Life and Nontraditional Life Insurance Practice Flashcards

This set of vocabulary flashcards covers various types of traditional and nontraditional life insurance policies, their unique characteristics, riders, and tax considerations based on the provided training materials.

Straight Whole Life

A policy with premiums that are level for life and a death benefit that is predetermined and fixed for the life of the policy until age $100$.

Limited Pay Whole Life

A whole life policy where premiums are level for a selected period and then cease, while the death benefit remains fixed until age $100$.

Single Premium Whole Life

A policy characterized by a predetermined single, lump-sum premium paid at issue and a level death benefit for the life of the policy.

Modified Whole Life Insurance

A policy with an initial premium lower than straight whole life for an introductory period (usually $3$-$10$ years), which then increases once and remains level for life.

Graded Premium Whole Life

A contract where premiums are lower in the early years but increase annually or every year during the initial period before remaining fixed for the remainder of life.

Enhanced Whole Life Insurance

Also known as economatic or extraordinary life, this is a low-premium, participating policy that uses dividends to purchase paid-up additions or one-year term insurance.

Indeterminate Premium Whole Life Insurance

A policy offering a low initial premium for a specified period, after which the insurer may adjust premiums based on its investment performance, mortality experience, and expenses.

Current Assumption Whole Life (CAWL)

Also referred to as interest-sensitive whole life, it features premiums that vary based on the insurer's changing assumptions regarding death, investment, and expense factors.

Equity-Indexed Whole Life Insurance

A policy that allows interest earnings tied to an equity index like the S&P 500 while providing a guaranteed minimum interest rate without direct stock market risks.

Adjustable Life

A permanent insurance product that allows the policy owner to make prospective adjustments to the death benefit and premium based on changing needs.

Universal Life Insurance

A flexible premium adjustable life policy that utilizes changing interest rates to determine cash values and allows owners to change the coverage amount at their discretion.

Unbundled Premium

A characteristic of universal life insurance where the contract owner receives a breakdown showing the distribution of premiums to mortality charges, expenses, and cash values.

Universal Life Option A

A death benefit choice that provides a level death benefit by adjusting the net amount at risk monthly as the cash value increases.

Universal Life Option B

A death benefit choice that provides an increasing death benefit equal to the face amount plus the policy's cash value at the time of death.

Corridor

The amount of pure insurance protection above the cash value required by the Internal Revenue Code for a contract to qualify as life insurance for tax purposes.

Waiver of Monthly Deduction Rider

A universal life rider that waives the cost of pure protection (mortality, interest, and expenses) but not the portion allocated to cash value, if the owner becomes permanently disabled.

No-Lapse Guarantee Rider

A rider that prevents a universal life policy from terminating by requiring a minimum premium payment schedule, even if the cash value is insufficient.

Indexed Universal Life

A fixed product that links its rate of return to a stock market index, ensuring owners receive a portion of market gains while protecting against cash value loss if the index declines.

Survivorship Universal Life Insurance

Often referred to as second-to-die insurance, this contract covers two people and pays a benefit only after both individuals have died.

Variable Life (Variable Whole Life)

A policy that combines life insurance with a separate account for investments like stocks and bonds, where the policy owner assumes all investment risk.

Variable Universal Life (VUL)

A policy combining variable whole life and universal life features, offering investment options, flexible premiums, and a non-guaranteed death benefit.

Family Plan Policy

A policy designed to cover all family members in one contract, typically combining whole life for the primary breadwinner and level term riders for the spouse and children.

Family Income Policy

A policy consisting of whole life and decreasing term insurance which provides monthly income for a specified period (e.g., $10$, $15$, or $20$ years) starting from the date of policy issue.

Family Maintenance Policy

A policy consisting of whole life and level term insurance that provides income for a stated number of years starting from the date of the insured's death.

Joint Life

A policy covering two or more people that pays the death benefit upon the death of the first insured, also known as a first-to-die policy.

Jumping Juvenile Insurance (Estate Builder)

A policy where the face amount increases, typically five times the initial amount, when the child reaches age $21$ without a premium increase or evidence of insurability.

Industrial (Home Service) Life Insurance

Insurance characterized by small issue amounts (e.g., $1,000$) with premiums collected weekly or monthly by an agent at the policy owner's home.

Endowment Policy

A type of insurance that pays a death benefit if the insured dies during the term or a maturity benefit equal to the face amount if the insured survives to the end of the term.

Modified Endowment Contract (MEC)

A whole life insurance policy that is considered overfunded according to IRS tables and loses certain favorable tax treatments.

Seven-Pay Test

A limitation on the total amount paid into a policy during its first seven years; exceeding this limit causes the policy to be classified as a Modified Endowment Contract (MEC).