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FIL 250 - life ins
Life insurance
| Question | Answer |
|---|---|
| traditional family | family with two parents, one works outside the home while the other cares for children in the home |
| blended family | two parents, each with their own children, getting married and living together |
| sandwiched family | two generations of obligations - caring for children and your parents |
| human life value | approach to determine the amount of life insurance needed by an individual. it is based on the present value of all future earnings of a worker |
| needs approach | estimates the amount of life insurance needed by individuals. compares family needs after the death of the individual vs actual resources. |
| variable life insurance | fixed premiums whole life insurance. cash values are not guaranteed, but are tied to investment experience directed by policyholders (often stocks). |
| universal life insurance | flexible premium whole life insurance policy. unbundles insurance and savings components so that policyholder can see cost of insurance and investment performance each period. |
| limited pay life insurance | lifetime death benefit, but policy becomes paid up after a certain, after which insurance remains in force without additional future premiums. |
| parties in life insurance contracts | policyowner - retains all rights, insured life - upon death, benefits are paid, beneficiary - receives proceeds upon death of insured |
| specific beneficiary vs. class beneficiary | specific beneficiaries are identified explicitly (for example - by name) in the policy. Class beneficiaries are members of a group (e.g., "my children") |
| options for receiving policy dividends | cash, reduce next premium, accumulate at interest with insurer, paid-up additions |
| nonforfeiture options | how can the policyholder cancel a whole life policy and receive cash surrender value benefits: 1. cash, 2. reduced paid up insurance, and 3. extended term insurance |
| accidental death benefit (double indemnity) | if insured dies as a result of an accident, the policy pays twice the face value |
| accelerated death benefits | allows terminally ill insureds to collect benefits before death |
| life settlement | selling a life insurance policy to someone else |
| waiver of premium | a provision that states if the insured becomes disabled, the policy becomes paid up and no further premiums are required |
| guaranteed purchase option | allows for the purchase of small additional amounts of insurance at specific times in the future without EOI |
| evidence of insurability (EOI) | when applying for life insurance, the life insurer needs information to ensure you are generally healthy before offering coverage. Common information requested is basic medical stats and perhaps medical/blood tests |
| incontestability clause | the life insurer has 2 years to discover problems with the application. after 2 years, the insurer's ability to deny claims is severely restricted |
| what are the reasons a life insurer can deny a claim after 2 years? | 1) The beneficiary takes out the policy with the intent of murder the insured, 2) the applicant has someone else take the medical exam, or 3)Insurable interest did not exist |
| second-to-die life insurance | the beneficiary does not receive the policy proceeds until the death of both insured lives. example: children receiving policy proceeds only after the death of both parents |
| paid up life insurance | a policy where the cash value is sufficient so that no future premiums are required, yet death benefit protection continues to exist forever |
| traditional whole life insurance (straight life or ordinary life) | permanent, lifetime protection for a level-premium. whole life builds cash value over time and has cash value guarantees over time |
| term life insurance | temporary protection (usually 1-, 5-, 10-, or 20-years) that pays only a death benefit. there are no cash values / savings. most term policies are renewable (though premiums increase each term) and convertible to a whole life policy without EOI |
| What are the uses and limitations of term life insurance? | Uses: 1. income is limited 2. need for protection is temporary 3. guarantee future insurability. Limits: 1. increasing premiums by age 2. no savings |
| ordinary whole life | fixed death benefit, level premium, lifetime protection, cash savings component |
Created by:
isufil250
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