Fixed (Equity) Indexed Life Policy

Fixed (Equity) Indexed Life Policy

Which of the following types of insurance policies is most commonly used in credit life insurance?

 

·         Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor. It is usually written as decreasing term insurance.

 

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

 

·         Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit.

 

All other factors being equal, the least expensive first-year premium payment is found in

 

·         Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.

 

Term Life Insureance

 

·         It is a temporary protection because it only provides coverage fora specific period of time. it is also referred to Pure Life Insurance.

 

 

Pure Death Protection

 

·         It is what term life insurance provides. If the insured dies during the term of the policy, the benefit is pay to the beneficiary, however if the insured lives past the term of the policy, no benefit will be paid out. Also, there is no cash value of a term life policy

 

Level Premium Term Insurance

 

·         As the name implies, both the death benefit and the premium will remain constant throughout the life of the policy.

 

What are the Three basic ways of how the face amount (death Benefit) could change during the life of the policy?

 

·         It could either be a level amount (not changing), increasing amount, or decreasing amount.

 

Annually Renewable Term Life Insurance

 

·         (ART) is the purest form of term insurance. throughout the life of the policy, the death benefit remains the same and the policy is guaranteed renewable each year without proof of insurability. But, the premium increases annually according to the attained age of the new year. In New York, the max age for which coverage will not be offered is 80.

 

 

Renewable Feature

 

·         allows the policyowner the right to renew the coverage at the expiration date without evidance of insurability. The premium of the new term policy will be based on the insured's current age.

 

Convertable Feature

 

·         Provision that allows the policyowner the right to convert the policy to a permanent insurance policy without evidence of insurability. the premium will be based on the insured's attained age at the time of conversion.

 

Whole Life Insurance

 

·         Also referred as Permanent Life Insurance and is a general term used to refer to various forms of life insurance polices that build cash value and remain in effect for the entire life of the insured (or until age 100) as long as the premium is paid. Premiums for whole life Insurenace are generally higher than term life insurance.

 

What are the key characteristics of a Whole Life Insurance Policy

 

·         Level Premium
2. Death Benefit
3. Cash Value
4. Living Benefits (the policyowner can take out a loan on the cash value of the policy).

 

Continuous Permium (Straight Life) Policy

 

·         Form of Whole Life Insurance. the premium and the Death Benefit remain constant throughout the policy. also, the cash value grows in a straight line, up until it matches the face value. Straight Life Policies will have the lowest annual premium.

 

Limited Payment Policy

 

·         Form of Whole Life Insurance.
Policyowners can choose a certain amount of years that they would like to pay a premium until, (say 20 years, making payments stop at 65). cash value builds up faster as well. Premiums will be higher because less years and payment cycles are given to pay the face value due.

 

 

Single Premium Policy

 

·         Form of Whole Life insurance.
A single lump-sum premium is paid at the very beginning of the policy. after this, the policy is completely paid for.

 

Fixed (Equity) Indexed Life Policy

 

·         The main feature is that the cash value is dependent upon the performance of the equity index, such as S&P 500 although there is a guaranteed minimum interest rate. The policy's face amount increases annually to keep pace with inflation (as the
Consumer Price Index increases) without requiring evidence of insurability.
Indexed whole life policies are classified depending on whether the policyowner
or the insurer assumes the inflation risk. If the policyowner assumes the risk,
the policy premiums increase with the increases in the face amount. If the
insurer assumes the risk, the premium remains level.

 

Universal Life Insurance Policy

 

·         It is a Flexible Premium Adjustable Life policy apart of whole life insurance.
The policy owner can either pay the Minimum premium needed to keep the policy in force or target Premium. Also, extra can be paid to the premium so there is a "buffer zone" just in case payments are missed in the feature or wish not to be paid.

 

What does Paying the Minimum Premium do in a Universal Life insurance Policy

 

·         Keep the policy in force for the current year. Will make the policy perform as an annually renewable term product

 

What does paying the Target Premium do in a Universal Life Insurance Policy?

 

·         It is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

 

What are the Two components to Universal Life Insurance

 

·         the Insurance component and the Cash Account. The insurnace component is always the annually renewable term insurance.

 

What are the two options regarding a universal life policy

 

·         Level Death Benefit option and Increasing Death Benefit option

 

Level Death Benefit Option for Universal Life insurance?

 

·         The Death benefit remains level while the cash value gradually increases, thereby lowering the Pure Insurance with the insurer in the later years. There maybe an increase in death benefit in the later years or a " IRS Corridor" so that it stays ahead of the cash value, if it does not, it will be stipulated to taxation by law.

 

Increasing Death Benefit Option for Universal Life Insurance?

 

·         The death benefit includes the annual cash value so that the death benefit gradually increases each year by the amount that the cash value increases. since Pure Insurance is remains lvel for life with the insurer, expenses of this option are much greater, thus reducing the cash value in the later years of this option when comparing it to The Level Death Benefit Option.

 

What is Variable Life Insurance

 

·         Referred to as Variable whole like insurance. It is a level, fixed premium, investment based product. includes a minimum gaurenteed death benefit. the Insurance company must establish Separte Accounts for each investment risk, containing the underlying assets of the contract and not part o the insurance companies general accounts.

 

Regulation of Variable Products

 

·         Cariable Life Insurance is products are Dually Regulated by state and federal Government. The federal Government has declared variable contracts to be Securities and thus are regulated by the SEC, FINRA, and NASD.