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Life Policies

Types of Whole Life and Term Life Policies

TermDefinition
Types of Whole Life (Permanent) Policies Permanent coverage/insurance that endows (cash values = face amount) at age 100 (cash values are paid out to the policy owner if insured reaches 100 years old); matures when the face amount is paid out
Ordinary Whole Life/ Straight Life A permanent policy with level premiums and a level face amount with cash values; Premiums are paid until the age of 100 or death, whichever comes first.
20 Pay Life A limited pay permanent policy; premiums are paid by policy owner for 20 years or until death, whichever occurs first
Life Paid Up at 65 A limited pay permanent policy; premiums are paid until age 65 or death, whichever occurs first
Single Premium Whole Life A permanent policy; premiums are paid by policy owner with one lump sum payment, generates immediate cash values
Universal Whole Life An Annual Renewable Term (death benefit component) with cash values and two death benefit options. Policy owner can increase, decrease, or even skip premiums and do partial surrenders according to their cash values. Life license required
Universal Whole Life: Option A/1 Beneficiary only receives the face amount upon the death of the insured
Universal Whole Life: Option B/2 Beneficiary receives both the cash values and the face amount upon the death of the insured; policy owner pays higher premiums - target premiums
Variable Whole Life A permanent policy with an investment based product where the cash values (portion of fixed premiums) are held in a separate account, and the policy owner bears the investment risk. Life and Securities licenses required
Variable Universal Life A permanent policy with flexible premiums like a universal life policy and premiums that are invested in a separate account like a variable life policy. Life and Securities licenses required.
Interest Sensitive Whole Life A permanent policy with a fixed premium with guaranteed death benefit to age 100. Two possible rates of return, guaranteed and current; the policy owner is given whichever is higher
Equity Indexed Whole Life A permanent policy where the cash value growth is tied to an index such as the Standards & Poor 500; Guaranteed minimum interest rate to protect against downside market risk and death benefit. Life license required.
Level Term A temporary policy; the premium and face amount remains level for the length of the term
Decreasing Term A temporary policy; the premium remains level and the face amount is reduced every year during the length of the term. Used to pay off a debt such as a mortgage
Return of Premium Term A temporary policy. A type of increasing term that pays an additional death benefit equal to the amount of the premiums paid to the beneficiary if the insured died within a specified period of time
Annual Renewable Term A temporary policy. The purest form of term insurance; level term policy that renews annually without proof of insurability up to a specified age. Premium is based on attained age and increases annually
Renewable Provision Allows the policy owner to renew coverage without evidence of insurability; renewed premiums are based on the insured’s attained age
Convertible Provision Allows the policy owner the right to convert their term insurance policy to a permanent insurance policy without evidence of insurability; premiums are based on the insured’s attained age at the time of conversion
Types of Term (Temporary) Policies Temporary coverage/insurance with no cash values that expires after a specified period; death benefit is only paid if the insured dies within the term
Annuity A contract that provides income for a specified number of years or for life; a way to liquidate an estate; grows tax deferred. An annuity has three parties: the Owner, the Annuitant and the Beneficiary
Accumulation Period The pay in period to the annuity; Single Premium – one payment and Flexible Premium – level or flexible payments
Annuity Period/Annuitization Period The pay out period of an annuity; Immediate: payments begin within 12 months or less, Deferred: payments begin after 12 months
Fixed Annuity An investment option of an annuity. Interest rate is guaranteed during the accumulation phase and premiums invested in the general account. The insurance company assumes the investment risk. Life license required.
Variable Annuity An investment option of an annuity. Premiums are invested in a separate account. The benefit payment varies in value depending upon the underlying investment account; a hedge against inflations. Life and Securities licenses required
Equity Indexed Annuity Earn a higher interest rate than fixed annuities but is less risky than variable annuities. Interest earned is tied to an equity index such as the S&P 500 or the minimum guaranteed rate in the contract, whichever is higher. Life licensed required
Joint Whole Life A permanent policy that insures two or more; premiums are higher and pays the face amount when the first person dies
Survivorship Whole Life A permanent policy that insures two or more; premiums are lower than a joint life policy and pays the death face amount when the second person dies
Created by: KHodge5812