Free Study Guide PDF - Life Insurance Terms

Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary As you work through this chapter, make sure to grasp the following important terms: Industrial Life Insurance - This type of insurance provides small face amounts, typically around $1,000 or $2,000. - Premiums are collected by debit agen...

Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary As you work through this chapter, make sure to grasp the following important terms: Industrial Life Insurance - This type of insurance provides small face amounts, typically around $1,000 or $2,000. - Premiums are collected by debit agents and are due on a weekly basis. - Industrial life policies were primarily designed to cover funeral expenses. - Example: - A worker purchases an industrial life insurance policy with a face amount of $2,000 to ensure that their funeral expenses are covered. The policyholder pays a small weekly premium, which is collected by a debit agent who visits their home. Ordinary Life Insurance - Ordinary life insurance is offered by commercial insurers and is not based on weekly premiums. - It includes various forms of individual life insurance, such as term life (temporary) and whole life (permanent) policies. - Example: - A 35-year-old individual purchases an ordinary life insurance policy from a commercial insurance company. They choose a whole life insurance option, which provides permanent coverage with fixed premiums and a savings component. Unlike industrial life insurance, they pay premiums monthly rather than weekly, and the policy remains in effect for their entire life, as long as premiums are paid. Group Life Insurance - Group life insurance covers members of a defined group, such as employees of a company, members of an association, or union workers. - The coverage is provided under a single master contract, with underwriting based on the group as a whole rather than on individual members. - A key benefit of group life insurance is that it typically does not require proof of insurability. - Example: - A large corporation offers group life insurance to its employees as part of their benefits package. Each employee is automatically covered under the company's master policy, without needing to provide any medical information or proof of insurability. The insurance covers all eligible employees equally, and the company is responsible for the premiums. This allows employees to receive life insurance coverage without going through individual underwriting. Term Life Insurance - Provides the maximum coverage for a specific period (the "term"). - The policy ends at a predetermined date (TERMination date), and no benefits are paid if the insured survives the term. - Term insurance is a cost-effective option, which makes it appealing for larger policies. - Term insurance is typically the most affordable type of pure life insurance due to its temporary nature and lack of cash value. It is consistently more affordable than a whole life policy with an equivalent face value. This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary - It offers pure death protection, meaning the death benefit is only paid if the insured dies during the policy period. - Example: - A 40-year-old individual purchases a 20-year term life insurance policy with a face value of $500,000. The policy provides the greatest amount of coverage at a low cost because it has no cash value and only pays out if the policyholder passes away during the 20-year term. Since the policy is designed purely for death protection and will terminate after 20 years, it is significantly cheaper than a comparable whole life policy with the same face value. Term Life Insurance - Provides the maximum coverage for a specified amount of time, making it suitable for temporary protection. - It is valid only for a specific time frame due to its TERMination date. - Term insurance is more affordable compared to other life insurance types, making it attractive for larger policies. - Term life insurance is the most affordable form of pure life insurance. Since it has a set expiration date and no cash value component, it is consistently less expensive than a whole life policy with an equivalent face value. - Offers pure death protection, meaning a death benefit is only paid if the insured dies within the policy's term period. - Example: - A 30-year-old individual buys a 10-year term life insurance policy with a face value of $1,000,000. The policy offers a large amount of coverage at a low premium because it only provides pure death protection and does not accumulate cash value. If the insured dies within the 10-year term, the death benefit will be paid to the beneficiaries. However, if the insured outlives the term, the policy expires without paying any benefit, making it a more affordable option than whole life insurance. Level Term Insurance - Also known as level premium term, it features a level face amount and level premiums throughout the policy period. - Premiums are typically higher than those for annual renewable term insurance because they remain fixed for the entire term. Premiums will increase upon renewal. - It is designed to cover specific needs for a set period of time at the lowest possible premium. - Like all term insurance, level term policies expire at the end of the policy period. - Level term offers a consistent, low premium in return for coverage over a