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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
Topic
Key Points
General Characteristics
Pure protection; lasts for a specific term; no cash value
Level Premium Term
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
Topic
Key Points
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
Topic
Key Points
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
Topic
Key Points
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
Combination Plans
Joint Life: premium is based on the joint average age of the insured, death benefit upon the first death only. Survivorship Life: premium is based on the joint average age of the insured, death benefit upon the last death
Group Life
Master contract goes to the sponsor, usually employer; certificate of insurance goes 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
Credit Life
Written as decreasing term insurance on the life of a debtor; the creditor is the owner and beneficiary; cannot pay out more than the balance of the debt