Life Insurance: Premiums & Policies

Single Premium Policy

• Requires only one premium payment

Policy Fee

• A fixed amount added to the premium of a given policy regardless of its size

Calculating Premiums

• To be able to calculate the required premiums for a given policy, the agent must know all of the applicant's options

Premium Calculation

• The annual premium is multiplied by a conversion factor for the mode of payment desired

Life Insurance Contract

• When a father enters into a life insurance contract on behalf of his child, the father is the applicant-owner

Term Insurance

• The convertible feature of a term insurance policy provides that the policy may be changed to a permanent insurance policy without evidence of insurability

Life Insurance Policy

• If, within two years of buying a life insurance policy, death occurs accidentally when your car hits a tree, the insurance company will pay the face amount

Dividends

• When explaining dividends, inform consumers that they are not guaranteed

Premium Paid

• Part of the premium paid by a policyholder is invested by the insurance company and, in premium computation, this factor is known as interest

Life Insurance Contract Parties

• The parties involved in a life insurance contract are the insurance company and insured

Economic Losses and Insurance

• The fundamental advantage of insurance is that, as a means of dealing with economic losses, these losses are spread over a large number of people

Life Insurance Contribution

• Insurance contributes directly to the welfare and progress of the country by all of the following: accumulating capital for investment in commerce and industry, partially relieving the community of the care of dependents and encouraging provisions for the future

Mortality Table

• The number of years that persons at a given age will live on the average is called life expectancy

Insurance Plan

• An insurance plan which offers both protection and savings is called a permanent plan has both protection and savings

Insurance Protection

• A man with moderate means can have maximum protection possible thanks to term insurance.

Recommended Policy

• It is recommended that Juan Valdez take out a participating policy that will enable him to receive dividends yearly

Life Insurance Protection

• Ordinary life insurance can provide the longest protection

Individual Policy

• An individual at age 35, purchases a policy under which he will, in 20 years, receive the face amount of the policy himself if he is still alive at that date, his policy is obviously a 20 year endowment

20 Life Policy

• A 20 life policy, protection, is until age 100 and payment of premium is for 20 years

Participating Plan

• A participating plan entitles the policyowner to receive a return of excess premium, known as dividends

Insurance Policies

• Rose Cortez owns a policy which does not provide for the build up of cash values and whose premiums remain level, she owns level term insurance

Term Insurance Features

• Two attractive features of a Term insurance are convertibility and renewability

Term Insurance Feature

• A term insurance features convertibility, which allows the policyowners to convert it to a permanent insurance within a specified period without evidence of insurability

Term Policy

• A term policy only offers protection

Term/Permanent Plan

• Permanent plans provide both protection and savings while term plans offer protection only

Permanent Plans

• The savings element of permanent plans allows for the build up of cash values

Term Rider

• A term insurance added to a permanent plan

Optional Rider

• An optional rider is called waiver of premium that can be attached to a policy stopping further premium payment in the event of disability

Premium Waiver

• For the premium waiver to be effective, disability must be total and permanent

Disability Benefits

• Disability benefits are not paid for self-inflicted injuries

Income Policy

• Under the usual provisions of a disability income policy, Mr. Pedro Cruz, who became paralyzed as a result of jumping out of the window in an attempt to commit suicide, is not entitled to receive neither disability income nor waiver of premiums

Greater Coverage

• A person wanting a greater coverage for the least amount of premium has an option of attaching term insurance rider to a permanent life policy

Supplementary Benefit

• One supplementary benefit offered is a payor's benefit which is meant to provide a waiver of premium benefit in the event of death or disability of the person paying the premium

Life Insurance Policy

• If an insured is disabled and a life insurance policy is being continued in force through the waiver of premium, the dividends of the policy would continue as if the owner is paying the premium

Policy

• A policy with a minor as the proposed insured is called a juvenile policy

Life Insurance Policies

• Life insurance policies for which higher than standard premium rates are payable are said to be rated policies

Voluntary Choice

• Since the purchase of life insurance is a voluntary choice, the individual must meet certain standards of health and occupation

Life Insurance Premium

• The factor that would have the least effect on the premium charged for life insurance is income

Insurance Information Companies

• Insurance Companies have various sources of information about the insured; these are all of the following: application form, medical information bureau and inspection report

Anti-Selection

• Anti-selection occurs when persons in poor health wish to buy insurance

Risk Meaning

• In insurance, risk means hazard on people's lives

Application Information

• In an application, disclosed information must include every fact in knowledge that is material to the insurance

Classified Risks

• In insurance, risks are classified as standard, substandard and declined

Substandard Risk

• A risk is considered substandard based on occupation, moral character and family health history

Hazardous Occupation

• A hazardous occupation could be defined as all of the following: an occupation the duties of which expose the insured to a degree of danger of sustaining injury, an occupation in an unhealthy working condition exposing the insured to elements which can cause sickness, an occupation which exposes the insured to social hazards

Application Forms

• Statements in the application forms are representations

Confidential Report

• An agent filling up the Agent's Confidential Report must include all information he knows which are material to the application for insurance in the report

Hospital Confinement

• Roel Reyes, who has been confined in a hospital 3 years prior to his application for insurance, must give the attending doctor, diagnosis, date of confinement

Insurance Companies

• Insurance companies have a source of confidential medical information on applicants for life insurance, known as, medical impairment bureau

Companies

• Insurance companies which are owned by the policyowners are examples of mutual companies

Stock Companies

• Stock companies are owned by stockholders

Policy Basis

• The completed application is the basis of the policy contract and the company may accept or reject an application based on the information given in the application

Insurance Statements

• It is true that all information about a client or a prospective client has to be treated as confidential

Incorrect Statement

• Any verbal statement made by the agent to the application is not part of the entire contract between the policyowner and insurnace company

Life Insurance

• Life insurance is a cooperative risk-sharing plan

Insurance Income

• A life insurance company earns income from two main sources: premium income and investment income

Insurance Official

• The official who makes the necessary assumption and calculation with respect to the principal elements of life insurance premium in order to arrive at the premium rates to be charged is the actuary

Loading

• Term loading means the difference between the gross and net premiums to pay the insurance overhead expenses including commissions and taxes

Life Insurance Money

• Life insurance can provide money when income stops because of all of the following: disability, death and retirement

Elements Of Life Insurance Premium

• The three elements that make up a life insurance premium are mortality experience, investment earnings and operating expense

Overview of single premium policies and policy fees in life insurance. Covers premium calculation methods and the roles within a life insurance contract. Explains convertible term insurance and payouts.