predetermined time period. - Example: - Sarah, a 40-year-old, wants life insurance coverage for the next 20 years, until she retires. She chooses a 20-year level term life insurance policy with a face value of $250,000. The policy has a fixed premium that remains the same throughout the 20-year period. This allows Sarah to pay a consistent, affordable premium while ensuring that her beneficiaries are protected if she passes away during her working years. If Sarah outlives the policy, it will expire at the end of the 20 years, and no death benefit will be paid. This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary Decreasing Term Insurance - Offers a face amount that decreases over time, while premiums remain constant. - Primarily used for mortgage or debt protection, where the outstanding balance decreases over time until they are fully paid. - A decreasing term policy is a type of life insurance where the death benefit gradually reduces over time (based on a set schedule) and is designed for a specific term. - Example: - Mark takes out a 15-year decreasing term life insurance policy to protect his 15-year mortgage. Each year, as Mark pays down his mortgage, the face amount of the policy decreases to match the remaining balance. The premiums, however, remain level throughout the policy’s term. If Mark passes away during the policy period, the death benefit will cover the outstanding mortgage balance. Once the mortgage is fully paid off, the policy expires. Credit Life Insurance - Typically uses a decreasing term life insurance policy, where the policy term matches the loan period, and the face value decreases alongside the loan balance. - The purpose is to cover the life of a debtor, ensuring the loan is paid off if the debtor passes away before fully repaying it. - It’s only possible to purchase a credit policy in an amount that equals or is less than the outstanding debt or loan. - Example: - David takes out a $30,000, 7-year auto loan and purchases a 7-year decreasing term life insurance policy with an initial face value of $30,000. Throughout the term, his premiums remain level, but the face value of the policy decreases each year in line with his declining loan balance. If David were to pass away before the loan is fully repaid, the insurance policy would cover the remaining loan balance. Once the loan is paid off at the end of 7 years, the insurance policy will expire, as it was designed specifically to cover the auto loan. Increasing Term Insurance - Provides a death benefit that increases over time, either by a fixed amount or a percentage of the initial face value. - Example: - Lisa purchases a 10-year increasing term life insurance policy with an initial face value of $100,000. Each year, the face amount increases by 5% of the original face value, so after one year, the coverage amount becomes $105,000, and after two years, it increases to $110,000. This policy is designed to offer more protection as time goes on, ensuring that Lisa's beneficiaries receive a larger death benefit if she passes in the later years of the policy. Convertible Term Insurance - Convertible term insurance includes a provision that permits policyholders to change their term insurance into permanent coverage without needing to provide proof of insurability. - Convertible term insurance allows for temporary coverage that can later be switched to permanent insurance without needing to provide proof of insurability. This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary - Ideal for individuals who initially want lower premiums but later seek permanent coverage as their financial situation improves. - For instance, if you purchase a term insurance policy while you are young to benefit from lower premiums and good health, but wish to convert it to permanent coverage later for final expense benefits when your financial situation improves, a convertible term life policy would be ideal. - A group term life policy’s conversion privilege enables an individual to transition from the group term (temporary) coverage to an individual (permanent) plam without needing to prove insurability. - When deciding whether to convert term insurance based on the insured's attained age or original age, the most crucial factor to consider is the premium cost. The primary element affecting life insurance premiums is the insured's current or attained age. - For instance, a $30,000 policy for a healthy 10-year-old will be significantly cheaper than a similar policy for a 60-year-old. - When converting a term policy, whether individual or group, your insurability is guaranteed, but the premium will be calculated based on your current age rather than the age you were when you first obtained the policy. - Convertible term insurance allows you to switch to permanent coverage without needing to prove insurability, but expect higher premiums due to your current age. - Example: - At 30, Jake buys a convertible term life insurance policy with 20 years of coverage. At 45, he decides to convert it to a whole life policy for permanent coverage. He doesn’t need to provide proof of insurability, but his premiums increase based on his attained age of 45 at the time of conversion. Renewable Term Insurance - Guarantees the right to renew the policy after the initial term expires, without requiring proof of insurability. - All term insurance policies have a final termination date after