable Life

A flexible policy that can assume the form of either term or permanent insurance, allowing the policyowner to adjust the premium, premium-paying period, face amount, or period of protection based on changing needs.

Universal Life

Also known as flexible premium adjustable life, a policy allowing the policyowner to adjust premiums, skip payments if cash value covers monthly deductions, and which consists of an annually renewable term insurance component and a cash account.

Minimum Premium (Universal Life)

The amount of premium needed to keep a universal life policy in force for the current year.

Target Premium (Universal Life)

The recommended premium amount that should be paid on a universal life policy to cover the cost of insurance protection and keep the policy in force throughout its lifetime.

Partial Surrender (Universal Life)

A partial withdrawal of the cash value from a universal life policy, which may involve charges and limits on the amount and frequency, distinct from a policy loan.

Option A (Level Death Benefit Option)

A universal life death benefit option where the death benefit remains level while cash value increases, lowering the pure insurance risk with the insurer and expenses in later years; requires a corridor between cash value and death benefit for tax qualification.

Option B (Increasing Death Benefit Option)

A universal life death benefit option where the total death benefit increases each year by the amount the cash value increases, equaling the face amount plus the current cash value, resulting in higher expenses and lower cash value in later years.

Indexed Universal Life (IUL)

A universal life policy featuring flexible premiums and adjustable death benefits where cash value accumulation is dependent upon the performance of an equity index.

Guaranteed Universal Life

A universal life policy that eliminates market risk and does not accumulate cash value, providing more affordable coverage, a level death benefit throughout the policy, and a no-lapse guarantee.

Survivorship Universal Life (SUL)

A permanent second-to-die policy covering two people that pays income-tax-free death benefits after both insureds pass, featuring tax-deferred cash value growth and lower costs than two individual policies.

Variable Life Insurance

A level, fixed premium, investment-based product where cash value is not guaranteed, is held in a separate account, fluctuates based on the performance of a portfolio of stocks, places investment risk on the policyowner, and guarantees a minimum death benefit.

Variable Universal Life (VUL)

A securities version of universal life insurance combining whole life features with flexible premiums, variable investment options, and cash withdrawals or policy loans, which may or may not guarantee a minimum death benefit.

Regulation of Variable Products

Dually regulated life insurance products overseen by the Securities and Exchange Commission (SEC), Financial Industry Regulatory Authority (FINRA), and the State; agents must be FINRA registered, state life licensed, and hold a securities license.

Group Life Insurance

Life insurance where individual participants do not receive an individual policy but instead receive a certificate of insurance under a master policy issued to a sponsoring organization.

Credit Life Insurance

Decreasing term insurance written on the life of a debtor to pay off a loan balance in the event of death, where the creditor is the owner and beneficiary, the debtor pays premiums, and coverage cannot exceed the outstanding debt balance.