Types of Individual Life Insurance

Another name for Term Life insurance is...

Pure Death Protection

Another name for Death Benefit is...

Face Value

What are the basic types of Term Life insurance?

1. Level
2. Decreasing
3. Increasing

What are the basic types of Level Term Life?

1. Level Premium
2. Annual Renewable Term

What do all Level Term Life insurance products have?

1. Level DB
2. Level prem
3. Highest prem

What are the differences between Level Premium and Annual Renewable Term?

1. Renew at end of term vs. Renew every year
2. Renewable w/o proof of insurability vs. Requires proof of insurability

Why would someone possibly want Decreasing Term Life?

When needed protection is time-sensitive... for example, a mortgage is owed.

Why would Decreasing Term Life be convertible but not renewable?

It would be convertible because the insured may want the option to convert it to another type of insurance. It would be non-renewable because it is designed to decrease to zero.

Decreasing Term Life has the ... premium because ...

Decreasing Term Life has the LOWEST premium because IT DECREASES TO ZERO FACE VALUE.

Increasing Term Life has the ... premium because ...

Increasing Term Life has the MEDIUM premium because IT INCREASES FROM ZERO FACE VALUE.

Why would someone possibly want Increasing Term Life?

When needing to fund certain riders that provide a refund of premiums

Name three special features of Term Life insurance?

1. Renewable
2. Convertible
3. Renewable & Convertible
(w/o evidence of insurability; prem based on age)

EXTRA: Why would an insurance company rather have a customer buy Term than Whole Life insurance?

Because more than 95% of people outlive their term, meaning that no DB is paid

EXTRA: What would be the typical reasons for purchasing Term Life insurance?

1. When unable to afford anything else; "Some insurance is better than none!"
2. When there is a temporary need / large debt (like a mortgage)

What are the three main differences between Whole Life insurance and Term?

1. Entire life vs. Limited duration
2. Higher premium vs. Lower premium
3. Builds Cash Value vs. No Cash Value

Cash Value is also called...

Nonforteiture Value.

How do taxes influence Cash Value?

TAX-DEFERRED: Growth
TAXABLE: Withdrawals
NON-TAXABLE:
1. Loans
2. CV rolled into DB

The premium is based on the ... equaling the ... at the specified age limit.

The premium is based on the CASH VALUE equaling the DEATH BENEFIT / FACE VALUE at the specified age limit.

What are the three types of Whole Life insurance?

1. Straight
2. Limited-pay
3. Single premium

What are the differences between Straight Whole Life and Limited-pay Whole Life?

1. Premiums from 0 to end of life vs. 0 to specified age
2. Lower premium vs. Higher premium

Angela received an inheritance of $20,000 from her grandmother. She decided to purchase a Whole Life product to ensure that her family would have death benefits. What product did she purchase?

Single Premium Whole Life

Why might a couple want Modified Whole Life insurance?

Perhaps they are just beginning in their careers and cannot afford the regular premium that Whole Life would involve. So they opt for a modified version that enables them to pay a lower premium now and a higher premium later.

Bob's job provides him with a base pay and 80% commission. He has a small client base which he is steadily building. He would like the benefits of Whole Life, but he can't really afford the premium that Straight Whole Life would involve. What are his opti

1. He could purchase Modified Whole Life which would mean he pays less now and more later.
2. He could purchase Graded Premium Whole Life which means his premium gradually increases until it levels off.
Option 2 would best fit his needs because his client

List the specifics of Indeterminate Premium Whole Life.

1. Prems change yearly
2. Two prem rates: (1) guaranteed max and (2) Non-guaranteed lower
3. After initial time period, insurER establishes a new "non-guaranteed lower" rate which could be raised, same, or lowered depending on company and capped at guaran

List the specifics of Endowments.

1. Level DB
2. Prems can be paid (a) until endowment, (b) for a limited period of time, or (c) in a lump sum single payment
3. Matures at earlier date than end of life, so CV builds up faster (prem considerably higher)

What is the role of the insured in the creation of an Adjustable / Flexible Life insurance product?

1. Choose DB / Face Value (need)
2. Choose premium (budget)

What is the role of the insurer in the creation of an Adjustable / Flexible Life insurance product?

1. Choose the type of insurance (solution)

What three adjustments can the insured make to an Adjustable / Flexible Life insurance product?

1. Premium / Paying period
(lowering may require proof of insurability)
2. Death Benefit / Face Amount
(increasing may require proof of insurability)
3. Period of protection

If the insured converts an Adjustable / Flexible Life insurance product into a different kind of product, what might the insurer do to the policy?

Adjust the Death Benefit / Face Value

Why might the insured pay additional premiums under the permanent (i.e. "Whole Life") form of an Adjustable / Flexible Life insurance product?

1. To accumulate greater CV
2. To shorten the premium paying-period

When does CV begin to develop in an Adjustable / Flexible Life insurance product?

When premiums paid are more than the cost of the policy

An Adjustable / Flexible Life insurance product may take what forms?

1. Permanent (like Whole Life)
2. Temporary (like Term)

What would the Multiple Indemnity rider provide? What would it require?

Certain benefits would be doubled / tripled when death caused by specified event(s). Death would have to occur within specified period of time from date of event(s).

What is the purpose of Term riders?

They allow for additional Term Life insurance w/o the need for another policy.

What are three Term riders designed for families?

1. Family Policy
2. Family Income
3. Family Maintenance

List the characteristics of the Family Policy Term rider.

1. SPOUSE can convert to perm insurance up to age 65
2. CHILDREN covered up to 30-31 days after birth and further if requested
3. CHILDREN can covert w/o evidence of insurability when they turn 21 or max age specified

What are the differences between the Family Income and Family Maintenance Term riders?

1. Decreasing Term vs. Increasing Term riders
2. DB paid after rider expires vs. DB paid upon death of insured

What are the differences between Joint Life and Last Survivor Life?

1. Higher prem vs. Lower prem
2. DB paid upon 1st death vs. 2nd death

What characteristics are the same in Joint Life and Last Survivor Life?

1. Perm or term
2. Prem based on avg. of ages

What are the characteristics of the Juvenile Life insurance policy?

1. DB increases at a predetermined age, such as 21
2. Level prem

What would a Limited Benefit Life insurance policy cover?

Certain expenses from specifically named illnesses, injuries, or circumstances like cancer