Life Insurance Policy Concepts and Products

Comprehensive vocabulary flashcards covering the various types of life insurance policies, their characteristics, and specific regulatory terms based on the lecture summary.

Second-to-die (survivor) policy

A policy that covers two or more people and pays a benefit upon the death of the last covered person.

Juvenile life insurance policy

Any type of ordinary life insurance policy that insures the life of a minor.

Endowment policy

A policy characterized by cash values that grow at a rapid pace so that the policy matures or endows at a specified date before the age of $100$.

Modified endowment contract (MEC)

A policy that is considered overfunded by the IRS and has failed the seven-pay test.

Seven-pay test

A rule stating that premiums paid in the first seven years cannot exceed the total amount of premiums required for the same policy to be paid up in seven years.

Industrial life insurance

Insurance characterized by small issue amounts, such as $1,000$, with premiums collected on a weekly or monthly basis by an agent.

Monthly debit ordinary life insurance

A hybrid combination of industrial life insurance and ordinary life insurance with higher face amounts.

Stranger-owned life insurance (STOLI)

When a person purchases life insurance only to sell it to a third party with no insurable interest.

Nonmedical life insurance

Life insurance that typically doesn't require a medical exam and tends to be more expensive than medically underwritten policies.

Participating life insurance policy

A policy that receives dividend payments from the life insurance company's excess earnings.

Variable Universal Life

A hybrid policy of universal life and variable whole life featuring flexible premiums and control over investment aspects.

Family Maintenance Policy

A policy combining whole life and level term insurance to provide income for a specific period beginning on the date of death of the insured.

Joint life policy

A policy covering two or more people that pays a benefit upon the first death of a covered person.

Universal life insurance

Essentially a term policy with tax-deferred cash value, flexible premiums, and an adjustable death benefit.

Universal Life Option A

A death benefit option where the benefit equals the cash value plus the remaining pure insurance.

Universal Life Option B

A death benefit option where the benefit equals the face amount plus the cash value.

Variable life insurance

Permanent insurance with fixed premiums and a guaranteed minimum death benefit where cash value varies based on investment performance.

Single-premium whole life policy

The most expensive whole life policy initially, requiring a predetermined lump-sum premium paid at issue.

Modified whole life insurance

A policy with an initial premium lower than straight life for an introductory period, followed by a rate higher than a standard straight life policy.

Graded premium whole life plan

A contract where premiums increase annually for an initial period and thereafter remain fixed at an amount higher than whole life.

Adjustable life insurance

A single plan combining flexibility and permanent insurance where the premium and death benefit can change with the owner's financial condition.

Whole life insurance

A form of permanent insurance providing a level death benefit and dividend potential designed to mature at age $100$.

Annually renewable term (ART)

Life insurance that provides coverage for one year and allows renewal each year without evidence of insurability.

Increasing term life insurance

Insurance providing a death benefit that grows at periodic intervals over the policy's term.

Interim term life insurance

Convertible term insurance for individuals who need immediate protection but cannot afford permanent protection initially.

Decreasing term life insurance

Provides a death benefit that decreases gradually over the term, often used for mortgage redemption.

Credit life insurance

A limited term policy designed to pay off the amount due on a loan if the debtor dies before the loan is repaid.

Investor-owned life insurance (IOLI)

A policy initiated by an investor covering an unrelated individual where the investor pays premiums in exchange for benefits.

Jumping Juvenile Insurance

Also called a junior estate builder, it increases the face amount (typically $5x$) at age $21$ without premium increases or medical exams.

Accidental Death and Dismemberment (AD&D)

A policy providing financial benefits if the insured is killed, loses a limb, suffers blindness, or is paralyzed in a covered accident.