What is a life cycle life insurance policy?

The simplest way of understanding a life cycle insurance contract (or adjustable whole life contract) is that it’s a contract that grows with the beneficiary’s needs and lifestyle.

A life cycle life insurance policy does not refer to a literal policy but a concept in the insurance business. The insurance life cycle diagram can refer to the “cycle” of profitable and unprofitable periods of time. The cycle itself is a period of growth and decline, and it is largely seen as unpredictable.

The insurance cycle affects all types of policies, with the exception of a traditional life insurance policy. In this case, the life insurance policy is fairly predictable since enough data and research has been compiled to predict claims and minimize risk.

How is the term life cycle commonly used?

The cycle suggests that there is a time in the insurance cycle in which premiums are relatively low and the capital base is high. Premiums fall for a while, as insurance carriers offer unusually low rates. This causes intense competition throughout the industry. The next stage in the insurance cycle is the “catastrophe” stage where there is a major occurrence that brings great loss. A good example of a catastrophic event would be a hurricane or perhaps a major terrorist attack.

Charts created to analyze the insurance cycle reveal that there is a major claims burst after a catastrophe, and that this causes smaller companies to leave the market, ending competition, and leaving larger entities with less capital to spend.

Read More: Understanding Life Insurance

This results in a rapid increase in premiums and leaves underwriters in a negative state of mind when it comes to taking on qualified risks. The cycle ends when the high rates become profitable, causing more companies to join the market and an increase in competition. Market saturation continues until the next cycle.

Life Insurance and the Insurance Policy Lifecycle

How does a life insurance cycle come into the picture? The life cycle doesn’t seem to lend itself to the life insurance avenue of the insurance industry. In this context, an insurance policy lifecycle might refer to an adjustable life insurance policy. An adjustable life insurance policy is a type of whole life insurance coverage.

Simply put, whole life insurance is a policy that stays in effect for the insured person’s entire life. In exchange for lifetime coverage, the contract holder makes premium payments every year. The whole life insurance policy is slightly different than the universal (flexible contract) or the variable (multiple accounts) policy. Whole life insurance benefits are paid at the insured person’s death or at the endowment age, which is typically 100 years old. This is one example of an insurance processing life cycle diagram. (For more information, read our “How long should life insurance coverage last?“).

The idea behind life cycle insurance (a nickname for adjustable whole life insurance) is that the insured person can request that changes be made, as can the insurance company, so as to prepare for a life cycle change.

Both parties are able to adjust the terms of the contract, which might include the amount insurance, the protection period, the premium price and term duration.

Before such a desirable contract is offered, an insurance company would have to consider important data about the insured, such as lifestyle, expected income and typical expenses. With this data, the company could come up with an adjusted contract and amount.

What factors determine the terms of life insurance contracts?

When dealing with a life insurance policy, other considerations might be taken into account, such as a mortgage, credit card debt, or a child’s education. All of these factors might require an adjustment in premiums as well as benefits. Naturally, as the life cycle continues and adulthood becomes retirement, expenses may again be decreased.

If you are interested in buying a life insurance policy for one of your loved ones, then consider looking into whole life insurance. Many insured people consider a life insurance policy to be the final gift that a household head leaves his/her surviving family. The insured can rest with the knowledge that the family will be taken care of for years on end—long enough to process the grief and get their lives back on track.

This policy lasts until endowment or until death. You can find life insurance quotes online and get comparisons between top insurance providers in your area. 

Read more: How long do you have to file a life insurance claim?

Case Studies: Life Cycle Life Insurance Policy

Case Study 1: John’s Secure Future

John, a 30-year-old professional, recently got married and started a family. He wanted to ensure financial security for his loved ones in case of any unforeseen circumstances. John opted for a life cycle life insurance policy that offered both protection and savings components.

This policy provided him with adequate coverage during his early years and gradually accumulated cash value, which he could utilize for future needs such as his children’s education or retirement planning.

Case Study 2: Sarah’s Retirement Plan

Sarah, a 45-year-old businesswoman, realized the importance of preparing for her retirement years. She decided to explore life cycle life insurance as a means to secure her financial future. Sarah opted for a policy that focused on building a substantial cash value over time while providing a death benefit.

This allowed her to safeguard her family’s financial well-being in case of an untimely demise, while also accumulating funds for her retirement goals.

Case Study 3: Mark’s Legacy Protection

Mark, a 60-year-old retiree, wanted to leave a lasting legacy for his children and grandchildren. He chose a life cycle life insurance policy that allowed him to create an inheritance for his loved ones while enjoying the benefits of lifelong coverage. The policy offered a guaranteed death benefit and ensured that Mark’s family would receive a substantial payout upon his passing.

Moreover, the policy had a cash accumulation feature that Mark could access during his retirement years for additional financial support.

Case Study 4: Emily’s Estate Planning

Emily, a successful business owner in her early 50s, wanted to efficiently manage her estate and ensure a smooth transfer of wealth to her heirs. She opted for a life cycle life insurance policy with estate planning benefits. This policy helped Emily protect her estate from potential taxes and probate fees, allowing for a seamless transfer of assets to her beneficiaries.

By strategically utilizing life insurance, Emily could safeguard her wealth and leave a lasting legacy for future generations.

Case Study 5: David’s Mortgage Protection

David, a 35-year-old homeowner, wanted to ensure that his family could continue living in their home if something were to happen to him. He chose a life cycle life insurance policy that included mortgage protection.

This type of policy provided a death benefit that could be used to pay off the mortgage in case of David’s untimely demise, ensuring that his family would not face financial hardships while dealing with the loss of their primary breadwinner.