Chapter 2 Flashcards
Terms & Vocabulary (23 cards)
Attained age
— the insured’s age at the time the policy is issued or renewed (How old am I right now?)
Cash value
— a policy’s savings element or living benefit
Face amount
— the amount of benefit stated in the life insurance policy
Deferred
— withheld or postponed until a specified time or event in the future
Endow
— the cash value of a whole life policy has reached the contractual face amount
Level premium
— the premium that does not change throughout the life of a policy
Liquidation of an estate
— converting a person’s net worth into a cash flow
Nonforfeiture values
— benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses
Policy maturity
— in life policies the time when the face value is paid out
Securities
— financial instruments that may trade for value (for example stocks, bonds, options)
Term insurance provides what is known as pure death protection:
If the insured dies during this term, the policy pays the death benefit to the beneficiary;
* If the policy is canceled or expires prior to the insured’s death, nothing is payable at the end
of the term; and
* There is no cash value or other living benefits.
What is term insurance also known as?
Pure Life Insurance and/or Pure Death Protection
what are the three basic types of term insurance?
- Level: Premium is LEVEL or stays the same
- Increasing:
3: Decreasing
True or false: Level in level term insurance refers to the premium which does NOT change
False: Level in level termm insurance refers to the DEATH BENEFIT, which does not change.
Explain Increasing Term insurance
Debt goes up, the death benefit goes up
Explain decreasing term insurance
as Debt goes down, the death benefit goes down
Define Annually Renewable Term
Hint: ART increasing in value. Death benefit remains level, but premium increases annually according to attained age as the probability of death increases
Define Return of premium (ROP)
life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid. The return of premium is paid if the death occurs within a specified period of time or if the insured outlives the
policy term
What is Whole Life also known as?
Straight Life, Ordinary life or continuous premium. Also has the lowest annual premium.
What is Limited Payment Whole Life Insurance?
limited payment is designed so that the premiums for coverage will be completely paid up well before 100. (Ex: LP 25 = limited payment is premium split over 25 years vs. 100)
define Single Premium Whole Life
Premium is paid in one lump sum
What are the three types of traditional whole life policies?
Traditional Whole life, Limited Payment and Single Premium
