Life insurance Policies

Life Insurance Policies Overview

Key Terms

  • Industrial Life Insurance

    • Issues very small face amounts (e.g., $1,000-$2,000).

    • Premiums paid weekly collected by debit agents.

    • Primarily designed for burial coverage.

  • Ordinary Life Insurance

    • Issued by commercial companies, not on a weekly premium basis.

    • Comprised of individual types, such as temporary (term) and permanent (whole).

  • Group Life Insurance

    • Coverage for members of a group (e.g., employment, associations, unions) under one master contract.

    • Underwritten as a whole, not individually.

    • Benefit: Usually no evidence of insurability required.

Types of Term Life Insurance

  • Term Life Insurance

    • Offers the greatest coverage amount for a limited time.

    • Cheapest pure life insurance due to having no cash value and a termination date.

    • Provides only a death benefit if the insured dies during the policy term.

  • Level Term Insurance

    • Known as level premium level term with fixed face amount and premiums.

    • Premiums higher than annual renewable term but level throughout the policy period.

    • Expires at the end of the policy period.

    • Suitable for those needing coverage for a specified period at the lowest premium.

  • Decreasing Term Insurance

    • Provides a decreasing face amount with level premiums, commonly used for mortgage protection.

    • Death benefit adjusts periodically, matching the decrease in debt obligations (e.g., mortgage).

  • Increasing Term Insurance

    • Provides an increasing face amount over time based on schedules or percentages of the original amount.

  • Convertible Term Insurance

    • Allows conversion of term insurance to permanent policies without showing proof of insurability.

    • Premiums may increase due to being reevaluated based on attained age.

  • Renewable Term Insurance

    • Guarantees continued term coverage after the initial period without proof of insurability.

    • Premiums increase upon renewal.

  • Annual Renewable Term

    • Provides level face amount that renews annually, guaranteed without proof of insurability.

Additional Life Insurance Provisions

  • Term Rider

    • Covers children under their parent's policy, allowing for cost savings as compared to individual policies.

  • Whole Life Insurance

    • Provides death benefits for the entire life of the insured and living benefits through cash values.

    • Matures at age 100 with level premiums.

  • Whole Life Variations

    • Straight Life: Premiums paid throughout life, benefits paid upon death or at age 100.

    • Limited Pay: Premiums paid for a limited time (e.g., 20 years), coverage continues until death or age 100.

    • Modified Whole Life: Lower premiums for the first few years that increase afterward.

    • Modified Endowment Contract (MEC): Policies exceeding maximum premium limits lose favorable tax treatment.

Specialized Policies

  • Joint Life Policy

    • Covers two individuals; benefits paid upon the first death, leading to termination of coverage for the surviving individual.

  • Last Survivor Life Policy

    • Benefits paid only after the death of the last insured individual.

  • Family Maintenance Policy

    • Pays monthly income from insured's death to the end of a preselected period.

  • Family Income Policy

    • Starts income payments upon the insured's death for a specified duration.

  • Adjustable Life Policy

    • Allows for flexible premiums and adjustments based on changing financial needs.

  • Universal Life Insurance

    • Incorporates flexible premiums and adjustable death benefits, where gains contribute to cash value.

Other Insurance Concepts

  • Variable Life Insurance

    • Requires specific securities registrations (FINRA/NASD) before selling.

    • Cash value and death benefits fluctuate based on investment performance.

  • Variable Universal Life (VUL)

    • Offers control over premium payments and investment allocations.

  • Equity Index Universal Life Insurance

    • Links accumulation values to equity indices, provides a guaranteed minimum interest rate amid potential inflation protection.

  • Investor Originated Life Insurance (IOLI)

    • Investor purchases policies on others, profiting upon death—which violates insurable interest requirements.

Additional Definitions

  • Cash Value

    • The accumulated savings in whole life policies.

  • Endowment Policy

    • Pays the face amount at the end of a fixed period, a specified age, or upon death.

  • Juvenile Insurance

    • Life insurance for children, typically under parental control.

  • Non-Medical Life Insurance

    • Typically does not require medical exams but comes at a higher cost.

  • Target Premium

    • Suggested premium to maintain a Universal Life policy, indicating required funding under conservative estimates.