The ABCs of Life Insurance: U–Z

By Corey Dahl, Brian Anderson for LifeHealthPro.com

Image: FreeDigitalPhotos.netThe difference between universal life and whole life is clear to agents, but to clients and prospects, they may look the same. Use this slideshow to help explain all kinds of important life insurance terms located at the far end of the alphabet, from whole life to viaticals to underwriting.

Universal Life Insurance: A newer, more flexible version of whole life offering the low-cost protection of term life insurance as well as a savings element that is invested to provide a cash value buildup. Neither the premium levels nor the death benefit in a UL policy is set in stone and can be reviewed and altered as circumstances warrant. If you are able to make increased payments and can show you are still in good health, many UL policies will allow you to increase the amount of your death benefit. Unlike whole life, UL allows the policyholder to use the interest from accumulated savings in the policy to help pay premiums.

Underwriting: The process of the life insurance company underwriter deciding whether to insure you and at what rate, based on your medical history and lifestyle.

Variable Life InsuranceVariable Universal Life Insurance: A combination of the features of variable life insurance and universal life insurance under the same contract. Benefits are variable based on the value of underlying equity investments, and premiums and benefits are adjustable at the option of the policyholder. VUL offers the potential for greater cash value and death benefit growth than traditional life insurance, but it is also riskier. Because the policyholder determines where the policy’s cash value is invested, the policyholder takes on more risk in exchange for potential growth.

Viatical Settlement: The sale of a life insurance policy owner’s existing policy to a third party for more than its cash surrender value but less than its net death benefit. It provides the owner with a lump sum, while the third party becomes the new owner of the policy, pays the premiums and receives the full benefit of the policy when the original insured dies. Also called a life settlement.

Whole Life Insurance: A permanent life insurance policy that provides both a tax-free death benefit and a cash value component. Whole LifePremiums generally stay at a fixed amount, and the death benefit amount is guaranteed so long as the premiums are maintained. The death benefit, premium payment schedule, and sometimes the interest rate for the accumulation of cash value are determined at the time the insurance contract is written and are not subject to change. Due to the variety of options that can be selected, a knowledgeable agent can be a big help in determining the right whole life policy for a particular client’s needs.

Yearly Renewable TermYearly Renewable Term: A one-year term life insurance policy that is renewable at the end of the policy term. It provides a level death benefit with premiums that increase each year with the insured’s age. YRT is also referred to as annual renewable term.

Just the facts

YRT is designed to cover short-term insurance needs and is less common than level term insurance where premiums stay constant. The longer an insured person uses YRT, the more costly it becomes.

Zeal

Zeal: The intense enthusiasm displayed by agents who are ardently devoted to helping their fellow citizens protect the futures of their families with life insurance.

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