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Questions and Answers
What are the 3 basic types of coverage for life insurance?
What are the 3 basic types of coverage for life insurance?
What is Ordinary Life Insurance?
What is Ordinary Life Insurance?
Individual life insurance that includes many types of temporary and permanent insurance protection plans
What characterizes Industrial Life Insurance?
What characterizes Industrial Life Insurance?
Characterized by comparatively small issue amounts with premiums collected on a weekly or monthly basis
What is Group Insurance?
What is Group Insurance?
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What does Term Life Insurance provide?
What does Term Life Insurance provide?
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What are the 3 basic forms of Term Life?
What are the 3 basic forms of Term Life?
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What is Level Term Insurance?
What is Level Term Insurance?
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What is Decreasing Term Insurance?
What is Decreasing Term Insurance?
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Credit life insurance is based on decreasing term insurance.
Credit life insurance is based on decreasing term insurance.
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Decreasing term insurance is commonly used to protect an insured's mortgage.
Decreasing term insurance is commonly used to protect an insured's mortgage.
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What is Increasing Term Insurance?
What is Increasing Term Insurance?
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What are the two options on a term life policy to extend the coverage period?
What are the two options on a term life policy to extend the coverage period?
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What does the option to Renew in a term policy allow?
What does the option to Renew in a term policy allow?
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What is Annually Renewable Term (ART)?
What is Annually Renewable Term (ART)?
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What is the Option to Convert in a term policy?
What is the Option to Convert in a term policy?
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Can the option to renew and convert be combined in the same policy?
Can the option to renew and convert be combined in the same policy?
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Study Notes
Types of Life Insurance Coverage
- Three basic types of coverage: ordinary, industrial, and group insurance.
Ordinary Life Insurance
- Individual life insurance encompassing various temporary and permanent protection plans.
- Premiums can be paid monthly, quarterly, semiannually, or annually.
- Includes types such as whole, term, universal, variable life, and endowment policies.
Industrial Life Insurance
- Features small issue amounts (e.g., $1,000) with weekly or monthly premium collections.
- Designed for industrial workers or those unable to afford larger coverage amounts.
- Often marketed as burial insurance.
Group Insurance
- Coverage provided under one contract for employer-employee groups, associations, unions, and creditors.
- Underwriting based on the group as opposed to individual assessments.
Term Life Insurance
- Low-cost insurance providing coverage for a specified period (term).
- Benefits payable only if the insured dies during the term; there is no cash value.
- Example: A $50k 20-year plan pays $50k if the insured dies within the term; otherwise, there is no payout.
Basic Forms of Term Life
- Three main forms: level term, decreasing term, and increasing term insurance.
Level Term Insurance
- Maintains a fixed (level) amount of protection throughout the policy term.
- Features level premiums throughout the policy duration.
Decreasing Term Insurance
- Death benefits gradually decrease over the policy term.
- Premiums are level, as illustrated by policies declining in benefit from $50k to $0 over 20 years.
Credit Life Insurance
- Based on decreasing term insurance; sold to cover outstanding loan balances.
Increasing Term Insurance
- Provides a death benefit that increases at specific intervals during the policy term.
- Benefits may increase by specific amounts or percentages, often linked to a cost of living index.
- Typically purchased as a cost of living rider to a policy.
Options to Extend Term Life Coverage
- Two options available: renewal and conversion.
Option to Renew
- Allows for policy renewal before expiration without new proof of insurability.
- Renewed premiums will be higher due to increased risk; policies usually offer several renewal periods until a specified age.
Annually Renewable Term (ART)
- Provides one-year coverage, renewable each year without proof of insurability.
- Represents the most basic form of life insurance.
Option to Convert
- Permits exchange of a term policy for a whole life plan without evidence of insurability.
- Conversion may be based on either the insured's age at conversion or the original age at policy issuance.
- Specific limits on conversion timeframes can apply.
Combination of Renewal and Conversion Options
- Policies can combine both options, such as a 10-year convertible renewable policy allowing renewals until age 65 and conversion until age 55.
Re-entry Term Insurance
- Initially offers low premium rates for a set period, but renewal requires passing a medical examination at the re-entry date.
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Description
Explore essential concepts of life and health insurance through these flashcards. Learn about various types of coverage, including ordinary, industrial, and group life insurance policies. This resource is ideal for anyone studying life insurance fundamentals.
