102-3 Life Insurance (Individuals) - Part 1 Flashcards Preview

CFP 2 - Risk, Insurance, Emp. Benefits > 102-3 Life Insurance (Individuals) - Part 1 > Flashcards

Flashcards in 102-3 Life Insurance (Individuals) - Part 1 Deck (18)
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Temporary life insurance

Provides coverage for a specified period
Term life insurance is the most common

Term life is aka pure insurance because it does not accumulate cash value


Permanent life insurance

Does not terminate at any given tune as long as adequate premiums are paid


Annual renewable term (ART) Insurance

Issued for (and provides protection for) only one year, but the policyowner is permitted to renew the policy for subsequent periods to a stated age without evidence of insurability

Premiums increase each year as the insured ages


Level term insurance

Has a level death benefit and a fixed annual premium for a stated period


Decreasing term insurance

Features a level premium with a decreasing death benefit

This type of policy has been historically used as mortgage protection insurance


Recently term insurance

A policy under which the insurance company may renew coverage at a lower premium rate than the guaranteed renewal rate, provided that, at the time of renewal, the insured furnishes satisfactory evidence of continued insurability


Convertible term insurance

May be converted to a cash value policy (ie permanent policy) without evidence of insurability


Whole Life Insurance

Pays a benefit at the death of the insured as long as the premiums are paid according to the terms of the insurance contract

Provides protection for the entire (whole) life of the insured while also generating a cash reserve that can be made available to the policyowner during the insured’s lifetime


Ordinary (or straight) life insurance

Based on the assumption that the policyowner will pay the premiums on the policy until either death or the endowment age (which has historically been 100 but recently has often been 120)

This policy provides maximum permanent death benefits for the lowest premiums


Limited-pay whole life

The insurance is permanent and the insured has lifetime protection

Premiums are payable only for a limited # of years, after which the policy becomes paid up


Modified premium whole life

Premiums are lower for the initial years after policy issue (usually no more than the first 5 years) and then increase once thereafter


Single premium whole life

The ultimate example of a limited-pay whole life policy — that is, a policy for which all premiums are paid in one up-front lump sum

Usually classified as a MEC for tax purposes


Nonforfeiture options

Benefits available in a whole life insurance policy if the policy is discontinued during the insured’s lifetime

-cash surrender value option
-reduced paid-up insurance option
-extended term insurance option


Whole life insurance policy that pays dividends that are not guaranteed

Considered to be a participating policy


Whole life insurance dividend options

-Cash option
-Dividends to reduce premium
-Dividends to accumulate at interest
-Paid-up additions
-One-year term insurance option (fifth dividend option)


Life insurance settlement options

-Cash option
-interest only option
-fixed-period installments
-fixed-amount installments
-life income option
-life annuity with period certain
-life annuity with refund


Contractual provisions in life insurance policies

-grace period
-incontestability clause
-insurance company cannot contest validity after policy has been in force for 2 years
-suicide clause
-reinstatement clause
-misstatement of age or gender clause


Life insurance policy riders

-disability waiver of premium
-guaranteed insurability option
-accidental death benefit
-aka double indemnity clause