Life and Health Insurance Policies Flashcards

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.