Principles of Insurance: Life, Health and Annuities

1. The Life and Health Insurance Industry
 
1. Types of Business Organizations
• Sole proprietary
• Partnership
• Corporation
 
2. Life insurance policy
• A policy under which an insurer promises to pay a benefit upon the death of a named person.
• Can be classified as
1. Term life insurance: provides coverage during the period specified in the policy.
2. Cash value life insurance (aka permanent life insurance): provides coverage throughout the insured's lifetime and includes a savings element (the policy's cash value).
3. Endowment life insurance: provides a policy benefit payable either when the insured dies or on a stated date if the insured is still alive on that date.
 
3. Annuity contract
• A contract under which an insurer promises to make a series of periodic payments to a named person in exchange for a premium or a series of premiums.
 
4. Health insurance policy
• A policy that provides protection against the risk of financial loss resulting from the insured person's illness, accidental injury, or disability.
• Major forms of health insurance coverage:
1. Medical expense coverage
2. Disability income coverage
 
5. Types of insurance policy
• An individual insurance policy
• A group insurance policy
 
6. Types of Insurance Company Organizations
• Stock Insurance Company
• Mutual Insurance Company
• Fraternal Benefit Societies
 
7. Types of Financial Institutions
• Insurance companies provide protection against the risk of financial loss caused by specific events.
• Depository institutions accept deposits from people, businesses and government agencies and use these deposits to make loans to people, businesses and government agencies.
• Finance companies specialize in making short- and medium-term loans to businesses and people.
• Mutual fund companies operate mutual funds.
• Security firms facilitate the sale of investment instruments known as securities.
 
• Convergence: the movement toward a single financial institution being able to serve a customer's banking, insurance and securities needs.
• Consolidation: occurs primarily through merger and acquisitions.
• Globalization
 
8. Role of Government in Insurance
• Regulation of Insurance: the insurance industry is subject to regulation designed specifically to safeguard the public interest in insurance companies.
• Remain solvent
• Conduct their business fairly and ethically
• Assets = Liabilities + Owner's Equity
• Social Insurance Programs: welfare plans that are established by law and administered by a government and that provides the population with income security.
• Taxation
 
2. Introduction to Risk and Insurance
 
1. The Concept of Risk
• Speculative risk involves three possible outcomes: loss, gain, or no change.
• Pure risk involves no possibility of gain; either a loss occurs or no loss occurs.
• This possibility of financial loss without the possibility of gain is the only kind of risk that can be insured.
 
2. Risk Management
   • Avoiding Risk
   • Controlling Risk
   • Accepting Risk
   • Transferring Risk
   
   
   • The policy is a written document that contains the terms of the agreement between the insurance company and the owner of the policy.
   • The policy benefit is the amount of money the insurance company agrees to pay when a specific loss occurs.
   • The premium is the specific amount of money the insurer has received.
3. Managing Personal Risks Through Insurance
• Characteristics of Insurable Risks
1. The loss must occur by chance
2. The loss must be definite in terms of time and amount
3. The loss must be significant
4. The loss rate must be predictable
5. The loss must not be catastrophic to the insurer
 
• A contract of indemnity is an insurance policy under which the amount of the policy benefit payable for a covered loss is based on the actual amount of financial loss that results from the loss, as determined at the time of loss.
• A claim is a request for payment under the terms of the policy.
• A valued contract specifies the amount of the policy benefit that will be payable when a covered loss occurs, regardless of the actual amount of the loss that was incurred.
• The law of large numbers states that, typically, the more times we observe a particular event, the more likely it is that our observed results will approximate the "true" probability that the event will occur.
• Mortality tables: charts that indicate with great accuracy the number of people in a large group (100,000 people or more) who are likely to die at each age.
• Morbidity tables: charts that display the rates of morbidity, or incidence of sickness and accidents, by age, occurring among a given group of people.
• Reinsurance is insurance that one insurance company - known as the ceding company - purchases from another insurance company - known as the reinsurer - to transfer risks on insurance policies that the ceding company issued.
• Retention limit is the max amount of insurance that the insurer is willing to carry at its own risk on any one life without transferring some of the risk to a reinsurer.
• Retrocession - a transaction in which a reinsurer cedes risks to another reinsurer (retrocessionaire).
 
