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| Questão | Responda |
| Ordinary Life Insurance | Individual life insurance that contains many types of temporary and permanent insurance protection plans. Premiums are paid monthly, quarterly, semiannually or anually. Insurance includes such types as whole, term, universal, and variable coverage insurance. |
| Term-Life Insurance | Insurance protection for a certain period of time and will only pay out if the insured dies in that period of time. Term-Life can be insured for a specific number of years (1, 5, 20 year plan), or for specific age lengths (term to age 45). |
| Level Term-Life Insurance | Provides a level amount of protection for a specified period of time, after which the policy expires. If a person has a $100,000 level term for 10 years and they die in that time period, the $100,000 is paid to the beneficiary. If they do not die in that period of time, the insurance plan expires. |
| Decreasing Term Insurance | Benefit amounts for the policy will decrease over time. A 20-year $50,000 decreasing term policy will pay $50,000 at the time of death in the beginning of the 20-year term, than slowly decline to $0 by the end of the 20-year policy. |
| Increasing Term Insurance | A policy which increases the benefit of the death pay-out at periodic intervals. A 20 year plan will increase every year (if the person is alive) how much the beneficiary is paid. |
| Features of Term Life | Issued for a specific period of time, must contain two options to extend the policy by either renewing, or converting the policy. |
| Option to Renew | Guaranteed renewable policies allow the policy-owner to renew the term policy before it's termination date. This allows the policy-owner to continue the term-life policy even if they have become 'uninsurable.' During this renewal process, the premiums will become higher. |
| Yearly Renewable Term | Policy provides the most basic form of life insurance with coverage for one year and allows the policy-owner to renew coverage each year without evidence of insurability. |
| Option to Convert | Gives the insured the right to convert or exchange the term policy for a whole life (permanent) plan without evidence of insurability. This plan involves the issuance of a whole life policy at a premium rate reflecting the insured's age at either the time of exchange (attained age method), or the time when the original policy was taken out (original age method). |
| Whole Life Insurance | Permanent life insurance. Provides insurance from the date issued, until the policyowners death. The benefit payable is the face amount of the policy which remains constant through the policy's life. Premiums are set at the time of policy issue, they remain level for the policy's life. |
| Cash Values (Whole Life) | Combines insurance protection with a savings element. Have a guaranteed rate of interest that builds over the policies life-time and is credited to the policy-owner if the plan is ever cancelled (surrender value). |
| How to calculate Cash Value | -Face amount of the policy -The duration and amount of the premium payments -How long the policy has been in force -Higher face amount = larger cash value -Shorter premium payment periods = quicker cash growth -Longer duration the policy is in place = larger amount of cash accumulated |
| Maturity at age 100 | If a policyowner of a whole life insurance plan reaches 100, the cash value has accumulated to the point that it equals the face amount of the policy. This policy has completely matured and now premiums are owed. The insurance company will now issue a check for the full amount of the policy to the policy owner because the policy is completely paid up. Insurance companies do this because it is very rare that policyowners reach 100 and that they will most likely cash in their policy earlier than reaching 100. |
| Living Benefits | Through cash value accumulation build-up, the policyowner can use these funds for personal uses (if needed). Ex: paying off a mortgage. The funds belong to the policy-owner and these loans of funds do not have to be repaid UNLESS there is an outstanding loan at the time the insured dies. Then the loaned money (and interest of it) will be subtracted from the payout of the insurance plan. |
| Whole Life Premiums | The number of years between the insured's age at issue and 100 that is used to calculate the whole life policy. This time span is the full premium-paying period; which keeps the premiums level and do not increase them each year. |
| Straight Whole Life | Whole life insurance providing permanent level protection with level premiums from the time the policy is issued, until the insured's death (or age 100). |
| Limited Pay Whole Life | Level premiums that are limited to a certain period of time. Ex: Life paid up at 65-policy is one where the insured pays premiums until age 65 and than they have protection until 100 without needing to pay any more premiums |
| Single-Premium Whole-Life | One large premium payment at the signing of the policy and then all premiums are completely paid for. |
| Premium Periods | The shorter the premium paying period, the higher the premius. |
| Modified Whole Life | Lower premium payments in the first few years of the policy, than higher than normal payments later on to balance out at the end. This is to entice individuals to get insurance who are not doing so well financially at the time, but have high hopes for better financial success in the future. |
| Graded Premium Whole Life | Similar to modified; the premiums are lower in the beginning, than increase at each premium payment over time until they level off and balance out. |
| Endowment Policies | Cash values grow at a rapid pace so the policy matures and endows at a specific date. 2 ways it pays benefits: 1.) As a death benefity to a beneficiary if the insured dies within the speificied policy period (known as endowment period) 2.) As a living benefit to the policyowner if the insured is alive at the end of the endowment period at which time the policy is fully matured. |
