Terms - Term Life Insurance

Single Life Policies

• Only one person is insured, and the death benefit will only be paid if that person dies within the term of the policy.

Joint First-to-Die

• Two people are life insured.

• The death benefit is paid out to the names beneficiary, usually the surviving life insured, when the first person dies. The policy is then terminated.

Joint Policy

• A life insurance policy that insures two or more people.

Joint Last-to-Die

• The death benefit is paid when the last person insured dies. Thus, both life insureds must die before the death benefit is paid to a beneficiary.

• Commonly used with permanent insurance.

Level Term Policy

• Has a set death benefit. It is the same as the initial face amount of the policy.

Decreasing Term Policy

• Has a death benefit that becomes smaller over the life of the policy.

• Has lower premiums than a level term policy.

• Reduces obligations over time.

Increasing Term Policy

• Has a death benefit that grows larger over the length of the policy.

• Change may occur every year or on a schedule (e.g., every 5 years).

• Premiums increase in proportion to the changes in death benefits

• Terms doesn’t change even if the health of the insured declines.

• Good for if an obligation is expected to increase over time.

Premium

• The cost of the life insurance coverage for the life insured named in the policy.

  • e.g., $200,000

• Can be paid weekly, quarterly, semi-annually or annually.

Non-Renewable Term Policy

• Expires at the end of its term.

  • If the policyholder wants to continue coverage, they would have to apply again.

Renewable Term Like Policy

• The policyholder’s right to renew is guaranteed regardless of the health of the life insured.

• Higher premiums than its counterparts.

• Right to renew is limited to a certain age.

Convertible Term Insurance

• A policy that can be switched (or converted) from a term policy to a permanent life insurance policy without evidence of insurability (does not have to prove good health).

• Higher premium than permanent life policy.

Permanent Life Insurance

• Policy ends with the death of the life insured.

• Includes whole life insurance, Term-100 and universal-life insurance.

Contestability Period

• Two years following the issue date of the policy. During this time the insurance company can void a policy if it discovers a material error was made in the application

Attained Age

• The age of the life insured on his last, nearest or next birthday (depending on insurance company policy)

Original Age

• The age of life insured when the policy was first issued.

• Premiums are less

Short-Term Risks

• Risks that are short in duration

Decreasing Risks

• Risks that diminish over time

Limited Cash Flow

• Where the policyholder may not have enough cash to put towards a permanent policy.