• Insurability of Specific Risks
  • The applicant is the person or business that applies for an insurance policy.
  • The policyowner is the person or business that owns the insurance policy.
  • The insured is the person whose life or health is insured under the policy.
  • A third-party policy is a policy where one person purchases an individual insurance policy on the life of another person.
  • The policy's beneficiary is the person or party the policyowner named to receive the policy benefit.
  
  
  • Assessing the Degree of Risk
  • Antiselection, adverse selection or selection against the insurer, is the primary reason that insurers need to carefully review each application to assess properly the degree of risk the company will be assuming if it issues the requested policy.
  • Underwriting (or selection of risks) is the process of identifying and classifying the degree of risk represented by a proposed insured.
  • A physical hazard is a physical characteristic that may increase the likelihood of loss.
  • A moral hazard is a characteristic that exists when the reputation, financial position, or criminal record of an applicant or a proposed insured indicates that the person may act dishonestly in the insurance transaction.
  • A risk class is a grouping of insureds who represent similar level of risk to the insurer.
  • Standard risks / standard premium rates
  • Preferred risks / preferred premium rates
  • Substandard risks / substandard premium rates
  • Declined risks
   
  • Insurable Interest Requirement
  • Insurable interest: the policyowner must be likely to suffer a genuine loss or detriment should the event insured against occur.
  • If the insurable interest requirement is not met when a policy is issued, the policy is not valid.
  • An insurable interest exists when the policyowner is likely to benefit if the insured continues to live and is likely to suffer some loss or detriment if the insured dies.
   
3. The Insurance Policy
 
1. Types of Contracts
• A formal contract is one that is enforceable because the parties to the contract met certain formalities concerning the form of the agreement. These formalities generally require that the contract be in writing and that the written document contain some form of seal in order to be enforceable.
• An informal contract is a contract that is enforceable because the parties of the contract met requirements concerning the substance of the agreement rather than requirements concerning the form of the agreement. An informal contract may be expressed in either an oral or a written fashion.
• If both parties make legally enforceable promises when they enter into a contract, the contract is bilateral.
• If only one of the parties makes legally enforceable promises when the parties enter into the contract, the contract is unilateral.
• A commutative contract is an agreement under which the parties specify in advance the values that they will exchange; moreover, the parties generally exchange items or services that they think are of relatively equal value.
• In an aleatory contract, one party provides something of value to another party in exchange for a conditional promise. A conditional promise is a promise to perform a stated act if a specified, uncertain event occurs.
• A bargaining contract is one in which both parties, as equals, set the terms and conditions of the contract.
• A contract of adhesion is a contract that one party prepares and that the other party must accept or reject as a whole, generally without any bargaining between the parties to other agreement.
• Characteristics of an insurance policy: informal, unilateral, aleatory, contract of adhesion
 
2. General Requirements for a Contract
   • Contract law sets forth the following four general requirements that must be met for the parties to create an informal contract that is legally enforceable:
     1. The parties to the contract must manifest their mutual assent to the terms of the contract
     2. The parties to the contract must have contractual capacity.
     3. The parties to the contract must exchange legally adequate consideration.
     4. The contract must be for a lawful purpose.
      
   • A valid contract is one that satisfies all legal requirements and, thus, is enforceable at law.
   • A void contract is one that does not satisfy one or more of the legal requirements to create a valid contract and, thus, is never enforceable at law.
   • A voidable contract is one in which a party has the right to avoid her obligations under the contract without incurring legal liability.
    
   1. Mutual Assent
      • The requirement of mutual assent is met when the parties reach a meeting of the minds about the terms of their agreement.
   2. Contractual Capacity
      • The parties to the contract must each have the legal capacity to make a contract.
      • In most jurisdictions, most people who have limited contractual capacity either (1) are minors or (2) lack mental capacity.
   3. Legally Adequate Consideration
      • Consideration: each party must give or promise something that will be of value to the other party. In addition, the consideration exchanged must be legally adequate.
      • If the initial premium is not paid, then no contract has been formed because the applicant has not provided the required consideration.
      • Renewal premiums are a condition for continuance of the policy and are not consideration for the policy.
   4. Lawful Purpose
      • No contract can be made for a purpose that is illegal or against the public interest.
      • The requirement of lawful purpose in the making of an individual life or health insurance contract is fulfilled by the presence of insurable interest.
    