| Endowment Premiums | Have higher premiums to reach policy maturity sooner. Endowment policies are on the decline because they no longer meet the income tax definition of 'life insurance' and don't receive favorable tax treatment that life insurance is given. |
| Life Insurance Policy Taxing | 1.) Cash value accumulations are not taxed to the policyowner as they build inside a policy. 2.) Policy withdrawals are not taxed to the policyowner until the amount withdrawn exceeds the total amount the policyowner paid into the contract. 3.) Policy loans are not considered distributions and are not taxed to the policyowner unless or until full policy surrender takes place, and then, only to the extent that the distribution exceeds what was paid into the policy. |
| Family Plan Policies | Insures all family members under one policy. Each member is insured for a specific amount and the policies are sold in 'units' (covers everyone, not sold to each individual member of the family). |
| Multiple Protection Policies | Policy that pays a benefit of double or triple the face amount if death occurs during a specific time period. However, after that period expires, only the face amount is paid to the beneficiary. |
| Joint Life Policies | Sold to cover two or more people and uses some type of permanent insurance that pays the death benefit when one of the insured's dies. The survivors then have the option of purchasing an individual policy without evidence of insurability. The premiums are less for a joint policy than for two separate individual policies and the age of the insureds is 'averaged' and a single premium is charged for each life. |
| Second to Die policy | Join policy that covers two lives, but the benefit is paid upon the death of the last surviving insured. |
| Juvenile Insurance | A guardian buys this insurance for a juvenile and pays the premiums. Once the child comes of age, they can pay the premiums, and in the event of death or disability of the adult premium payor, the premiums will be waived until the insured child reaches a specified age, or until the maturity date of the contract. |
| Credit Life Insurance | Designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid. The beneficiary of the policy is usually the lender. |
| Interest Sensitive Whole Life | Characterized by premiums that vary to reflect the insurer's changing assumptions with regard to its death, investment and expense factors. This could mean one of two things 1.) if the characteristics are in favor of the policy-owner, they can choose to have lower premiums or higher cash values. 2.) if the characteristics are not in favor of the policy-owner, they will either have to pay a higher premium to increase face amount, or reduce face amount and pay the same premium. |
| Adjustable Life | Combines Term and Permanent into one plan. The policyowner determines how much face amount protection is needed and how much premium the policyowner wants to pay. The insurer then selects the appropriate plan to meet those needs. |
| Universal Life | Allows policyowners to determine the amount and frequency of premium payments and to adjust the death benefit up or down to reflect changes in needs. |
| UL Death Benefit Option | Two options: 1.) Policyowner may designate a specified amount of insurance. Death benefit = cash values + remaining pure insurance. 2.) Death benefit equals the face amount + cash values. |
| Variable Insurance Products | Under traditional whole life insurance policies, the insurer guarantees a certain minimum rate of return will be credited to the policies' cash values. This is accomplished because the insurer invests the policyowners premiums in to a general account that is composed of investments that are carefully selected to back the liabilities and guarantees of the contracts they back. However, a variable insurance products plan does not guarantee contract cash values, because it is the policyowner that assumes the investment risk (not the insurer). This provides the potential for the policyowner to invest in areas that could potentially exceed traditional life insurance policies, at the risk of taking the blow if the investments do not work out. |
| Mortality Factor | A measure of the number of deaths in a given population. |
| Interest Factor | Insurance companies invest the premiums they receive in an effort to earn interest. This interest is one of the ways an insurance company can lower the premium rates. |
| Expense Factor | Insurance companies have operating expenses which need to be factored in to premiums. The expense factor is also known as the loading charge. |
| Women | Tend to live longer than men, so their premiums are usually lower |
| Premium Payment Mode | Mode refers to the premium payment schedule. Premiums are usually paid anually (once a year) and that money can be used to gain interest for a full year. However, if the person pays multiple times a year, there are additional charges that may apply. 1.) annually 2.) Semi-Annually 3.) Quarterly 4.) Monthly |
| Level Premium Funding | The policyowner pays more in the early years for protection to help cover the cost in later years, which allows premiums to remain level throughout the life of the policy. |
| Reserves vs. Cash Value | Reserves: Money that together with future premiums, interest, and survivorship benefits will fullfill the company's obligation to pay future claims. Cash Value: Cash value applies to the savings element of whole life insurance policies that are payable before death. However, during the early years of the whole life insurance policy, the savings portion brings very little return compared to the premiums paid. |
| Tax Treatment of Premiums | Premiums for individual life insurance policies are not deductible. Premiums on life insurance used for business purposes are also not tax deductible. Exceptions: Premiums used for a charity are tax deductible. -Life insurance premiums paid by an ex-spouse as court-ordered alimony are tax deductible -Employer-paid premiums sued to fund group life insurance for the benefit of employees are tax deductible. |
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