which renewal is no longer possible. - Example: - Sarah buys a 15-year renewable term life insurance policy. After the initial 15-year period ends, she chooses to renew the policy without providing proof of insurability. Although her premiums increase with each renewal due to her age, she can continue renewing the policy until she reaches the maximum age allowed by the insurer, at which point the policy will no longer be renewable. Annual Renewable Term Insurance - Provides coverage with a level face amount that renews on an annual basis. - The policy is guaranteed renewable each year without providing evidence of insurability. - Example: - Tom purchases an annual renewable term life insurance policy with a face value of $100,000. Each year, the policy automatically renews without requiring Tom to prove insurability. This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary Tom can continue renewing the policy each year, until he gets too old, as long as he pays the premiums. Term Rider - A type of life insurance that extends coverage to children under the policy of a parent. - Family plan policies often provide permanent coverage for the family head, while the spouse and children are covered through term riders. - Term riders are always structured as level term policies. - This option is more affordable than having separate policies for each family member. - For instance, the main policy may cover the father, while the spouse and children are attached as term riders. This allows for the entire family to be covered under a single policy by attaching additional family members to a primary policy. - Term riders also allow applicants to add extra coverage for themselves by attaching additional riders to the main policy. - Example: - John purchases a whole life insurance policy for himself and adds a term rider to cover his wife and children. This allows his entire family to be insured under one policy. His wife and children are covered by level term insurance through the rider, which is more affordable than purchasing separate policies for each family member. Whole Life Insurance - Death benefits are provided for the whole life of the insured. - Offers living benefits through the accumulation of cash values. - These policies typically mature when the policyholder reaches the age of 100 and usually have level premiums throughout the policy duration. - All whole life policies offer the same core benefits: permanent coverage until death or age 100, level premiums, and level death benefits with the accumulation of cash value. - The main difference between types of whole life policies lies in how the premiums are paid: - Some policies are paid all the way until death or age 100. - Others allow for a shorter premium payment period (e.g., a set number of years or until a specific age). - Certain policies may offer lower premiums in the beginning years to make them more affordable. - Whole life insurance is often compared to buying a house—once it’s fully paid, you still own it for life, with long-term value building over time. - Example: - Mary buys a whole life insurance policy with fixed premiums until age 100. The policy provides a death benefit for her entire life and builds cash value over time. Regardless of the payment method, the coverage lasts until death, with level premiums and cash value, much like buying a house that builds equity. Types of Whole Life Insurance: Whole Life – Straight Life Insurance This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary - Premiums are paid for the duration of the insured’s entire lifetime, with coverage continuing until death. In other words, premiums are payable for as long as the coverage remains in effect. - Similar to other whole life policies, straight whole life offers level premiums, a consistent death benefit, and cash value accumulation. - Whole life insurance also mandates that the insured be paid the face amount upon reaching age 100 (when the policy reaches maturity), if a death benefit has not already been disbursed. - If someone seeks a policy with a fixed premium and a benefit that is paid out either at death or upon reaching age 100, they should consider a whole life policy. - Straight whole life insurance provides coverage for your whole lifetime and allows you to distribute the cost evenly across your life. - Example: - Sarah purchases a straight whole life insurance policy with fixed premiums that are payable throughout her lifetime. The policy guarantees a level death benefit and accumulates cash value over time. If Sarah lives to age 100, the policy will pay out the face amount, or if she passes away before then, the death benefit will be paid to her beneficiaries. Whole Life – Limited Pay Insurance - Coverage remains in force until age 100 or the insured's death, whichever comes first, while premium payments are limited to a specific period. - While premiums are only paid for a designated time, the insurance protection extends for the insured's entire lifetime or until age 100. - For instance, if you purchase a 10-pay policy, premiums are paid for 10 years in a row, after which no further payments are required. Coverage is then guaranteed until death or age 100. - Ideal for those wanting to retire without ongoing premium payments, such as a 35-year-old who wants a policy with level premiums, permanent protection, and no premium payments after retirement at age 