Traditional Life Insurance

Posted on by bryankashflow

What is Traditional Life Insurance?

  • Policyholders do not have investment options but may savings or guaranteed cash components
  • Premiums, cash values and death benefits are pre-determined
  • Implicit charges
  • The reason why it is called traditional is that what insurance used to be before the innovations of VUL has come.
  • Under traditional policies, we have non-participating and participating policies.

Definition of Terms

But first, some definition of terms:

  1. Insured – is the person whose life is convered by the insurance policy.
  2. Applicant or Policy owner – the person is buying the life insurance – it could be for himself or for another person.
  3. Beneficiary – the person designated to receive the insurance proceeds upon death of the insured.
  4. Face amount – the amount stated in the policy as payable under a life insurance policy if the policy is in force and the insured dies.
  5. Premium – the sum of money given by the insured as a consideration for the insurer’s promise to indemnify or replace a loss
  6. Death benefit – the amount payable upon the death of the insured
  7. Maturity benefit – the amount payable if the insured outlives the protection period
  8. Cash values – the guaranteed amount received in case the plan is terminated prior to the insured’s death or maturity of the policy.
  9. Dividends – the return of excess premium paid annually to owner of insurance policy based in insurer’s performance and experience over a given period.

Types of Traditional Life Insurance

Non-participating and participating

Non-participating life insurance policies are those that do not provide for the distribution of dividends, surplus, or cash benefits to the policy owner. This is usually cheaper than participating policies. Meaning, the premiums are lower. 

In Sun Life, non-participating products are the following:

  • SunStartUp is a 10-pay endowment insurance plan. Meaning, upon inception, you will have a death benefit equal to 100% of the Face Mount, and after 10 years of paying, the policy matures and you will get the benefit equal to 50% of the total annual premiums paid.
  • Sun Safer Life is a renewable term insurance every 5 years, and may be converted to Whole Life, Endowment, or VUL. The premiums are adjusted based in insured’s age upon renewal.
  • Sun LifeAssure is renewable every 5 years that provides 100% of the Face Amount either upon death or upon diagnosis of a covered critical illness, whichever occurs first. Coverage is until age 70.
  • Sun Maiden is designed for women and is a renewable term insurance every 5 years. It provides cash benefit equal to 100% of the Face Amount upon diagnosis of a female-specific critical illness and surgeries. The Sun Maiden Plus provides 2% of the Face Amount for every child delivered for a maximum of 3 birthing, and 10% of the Face Amount in case of pregnancy-related complications.
  • Sun First Aid Plus is a hospital reimbursement income plan for 10 years. Meaning, you get a reimbursement equal to the number of days you are hospitalized. It also offers 50% or 75% return of premiums if the insured outlives the coverage period.

Participating life insurance policies

  • These policies provide for the distribution of dividends to the policy owner.
  • Under the law, there must be a provision in the policy that the company shall periodically provide or ascertain any divisible surplus accruing or accumulating on the policy under conditions specified therein.
  • Premium in this type is higher than a non-participating policy
  • Here, you have cash benefits where you can place for: (a) accumulated dividends; (b) extend term insurance; (c) paid-up addition.
    • If you want to have maximum cash for emergencies, choose accumulated dividends.
    • If you want to use the cash benefits to prolong your coverage, opt for extended term insurance.
    • If you want to increase your death and living benefits, choose paid-up addition.

In Sunlife, the following products are participating life insurance policies:

  • Sun Dream Achiever
  • Sun Acceler8
  • Sun Smarter Life Classic
  • Sun Smarter Life Elite
  • Sun Senior Care
  • Sun Fit and Well
  • Sun Cancer Care

Term, Endowment and Whole Life

Term insurance 

  • One of the most affordable forms of life insurance;
  • Insurance protection will be limited only for a specific period;
  • No savings component (e.g. Cash Value and Dividends);
  • Also known as “temporary protection”
  • Renewable – meaning that if a policy owner wants to renew term insurance he may renew the same coverage on a higher premium;
  • Has so-called “Natural premium” – when premium increases as you renew or convert the plan (at a certain attained age);
  • Specific riders can be attached;
  • Convertible Feature: Term insurance can be changed to permanent insurance without evidence of insurability; Some can be converted to endowment or VUL;
  • Limited – the premiums are for a limited term of years for the protection of the life of the policyholder.