3. The Policy as Property
• Insurance policies are a type of property and, thus, are also subject to the principles of property law.
• In legal terminology, property is defined as a bundle of rights a person has with respect to something.
• Real property is land and whatever is growing on or affixed to the land.
• All property other than real property is characterized as personal property and includes tangible goods as well as intangible property.
• Right to use and enjoy property
• Right to dispose of property
  
4. The Life and Health Insurance Industry
 
1. Methods of Funding Life Insurance
1. Mutual Benefit Method (Post-death Assessment Method)
• They collect money after the death of the person who was insured. Each member of a mutual benefit society agrees to pay an equal, specific amount of money when any other member dies.
• Usually, the person or persons doing the administrative work for the society would receive a fee.
• Three major problems:
1. Mutual benefit societies often have problems collecting the money to pay death benefits.
2. Unless a society constantly recruits new members, the size of the group becomes smaller and smaller as members die or resign from the society.
3. As the members of a society grow older, the number of deaths increases each year, and each member's cost increases each year.  As the cost of membership in a society increases, attracting new members becomes more difficult for the society.
2. Assessment Method
• The organization that offers insurance coverage estimates its operating costs for a given period, usually one year.  These operating costs includes anticipated death claims and the organization's administrative expenses.
• The organization then divides equally among the participants in the plan the total amount of money needed to pay operating costs for the period.
• If the total actual cost of operations during a period is less than expected, then each participant receives a refund.  Otherwise, the organization levies an additional assessment on each member.
• Problems:
1. Collection of any additional assessments is difficult.
2. Does not solve the problems caused by the aging of the group of insureds.
3. Legal Reserve System
• Premises:
• The amount of the benefit payable under a life insurance policy should be specified or calculable before the insured's death.
• The money needed to pay policy benefits should be collected in advance so that the insurer will have funds available to pay claims and expenses as they occur.
• The premium an individual pays for an insurance policy should be directly related to the amount of risk the insurance company assumes for that policy.
• The insurance company is required by law to maintain assets that are at least equal to the amount of its policy reserve liabilities.
 
2. Premium Rate Calculations
• Actuaries: specialists who are responsible for calculating the premium rates the company charges for its products.
• A premium rate is a charge per unit of insurance coverage.
• Actuaries consider may factors as they perform the calculations necessary to establish premium rates that are adequate and equitable:
1. Cost of benefits
2. Investment earnings
3. Expenses
• Cost of Benefits
• The cost of benefits for an insurance product equals all of the insurer's potential payments of benefit obligations to customers multiplied by the expected probability that each benefit will be payable.
• For life insurance policies, benefit obligations include the payment of policy proceeds.
• The actuaries in an insurance company are concerned with estimating the number of deaths that will occur in a given group of insured, called a block of insureds, and not with predicting which individual insureds will die.
• A block of policies is a group of policies issued to insureds who are all the same age, the same sex, and in the same risk classification.
• Expected mortality (or tabular mortality) means the number of deaths that have been predicted to occur in a group of people at a given age according to a mortality table.
• The number of deaths that actually occur in given group of insureds is referred to as the group's mortality experience.
• Life insurers use mortality tables as a first step in determining the premium rate to be charged for a block of life insurance policies.
• Other factors: being overweight or underweight, engaging in certain occupations or hobbies, and having various illnesses, etc
• Investment Earnings
• The money that insurers earn by investing premium dollars.
• Insurance companies can place money in any safe investment that is likely to provide good earnings and is not prohibited by government regulation. e.g. government and corporate bonds, mortgages, real estate, and corporate stock.
• An insurer's investment earnings enable it to charge lower premium rates than would be possible if the insurer considered only the mortality risk factor.
• The longer a policy is in force, the greater the effect investment earnings will have on premium rate calculations.
• Expenses
• A policy's net premium is the amount of money the insurer needs to provide the policy benefits.  To calculate net premium rates, life insurers must make assumptions as to mortality rates, investment earnings, and lapse rates.
• When pricing insurance, insurers must also consider their operating costs.
• The total amount added to the net premium to cover all of the insurer's costs of doing business is called the loading.
• Net Premium + Loading = Gross Premium
 
3. The Level Premium Pricing System
• The level premium pricing system is a life insurance pricing system that allows the purchaser to pay the same premium amount each year the policy is in force.
 
