280qr lesson 05
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Loma Life insurance pptTRANSCRIPT
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Lesson 5
LESSON FIVE *
LESSON 5
LESSON FIVE *
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LESSON FIVE *
All term life insurance products provide coverage for a specified period of time, called the policy term.
The policy benefit is payable only if
1. The insured dies during the specified term and
2. The policy is in force when the insured dies
If the insured lives until the end of the specified term, the policy may give the policyowner the right to continue life insurance coverage.
If the policyowner does not continue the coverage, then the policy expires and the insurer has no liability to provide further insurance coverage.
Characteristics of Term Life
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LESSON FIVE *
The length of the policy term varies considerably from policy to policy, and can be shown as either
Characteristics of Term Life
A specified number of years
For example, a policy may specify a term of 1 year, 5 years, 10 years, or 20 years (generally speaking, insurers seldom sell term life insurance to cover periods of less than 1 year).
A specified age the insured has reached
For example, a term insurance policy may cover an insured until age 65 (referred to as term to age 65).
Lesson 5
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LESSON FIVE *
By far, the most common plan of term insurance is level term life insurance, which provides a policy benefit that remains the same over the term of the policy.
Plans of Term Life
Insurance Coverage
Example: Under a 5-year level term policy that provides $100,000 of coverage, the insurer agrees to pay $100,000 if the insured dies at any time during the 5-year period that the policy is in force.
The amount of each renewal premium payable for a level term life insurance policy usually remains the same throughout the stated term of coverage.
3
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LESSON FIVE *
Decreasing term life insurance provides a policy benefit that decreases in amount over the term of coverage. The policy benefit begins as a set face amount and then decreases over the policy term according to a stated method in the policy.
Plans of Term Life
Insurance Coverage
Example: Under a 5-year decreasing term policy that provides a 1st year benefit of $50,000 and decreases by $10,000 on each policy anniversary, the insurer agrees to pay, while the policy is in force:
$50,000 if the insured dies during the 1st policy year
$40,000 if the insured dies during the 2nd policy year
$30,000 if the insured dies during the 3rd policy year
$20,000 if the insured dies during the 4th policy year
$10,000 if the insured dies during the 5th policy year
Coverage ends at the end of the 5th policy year.
3
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LESSON FIVE *
Insurance Coverage
The amount of each renewal premium payable for a decreasing term life insurance policy usually remains level throughout the policy term.
Insurers offer several plans of decreasing term insurance, including
Mortgage insurance
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LESSON FIVE *
mortgage insurance: a plan of decreasing term insurance designed to provide a benefit amount that corresponds to the decreasing amount owed on a mortgage loan
Plans of Term Life
Insurance Coverage
The term of a mortgage policy is based on the length of the mortgage, usually 15 or 30 years.
Renewal premiums are generally level throughout the term.
In most instances, the life insurance policy is independent of the mortgage—the institution granting the mortgage is not a party to the insurance contract.
The beneficiary is not required to use the proceeds of the policy to repay the mortgage.
3
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LESSON FIVE *
Insurance Coverage
If both insureds survive until the end of the stated term, the joint mortgage policy expires.
If one of the insureds dies while the policy is in force, the insurer pays the policy benefit to the beneficiary (typically the surviving insured).
joint mortgage insurance: a variation of mortgage insurance which provides the same benefit as a mortgage insurance policy except the joint policy insures the lives of two people
3
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LESSON FIVE *
credit life insurance: a type of term life insurance designed to pay the balance due on a loan if the borrower dies before the loan is repaid
Plans of Term Life
Insurance Coverage
Unlike mortgage insurance policies, credit life insurance policies always provide that the policy benefit is payable directly to the lender, or creditor, if the insured borrower dies during the policy’s term.
Although credit life insurance is available on an individual basis, most credit life insurance is sold to lending institutions as group insurance to cover the lives of the borrowers of that lender.
3
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LESSON FIVE *
Insurance Coverage
The amount of credit life insurance benefit payable is usually equal to the amount of the unpaid debt; as the amount of the loan decreases, the face amount of the coverage decreases.