In SunLife, term insurance include the following products:

  1. Sun Safer Life (5YRCT)
  2. Sun LifeAssure (5YRT)
  3. Sun Maiden (5YRT)
  4. Sun Maiden Plus (5YRT)

Renewable term life is a policy where premiums increase every time the policy is insured;

Level term insurance is an insurance protection will be limited for a specific period.

Endowment

Pure Endowment

Pays proceeds to the insured only if he lives to the end of a specified period.

  • In this kind of policy, the insured person will receive the full face amount on the date of maturity.

Endowment Insurance

  • insurance protection will be limited for a specific period with savings components such as cash value, endowment benefit if any, and dividends;
  • Usually payable for 10 or 20 years;
  • also called as a combination of level term and pure endowment;
  • With non-forfeiture options: means that the policy owner may discontinue premium payments but the policy may be kept in force;
  • Endowment insurance pays a percentage of the face amount in case of death of the insured during the coverage period or the insured gets the face amount if he survives to the end of the period stated in the policy;
  • Example: A 35-year-old individual purchases a policy under which, in 20 years, he will receive the face amount of the policy himself, is he is alive at that date. This policy is obviously a 20-year endowment.
  • Here you can avail the Fully-Paid Up and Early Maturity option
    • Paid-up insurance option – if the policy owner chooses this option, the premiums cease and the protection continues with a reduced amount of coverage. 

Early maturity – the maturity amount entitled to a life insurance policyholder is paid in structured periodic installments (up to a certain stipulated period of time post maturity) instead of a ‘lump-sum’ payout.

In Sun Life, the following are traditional endowment plans:

  • Sun Acceler8
  • Sun First Aid Plus
  • Sun StartUp
  • Sun Dream Achiever

Whole Life

provides protection with premiums payable for life; and usually has a low level of savings as an alternative to continued protection in old age. 

  • If a prospect wants to be insured for his entire lifetime with the least annual cost until he dies, a whole life policy is the best type of life insurance to get;
  • Pays a percentage of the face amount in case of death of the insured during the span of his life or up to age 100;
  • Savings components options are cash value, dividends, and endowment benefit
  • Premiums are level – meaning, it is a series of equal installments rather than lumpsum
  • With non-forfeiture options: means that the policy is kept in force but the policy owner discontinues premium payments.

Straight premium or Limited payment

  • Straight-premium or regular pay whole life policy – advantage of this is that premium payments are concentrated during the period of highest earnings of a policy owner;
  • Limited payment whole life policy – premium payments are only spread out to a number of years, regardless of earning years or not.

Can avail of Full paid-up option, early maturity, and premium offset:

  • Paid-up insurance option – if the policy owner chooses this option, the premiums cease and the protection continues with a reduced amount of coverage.
  • Early maturity – the maturity amount entitled to a life insurance policyholder is paid in structured periodic installments (up to a certain stipulated period of time post maturity) instead of a ‘lump-sum’ payout.
  • Premium offset – you can use dividends (if any) to pay all or part of your premium payments.

In Sun Life, the following are Whole Life Plans:

  • Regular-Pay Whole Life
    • Sun Smarter Life Classic Peso Regular Pay
    • Sun Smarter Life Elite Peso Regular Pay
  • Limited-Pay Whole Life
    • Sun Smarter Life Classic Peso 5/10 year pay
    • Sun Smarter Life Elite Peso 5/10 
    • Sun Fit and Well 10/15/20 
    • Sun Cancer Care 5/10/15/20 
    • Sun Senior Care 3/5/10