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8 Cards in this Set
- Front
- Back
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Renewable vs Non-Renewable Term Life. |
Renewable: policyholder is guaranteed the right to renew policy at end of term with no EOI. Right to renew usually limited to specific age (e.g., 70) Non-Renewable: policy expires @ end of term and policyholder has to apply again if they want continued coverage. Risk of higher premiums or denied coverage if health has deteriorated Renewable Policies tend to be more $$ than non-renewable. Added risk to the Insurer who may have to continue insuring someone with bad health |
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Renewable with Guaranteed Rates |
Guaranteed right to renew policy at end of term. New premiums will reflect the age of the Life Insured at renewal. Most policies have guaranteed schedule of renewal rates when policy is first issuedRe |
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Re-Entry Term with Adjustable Rates |
Renewable Policy that can be subject to two different renewal rate schedules. A guaranteed rate and lower rate that is adjusted for good health of Life Insured. Advantage: initial premium tends to be lower. Can be good deal if coverage is required for a term or two or has reasons to expect good health |
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Convertible Term-Life |
Option to convert term policy to perm life insurance at a future date. Does not require EOI - so can get lifetime protection even if no longer insurable. Conversion term life is more $$ than term insurance that doesn’t include conversion option because more risk for insurer. Insurer may restrict age at which conversion is permitted |
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Incontestability & Suicide provisions |
Under Mandatory Incontestability, insurer has 2 years to void policy if error in material fact (e.g., smoker status, health etc..) discovered in the application. Once incontestability period is over, policy becomes incontestable & insurer can only void policy if fraud is discovered. Suicide extension clause- usually 2 years New policy issued as result of conversion usually treated as extension of original policy so don’t need to satisfy the 2 years again. |
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Attained-Age vs Original-Age Conversions |
Attained age is the age on which the premiums are based. Depending on Insurer could be age of life insured as of last birthday, next birthday or nearest birthday. Attained-Age Conversion: Depending on convertible policy premiums for perm life may be based on attained age at time of conversion. Original-Age Conversion or retroactive conversion: some policies base perm life premiums on original age of life insured at time insurance contract was first issued. In this case, policy holder would have to pay a lump sum to insurer to catch up. Can be substantial so insurers usually don’t offer this option. |
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Using Term Insurance |
Should be considered temporary insurance- used for risks that will end before age 60-70. Short-Term Risks: short term risk of known duration e.g., short-term loan Decreasing Risks: risks that diminish over time e.g., mortgages or loans that are repaid over a known amortization period, meeting child support obligation after death Limited cash flow: don’t have cash flow to put towards a perm. policy at a certain time (e.g., young family) Maybe consider convertible policy which provides affordable Term life now and option to convert when finances permit |
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Term insurance premiums |
Term insurance premiums tend to be level overtime (with exception of increasing term insurance). Usually have option to pay monthly or annually Provinces/territories charge premium tax from 2% to 5% which is incorporated into the premiums.
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