Life Insurance Policies Overview

A whole life insurance policy with the lowest annual premium, covering the policyholder until age 100.

Whole life insurance where premiums are paid for a limited time (e.g., 20 years or until age 65), providing coverage until age 100.

Whole life insurance with a single, lump sum payment that provides lifetime coverage until age 100.

A whole life insurance policy where cash value is linked to a specific equity index (e.g., S&P 500), with a guaranteed minimum interest rate.

The length of time during which a policyholder pays premiums for whole life insurance.

A portion of premiums accumulating throughout the policy's duration.

Policy benefits for individuals who need protection for a specific timeframe (e.g., until retirement).

A way to borrow money against cash value accumulated in a life insurance policy.

The lowest premium required to keep the policy active and functioning as annually renewable term insurance.

The recommended premium amount for a universal life policy to cover insurance costs and maintain coverage throughout the policy's duration.

If a premium is missed on a universal life policy, the missing amount can be deducted from the policy's cash value.

A universal life policy has both a guaranteed interest rate (usually 3-6%) and a potential (but not guaranteed) current market interest rate that is higher and not fixed.

A universal life policy has two main parts: an insurance component and a cash account.

The insurance component of a universal life policy is always annually renewable term insurance.

Policyowners have two choices: a level death benefit (Option A) or an increasing death benefit (Option B).

Option A. Death benefit stays the same while cash value increases.

The required gap between the death benefit and the cash value in a life insurance policy, as defined by the IRS.

A life insurance option where the death benefit increases each year by the amount the cash value increases.

A type of life insurance where the cash value fluctuates based on the performance of a specific investment portfolio.

The minimum amount guaranteed to be paid to the beneficiary in a variable life insurance policy, even if investments perform poorly.

The policyholder takes on the risk of investment performance in variable life insurance, not the insurer.

The insurance company's main pool of assets, where money from traditional life insurance policies is held.

Life insurance with guaranteed minimum or fixed benefits, not tied to investment performance.

Contracts that provide retirement income where the amount fluctuates based on the performance of investments.

A specialized account held by a life insurance company that invests in stocks, bonds, and other securities to support variable insurance products. It's legally separated from the insurer's general account, ensuring that assets are dedicated to variable policyholders.

A life insurance policy combining the flexible premium and cash value features of universal life with the investment component of variable life. This allows policyholders to invest premiums in mutual funds or sub-accounts within the separate account, offering potential growth but also investment risk.

While both offer flexibility, variable life focuses on investment growth through separate account funds, exposing you to market risk. Universal life offers a guaranteed interest rate on cash value but generally lower potential returns.

Variable life insurance products are regulated by both state insurance departments and federal agencies like the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) due to their investment component.

Agents selling variable life insurance must hold a combination of licenses: they need to be registered with FINRA (for securities), licensed by the state for life insurance, and have specific securities knowledge.

Group insurance differs from individual insurance in two key ways: 1) Evidence of insurability is typically not required for enrollment, and 2) Participants don't own the policy; they receive certificates of insurance. The group sponsor owns the master policy.

Group underwriting assesses the characteristics of the entire group, rather than individual members. Factors considered include group purpose, size, turnover, and financial strength.

A group seeking insurance must be formed for a reason other than just obtaining insurance. For example, an employer-sponsored health plan is formed for employment, not insurance.

Larger groups allow for more accurate predictions of future claims. This is based on the Law of Large Numbers, where a larger sample size leads to more reliable results.

Ideal group turnover involves younger, lower-risk members entering and older, higher-risk members leaving. This helps maintain a balanced risk profile.

Underwriters assess if the group can afford policy premiums and renew coverage. This is especially crucial for high group costs.

Group insurance costs are based on the average age of the group and the ratio of men to women. This helps account for different risk profiles.

To minimize adverse selection (high-risk individuals disproportionately joining), insurers require a minimum number of participants in the group. This helps distribute risk.

If a group life insurance policy terminates, individuals insured for at least 5 years are entitled to an individual policy from the same insurer.

The individual policy's death benefit cannot exceed the smaller of the insured's group policy coverage or $2,000.

If a person dies before converting their group policy to an individual policy, the death benefit payable is the amount they would have been entitled to under the individual policy.

Credit life insurance pays off the balance of a loan if the borrower dies, protecting the lender.

Credit life is typically written as decreasing term insurance, meaning the coverage amount decreases as the loan balance is paid down.

The creditor owns the master policy in a group plan, while each borrower receives a certificate of insurance.

Credit life insurance cannot pay out more than the outstanding loan balance.

While creditors can require borrowers to have life insurance, they cannot force them to use a specific insurer.