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Life Insurance Chapter 12
Terms in this set (47)
Life Insurance that does not provide policy dividends; also called a nonpar policy
Life insurance that provides policy dividends; also called a par policy
Part of the premium is refunded to the policyholder annually
Types of Life Insurance Policies
Temporary and Permanent
Temporary Life Insurance Policy
term, renewable term, convertible term or decreasing term insurance
Group life and credit life
Permanent Life Insurance Policy
Whole life, straight life, ordinary life, and cash value life insurance
Limited payment, variable, adjustable or universal life insurance
Protection for a specified period of time; sometimes called temporary life insurance
Continue term insurance for another term
Premium increases every 5 years
Multiyear level term
a relatively new policy
Most popular form of term insurance guarantees that you will pay the same premium for the life of your policy
convertible term -> exchange it for a whole life policy without a medical examination and at a higher premium. Premium stays the same the rest of your life.
Decreasing Term Insurance
Term Insurance that pays less to the beneficiary as time passes.
Return of Premium
Money-back term policies refund every penny you paid in premiums if you outlive the 15-, 20-, or 30-year term of the policy
ROP policies cost 30-50 percent more than traditional term life
Whole Life Policy
An insurance plan in which the policyholder pays a specified premium each year for as long as he or she lives; also called a straight life policy, cash value policy, or ordinary life policy
The amount received after giving up a life insurance policy (cash surrender value)
Limited Payment Policy
life insurance that is paid up after a specified number of years, or until the insured reaches a certain age, but offers lifetime protection
Annual premium is higher
Variable Life Insurance Policy
Fluctuate according to the yields earned by a separate fund, which can be a stock fund, a money market fund, or a bond fund. A minimum death benefit is guaranteed, but the death benefit can rise about that minimum depending on the earnings of the dollars invested in the separate fund.
Adjustable Life Insurance Policy
Another relatively recent type of whole life insurance. You can change such a policy as your needs change
A whole life policy that combines term insurance and investment elements
You control your outlay and can change your premium without changing your coverage
It allows you to access to your cash value by a policy loan or withdrawal.
Group Life Insurance
Insures a large number of persons under the terms of a single policy without requiring medical examinations
Insurance you get from work (group of employees)
Endowment Life Insurance
Provides coverage from the beginning of the contract to maturity and guarantees payment of a specified sum to the insured, even if he or she is still living at the end of the endowment period
Endowment period - 10 to 20 years or the attainment of a specified age
Credit Life Insurance
used to repay a personal debt should the borrower die before doing so. It is based on the belief that "no person's debts should live after him or her"
Nation's biggest ripoff
Industrial Life Insurance
Home service or debit insurance
Not very popular
a person who is designated to receive something, such as life insurance proceeds, from the insured
Allows 28 to 31 days to elapse, during which time you may pay the premium without penalty
To reinstate the policy of the grace period, you must again qualify as an acceptable risk, and you must pay overdue premiums with interest. Time limit is usually one or two years
A provision that allows the insured not to forfeit all accrued benefits
A provision stating that the insurer cannot dispute the validity of a policy after a specified period
A provision stating that if the insured dies by suicide during the first two years the policy is in force, the death benefit will equal the amount of the premium paid
Automatic Premium Loans
If you do not pay the premium within the grace period, the insurance company automatically pays it out of the policy's cash value if that cash value is sufficient in your whole life policy
Misstatement of Age Provision
If the company finds out that your age was incorrectly stated, it will pay the benefits your premiums would have bought if your age had been correctly stated.
Policy Loan Provision
Permits you to borrow any amount up to the cash value of the policy
A document attached to a policy that modifies its coverage
Waiver of Premium Disability Benefit
The company waives any premiums that are due after the onset of total permanent disability
The disability must occur before 60
Accidental Death Benefit
The insurance company pays twice the face amount of the policy if the insured's death results from an accident
The benefit must occur within a time period after the injury, usually 90 days and before 60 or 65
A benefit under which the company pays twice the face value of the policy if the insured's death results from an accident.
Another name for Accidental Death Benefit.
Guaranteed Insurability Option
Allows you to buy specified additional amounts of life insurance at stated intervals without proof of insurability.
Designed to help prevent inflation from eroding the purchasing power of the protection your policy provides.
Life insurance policy proceeds paid to the terminally ill policyholder before he or she dies.
Insures two lives, usually husband and wife.
The death benefit is paid when the second spouse dies.
Intended to pay estate taxes when both spouses die.
Chartered Life Underwriter (CLU)
A life insurance agent who has passed a series who has passed a series of college-level examinations of insurance and related subjects
Factors that affect the price a company charges for a life insurance policy
The company's cost of doing business.
The return on its investments.
The mortality rate it expects among its policyholders.
The features the policy contains.
Competition among companies with comparable policies.
A method of evaluating the cost of life insurance by taking into account the time value of money
The insurance company pays the face amount of the policy in one installment to the beneficiary or to the estate or the insured
Limited Installment Payment
The option provides for payment of the life insurance proceeds in equal periodic installments for a specified number of years after your death
Life Income Option
Payments are made to the beneficiary for as long as she or he lives.
The amount of each payment is based on the sex and attained age of the beneficiary at the time of the insured's death
A contract that provides a regular income for as long as the person lives
the annuitant will receive a fixed amount of income over a certain period or for life
This set is often in folders with...
Personal Finance: Chapter 3
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