Life Insurance Policies
Term insurance
Pure protection with no cash value: level, decreasing (often mortgage protection), increasing, and annually renewable term (ART). Key options: renewability (continue without proof of insurability at higher premium) and convertibility (exchange for permanent coverage without evidence of insurability). Renewable/conversion periods and attained-age or original-age conversion pricing are classic question material.
Whole life
Level premium, guaranteed cash value (the nonforfeiture value), guaranteed death benefit, and dividends that are not guaranteed (participating policies). Variations: straight life (pay to 100/121), limited-pay (20-pay, paid-up at 65), single premium, modified/graded premium. Dividends can be taken in cash, reduce premium, accumulate at interest, buy paid-up additions, or buy one-year term.
Universal life
Flexible premium and adjustable death benefit with a cash value credited interest. Option A (level) keeps a constant death benefit; the pure insurance amount decreases as cash value grows. Option B (increasing) pays face plus cash value. Beware the corridor test and no-lapse guarantees (a no-lapse guarantee can lapse if premiums are insufficient).
Variable and indexed
Variable life and variable universal life place cash value in separate-account subaccounts: these are securities, requiring both a life license and FINRA registration, plus a prospectus. Indexed UL credits interest tied to an index with a floor and cap; it is not a direct market investment.
Other products
Endowment, juvenile, family income, joint/survivorship (second-to-die), and return-of-premium term.
Traps
- Term has no living benefit value; convertible does not mean refundable.
- Dividends are a return of divisible surplus, not taxable income while left on deposit.
- UL credited rates are not guaranteed beyond the minimum.