Understanding insurance

Having this post is because i am working some projects for insurance and need to have the domain knowledge of insurance.

Term life insurance

Term life insurance is the original form of life insurance and is considered to be pure insurance protection because it builds no cash value. This is in contrast to permanent life insurance such as whole life, universal life, and variable universal life.

Permanent life insurance

Permanent life insurance is a form of life insurance such as whole life or endowment, where the policy is for the life of the insured, the payout is assured at the end of the policy (assuming the policy is kept current) and the policy accrues cash value.

Here are the main characteristics of permanent life insurance:

* Permanent insurance protection.
* More expensive to own.
* Builds cash value.
* Loans are permitted against the policy.
* Favorable tax treatment of policy earnings.
* Level premiums.

There are three basic types of permanent insurance: whole life, variable life and universal life. The two most common are whole life and universal life. Whole life insurance provides lifetime protection, for which you pay a predetermined premium. Cash values usually have a minimum guaranteed rate of interest and the death benefit is a fixed amount. Whole life insurance is the most expensive life-insurance product available.

Universal life insurance separates the investment and the death benefit portions. The investment choices available usually include some type of equity investments, which may make your cash value accumulate quicker. As the you can usually change your premiums and death benefits to suit your current budget.

What i feel that variable and universal life insurance are all variation of whole life insurance policy and differences are:

Variable life insurance policy is something like death benefit + flexible investment options and much more expensive and risky as there are investment risk.

Universal life insurance policy is something like death benefit + saving component + loan facility as insurer will pay fixed amount regularly against to the interest rate or certain managed fund. It is much cheaper than whole and variable life insurance policy.

You can find more from here

Participating Policy

An insurance contract that pays dividends to the policy holder. Dividends are generated from the profits of the insurance company that sold the policy and are typically paid out on an annual basis over the life of the policy. Most policies also include a final or terminal payment that is paid out to the holder when the contract matures. Some participating policies may include a guaranteed dividend amount, which is determined at the onset of the policy.

Also referred to as a "with-profits policy".

Investopedia Says:
Participating policies are typically life insurance contracts such as a whole life participating policy. The dividend received by the policy holder can be used in several different ways. First, the policy holder can apply the dividend proceeds to the insurance policy's premium payment. Second, the dividend can be kept with the insurance as a deposit in order to generate interest much like a savings account at a bank. Finally, the policy holder can simply receive the dividend payment in cash, much like a dividend payment on a stock.

Nonparticipating Life Insurance Policy

Life insurance policy that does not pay dividends. Policyholders thus do not participate in the interest, dividends, and capital gains earned by the insurer on premiums paid. In contrast, Participating Insurance Policies pay dividends to policyholders from earnings on investments.

Frequently used Insurance Term

Term Life Insurance :: definition
Noted, there is no cash value with this policy.

Permanent Life Insurance :: definition
There are cash values with this set of policies.

Substandard Premium Rate :: definition

This is an extra premium (a substandard premium rate) charged a policy owner as a result of the insured being classified as having a higher-than-average risk of death. Reasons may include the person's physical condition, health, occupation and/or life-style. The premium rate charged is higher than a standard premium rate.

Cash Surrender Value :: definition

Indemnity :: definition

Long Term Care Insurance :: definition

Projected Dividend

Estimated future dividends to be paid by a Participating Insurance Policy. These dividend estimations cannot be part of the policy since they are not guaranteed. They are normally shown in a separate computer printout and are only as accurate as the basic interest rate assumptions made.

Reference and recommended links

Let Life Insurance Riders Drive Your Coverage?

Five Insurance Policies Everyone Should Have

Fifteen Insurance Policies You Don't Need

Understand Your Insurance Contract

Exploring Advanced Insurance Contract Fundamentals

Insurance Glossary (1 | 2)