Credit life insurance premiums may be level over the duration of the loan or, in cases in which the amount of the loan varies, may increase or decrease as the amount of the outstanding loan balance—and the corresponding policy benefit—increases or decreases.
Premiums for credit life insurance may be paid to the insurance company by the lender or by the insured borrower; in most cases, the borrower pays the premium to the lender, which then remits the premium to the insurer.
3
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LESSON FIVE *
family income coverage: a plan of decreasing term life insurance that provides a stated monthly income benefit amount to the insured’s surviving spouse if the insured dies during the term of coverage
Plans of Term Life
Insurance Coverage
The longer the insured remains alive during the term of coverage, the smaller the total amount of benefits the insurer will pay out.
Under some family income coverages, the insurer promises to pay the income benefit amount for at least a stated minimum number of years if the insured dies during the policy’s term.
3
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LESSON FIVE *
Increasing Term Life Insurance provides a death benefit that starts at one amount and increases by some specified amount or percentage at stated intervals over the policy term.
Plans of Term Life
Insurance Coverage
Example: Coverage starts at $100,000 and then increases by 5 percent on each policy anniversary date throughout the term of the policy.
The premium for increasing term insurance generally increases as the amount of coverage increases.
The policyowner usually has the option of freezing at any time the amount of coverage provided by the increasing term insurance.
3
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LESSON FIVE *
Term Life Insurance
If the policy gives the policyowner the option to continue the policy’s coverage for an additional policy term, then the policy is a called a renewable term insurance policy.
If the policy gives the policyowner the right to convert the term policy to a cash value policy, then the policy is referred to as a convertible term insurance policy.
Term life insurance policies often contain features that allow the policyowner to continue the life insurance coverage beyond the end of the original term.
Some policies, called renewable/convertible term insurance policies, contain both of these features.
3
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LESSON FIVE *
Evidence of insurability: proof that the insured person continues to be an insurable risk
The insured is not required to undergo a medical examination or to provide the insurer with an updated health history.
Often, all the policyowner must do to renew the policy is pay the renewal premium.
Renewable term life insurance policies include a renewal provision that gives the policyowner the right, within specified limits, to renew the insurance coverage at the end of the specified term without submitting evidence of insurability.
Renewable Term and Convertible
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LESSON FIVE *
Term Life Insurance
Under most renewable term insurance policies, the policyowner has the right to renew the coverage for the same term and face amount originally provided by the policy.
Example: A 10-year, $100,000 renewable term policy usually can be renewed for another 10-year period and for $100,000 in coverage.
Most insurers allow the policyowner to renew the policy for a smaller face amount and/or a shorter period than provided by the original contract, but not for a larger face amount and/or a longer period.
One-year term policies and riders are usually renewable, and such coverage is called yearly renewable term (YRT) insurance or annually renewable term (ART) insurance.
3
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LESSON FIVE *
Term Life Insurance
Often, the renewal provision places some limit on the policyowner’s right to renew. The most common limitations are:
Example: The renewal provision of a policy may specify that the coverage is not renewable after the insured has reached age 75. Another policy may specify that the coverage is renewable no more than three times.
The coverage may be renewed only until the insured attains a stated age
or
The coverage may be renewed only a stated maximum number of times
3
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LESSON FIVE *
Term Life Insurance
The renewal premium rate is based on the insured person’s attained age—the age the insured has reached (attained) on the renewal date.
As people age, mortality rates and the insured’s mortality risk increase.
As people age, renewal premium rates also increase.
The renewal premium rate remains level throughout the new term of coverage.
3
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LESSON FIVE *
The renewal feature can lead to antiselection.
Insureds in poor health are more likely to renew their policies because they may not be able to obtain other life insurance.
Because of this risk of antiselection, the premium for a renewable term life insurance policy is usually slightly higher than the premium for a comparable nonrenewable term life insurance policy.
3
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LESSON FIVE *
Term Life Insurance
Convertible term insurance policies contain a conversion privilege that allows the policyowner to change—convert—the term insurance policy to a cash value policy without providing evidence that the insured is an insurable risk.
Cash value coverage is available if the health of the person insured by a convertible term policy has deteriorated to the point that the person would otherwise be uninsurable.
