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Major types of Life Insurance (Variable (Adjustable Life Adjust the…
Major types of Life Insurance
Whole Life
Most common type of a permanent life insurance.
Provides Savings or cash value.
Endow until age of 100 - Assume the premium payment until that age.
Usually higher than Term.
Level Premium - based on the issue age.
Level death benefit for life.
Guaranteed interest rate on premiums.
Living Benefits - borrow cash value or get whole amount when the policy is surrendered. Monthly payments higher than usual and 3 years minimum.
Ordinary or straight Whole Life
lowest annual premium of the Whole section.
Premium and death benefit are stable until 100 years or death and cash value increases.
limited-pay whole life and single premium whole life
Established paid-up age, usually 65 or lump-sum payment when applying.
Immediate cash value and they build up faster due the investments.
Term Life:
Temporary
Pure Life - no cash value.
Greatest Coverage with the lowest Premium.
Premium always leveled by the age.
Renewable or convertible by attained age.
No Cash Value = no loans and withdraws.
Level:
Death Benefit also not fluctuates.
Premium change only when renews - attained by the age.
Annually Renewable Term (ART):
Purest form of Term - Level death benefit.
Automatically renew - without proof of insurability.
Premium increases according to the attained age.
Decreasing Term:
Face Amount (Death Benefit) decreases and premium remains the same.
Used to cover mortgage or other debts on a premature death.
Convertible but not renewable.
ROP - Return of Premium.
Increasing term.
If death occurs or beneficiary outlives the policy term.
Variable
Adjustable Life
Adjust the premium, face amount and period of protection. So can covert from termo whole life and vice versa.
Changing to a lower premium or increasing the death benefit will usually require proof of insurability.
Cash Value: Fixed rate of return; general account.
Policy Loans: Can borrow cash value
Universal Life
Also known as Flexible premium adjustable life.
More flexible premium payment even skipping as long as that is enough cash value to cover the monthly deductions.
Minimum Premium payment to keep the policy perform annually.
Target Premium is to make the the policy permit throughout its lifetime.
Always annually renewable.
Premium + Interest = Cash Value - Insurance Costs - Term Policy - Withdraws.
Partial Withdraw with limits of amount and time do it.
The insured can opt by increasing the cash value over the time and decreasing the Pure Insurance but need to maintain a IRS corridor to not lose tax advantages associated with insurance.
Whole Life
Fixed Premium and Death Benefit.
Investment based product.
Cash Value oscillates with the investment performance.
Variable Life
Whole life with:
Flexible Premium payment but less flexible than Universal.
Flexible insurance amount.
Cash Withdraws or policy loans.
Not return guaranteed by the investments as they are unlimited.
Securities version of the Universal Life.
Dually regulated by state and federal gov.
Securities and Exchange Commission, Financial Regulatory Authority and Insurance Department licenses to sell those products.
Interest - Sensitive Whole Life
Known as current assumption lfe.
Guaranteed death benefit to age 100.
Premium oscillates due the interest rates of the market.
Whole life with current interest rates which allow cash value accumulation or shorter premium payment period.
Indexed Life
Cash value indexed by equity - S&P 500.
Althought guaranteed minimum interest rate.
Face Amount increases annually following the consumer Price index/inflation.
-Policyowner accepting the risk of inflation premium increase.
Flexible:
Flexible and unique premium payments and investment.
Combination Plans and Variations
Joint Life
Single policy for 2 lives or more.
Like regular whole life with 2 exceptions.
Premium based on a joint average age.
Death benefit is paid upon the first dead only.
Also for business partners for funding of a buy - sell agreement.
Suvivorship Life
Same as Joint Life but premium paid is only after second die.
Offset the liability of the estate tax upon death.
Premium would be lower considering life expectancy’s higher due the second death.