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What is a life cycle life insurance policy?

Daniel Walker
Licensed Insurance Agent for 15 Years

UPDATED: Mar 19, 2020

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Life Cycle Life InsuranceThe 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 industry. 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.

To compare life cycle life insurance quotes with traditional life insurance quotes online just enter your ZIP code above!

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 companies offer unusually low rates. This causes an intense competition throughout the industry. The next stage in the 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.

This results in a rapid increase of 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.

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Life Insurance and the Life Cycle

life cycle life insurance policyHow does life insurance 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, a life cycle insurance policy might refer to an adjustable life insurance policy. An adjustable life insurance policy is a type of whole life insurance.

Simply put, whole life insurance is a policy that stays in affect 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.

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.

a life cycle life insurance policyWhat 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. Use our FREE tool right now to get started in your search for affordable life insurance!

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