The premium for the cash value policy cannot be based on any increase in the insured’s mortality risk, except with regard to an increase in the insured’s age.
3
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LESSON FIVE *
Term Life Insurance
As in the case of the renewal provision, the conversion privilege can lead to antiselection.
Insureds in poor health are more likely to convert their coverage because they may not be able to obtain other life insurance.
Because of this risk of antiselection, the premium for a convertible term life insurance policy is usually higher than the premium for a comparable nonconvertible term life insurance policy.
3
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LESSON FIVE *
After the insured attains a stated age
or
After the term policy has been in force for a specified time
Example: A 10-year term policy may not permit conversion after the insured has attained age 65 or may only permit conversion during the first 8 years of the term.
Conversion also may be limited to an amount that is only a percentage of the original face amount.
Example: A 10-year term policy may permit conversion of 100 percent of the face amount within the first 5 years of the 10-year term, and a smaller percentage, such as 50 percent, if the policy is converted during the last 5 years of the 10-year term.
3
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LESSON FIVE *
Term Life Insurance
Under an attained age conversion, the renewal premium rate is based on the insured’s age when the coverage is converted.
Under an original age conversion, the effective date of the cash value life insurance policy is considered to be the date on which the policyowner purchased the original term insurance policy; as a result, the premium rate for the cash value policy is based on the insured's age at the time the original term insurance policy was purchased.
Premiums for a converted policy depend on the type of conversion.
3
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LESSON FIVE *
Some of the typical personal needs that life insurance can meet are
Personal Needs
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LESSON FIVE *
Business Needs
Business continuation needs
A life insurance policy can provide funds to ensure that a business continues in the event of the death of an owner, partner, or other key person.
Employee benefit needs
A business can purchase life insurance to provide benefits for its employees.
© 2005 LOMA All Rights Reserved
Press “Esc” to return to main menu
Lesson 5
LESSON FIVE *
Lesson 5
LESSON FIVE *
LESSON 5
LESSON FIVE *
Press “Esc” to return to main menu
LESSON FIVE *
All term life insurance products provide coverage for a specified period of time, called the policy term.
The policy benefit is payable only if
1. The insured dies during the specified term and
2. The policy is in force when the insured dies
If the insured lives until the end of the specified term, the policy may give the policyowner the right to continue life insurance coverage.
If the policyowner does not continue the coverage, then the policy expires and the insurer has no liability to provide further insurance coverage.
Characteristics of Term Life
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LESSON FIVE *
The length of the policy term varies considerably from policy to policy, and can be shown as either
Characteristics of Term Life
A specified number of years
For example, a policy may specify a term of 1 year, 5 years, 10 years, or 20 years (generally speaking, insurers seldom sell term life insurance to cover periods of less than 1 year).
A specified age the insured has reached
For example, a term insurance policy may cover an insured until age 65 (referred to as term to age 65).
Lesson 5
Press “Esc” to return to main menu
LESSON FIVE *
By far, the most common plan of term insurance is level term life insurance, which provides a policy benefit that remains the same over the term of the policy.
Plans of Term Life
Insurance Coverage
Example: Under a 5-year level term policy that provides $100,000 of coverage, the insurer agrees to pay $100,000 if the insured dies at any time during the 5-year period that the policy is in force.
The amount of each renewal premium payable for a level term life insurance policy usually remains the same throughout the stated term of coverage.
3
Press “Esc” to return to main menu
LESSON FIVE *
Decreasing term life insurance provides a policy benefit that decreases in amount over the term of coverage. The policy benefit begins as a set face amount and then decreases over the policy term according to a stated method in the policy.
Plans of Term Life
Insurance Coverage
Example: Under a 5-year decreasing term policy that provides a 1st year benefit of $50,000 and decreases by $10,000 on each policy anniversary, the insurer agrees to pay, while the policy is in force:
$50,000 if the insured dies during the 1st policy year
$40,000 if the insured dies during the 2nd policy year
$30,000 if the insured dies during the 3rd policy year
$20,000 if the insured dies during the 4th policy year
$10,000 if the insured dies during the 5th policy year
Coverage ends at the end of the 5th policy year.