4. Policies with Non-guaranteed Elements
• Several types of life insurance policies provide that the policy's price can change after the policy is issued.
• Policy dividend: to reduce the price by returning to policyowners a portion of the premium that was paid for the coverage.
• A participating policy (par policy) is one under which the policyowner shares in the insurance company's divisible surplus.
• A nonparticipating policy (nonpar policy) is one in which the policyowner does not share in the insurer's surplus.
• Change the value of the pricing factors while the policy is in force and, consequently, changing the amount charged to the policyowner for the coverage.
 
5. Life Insurance Reserves
• Reserves are liabilities representing the amounts of money an insurer estimates it will need to pay its future obligations.
• Policy Reserves
• Policy reserves represent the amount an insurer estimates it will need to pay policy benefits as they come due.
• To calculate the amount needed for policy reserves, regulators require insurance companies to use a conservative mortality table.
• Net Amount at Risk = Face Amount - Policy Reserves
• Contingency Reserves
• Contingency reserves are reserves against unusual conditions that may occur
• Although some insurers establish contingency reserves for life insurance policies, insurers typically establish contingency reserves for health insurance policies.
 
5. Term Life Insurance
 
1. Characteristics of Term Life Insurance Products
• All term insurance products provide coverage for a specified period of time, called the policy term.
• The policy anniversary generally is the anniversary of the date on which coverage under the policy became effective.
• A policy rider (endorsement) is an amendment to an insurance policy that becomes a part of the insurance contract and that either expands or limits the benefits payable under the contract.
 
2. Plans of Term Life Insurance Coverage
1. Level Term Life Insurance
• Provides a policy benefit that remains the same over the term of the policy.
• The most common plan of term insurance.
2. Decreasing Term Life Insurance
• Provides a policy benefit that decreases in amount over the term of coverage.
• Mortgage insurance, credit life insurance, family income insurance, etc
3. 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.
 
3. Features of Term Life Insurance Policies
1. Renewable term insurance policy
• Renewable term life insurance policies include a renewal provision that gives the policyowner the right, within specified limit, to renew the insurance coverage at the end of the specified term without submitting evidence of insurability - proof that the insured person continues to be an insurable risk.
• 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.
• 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.
• When a term life insurance policy is renewed, the policy's premium rate increases because the premium rate is based on the insured person's attained age (the insured is older).
2. Convertible Term Life Insurance
• Convertible term insurance policies contain a conversion privilege that allows the policyowner to change the term insurance policy to a cash value policy without providing evidence that the insured is an insurable risk.
• The premium that the policyowner is charged 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.
• When a term life insurance policy is converted to a cash value policy under an attained age conversion, the renewal premium rate is based on the insured's age wen the coverage is converted.
• When a term life insurance policy is converted on an original age basis, the insurance company must establish a policy reserve equal to the reserve that would have accumulated if the policy had originally been issued as cash value life insurance.
 
4. Needs Met by Life Insurance
• Personal Needs
• Estate Planning
• Debts and Final Expenses
• Dependents' Support
• Business Needs
• Business Continuation Insurance
• A business continuation insurance plan is an insurance plan designed to enable a business owner (or owners) to provide for the business' continued operation if the owner or a key person dies.
• A buy-sell agreement is an agreement in which (1) one party agrees to purchase the financial interest that a second party has in a business following the second party's death and (2) the second party agrees to direct his estate to sell his interest in the business to the purchasing party.
• Key person life insurance is insurance that a business purchases on the life of a person whose continued participation in the business is necessary to is success and whose death would cause financial loss to the business.
• Life Insurance as an Employee Benefit
 
6. Cash Value Life Insurance and Endowment Insurance
 
1. Cash Value Life Insurance
• Two primary characteristics distinguish cash value life insurance products from term life insurance products.
• Cash value life insurance products offer lifetime coverage.
• Cash value life insurance products provide insurance coverage and contain a savings element.
 