70. This applicant would select a paid-up-at-age-70 limited pay policy. - A limited pay life policy offers lifetime coverage with level premiums that are fully paid over a shorter, defined period. - Example: - Taylor buys a 10-pay whole life insurance policy. He makes premium payments for just 10 years. After this period, no additional premiums are required, but the insurance protection continues until Taylor’s death or age 100, whichever comes first. Whole Life – Modified - A whole life policy where the premium remains the same for the first 5 years, then increases in the 6th year and stays level for the rest of the policy period. - Offers the same features as standard whole life insurance, including fixed premiums, cash value accumulation, and a level death benefit. The key difference is that the insurance company doesn’t charge as much for the premiums in the initial 5 years, making it more affordable initially. - This policy is ideal for individuals who want the benefits of whole life insurance but need an affordable option during the early years. - Example: This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary - Emily, a college student, purchases a modified whole life insurance policy. For the first 5 years, her premiums are lower to fit her budget. After this period, the premiums increase and stay level for the remainder of the policy. This option allows Emily to benefit from whole life insurance while paying reduced premiums during her college years. Whole Life – Modified Endowment Contract (MEC) - A MEC is a whole life policy that exceeds the IRS limits on the amount of premium that can be paid into the policy while still being considered a life insurance contract. - It fails to meet the 7-pay test, which ensures that the policy is not over-funded. When a policy fails this test, it is classified as a MEC and loses its favorable tax treatment. - The 7-pay test discourages schedules for premium payments that would allow a policy to be paid up in less than seven years. - Once classified as a MEC, you have surpassed the maximum allowable premium for the policy to still qualify as a life insurance contract. - Example: - Jamie buys a whole life insurance policy and pays $15,000 in premiums over the first 5 years, with an annual premium of $2,000. Since Jamie has paid a total that exceeds the $14,000 limit (7 years × $2,000), the policy fails the 7-pay test and is classified as a Modified Endowment Contract (MEC) by the IRS. This results in the loss of favorable tax treatment for the policy. Joint Life Policy - A Joint Life policy insures two individuals and reduces premium costs by averaging their ages. - The policy pays out the face amount upon the death of the first insured person. - Similar to a joint checking account, where the account is shared between two people and the surviving person receives the full amount after the other passes away. - A policy that pays the face amount upon the death of the first of two insured people is known as a Joint Life Policy. - Example: - Alex and Taylor purchase a joint life insurance policy. The policy covers both individuals and offers a lower premium by averaging their ages. If Alex passes away, Taylor receives the full death benefit and the policy terminates, with Taylor no longer being insured under that policy. This type of policy pays out the face amount upon the death of the first insured person. Joint Survivor or Last Survivor Life Policies - Covers two individuals and reduces premium costs by averaging their ages. - Unlike a joint life policy, joint survivor or last survivor policies only pay out the death benefit after the second insured person dies. - These policies are designed to cover two people’s lives, but only pay the death benefit upon the death of the last insured individual. - Example: - Jordan and Casey purchase a joint survivor life insurance policy. The policy covers both individuals and offers lower premiums by averaging their ages. If Jordan dies first, the policy This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary provides no benefits until Casey also passes away. Only after the death of the last surviving insured, Casey in this case, will the policy pay out the death benefit. Family Maintenance Policy - Provides a monthly income to the beneficiaries from the date of the insured’s death until the end of a prespecified time period. - After the preselected period ends, the face amount of the policy is paid as a lump sum. - Family maintenance policies offer an income for a designated period, beginning from the moment of the insured's death. - Example: - If Sam wants a life insurance policy that provides a monthly income of $800 to his beneficiaries for 15 years after his death, and a lump sum of $25,000 at the end of that 15-year period, Sam should choose a Family Maintenance policy. This policy offers a regular monthly income starting from the insured’s death and pays out the face amount as a lump sum after the preselected period ends. Family Income Policy - Family income policies provide a regular income starting from the insured's death and continue for a predetermined period after the policy's issuance. - Example: - If Taylor buys a Family Income policy at age 45 with a 15-year rider period, and Taylor dies at age 50, Taylor’s family would receive a monthly income for 10 years from the date of Taylor’s death. This type of policy provides an income for a