Life Insurance Policies - Provisions, Options and Riders Flashcards
Industrial Life Insurance
Issues very small face amounts such as $1000 or $2000. Premiums are paid weekly and collected by debit agents. They were designed for burial coverage.
Ordinary Life Insurance
Life insurance of commercial companies not issued on the weekly premium basis. It is made up of several types of individuals life insurance, such as temporary (term), Permanent ( Whole).
Group Life Insurance
Insurance written for members of a group, such as a place of employment, association, or union. Coverage is provided to members of that group under one master contract. The group is underwritten as a whole, not individually. Usually there is no evidence of insurability required.
Term Life Insurance
It gives you he greatest amount of coverage for a limited period of time. Term insurance is only good for a limited period of time because it has a termination date. Term life is the cheapest type of pure life insurance, and due to not having any cash value, it will ALWAYS be cheaper than a whole life policy with the same face value.
It provides a pure death protection since it only pays a death protection since it only pays a death benefit if the insured dies during the policy term.
Level Term
Also called level premium level term. It has a level face amount and be higher than annual renewable term because they are level throughout the policy period. However, the premiums will increase at each renewal. Life insurance written to cover a need for a specific period of time at the lowest premium is called Level Term Insurance. Term insurance always expires at the end of the policy period.
Decreasing Term
Term Life insurance that provides an annually decreasing face amount over time with level premiums. These policies are usually used for mortgage protection. A decreasing term policy is a type of Life policy which has a death benefit that adjusts periodically (according to a schedule) and is written for a specific period of time.
For example: a 15 year decreasing term policy could protect a 15 yr mortgage. As the mortgage balance reduces each year, the face value of the insurance policy will adjust accordingly to match. After the mortgage is paid off, the policy will expire.
Credit Policies
There are typically purchased using a decreasing term life insurance policy, with the term matched to the length of the loan period and the decreasing insurance amount matched to the declining loan balance. Since credit life insurance is designed to cover the life of a debtor and pay the amount due on the loan if the debtor dies before the loan is repaid, credit policies can only be purchased for up to the amount of the debt or loan.
Increasing Term
Term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.
Convertable Term
A provision that allows policy owners to convert their term insurance into a permanent policies without showing proof of insurability. it provides a temporary coverage that may be changed to permanent coverage.
Renewable Term
Term Insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability. All term insurance has a termination date where you can no longer renew.
Annual Renewable Term
Coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.
Term Rider
A life insurance product which covers children under the parent policy. Family plans policies usually cover the family head with permanent insurance, and the coverage on spouse and children is term insurance in the form of a rider. A term rider is always a level term. This is cheaper than every family member getting their own policy. Term riders can also allow an applicant to have excess coverage by adding additional term rider for them to the main policy.
Whole Life Insurance
Provides death benefit for the entire life of the insured It also provides living benefits in the form of cash values. It matures at age 100 and normally has a level premium. All whole life has the same type of benefits, the only difference in ¨types¨ of whole life is how the policy is paid. Some will be paid for after a few years or by a specified age, some may give you a little discount in the early years to get started, etc. All whole life lasts until death or age 100, has a fixed premium, and level benefit with cash value accumulation, regardless of how its paid. Whole life insurance is often compared to buying, like buying a house
With whole life -straight life insurance
premiums are payable throughout the insureds lifetime, and coverage continues until he insureds death. Said differently, premiums are payable as long as coverage is in force. Like all other whole life policies, straight whole life provides fixed premiums, a level death benefit, and cash value. Whole life also requires the face amount to be paid out to the insured at age 100, provided a death benefit has not already been paid. Straight whole life allows to maintain coverage through entire life and spread cost over entire life.
With Whole- life Limited pay
Coverage remains on a limited-pay life policy until 100 or death, whichever happens first. Even though the premium payments are limited to a certain period, the insurance protection extends until the insured death, or to age 100.
Whole Life - Modified
Where the premium stays fixed for the first 5 yrs., and the increases in yr 6 and stays level for the remainder of the policy. Modified whole life has all the same features of any other whole life except the insurance company cuts you a break on premium for the first few years. Modified whole life describes a whole life policy with a premium that increases once after the first few years and then remains level for the remainder of the policy.
Whole Life - Modified Endowment Contract (MEC)
Describes as a policy that exceeds the maximum amount of premium that can be paid into a policy and still have it recongnized as a life insurance contract. A MEC does not meet the 7 pay test and is considered over-funded, according to the IRS. For that reason, the policy will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid up policy before the end of yr. 7
Joint Life policy
Covers the lives of a 2 individuals and save on premiums cost by averaging the ages of the two insureds. Joint Life policies pay the face amount after the first person covered on the policy does. This is similar to a joint checking account. The policy is shared between 2 people, and when one person dies, the other receives the entire account.