1. Traditional Whole Life Insurance
• Whole life insurance provides lifetime insurance coverage at a level premium rate that does not increase as the insured ages.
• Because the policyowner generally has the right to surrender - or terminate - a cash value life insurance policy for its cash value during the insured's lifetime, the amount of the cash value that a policyowner is entitled to receive upon policy surrender is referred to as the cash surrender value.
• The size of a policy's cash value at any given time depends on a number of factors, such as the face amount of the policy, the length of time the policy has been in force, and the length of the policy's premium payment period.
• The policyowner of whole life insurance policy can use the accumulated cash value as a security for a loan (policy loan).
• Under a continuous-premium whole life policy (straight life insurance policy or ordinary life insurance policy), premiums are payable until the death of the insured.
• A limited-payment whole life policy is a whole life insurance policy for which premiums are payable only until some stated period expires or until the insured's death, whichever occurs first.
• A policy that requires no further premium payments but continues to provide coverage is said to be a paid-up policy.
• A single-premium whole life policy is a type of limited-premium policy that requires only one premium payment.
 
2. Modified Whole Life Insurance
• A modified-premium whole life policy functions in the same manner as a traditional whole life policy except that the policy's annual premium changes after a specified initial period.
• The face amount of a modified-premium whole life policy remains level throughout the life of the policy.
• Graded-premium policies are policies that call for three or more levels of annual premium payment amounts, increasing at specified points in time until reaching the amount to be paid as a level premium for the rest of the life of the policy.
• A modified coverage policy provides that the amount of insurance will decrease by specific percentages or amounts either when the insured reaches certain stated ages or at the end of stated time periods.
 
3. Joint Whole Life Insurance
• Joint whole life insurance (first-to-die life insurance) has the same features and benefits as individual whole life insurance, except that it insures two lives under the same policy.
• Joint whole life policies usually provide a specified period following the first insured's death within which the surviving insured may purchase an individual whole life policy of the same face amount without providing evidence of insurability.
 
4. Last Survivor Life Insurance
• Last survivor life insurance (second-to-die life insurance) is a variation of joint whole life insurance under which the policy benefit is paid only after both people insured by the policy have died.
• A couple can obtain insurance on both of their lives for an annual premium that is usually less than the cost of either (1) two individual whole life insurance policies or (2) a joint whole lief insurance policy.
 
5. Family Policies
• A family policy is a whole life insurance policy that includes term life insurance coverage on the insured's spouse and children.
• The amount of term insurance coverage provided on the insured's spouse and children is a fraction of the amount of the insured's whole life insurance coverage.
 
6. Monthly Debit Ordinary
• A monthly debit ordinary (MDO) policy is a whole life insurance policy that is marketed under the home service distribution system and is paid for by monthly premium payments.
• The home service distribution system is a method of selling and servicing insurance policies through commissioned sales agents, known as home service agents, who sell a range of products and provide specified policyowner services within a specified geographic area.
 
7. Pre-Need Funeral Insurance
• Pre-need funeral insurance is whole life insurance that provides funds to pay for the insured's funeral and burial.
• In most cases, the policyowner and a funeral home enter into an agreement, know as an assignment, under which the life insurance policy benefit will be paid after the insured's death to the funeral home, which agrees to provide specified funeral services and merchandise.
 
2. A Newer Generation of Cash Value Products
1. Universal Life Insurance
• Universal life (UL) insurance is a form of cash value life insurance that is characterized by its flexible premiums, its flexible face amount and death benefit amount, and its unbundling of the pricing factors (mortality, interest, and expenses).
• In some forms of UL policies, the cash value amount is reduced by significant expense charges, called surrender charges, if the policyowner chooses to surrender the policy.
 
• Unbundled Pricing Factors
• Each of the three factors that the insurer applies to price a universal life policy is listed separately in the policy.
• Mortality Charges
• The insurer periodically deducts a mortality charge from the universal life policy's cash value to cover the mortality risk the insurer has assumed by issuing the policy.
• UL policies guarantee that the mortality charge will never exceed a stated maximum amount. In addition, these policies usually provide that the mortality charge will be less than the specified maximum if the insurance company's mortality experience is more favorable than expected.
• Interest
• A UL life insurance policy guarantees that the insurer will pay at least a stated minimum interest rate on the policy's cash value each year.
• The policy also provides that the insurer will pay a higher interest rate if economic and competitive conditions warrant.
• Most UL policies provide that any portion of the cash value that is being used as security for a policy loan will earn interest at a rate that is lower than the current rate.
• Expenses
• Each UL insurance policy lists the expense charges that the insurance company will impose to cover the costs it incurs to administer the policy.
• Expense charges may include: a flat charge during the first policy year to cover sales and policy issue costs, a percentage of each annual premium to cover expenses, a monthly administration fee, specific service charges for coverage changes, cash withdrawals, and policy surrenders.
 