3
Press “Esc” to return to main menu
LESSON FIVE *
Insurance Coverage
The amount of each renewal premium payable for a decreasing term life insurance policy usually remains level throughout the policy term.
Insurers offer several plans of decreasing term insurance, including
Mortgage insurance
Press “Esc” to return to main menu
LESSON FIVE *
mortgage insurance: a plan of decreasing term insurance designed to provide a benefit amount that corresponds to the decreasing amount owed on a mortgage loan
Plans of Term Life
Insurance Coverage
The term of a mortgage policy is based on the length of the mortgage, usually 15 or 30 years.
Renewal premiums are generally level throughout the term.
In most instances, the life insurance policy is independent of the mortgage—the institution granting the mortgage is not a party to the insurance contract.
The beneficiary is not required to use the proceeds of the policy to repay the mortgage.
3
Press “Esc” to return to main menu
LESSON FIVE *
Insurance Coverage
If both insureds survive until the end of the stated term, the joint mortgage policy expires.
If one of the insureds dies while the policy is in force, the insurer pays the policy benefit to the beneficiary (typically the surviving insured).
joint mortgage insurance: a variation of mortgage insurance which provides the same benefit as a mortgage insurance policy except the joint policy insures the lives of two people
3
Press “Esc” to return to main menu
LESSON FIVE *
credit life insurance: a type of term life insurance designed to pay the balance due on a loan if the borrower dies before the loan is repaid
Plans of Term Life
Insurance Coverage
Unlike mortgage insurance policies, credit life insurance policies always provide that the policy benefit is payable directly to the lender, or creditor, if the insured borrower dies during the policy’s term.
Although credit life insurance is available on an individual basis, most credit life insurance is sold to lending institutions as group insurance to cover the lives of the borrowers of that lender.
3
Press “Esc” to return to main menu
LESSON FIVE *
Insurance Coverage
The amount of credit life insurance benefit payable is usually equal to the amount of the unpaid debt; as the amount of the loan decreases, the face amount of the coverage decreases.
Credit life insurance premiums may be level over the duration of the loan or, in cases in which the amount of the loan varies, may increase or decrease as the amount of the outstanding loan balance—and the corresponding policy benefit—increases or decreases.
Premiums for credit life insurance may be paid to the insurance company by the lender or by the insured borrower; in most cases, the borrower pays the premium to the lender, which then remits the premium to the insurer.
3
Press “Esc” to return to main menu
LESSON FIVE *
family income coverage: a plan of decreasing term life insurance that provides a stated monthly income benefit amount to the insured’s surviving spouse if the insured dies during the term of coverage
Plans of Term Life
Insurance Coverage
The longer the insured remains alive during the term of coverage, the smaller the total amount of benefits the insurer will pay out.
Under some family income coverages, the insurer promises to pay the income benefit amount for at least a stated minimum number of years if the insured dies during the policy’s term.
3
Press “Esc” to return to main menu
LESSON FIVE *
Increasing Term Life Insurance provides a death benefit that starts at one amount and increases by some specified amount or percentage at stated intervals over the policy term.
Plans of Term Life
Insurance Coverage
Example: Coverage starts at $100,000 and then increases by 5 percent on each policy anniversary date throughout the term of the policy.
The premium for increasing term insurance generally increases as the amount of coverage increases.
The policyowner usually has the option of freezing at any time the amount of coverage provided by the increasing term insurance.
3
Press “Esc” to return to main menu
LESSON FIVE *
Term Life Insurance
If the policy gives the policyowner the option to continue the policy’s coverage for an additional policy term, then the policy is a called a renewable term insurance policy.
If the policy gives the policyowner the right to convert the term policy to a cash value policy, then the policy is referred to as a convertible term insurance policy.
Term life insurance policies often contain features that allow the policyowner to continue the life insurance coverage beyond the end of the original term.
Some policies, called renewable/convertible term insurance policies, contain both of these features.
3
Press “Esc” to return to main menu
LESSON FIVE *
Evidence of insurability: proof that the insured person continues to be an insurable risk
The insured is not required to undergo a medical examination or to provide the insurer with an updated health history.
Often, all the policyowner must do to renew the policy is pay the renewal premium.
