Life Insurance Policies, Provisions, Options And Riders

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Industrial life

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Small face amounts such as $1000-$2000. Premiums paid weekly and collected by debit agents, they were designed for burial coverage.

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Group life

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Written for members of a group (place of employment/associations/unions). One master contract. Group underwritten as a whole. One benefit of group insurance is no evidence of insurability required.

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Ordinary life

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Made up of several types of individual life insurance, such as temporary (term), permanent (whole).

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Term life

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Insurance gives you the greatest amount of coverage for a limited period of time.

Inexpensive, cheapest type of pure life insurance, cheaper that a whole life policy with the same face value.

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Level term

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Also called level premium, has a level face amount and level premiums. Premiums increase at each policy renewal. Written to cover a need for a specific period of time at the lowest premium.

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Decreasing term

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Provides annually decreasing face amount over time with level premiums.

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Increasing term

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Provides increasing face amount over time base on specific amounts or a percentage of the original face amount.

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Convertible term

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Allows policy owners to convert their term insurance into permanent policies without showing proof of insurability.

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Renewable term

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Term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without proof of insurability.

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Annual renewable term

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Term coverage that provides a level face amount that renews annually.

Guaranteed renewable without proof of insurability.

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Term-rider

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Covers children under their parents policy.

A term rider is always level term.

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Whole life

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Insurance that provides death benefits for the entire life of the insured.

Matures at age 100 and normally has a level premium.

Provides living benefits such as cash value and policy loan.

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Straight life

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Basic whole life with level face amount and fixed premiums.

Premium payments made until death or age 100.

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Limited pay life

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Insured is covered for entire life but premiums are paid for a limited time.

As the premium payment period shortens, cash value increases faster and the fixed premiums are higher.

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Single premium whole life

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Allows the insured to pay the entire premium in one lump sum and have coverage their entire life.

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Modified whole life

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Low premiums in the early years and jumps to a higher premium in the later years and remains fixed thereafter.

Premiums increase just once.

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Graded whole life

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Premium increases yearly for a stated number of years and then remains level.

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Family plan policy

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These are designed to insure all family members under one policy.

Family head covered by permanent insurance and the spouse/children are included as level term riders.

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Family income policy

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Whole life and decreasing term.

Provides monthly income to beneficiary if death occurs during a specific period after date of purchase.

If the insured dies after specific period only the face amount is paid since decreasing term expires.

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Family income policy

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Whole life and decreasing term.

Provides monthly income to beneficiary if death occurs during a specific period after date of purchase.

If the insured dies after specific period only the face amount is paid since decreasing term expires.

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Family maintenance policy

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Whole life and level term (begins date of death).

Provides income to beneficiary for a selected period of time if insured died during that period. At the end of the income pay period the beneficiary receives the entire face amount. If an insured dies after the end of the selected period the beneficiary receives only the face value.

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Joint life

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Policy covers two or more people.

Pays a death benefit when one insured dies.

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Joint and survivor/ survivorship

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Covers two lives and benefit is paid upon death of the last insured.

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Credit life insurance

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Designed to cover the life of a debtor and pays the amount due on a loan if the debtor dies before repaying the loan.

Does not exceed the outstanding loan balance.

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Interest sensitive whole life

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Cash value can increase beyond the stated guarantee if economic conditions warrant.

Can increase face amount or use the extra cash value to lower premiums.

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Reinstatement

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Permits policyowner to reinstate policy that has lapsed as long as policyowner can provide proof of insurability and pays all back premiums, outstanding loans, and interest.

Reinstatement within 3 years after policy lapse.

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Incontestable clause

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Prohibits the insurer from questioning the validity of the contract after a certain period of time.

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Misstatement of age or sex

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Allows the insurer to adjust policy benefits if the insureds age or sex is misstated on the application.

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Adjustable life policies

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Distinguished by their flexibility that comes from combining term and whole life into a single plan.

Allows you to vary your coverage as your needs change without proof of insurability.

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Universal life

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A variation of whole life insurance l, characterized by considerable flexibility.

Policy-owner determines the amount and frequency of premium payments which will adjust the policy face amount.

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Equity index universal life insurance

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Policy holders ties accumulation values to a stock market index.

Contains a minimum guaranteed fixed interest rate.

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Modified endowment contract

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A policy that is overfunded.

Loses favorable tax treatment.

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Variable whole life

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Created to help offset the effects of inflation on the death benefits.

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Variable universal life

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Builds cash value.

Owner has variable component of investing in separate accounts and universal component of flexibility in premium payments.

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Insuring clause

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Insurers basic promise to pay specified benefits to a designated person in the event of a covered loss.

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Consideration clause grace

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A policy owners consideration consists of completing the application and paying the initial premium.

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Grace period

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Period of time policyowner has to pay an overdue premium.

30 days

The beneficiary receives face amount minus overdue premiums