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View and search for insurance terms and definitions. This glossary will continue to grow featuring areas such as life insurance, term policies, annuities, variable life, universal life and more.

The purpose of this glossary is to bring an understanding of insurance policies - life, term or other to financial brokers and to individuals looking to take our these policies.

Universal Life Insurance Contract and Policies

A type of insurance policy where the insured chooses premium levels or pay using adjustable premiums are known as Universal Life policies. When bought through an agent (broker) and an insurance company, the company issuing the universal life contract guarantees a minimum interest rate that that is paid on the cash value.

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Flexible Premium

Universal Life Insurance carries a flexible premium option. These policy provisions allow for the insured to make lump sum premium payments into the life contract or they can skip scheduled premiums without the contract lasping. The broker or agent informs the person that as long as cash values in the universal life contract are sufficient enough to cover the monthly expenses, the policy is still in effect. This flexible option allows customers to make insurance premiums as their cash situation allows.

No Lapse Guarantee (Minimum) Premium

The no lapse guarantee premium is determined by the company and is the lowest premium a policyowner may pay at issue. It is a cost-per-thousand of face amount that varies by age, sex, and smoker status. During the first five years, the policy is guaranteed not to lapse if at least the cumulative no lapse guarantee premium is paid and remains in the policy.

Death Benefit Guarantee

The Death Benefit Guarantee premium is a level premium required on a cumulative basis to have a guaranteed death benefit for 30 years or for life regardless of the amount of net surrender value. This premium may be less than the no lapse guarantee premium; if so, we will accept this lower premium level on the Universal Life Policy.

Planned Periodic

The planned periodic premium, also known as the stipulated premium, is the premium the policyowner plans to pay. It's a schedule for the company to follow for sending reminder premium notices or for Electronic Fund Transfers (EFTs) from the policyowner's bank account. The policyowner may change the planned periodic premium at any time. Both the dollar amount and frequency of notice may be changed. There is no charge to change the planned periodic premium.

Target Premium

The target premium on a universal life policy is the maximum premium on which full commissions are payable. First year commissions on Universal Life are 50 percent up to target premium, and 3 percent on premium exceeding target. The target premium normally equals the Death Benefit Guarantee to 95 Rider premium, excluding the cost of riders and/or ratings.

Death Benefit Option

Universal Policy holders can choose a level death benefit or an increasing benefit. The cash values in the policy allows for increasing amounts payable at death, if that option is chosen.

These can be very attractive policies for individuals looking for the best of life insurance protection, felxible premium schedules and the ability to earn more on the account through the cash value investments.

Policy Loans

The policyowner may borrow against the accumulated value of the policy.

Maximum Loan Amount

The maximum loan amount available is the accumulated value of the policy minus the surrender charge, any outstanding loans, loan interest and monthly deductions to the end of the year (EOY). The calculation assumes that all monthly deductions for the rest of the year are equal to the most recent monthly deduction and that no more premiums will be paid for the rest of the year.

Variable Insurance Contract and Life Policy

Insurance policies that offer death benefit protection and cash values are Variable life or Universal Variable Life contracts. Premiums are invested into a separate account of investments. As the variable cash values exceed expenses, the cash value grows. Premiums can be flex or flexible paying.

Variable insurance policy holders can take out loans or borrow on the cash value if they choose so. The loans may not be needed to be repaid, as long as the premiums are covered.

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This is a form of permanent life insurance as it acts like a whole life policy by maturing at 100 or until death of the insured. A variable life contract can act as pure insurance and retirement benefit because of the cash value account.

Flex Premium

Many Variable contracts offer flexible premiums. These flex payments allow for skipping premiums or paying in lump sum. As long as the cash value and investment value outperform expenses, flexible premiums will keep the policy in effect.

Variable Universal Life (VUL) Insurance Policy

VUL or Variable Universal Life contracts are permanent life insurance policies that offer death benefits until 100 or life and allow for cash value build up in investment accounts. Universal policies are popular based on their flexible premiums, tax free cash benefits and the ability to borrow off of the variable insurance policy itself.