• Flexible Features
• Face Amount and Amount of the Death Benefit
• When the policyowner purchases the policy, he decides, within certain limits, what the policy's face amount will be, the amount of the death benefit payable, and the amount of premiums he will pay for that coverage.
• Option A Plan: the amount of the death benefit is level; the death benefit payable is always equal to the policy's face amount.
• Option B Plan: the amount of the death benefit at any given time is equal to the policy's face amount plus the amount of the policy's cash value.
• Flexible Premiums
• The owner of a UL policy can determine, within certain limits, how much to pay for the initial premium and for each renewal premium.
• The policyowner also has great flexibility to decide when to pay renewal premiums.
 
• How a UL Policy Operates
• When a insurer receives a UL premium payment, it first deducts the amount of any applicable expense charges.
• The insurer then credits the remainder of the premium to the policy's cash value.
• Each month the policy remains in force, the insurer deducts the periodic mortality charges from the cash value and credits the remainder of the cash value with interest.
• From time to time, the insurer may deduct additional expense charges from the policy's cash value.
 
• Effects of Regulation on UL Policies
• The larger the cash value is in relation to the policy's face amount, the more a policy seems to be an investment product an investment product rather than an insurance product.
• Insurance companies do not allow a policyowner to pay a premium amount that would result in the cash value exceeding the legislatively defined percentage of the face amount.
 
• Periodic Reports
• Insurers send each policyowner an annual, semiannual or quarterly report giving the policy's current values and benefits.
• Generally, the report includes: the amount of the death benefit payable, the amount of the policy's cash value, the amount of the cash surrender value, the amount of interest earned on the cash value, the amount of the mortality charges deducted, the amount of the expense charges deducted, the amount of premiums paid during the reporting period, the amount of policy loans outstanding, the amount of an cash value withdrawals.
 
2. Indeterminate Premium Life Insurance
• An indeterminate premium life insurance policy (non-guaranteed premium life insurance policy or variable-premium life insurance policy) is a type of nonparticipating whole life policy that specifies two premium rates - both a maximum guaranteed premium rate and a lower premium rate.
• The insurer charges the lower premium rate when the policy is issued and guarantees that rate for at least a stated period of time.
• After that period, the insurer uses its actual mortality, interest, and expense experience to establish a new premium rate that may be higher or lower than the previous premium rate.
• To change the premium rate for an indeterminate premium policy, an insurer must change the premium rate for an entire class of policies based on the insurer's experience for that class of policies.
 
3. Interest-Sensitive Whole Life Insurance
• Interest-sensitive whole life insurance (current assumption whole life insurance) provide that the cash value, in addition to the premium rate, can be greater than that guaranteed if changing assumptions warrant such an increase.
• Each policyowner usually decides whether he wants favorable changes in pricing assumptions to result in a lower premium or in a higher cash value for the policy.
 
4. Variable Life Insurance
• Variable life (VL) insurance is a form of cash value life insurance in which premiums are fixed, but the face amount and other values may vary, reflecting the performance of the investment subaccounts selected by the policyowner.
• A subaccount is one of several alternative pools of investments to which a variable life insurance policyowner allocates the premiums she has paid and the cash values that have accumulated under her policy.
• The general account is an undivided investment account in which an insurer maintains funds that support its contractual obligations to pay benefits under its guaranteed insurance products. The funds in the general account are placed in relatively secure investments so that the insurer is assured of having funds available to pay the benefits it has guaranteed to pay policyowners.
• Variable life policies do not guarantee either investment earnings or a minimum cash value.
 
5. Variable UL Insurance
• Variable Universal Life (VUL) Insurance (universal life II or flexible-premium variable life insurance) combines the premium and death benefit flexibility of UL insurance with the investment flexibility and risk of VL insurance.
 
3. Endowment Insurance
• Endowment insurance provides a specified benefit amount whether the insured lives to the end of the term of coverage or dies during that term.
• Each endowment policy specifies a maturity date, which is the date on which the insurer will pay the policy's face amount to the policyowner if the insured is still living.
• The maturity date is reached either (1) at the end of a stated term or (2) when the insured reaches a specified age.
• An endowment policy's cash value builds much more rapidly than does the cash value of a comparable whole life insurance policy.
 
7. Supplemental Benefits