Cfp - Insurance - Unit 3

Front 1

Modified Premium Whole Life

Back 1

premiumsare lowerfor initial years after policy issue (usually no more than the firstfive years) and then increase once thereafter

Front 2

Ordinary (Straight) Life

Back 2

basedon the assumption that the insured will pay the premiums on the policy untileither death or age 100.

→ maximumpermanent death benefit for the lowest

Front 3

Limited-Pay Whole Life

Back 3

premiumsare payable only for a limited number of years, after which the policy becomespaid up for its stated face amount

Front 4

Single Premium Whole Life

Back 4

policyfor which all future premiums due are paid in one up-front lump sum

Front 5

Types of Whole Life Insurance

Back 5

Modified Premium Whole Life

Ordinary (Straight) Life

Limited-Pay Whole Life

Single Premium Whole Life

Front 6

Convertible Term

Back 6

maybe converted to a cash value type of policy without evidence ofinsurability.

Front 7

Reentry Term

Back 7

insurancecompany may renew coverage at a lower premium rate than the guaranteed renewalrate, provided that, at the time of renewal, the insured furnishes satisfactoryevidenceof continued insurability.

Front 8

Annual Renewable Term (ART)

Back 8

isissued for (and provides protection for) only one year, but the policy owner ispermitted to renew the policy for subsequent periods to a stated age withoutevidence of insurability. Premiums increase each year as the insuredages

Front 9

Decreasing Term

Back 9

alevel premium with a decreasing death benefit.

→· mortgageprotection insurance

Front 10

Level Term

Back 10

hasa level death benefit and a fixed annual premium for a stated period

Front 11

Cash surrender value option

Back 11

allowsthe owner who discontinues premium payments to surrender the policy and receiveits net cash value

· Lesssurrender charges and policy loans

· Mayincur a tax liability on at least part of the cash value accumulation

· losesthe income-tax-free death benefit

Front 12

Reduced paid-up insuranceoption

Back 12

netcash value of the original policy is used as a net single premium to purchase alesser amount of fully paid-up insurance

Front 13

Extended term insuranceoption

Back 13

usesthe net cash value as a net single premium to purchase a paid-up term insurancepolicy

Front 14

Dividends→ Cash option

Back 14

receivea check on the policy's anniversary date equal to the amount of the dividenddeclared

Front 15

Dividends→ Paid-up additions

Back 15

Dividendsare used to purchase additional paid-up insurance coverage (increases deathbenefit)

Front 16

Dividends→ One-year term insuranceoption

Back 16

usedto purchase one-year term insurance

Front 17

Dividends→ reduce premium

Back 17

appliedto reduce the amount of annual premiums on the policy

Front 18

Dividends→ accumulate at interest

Back 18

dividendsare left with the insurance company to accumulate interest. The amountaccumulated is then added to the death benefit

Front 19

1) Fixed-period installments -

Back 19

The proceeds (principal and interest) are paid over a specified period or term

· interest portion of the payment would be taxable

· use the exclusion ratio to determine the nontaxable portion

Front 20

1) Fixed amount installments -

Back 20

proceeds are paid at a set dollar amount per month until all of the principal and interest are exhausted

Front 21

1) Interest only option -

Back 21

proceeds of the policy are retained by the insurer and reinvested and only the interest is paid to the beneficiary

Front 22

1) Life income -

Back 22

1. Life annuity with period certain - beneficiary is paid a specified amount of money periodically for life, but the payments are guaranteed for a certain number of periods

2. Life annuity with refund - beneficiary is paid income periodically for life

Front 23

1) Cash option -

Back 23

the beneficiary elects to receive the promised benefit in a lump sum

Front 24

Policy Riders – (D-A-G-A)

Back 24

Disability waiver ofpremium

Guaranteed insurabilityoption

Accidental death benefit(double indemnity clause)

Accelerated death benefit

Front 25

Disability waiver of premium

Back 25

1) preventsthe policy from lapsing as a result of nonpayment of premiums during theinsured's disability

Front 26

Guaranteed insurability option

Back 26

Theinsured may purchase additional insurance, regardless of insurability, atspecified intervals up to a specified maximum age.

Front 27

Accidental death benefit (double indemnity clause)

Back 27

paysan additional death benefit if the insured dies accidentally (e.g., in a planecrash).

Front 28

Accelerated death benefit

Back 28

allowsthe policyowner to receive a portion of the policy's death benefit during theinsured's lifetime if the insured contracts a terminal illness