This is a form of permanent life insurance as it is not temporary insurance like a term policy. A Universal variable life UVL or VUL policy can act as pure insurance and retirement benefit because of the cash value account. The benefit will fluctuate with the values within the account. The insured bears more risk with a VUL as there are investments made into funds within the policy contract account. These investment values will vary with market conditions. Over the long term, these values will normally outperform fixed income or straight insurance policies.

Flex Premium

Many Variable contracts offer flexible premiums. These flex payments allow for skipping premiums or paying in lump sum. As long as the cash value and investment value outperform expenses, flexible premiums will keep the policy in effect.

VUL combines the aspects of tax retirement planning and protection of life insurance and the cash value in the account can potentially grow above and beyond the initial death benefit set on the policy or plan.

Tax Free Growth

As long as the variable insurance plan remains active, the value and growth in the account accumulates tax free. Withdrawels (not loans) are subject to regular income tax distribution.

VUL policies are also used in estate planning for transferring of estate assets to their family.

Charges, Expenses, Fees

Having the flexible premium on variable life plans allows for periodic premium payment or lump some. There must always be enough money in the account to cover any fees and insurance expenses ongoing. Should the cash value and the investments within the VUL perform well enough - many times those charges are covered.

VUL Income

VUL Income addresses three of your clients most basic needs:

First, it protects your clients' loved ones through its life insurance death benefit. Owning life insurance helps ensure clients their beneficiaries can maintain their current standard of living in the event of premature death. When used in a business context, the policy's death benefit can help ensure continuation of a business.

Second, this product can help protect your clients' future by building cash value. Tax-free liquidity through policy loans and partial surrenders is an attractive feature for both families and businesses. Third, it gives your clients control over policy funding cash value investments. With VUL Income your clients control their policy in important ways: Increasing or decreasing the death benefit as needs change. Changing the premium amount and payment schedule. Determining which investment options are right for their needs.

Insurance policies that offer death benefit protection and cash values are Variable life or Universal Variable Life contracts. Premiums are invested into a separate account of investments. As the variable cash values exceed expenses, the cash value grows. Premiums can be flex or flexible paying.

Variable insurance policy holders can take out loans or borrow on the cash value if they choose so. The loans may not be needed to be repaid, as long as the premiums are covered.

Whole Life Insurance Policies

Whole Life is a form of permanent insurance where the insurance company will pay a death benefit until death or age 100. Policy face values generally are $250,000, $500,000, $1 million or other amount. Whole life policies provide for additional cash value in the contract as well. They are bought through insurance agents and whole life brokers representing companies.

Premium

There are a few ways people can pay for whole life insurance. These include continuous premium life or limited pay life. Continuous pay keeps the premium level and will stay the same until death or age 100. Limited pay is when the policy holder will pay a higher rate in the beginning of the insurance contract, but will not have to pay beyond that term - as the policy would be considered paid up.

Other whole life premium paying set ups could be modified life, single premium (lump sum) and graded - where the cost is graduated over a period of time.

Cash Value - as the policy generates cash value above the insurance costs, the policycan provide the insured with loan value and if there is money above the state death benefit (ex: $500,000), the payout will be higher - assuming there are no outstanding loans on the whole life. Distributions of death benefits are tax free.

This form of insurance is more expensive than term, but unlike term - whole life pays for your entire life and the ability to grow cash values (unlike term), make them very attractive policies to own.

Broker and Agent

Whole life policies are bought through insurance agents and brokers representing an insurance company. There is no fee for buying whole life policies. The premiums paid cover all costs associated with the contract - including the issuing broker or insurance agent.

Brokers will survey a clients needs and offer various choices, including whole life insurance.

Whole Life vs. Term

The differences are fairly simple. Term is considered temporary insurance that is in effect or offers protection to people for a set period of time or term. This could be 10 year, 20 year, 30 year or other period. To learn more, visit the Term Insurance page. When asking the difference between term vs whole, whole lasted a person's life or age 100 as discussed above. Term comes at a lower cost and does not provide options for cash value increase.

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