Chapter 3. Life Insurance Policies- Chapter Recap

Term Life- General Characteristics

• Pure Protection

• Lasts for specific term

• No cash value

Types of Term Life

• Level Premium,

• Annually Renewable

• Decreasing

• Increasing

Level Premium Term

Level death benefit and level premium

Annually renewable term

• Renews each year w/o proof of insurability

• Premiums increase due to attained age.

Decreasing Term

Coverage decreases at predetermined times gradually; best used when the need for protections declines from year to year.

Increasing Term

Coverage increases each year.

Whole Life- General Characteristics

• Permanent protection

• Guaranteed elementcs (face amt, premium, and cash value) until death or age 100

• Level premium

• Cash value and other living benefits

Whole Life Types

• Straight life (Continuous Premium)

• Limited Payment

• Single Payment

Straight Life (Continuous Premium)

• Basic policy

• Level death benefit

• Insured pays premiums for life or until age 100

Limited Payment

Premiums are paid until a certain age or time; coverage in effect to age 100

Single Payment

Premiums paid in one lump sum and coverage continues to age 100

Flexible Premium- General Characteristics

• Types of whole life insurance

• Flexible premium

Flexible Premium Types

• Adjustable Life

• Universal Life

Adjustable Life

• Policyowner may adjust the premium and premium-paying period, the face amount, and the period of protection.

• Can be converted from term to whole life and vice versa

• Cash value only develops if the premiums paid are more than the cost of the policy

Universal Life

• Has an insurance component in the form of annually renewable term

• 2 death benefit options: Option A - level death benefit, and Option B - increasing death benefit

• Can make partial surrender/cash withdrawal

• Flexibility through unbundling (separating)

Other Types of Policies

• Variable Life

• Combination Plans

• Group Life

Variable Life

• Fixed premium, minimum death benefit

• Cash value and the actual amount of death benefit are not guaranteed

• Assets in separate accounts

• Agents must be dually licensed in insurance and in securities

Combination Plan Types

• Joint Life

• Survivorship Life

Joint Life

• Premium is based on the joint average age of the insured

• Death benefit upon the first death only

Survivorship Life

• Premium is based on the joint average age of the insured

• Death benefit upon the last death

Group Life

• Master Contract goes to the sponsor, usually employer

• Certificate of Insurance goes to member

• Underwritten as a group

• If coverage after open enrollment-proof of insurability is required

• Conversion to individual policy in 31 days - same face amount but higher premiums due to attained age