Monday, February 4, 2008

Related life insurance products

Riders are modifications to the insurance policy added at the same time the policy is issued. These riders change the basic policy to provide some feature desired by the policy owner. A common rider is accidental death, which used to be commonly referred to as "double indemnity", which pays twice the amount of the policy face value if death results from accidental causes, as if both a full coverage policy and an accidental death policy were in effect on the insured. Another common rider is premium waiver, which waives future premiums if the insured becomes disabled.

Joint life insurance is either a term or permanent policy insuring two or more lives with the proceeds payable on the first death.

Survivorship life or second-to-die life is a whole life policy insuring two lives with the proceeds payable on the second (later) death.

Single premium whole life is a policy with only one premium which is payable at the time the policy is issued.

Modified whole life is a whole life policy that charges smaller premiums for a specified period of time after which the premiums increase for the remainder of the policy.

Group life insurance is term insurance covering a group of people, usually employees of a company or members of a union or association. Individual proof of insurability is not normally a consideration in the underwriting. Rather, the underwriter considers the size and turnover of the group, and the financial strength of the group. Contract provisions will attempt to exclude the possibility of adverse selection. Group life insurance often has a provision that a member exiting the group has the right to buy individual insurance coverage.


Senior and preneed products
Insurance companies have in recent years developed products to offer to niche markets, most notably targeting the senior market to address needs of an aging population. Many companies offer policies tailored to the needs of senior applicants. These are often low to moderate face value whole life insurance policies, to allow a senior citizen purchasing insurance at an older issue age an opportunity to buy affordable insurance. This may also be marketed as final expense insurance, and an agent or company may suggest (but not require) that the policy proceeds could be used for end-of-life expenses.

Preneed (or prepaid) insurance policies are whole life policies that, although available at any age, are usually offered to older applicants as well. This type of insurance is designed specifically to cover funeral expenses when the insured person dies. In many cases, the applicant signs a prefunded funeral arrangement with a funeral home at the time the policy is applied for. The death proceeds are then guaranteed to be directed first to the funeral services provider for payment of services rendered. Most contracts dictate that any excess proceeds will go either to the insured's estate or a designated beneficiary.

These products are sometimes assigned into a trust at the time of issue, or shortly after issue. The policies are irrevocably assigned to the trust, and the trust becomes the owner. Since a whole life policy has a cash value component, and a loan provision, it may be considered an asset; assigning the policy to a trust means that it can no longer be considered an asset for that individual. This can impact an individual's ability to qualify for Medicare or Medicaid.

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