Attained age

— the insured's age at the time the policy is issued or renewed

Cash value

— a policy's savings element or living benefit

Face amount

— the amount of benefit stated in the life insurance policy

Deferred

— withheld or postponed until a specified time or event in the future

Endow

— the cash value of a whole life policy has reached the contractual face amount

Level premium

— the premium that does not change throughout the life of a policy

Liquidation of an estate

— converting a person's net worth into a cash flow

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)

What are the two classifications of annuities according to the time when annuity payments begin?

Immediate and deferred

General characteristics

**Pure protection **Lasts for specific term **No cash value

Level Premium Term

Level death benefit and level premium

Annually Renewable Term

**Renews each year without proof of insurability **Premiums increase due to attained age

Decreasing Term

Coverage gradually decreases at predetermined times; best used when the need for protection declines from year to year

Features of Term Policies

**Renewable - renew the policy without evidence of insurability **Convertible - right to convert a term policy to a permanent policy without evidence of insurability

General characteristics

**Permanent protection **Guaranteed elements (face amount, premium, and cash value) until death or age 100 **Level premium **Cash value and other living benefits

Ordinary Whole Life (Continuous Premium)

**Basic policy **Level death benefit **Insured pays premiums for life or until age 100

Limited Payment

Premiums paid until a certain time; coverage in effect to age 100

Single Premium

Premiums paid in one lump sum; coverage continues to age 100

General characteristics

**Types of whole life insurance **Flexible premium

Universal Life

**An insurance component in the form of annually renewable term **2 death benefit options: Option A - level death benefit, and Option B - increasing death benefit **Can make partial surrender/cash withdrawal

Variable Life

**Fixed premium, minimum death benefit **Cash value and the actual amount of death benefit are not guaranteed **Assets in separate accounts **Agents must be dually licensed in insurance and in securities Combination Plans Joint Life:

Combination Plans

Joint Life: - Premium is based on the joint average age of the insured - Death benefit upon the first death only Survivorship Life: - Premium is based on the joint average age of the insured - Death benefit upon the last death

Phases

**Accumulation (pay-in) - payments made into the annuity **Annuitization (pay-out) - payments made to the annuitant from the annuity

Parties

**Annuitant - insured (must be a natural person); annuity issued on annuitant's life **Beneficiary - will receive any amount contributed to annuity (plus any gain) if annuitant dies during accumulation period **Owner - has all rights to policy (usually annuitant); can be corporation or trust

Types of Annuities

**Fixed annuities - guaranteed, fixed payment amount; premiums in general account **Variable annuities - payment not guaranteed; premiums in separate account, and invested in stocks and bonds **Indexed annuities - interest rate tied to an index; earn higher rate than fixed annuities, not as risky as variable annuities or mutual funds

Premium Payments

**Single premium - ONE lump-sum payment; the principal is created immediately (both immediate and deferred annuities) **Periodic (Flexible) premium - multiple payments; the principal is created over time (used for deferred annuity only)

Income Payments

**Immediate - purchased with a single premium; income payments start within 12 months from the date of purchase **Deferred - purchased with either lump sum or periodic payments; benefits start sometime after 1 year from the date of purchase

Payout Options

**Lump Sum - received at annuitization **Life Only (Straight Life) - payments for the rest of annuitant's life; pays highest monthly amount **Refund Life Annuity - guaranteed lifetime income; upon annuitant's death, balance is "refunded" to beneficiary in cash or in installments **Joint Life - 2 or more annuitants receive payments until first death, then payments cease **Joint and Survivor - income for 2 or more that cannot be outlived; often used with period certain **Annuities Certain - payment guaranteed for fixed period or until certain fixed amount paid; no life contingencies

annuity

contract that provides income for a specified period of years, or for life.

Annuitant —

he person who receives benefits or payments from the annuity, whose life expectancy is taken into consideration, and for whom the annuity is written.

Joint life

single policy that is designed to insure two or more lives. Joint life policies can be in the form of term insurance or permanent insurance.

Joint life is based on?

joint average age and first death only.

major difference is that survivorship life pays on?

the last death

Adjustable life

developed in an effort to provide the policyowner with the best of both worlds (term and permanent coverage)

developed in an effort to provide the policyowner with the best of both worlds (term and permanent coverage) however?

changing to a lower premium type of policy will usually require proof of insurability