period specified at the time of purchase, starting from the insured’s death. Adjustable Life Policy - An Adjustable Life policyholder typically seeks this type of policy for the flexible premium options. - Offers flexibility with premiums and face amounts, allowing the policyowner to adjust both as their financial needs and goals change. - Combines elements of whole life and term life into one plan. - For a policyowner seeking flexibility in payment amounts and schedules, along with the ability to adjust the death benefit according to evolving life needs, an adjustable life policy would be ideal. - Adjustable life policies usually do not include dividends. - If the policyholder wishes to increase the face amount, they may need to provide proof of insurability. - Typically, customers who choose an adjustable life policy have a specific need for flexible premium payments. - Example: - Emma, who is self-employed and experiences fluctuating income, chooses an Adjustable Life policy to accommodate her varying financial situation. Initially, she opts for a lower premium to match her current budget. As her business grows and her income increases, Emma plans to This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary raise her premium and adjust the death benefit to align with her expanding financial goals and family needs. Universal Life Insurance - Universal life insurance features the ability to adjust both premiums and the death benefit. - Investment gains from the policy are typically allocated to the cash value, which the policyowner can use to manage the flexible features of the policy. - Ideal for customers who want the most choices and control over their policy, as universal life offers flexibility in both premium payments and death benefits. - Universal life policies leverage earnings to enhance the cash value and offer the policyholder the flexibility to adjust premiums and death benefits. - Example: - If Jordan wants a life insurance policy with flexible premiums and adjustable death benefits, and where investment gains contribute to the cash value, he should choose a Universal Life policy. This policy allows Jordan to adjust both premiums and coverage while the cash value grows based on investment performance. Variable Life Insurance - Variable life insurance policies necessitate that a producer hold valid FINRA and National Association of Securities Dealers (NASD) securities registration before selling any variable policy contract, including life insurance or annuities, due to their inclusion of regulated securities. - Known as interest-sensitive policies. - Variable life insurance policies generally feature a fixed premium, but their cash value and death benefits can change depending on how the underlying investments perform. - Investments for Variable Life policies often include mutual funds, stocks, and bonds. - Includes Variable Annuity, Variable Life, Variable Whole Life, and Universal Variable Life. - Ideal for those looking to offset inflation, as these policies allow for potential growth; however, the policyowner assumes all the investment risk, and returns are not guaranteed. - To sell any variable contracts, a person must hold both the appropriate FINRA securities registration and an insurance license. - Example: - If Alex is interested in a life insurance policy where the cash value and death benefits vary with the performance of investments like mutual funds and stocks, he should consider a Variable Life policy. Variable Life policies offer flexibility but involve investment risk, and the returns are not guaranteed. Variable Universal Whole Life (VUL) - Blends the features of Variable Life and Universal Life policies, enabling the policyholder to manage the investments as well as make adjustments to when premium payments are made and how much they are for. This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary - Ideal for someone who wants full control over their policy’s financial aspects, including selecting which investment accounts to fund, when premiums are paid, and where investment returns are allocated. - A Variable Universal Life Policy allows the policyholder to adjust both the premium payment schedule and amount, as well as make decisions about how the cash values are invested. - Example: - If Emma wants a life insurance policy where she can control not only the timing and amount of her premium payments but also how her cash value is invested—choosing between various investment accounts like mutual funds and stocks—she should consider a Variable Universal Life (VUL) policy. This type of policy combines the features of Variable Life and Universal Life, allowing Emma flexibility in both premium payments and investment choices. Equity Index Universal Life (Equity Indexed Life) Insurance - Blends the security and benefits of traditional life insurance with the potential for higher returns linked to an equity index (such as the Dow Jones Industrial Average). - Unlike a traditional whole life plan, this plan enables policyholders to tie accumulation values to an external equity index, such as the Nasdaq 100. - Typically, 80% to 90% of the premium is allocated to traditional fixed income securities, while the remaining portion is invested in contracts linked to a specific stock index. - Offers a guaranteed minimum interest rate, tax-deferred interest accumulation, and access to policy loans. - Designed