3.Types Of Life Policies.pdf - 12/6/2020 The Exam Simulator...

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Types Of Life Policies
Now that you have studied general life insurance concepts, you
are ready to learn about the different types of life insurance
policies. By the end of this chapter, you will know the major types
of life insurance policies, their characteristics and functions, and
who would be best served by each type. As you are reading about a policy, ask
yourself what makes this type of policy different from the others. The process of
determining the suitability of certain policies for different life situations can make
it easier for you to distinguish between the many types of policies covered in this
chapter.
TERMS TO KNOW
Accumulate — build up
Attained age — the insured's age at the time the policy is renewed or replaced
Cash value — a policy's savings element or living benefit
Deferred — withheld or postponed until a specified time or event in the future
Endow — to have the cash value of a whole life policy reach the contractual face amount
Face amount — the amount of benefit stated in the life insurance policy
Fixed life insurance products — contracts that offer guaranteed minimum or fixed benefits
Lapse — policy termination due to nonpayment of premium
Level premium — the premium that does not change throughout the life of a policy
Nonforfeiture values — benefits in a life insurance policy that the policyowner cannot lose even if
the policy is surrendered or lapses
Policy maturity — in life policies, the time when the face value is paid out
Securities — financial instruments that may trade for value (for example, stocks, bonds, options)
Variable life insurance products — contracts in which the cash values accumulate based upon a
specific portfolio of stocks without guarantees of performance
There are many types of life insurance products available for consumers.
Although all life insurance products offer death protection, each type also
includes its own unique features and benefits and is designed to serve different
insureds’ needs.
Regarding the length of coverage, all life insurance policies fall into 2 categories:
temporary and permanent protection.
A. Term Life
Term insurance is temporary protection because it only provides coverage for a
specific period of time. It is also known as pure life insurance. Term policies
provide for the greatest amount of coverage for the lowest premium as compared
to any other form of protection. There is usually a maximum age above which
coverage will not be offered or at which coverage cannot be renewed.
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Term insurance provides what is known as pure death protection :
If the insured dies during this term, the policy pays the death benefit to the
beneficiary;
If the policy is canceled or expires prior to the insured's death, nothing is payable
at the end of the term; and