Renewable term life insurance policies include a renewal provision that gives the policyowner the right, within specified limits, to renew the insurance coverage at the end of the specified term without submitting evidence of insurability.
Renewable Term and Convertible
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LESSON FIVE *
Term Life Insurance
Under most renewable term insurance policies, the policyowner has the right to renew the coverage for the same term and face amount originally provided by the policy.
Example: A 10-year, $100,000 renewable term policy usually can be renewed for another 10-year period and for $100,000 in coverage.
Most insurers allow the policyowner to renew the policy for a smaller face amount and/or a shorter period than provided by the original contract, but not for a larger face amount and/or a longer period.
One-year term policies and riders are usually renewable, and such coverage is called yearly renewable term (YRT) insurance or annually renewable term (ART) insurance.
3
Press “Esc” to return to main menu
LESSON FIVE *
Term Life Insurance
Often, the renewal provision places some limit on the policyowner’s right to renew. The most common limitations are:
Example: The renewal provision of a policy may specify that the coverage is not renewable after the insured has reached age 75. Another policy may specify that the coverage is renewable no more than three times.
The coverage may be renewed only until the insured attains a stated age
or
The coverage may be renewed only a stated maximum number of times
3
Press “Esc” to return to main menu
LESSON FIVE *
Term Life Insurance
The renewal premium rate is based on the insured person’s attained age—the age the insured has reached (attained) on the renewal date.
As people age, mortality rates and the insured’s mortality risk increase.
As people age, renewal premium rates also increase.
The renewal premium rate remains level throughout the new term of coverage.
3
Press “Esc” to return to main menu
LESSON FIVE *
The renewal feature can lead to antiselection.
Insureds in poor health are more likely to renew their policies because they may not be able to obtain other life insurance.
Because of this risk of antiselection, the premium for a renewable term life insurance policy is usually slightly higher than the premium for a comparable nonrenewable term life insurance policy.
3
Press “Esc” to return to main menu
LESSON FIVE *
Term Life Insurance
Convertible term insurance policies contain a conversion privilege that allows the policyowner to change—convert—the term insurance policy to a cash value policy without providing evidence that the insured is an insurable risk.
Cash value coverage is available if the health of the person insured by a convertible term policy has deteriorated to the point that the person would otherwise be uninsurable.
The premium for the cash value policy cannot be based on any increase in the insured’s mortality risk, except with regard to an increase in the insured’s age.
3
Press “Esc” to return to main menu
LESSON FIVE *
Term Life Insurance
As in the case of the renewal provision, the conversion privilege can lead to antiselection.
Insureds in poor health are more likely to convert their coverage because they may not be able to obtain other life insurance.
Because of this risk of antiselection, the premium for a convertible term life insurance policy is usually higher than the premium for a comparable nonconvertible term life insurance policy.
3
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LESSON FIVE *
After the insured attains a stated age
or
After the term policy has been in force for a specified time
Example: A 10-year term policy may not permit conversion after the insured has attained age 65 or may only permit conversion during the first 8 years of the term.
Conversion also may be limited to an amount that is only a percentage of the original face amount.
Example: A 10-year term policy may permit conversion of 100 percent of the face amount within the first 5 years of the 10-year term, and a smaller percentage, such as 50 percent, if the policy is converted during the last 5 years of the 10-year term.
3
Press “Esc” to return to main menu
LESSON FIVE *
Term Life Insurance
Under an attained age conversion, the renewal premium rate is based on the insured’s age when the coverage is converted.
Under an original age conversion, the effective date of the cash value life insurance policy is considered to be the date on which the policyowner purchased the original term insurance policy; as a result, the premium rate for the cash value policy is based on the insured's age at the time the original term insurance policy was purchased.
Premiums for a converted policy depend on the type of conversion.
3
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LESSON FIVE *
Some of the typical personal needs that life insurance can meet are
Personal Needs
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LESSON FIVE *
Business Needs
Business continuation needs
A life insurance policy can provide funds to ensure that a business continues in the event of the death of an owner, partner, or other key person.
Employee benefit needs
A business can purchase life insurance to provide benefits for its employees.
© 2005 LOMA All Rights Reserved
Press “Esc” to return to main menu
Lesson 5
LESSON FIVE *