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Definition
cash needed for burial expenses, uninsured medical bills, and taxes
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Term
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Definition
a 1-2 year period in which the family adjusts to its new living standard
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Term
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Definition
is the period until the youngest child reaches age 18 |
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Term
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Definition
| refers to the period from the time that Social Security survivor benefits terminate to the time the benefits are resumed |
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Term
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Definition
| provides temporary protection |
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Term
| Cash-value life insurance |
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Definition
has a savings
component and builds __cash values____ |
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Term
| Most term policies are _______, which means the policy can be exchanged for a cash-value policy without evidence of insurability |
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Definition
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Term
| Under the _______, the premium charged for the new policy is based on the insured’s attained age at the time of conversion |
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Definition
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Term
| Under the _________, the premium charged for the new policy is based on the insured’s original age when the term insurance was first purchased |
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Definition
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Term
| Yearly-renewable term insurance |
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Definition
| is issued for a one-year period |
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Term
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Definition
| provides protection to age 65, at which time the policy expire |
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Term
| decreasing term insurance |
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Definition
| policy, the face value gradually declines each year |
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Term
| Term insurance is appropriate when |
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Definition
O the amount of income that can be spent on life insurance is limited
o The need for protection is temporary
o the insured wants to guarantee future insurability |
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Term
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Definition
is a cash value policy that provides lifetime protection
o A stated amount is paid to a designated beneficiary when the insured dies, regardless of
when the death occurs |
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Term
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Definition
is a level-premium policy that provides
lifetime protection
o premiums are level throughout the premium paying period
o The excess premiums paid during the early years are used to supplement the
inadequate premiums paid during the later years of the policy. It is referred to as a
_legal reserve_
o The insurer’s legal reserve is a liability that must be offset by sufficient financial assets |
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Term
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Definition
| is the difference between the legal reserve and the face amount of coverage |
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Term
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Definition
A policy holder overpays for insurance protection during the early years,
resulting in a legal reserve and the accumulation of cash values
. because of the loading for expenses and high first-year acquisition costs, cash values are initially below the legal reserve
. The policy owner has the right to borrow the cash value or exercise a cash
surrender options
o ordinary life policy is appropriate when lifetime protection is needed |
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Term
| limited-payment life insurance |
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Definition
policy, the insured has
lifetime protection, and premiums are level, but they are paid only for a certain period |
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Term
| single-premium whole life |
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Definition
policy provides lifetime
protection with a single premium |
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Term
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Definition
is a fixed-premium policy in which
the death benefit and cash values vary according to the investment experience of a separate
account maintained by the insurer
o the premium is level
o The entire reserve is held in a separate account and is invested in common stocks or
other investments
. if the investment experience is favorable, the face amount or insurance is increased
o Cash surrender values are not guaranteed
. although the insurer bears the risk of excessive morality and expenses, the policyholder bears the risk of poor investment results |
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Term
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Definition
is a flexible premium policy that
provides lifetime protection
o After the first premium, the policyholder decides the amount and frequency of
payments
.most policies have a target premium, but the policy owner is not obligated to pay it
o The protection and savings components are unbundled
. The policyholder’s statement shows the premiums paid, death benefit, and
value of the cash value account
. it also shows the mortality charge and the interest credited to the cash value account
o Universal life provides considerable flexibility
. cash withdrawals are permitted
.policies receive favorable federal income tax treatment |
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Term
| Limitations of universal life policies include |
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Definition
.insurers can advertise misleading rates of return
. Cash-value and premium-payment projections based on higher interest rates
are misleading and invalid
.insurers can increase the current mortality charge to recoup expenses
. A policy may lapse because some policy owners do not have a firm commitment to pay premiums |
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Term
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Definition
is an important variation of whole life
insurance
o most are sold as an investments
o Similar to universal life except that:
. the policy owner decides how the premiums are invested
. The policy does not guarantee a minimum interest rate or minimum cash value |
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Term
| relatively high expense charges |
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Definition
| including front-end loads for sales commissions, back-end surrender charges, and investment management fees |
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Term
Historically, _______ was a class of life insurance that was issued in small amounts and an agent of the company collected the premiums at the insured’s home
O also known as home service life insurance |
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Definition
| industrial life insurance |
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Term
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Definition
is protection for installment sales (ex: autos)
o Premium incorporated into the payment for the item purchased
o decreasing term |
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Term
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Definition
| provides life insurance on a group of people in a single master contract |
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