LOMA 281 Module 2 Lesson 2

Cash Value Life Insurance

Summary of Key Points

Cash value life insurance offers lifetime coverage and a savings element, called the cash
value.

Uses of cash value:

• Policyowner can borrow against the cash value through a policy loan
• Policyowner can surrender the policy for its cash surrender value

Types of cash value coverage:

• Whole life insurance—the most basic type of cash value policy
o Provides constant amount of coverage with level premiums
o Single-premium, limited payment, and continuous premium options
• Modified whole life policies allow more flexibility
o Modified-premium—Smaller premiums for an initial period, then larger
premiums for remainder of policy. Level face amount.
o Modified coverage—Larger face amount at first, then smaller face amount
during policy’s later years. Level premium amount.
o Joint whole life—Insures two lives under one policy. Pays death benefit when
the FIRST insured dies.
o Last survivor coverage—Insures two or more lives under one policy. Pays
death benefit when the LAST insured dies.

New generation cash value products:

• Universal Life (UL)
o Separate pricing factors—clearly lists mortality charges, interest rate, and fees
o Within limits, policyowner can adjust face amount and size/timing of premiums
o Policyowner can choose level death benefit or variable death benefit
• Indexed Universal Life (IUL)
o Offers same features as universal life
o Allows policyowner to tie cash value to an equity index (example: S&P 500)
o Guarantees a minimum interest rate
• Variable Life (VL)
o Premiums are fixed
o Policyowner chooses how premiums are invested—into a fixed account or one or
more subaccounts
o Cash value and death benefit vary according to subaccount performance
o Regulated as securities
• Variable Universal Life (VUL)
o Blends investment flexibility of VL with premium and death benefit flexibility of UL
o Like VL, policyowner chooses how premiums are invested
o Like UL, policyowner can choose the size/timing of renewal premiums
o Like UL, policyowner can choose whether death benefit varies or remains level
o Regulated as securities

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