Chapter Recap
This chapter was full of information about different types of life insurance policies. Make sure you know all of the types of policies discussed in this chapter, can recognize their major characteristics, and can compare and contrast different types of policies. Let's recap all of these concepts.
| TERM LIFE |
| General Characteristics |
- Pure protection
- Lasts for specific term
- No cash value
|
| Level PremiumTerm | Level death benefit and level premium |
| Annually Renewable Term |
- Renews each year without proof of insurability
- Premiums increase due to attained age
|
| Decreasing Term | Coverage decreases at predetermined times gradually; best used when the need for protection declines from year to year |
| Increasing Term | Coverage increases each year |
| WHOLE LIFE |
| General Characteristics |
- Permanent protection
- Guaranteed elements (face amount, premium, and cash value) until death or age 100
- Level premium
- Cash value and other living benefits
|
| 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
|
| 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 |
- 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
|
| Joint Life(First-to-die) |
- Insures 2 or more people
- Premium based on a joint age of the insured
- Benefit paid upon the first death
|
| Survivorship Life (Second-to-die) |
- Insures 2 or more people
- Premium based on a joint age of the insured
- Benefit paid upon the last death
|
| Group Life |
- Master Contract goes to the sponsor, usually employer
- Certificate of Insurancegoes 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
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