Life Insurance Products, Provisions, and Riders
Product families
Term is pure death protection with no cash value: level, decreasing, increasing, renewable, and convertible. Whole life is permanent, level-premium, with guaranteed cash value (ordinary, limited-pay, single-premium). Universal life separates the mortality charge from the savings element: flexible premiums, adjustable death benefit, current interest crediting, and cost of insurance deductions that can lapse a policy if cash value is exhausted. Variable products (variable life, variable universal life, variable annuities) place the cash value in separate accounts, shifting investment risk to the owner - these are securities and require both an insurance license and FINRA registration. Annuities address longevity risk: immediate vs. deferred, accumulation vs. annuitization, and fixed, indexed, or variable crediting.
Provisions candidates must own
Entire contract; incontestability (two years); suicide clause (typically two years, restarted if the policy lapses and is reinstated); grace period (commonly 31 days); reinstatement; misstatement of age or sex (benefit adjusted, policy not voided); automatic premium loan; nonforfeiture options (cash surrender, reduced paid-up, extended term); dividend options; policy loans; and settlement options (lump sum, life income, fixed period, fixed amount, interest only).
Riders
Waiver of premium, disability income, accidental death (double indemnity), guaranteed insurability, term conversion, accelerated death benefit, long-term care, child term, and return of premium.
Traps and a rule of thumb
Questions love the ownership triad - owner, insured, beneficiary are separate roles; the owner controls the policy, the beneficiary has no rights until death, and naming a beneficiary does not create insurable interest. Watch per stirpes (by branch) versus per capita (by head) and the common disaster clause. Nonforfeiture options apply only when a permanent policy lapses with cash value. Rule of thumb: if the cash value grows with stock-market-linked returns, it is a variable product - and therefore a security.