II.B · Types of Life Policies
Four ways to classify a life policy
Any life policy can be sorted four ways:
Group vs. individual: group coverage is one master policy issued to an employer or association, and each covered person receives a certificate of insurance. Individual coverage is underwritten and issued person by person.
Permanent vs. term: permanent insurance (whole life, UL, VUL) lasts for life and builds cash value. Term is pure protection for a set period, with no cash value.
Participating vs. non-participating: a participating (par) policy shares in the insurer's divisible surplus through policy dividends. Par policies are typically issued by mutual insurers, non-par policies by stock insurers.
Fixed vs. variable: fixed products have guaranteed values. Variable products invest in a separate account, so values move with the market. Selling variable products requires securities registration with FINRA in addition to the life license.
Remember
· Participating policy = right to share in surplus through dividends (typically from mutual insurers).
· Group = master policy + certificates of insurance.
· Variable life and annuities: life license plus FINRA registration.
Exam prep classes
Life and real estate license exam prep with experienced instructors.
Learn more ›