to match or outpace inflation, these policies protect against downside market risk while offering the growth potential of the equity index. - Combines term life insurance with an investment component much like a universal life plan. - Death benefits are determined by the selected coverage amount and the policy's account value. - Example: - If Alex wants life insurance with both traditional benefits and interest tied to an equity index like the S&P 500, he should choose Equity Index Universal Life Insurance (EIUL). In this policy, most of the premium is invested in fixed income securities, with a portion linked to an equity index. It offers a guaranteed minimum interest rate, tax-deferred growth, and protection against market losses, combining term insurance with an investment component. Investor (Stranger) Originated Life Insurance Policy (S(I)OLI) - In an S(I)OLI policy, an investor benefits financially from the death of the insured, rather than a beneficiary with an insurable interest, which is typical in ordinary circumstances. - This arrangement involves the investor purchasing a policy on another person’s life with the intent to profit from that person's death. The investor becomes the policyowner, payor, and beneficiary. - In exchange, the insured often receives a living benefit, such as monthly payments, during their lifetime. - S(I)OLI policies are illegal, as they bypass the requirement for insurable interest in an insurance contract and allow the policyowner to profit from the insured's death. - Example: This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary - If Alex, an investor, purchases a $100,000 life insurance policy on Jamie, the insured, and names himself as the policyowner and beneficiary, Alex would receive the $100,000 benefit upon Jamie's death. Jamie, in exchange for allowing this policy, receives $500 a month. This type of policy, known as Investor-Originated Life Insurance (IOLI), is illegal because it bypasses the insurable interest requirement, allowing investors to profit from the death of someone they have no personal stake in. Cash Value - The cash value refers to the accumulated equity or savings within a whole life insurance policy. - Example: - Sarah has a whole life insurance policy with a cash value. After 10 years, her policy's cash value has grown to $15,000. She uses this amount to take out a loan for home renovations. Endowment Policy - An Endowment Policy provides for payment of the face value at the end of a specified period, upon reaching a certain age, or upon the insured's death before the specified period ends. - Example: - John purchases an endowment policy with a face amount of $50,000. The policy specifies a maturity period of 20 years. If John is still alive at the end of the 20 years, he will receive $50,000. If he dies before the 20 years are up, his beneficiaries will receive the $50,000. Face Amount Plus Cash Value Policy - A face amount plus cash value policy guarantees a payment that includes both the policy's face amount and an additional sum equivalent to the policy's cash value upon the insured's death. - Example: - Sarah has a life insurance policy with a face amount of $30,000 and a cash value of $5,000. If Sarah passes away, her beneficiaries will receive a total of $35,000, which includes both the face amount and the cash value of the policy. Juvenile Insurance - Life insurance policies written for children within certain age limits, typically while they are still under parental authority. - Example: - Emily takes out a juvenile insurance policy on her 5-year-old daughter, Sophie. The policy provides coverage for Sophie while she is under 18 and allows Emily to control the policy. Non-Medical Life Insurance - A type of life insurance that does not require the policyholder to undergo a medical exam, though it generally costs more than medically underwritten policies. - Insurers will evaluate the applicant's medical history and lifestyle to assess risk, even if no exam is required, and will adjust premiums accordingly based on the average risk. This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.  Module Two - Chapter Four Pt. 1 - Key Terms + Vocabulary - Example: - John decides to purchase a non-medical life insurance policy to avoid the hassle of a medical exam. The insurer reviews his medical history and lifestyle but does not require a physical examination. Because the insurer is covering a broader range of risks without individual medical assessments, the premiums are higher compared to policies that require a medical exam. Target Premium - A target premium is a recommended amount for Universal Life policies established to help indicate what is needed to maintain the policy under conservative estimates. - It does not ensure that there will be enough funds to keep the policy active indefinitely, including throughout the insured's lifetime. Example: - For a Universal Life policy, the insurer might suggest a target premium of $2,500 annually. This is an estimate to help keep the policy active, but it doesn’t guarantee coverage for life, as actual needs may vary. This document is the property of JustInsurance LLC and is protected by copyright law. Unauthorized reproduction, distribution, or transmission of this document, in whole or in part, is strictly prohibited without the prior written consent of JustInsurance LLC. Violators may be subject to legal action.