Table C Life Insurance Policy Comparison Chart - Life Health Page 2
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1
2INTRODUCTION TO LIFE INSURANCE
ChApTER 1
Figure 1.3 (cont’d)
Table C
LIFE INSURANCE POLICY COMPARISON CHART
PARTIAL
DIRECT
ADVANTAGES
DISADVANTAGES
SURRENDERS
POLICY
BORROWING
TO
TO
RISKS
PERMITTED?
ELEMENTS
RECOGNITION
BUYER
BUYER
TO BUYER
N/A
Bundled.
N/A
Low outlay for
Increasing
Increasing premium.
large face amounts;
outlay; buyer may
Failure to earn more
develop outside
not invest differ-
aftertax on investments
investment
ence or may realize
than insurer.
program.
lower return.
Yes, but
Bundled.
Yes, with many
Familiar product;
Costly if lapsed
Failure to meet premium
through paid
policies.
predictable; helps
early.
commitment.
up additions
buyer discipline;
only.
share in favorable
interest, mortality
and expense
experience.
Yes.
Unbundled.
Yes.
Take advantage of
Premiums can be
If assumptions change
high current interest
higher or cash
adversely, premiums can
rates and improved
value lower than
be higher or cash value
mortality.
projected; policy
can be lower than with
can lose paid-up
traditional products.
status.
No.
Bundled, but
No.
Take advantage of
Must decide on
Investment risk is great.
to some degree
growth in economy.
underlying invest-
Typically higher expenses
shown in
ments and monitor
than traditional products.
prospectus.
them for change;
few guarantees.
Yes.
Bundled.
Yes.
Flexibility to adjust
If needs are known
Changes made by buyer
to changing needs;
and not likely to
to satisfy short-term
only one policy
change, other
needs may have an
needed.
products may be
impact on the satisfac-
less costly per unit
tion of long-term goals.
of protection.
Yes.
Unbundled.
Yes.
Greater transparency
Flexibility places
Adverse change in
and more flexibility
greater responsibil-
assumptions can affect
than Adj. Life.
ity on buyer; buyer
satisfaction of long-term
assumes greater
goals and drop cash
investment and
value below that of
mortality risks.
ordinary life.
Yes.
Unbundled.
No.
Epitome of flexibility
Equity performance
Combined risks of
in all respects.
unpredictable; rela-
universal and variable
tively high expenses;
life products.
few guarantees.
Yes.
Partially
Yes,
Cannot outlive
Expenses can be
Under life options, pay-
unbundled.
if permitted.
benefits if life
higher than alter-
outs cease at death: if
option elected.
native investments.
death occurs early, total
benefits less than with
alternative investments.
15
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