general characteristics of term life
- pure protection
- lasts for specific term
- no cash value
level premium term
level death benefit and level premium
anually renewable term
- renews each year without proof or insurability
- premiums increase due to attained age
decreasing term
coverage gradually decreases at predetermined times; best used when the need for protection declines from year to year
increasing term
coverage increases each year
features of term policies
- renewable - renew the policy without evidence of insurability
- convertible - right to convert a term policy to a permanent policy without evidence of insurability
general characteristics of whole life
- permanent protection
- guaranteed elements (face amount, premium, and cash value) until death or age 100
- level premium
- cash value and other living benefits
- basic policy
- level death benefit
- insured pays premiums for life or until age 100
limited payment
premiums paid until a certain time, coverage in effect to age 100
single premium
premiums paid in one lump sum; coverage continues to age 100
general characteristics flexible premium
- types of whole life insurance
- flexible premium
universal life
- an insurance component in the form of annually renewable term
- 2 death benefit options: option 1 - level death benefit - option 2 - increasing death benefit
- can make partial surrender/ cash withdrawal
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
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
viatical settlements
- third party contracts
- viator receives a percentage of the policy’s face amount
- viator has a terminal illness
annuities phases
- accumulation (pay-in) - payments made into the annuity
- annuitization (pay-out) - payments made to the annuitant from the annuity
annuities parties
- annuitant- insured (must be a person); policy issued on annuitants’ life
- beneficiary - will receive any amount contributed to annuity (plus any gain) if annuitant dies during accumulation period
- owner - has all rights to policy (usually annuitant); can be corporation or trust
types of annuities
- fixed annuities - guaranteed, fixed payment amount, premiums in general account
- variable annuities - payment not guaranteed; premiums in separate account, and invested in stocks and bonds
- indexed annuities - interest rate tied to an index; earn higher rate than fixed annuities, not as risky as variable annuities or mutual funds
premium payments
- single premium; one lump-sum payment; the principal is created immediately (both immediate and deferred annuities)
- periodic (flexible) premium - multiple payments; the principal is created over time (used for deferred annuity only)
income payments
- immediate - purchased with a single premium; income payments start within 12 moths from the date of purchase
- deferred - purchased with either lump sum or periodic-payments premium; benefits start sometimes after 1 year from the date of purchase (often used to accumulate funds for retirement)
