— P —
Paid to age X: A policy funding strategy where premiums are paid until the policy holder attains a pre-determined age.
Paid for X years: A policy funding strategy where premiums are paid for a pre-determined number of years.
Paid over the life of the policy: A policy funding strategy where premiums are paid throughout the life of the policy.
Peer-Groups: Peer-groups are defined by the empirical characteristics common to each type of product like A) individual life (products insuring only 1 life) versus survivorship life (products insuring 2 lives), B) the asset classes for invested assets underlying policy cash values, C) the level of guarantees upon which the client is relying, etc. While some agents/brokers consider universal life (UL) and whole life (WL) to be 2 different peer-groups, both charge cost of insurance charges (COIs), both charge premium loads, fixed administration expenses (FAEs) and cash-value-based "wrap fees" (e.g., M&Es if variable), and both invest in the insurers General Account which is required by regulation (as a practical matter) to invest in high-grade corporate/government bonds and government-backed mortgages, and clients do not generally rely on the contractual guarantees in either. In other words, because there is little if any fundamental difference in either the way COIs and expenses are determined (other than that they are not disclosed in WL) or in the way earnings on invested assets underlying policy cash values are generated or in the way each is used by clients, then UL and WL are by empirical measures in the same peer-group. Conversely, because variable life (VL) cash values can be directed into a variety of asset allocations comprised of a variety of mutual-fund-like Separate Accounts, and because such investment flexibility often comes with some level of additional expenses, then VL is its own peer group. Of course, the individual and survivorship versions of each of these product types would also constitute their own peer-groups, and those universal life products that are marketed for their secondary death benefit guarantees (UL-GDB) could also be a separate peer-group since these products are fundamentally different from UL/WL in their pricing, marketing and operation (i.e., it is the only type of permanent insurance were death benefits can be maintained even when no further premiums may be due and cash values may be exhausted). However, THEInsuranceAdvisor.COM does not currently have separate benchmarks for UL-GDB products, so they are currently treated as part of the UL/WL peer-group.
Permanent life insurance: Insurance intended to provide life insurance protection for the entire life of the insured. Permanent insurance differs from term insurance in that its premium structure includes a "savings component." Permanent insurance policy premiums have two components, the insurance cost (mortality cost, administrative fees, sales loads, etc.) and the "savings component." The "savings component" typically is referred to as cash value. The policyholder may use the cash value to make the minimum premium payments necessary to maintain the death benefit protection, may access the cash value by taking out loans or making partial surrenders, or may use any combination of these techniques. If permanent insurance is surrendered before death, a surrender charge may be assessed against the cash value. Generally, surrender charges are assessed if the policy is surrendered within the first 10 or 15 years. The amount of money a policyholder will receive upon surrendering a policy is referred to as the cash surrender value (CSV).
Preferred Risk: A risk class designation for nonsmokers whose health profiles are likely to result in better than average mortality risks. [Also see risk class and health profile.]
Policy Expenses: All life insurance policies are priced with policy expenses as to 1) cost of insurance charges (COIs), fixed administration expenses (FAEs), cash-value-based "wrap fees" (e.g., M&Es), and/or premium loads. UL and VL policies generally disclose these charges. While WL products are priced based on these same pricing principals, WL products generally do NOT disclose these charges.
Policy Interest: Universal Life (UL) and Whole Life (WL) policies are credited with a declared interest rate, much like Certificates of Deposit (CDs) offered by banks. UL products fully disclose this net interest amount credited to policy cash values, net of deductions for investment expenses and management fees. On the other hand, WL products include this interest inside the policy "dividend", and do not disclose the amount of interest, and neither UL nor WL policies disclose investment expenses and management fees.