GA Variables Test
Free Look
10 days for fixed premium whole life 45-day free look from the date the application was signed in addition to the 10-day free look for variable
What is the additional tax return for annuity withdraws before 59 and 1/2
10%
Incontestability
2 years after the date of issuance or reinstatement, the policy becomes incontestable from material misstatements.
Variable insurance policies may be exchanged for a non-variable life insurance policy at any time within....
24 months after policy issuance
Transacting Variable Life Business in Georgia
A company cannot issue or deliver a variable life policy in Georgia unless it has a current Certificate of Authority The Commissioner must be satisfied with the insurer's method of operations so as not to be rendered hazardous to the public or policyholders.
Existing Life Insurance
A life insurance policy currently in force.
Assignments
A policyowner may assign all (absolute) or some (collateral) of the rights or values in the policy to a third party. The insurer is not responsible for the validity of the assignment, and it is only effective once filed at the insurer's home office.
Portfolio Rebalancing
A portfolio should be re-examined from time to time to see if it needs to be put back into alignment or rebalanced. If the original allocation was 50/50 stocks/bonds based on the investor's risk tolerance and now the portfolio stands at 70/30 due to a bullish stock market, it may be time to rebalance back to 50/50.
The application for a variable life insurance policy will contain:
A prominent statement that the death benefit may be variable or fixed under specified conditions A prominent statement that cash values may increase or decrease in accordance with the experience of the separate account (subject to any specified minimum guarantees) Questions designed to determine the suitability of variable life insurance for the applicant
Suitability information
Age Annual income Financial situation and needs, including the financial resources used for the funding of the annuity Financial experience Financial objectives Intended use of the annuity Financial time horizon Existing assets, including investment and life insurance holdings Liquidity needs Liquid net worth Risk tolerance Tax status
Direct Response Insurer
An insurer that does not use an agent in the sale of insurance.
Conservation
Any attempt by the existing insurer to discourage a policyowner from the replacement of existing life insurance.
Determination of Variable Benefits
Any variable life insurance policy issued under the Georgia Code section must contain a statement of the essential features the company will follow in determining the variable benefits dollar amounts provided under the policy. Any policy, including a group contract, must state on its first page that the dollar amount will vary to reflect investment experience
The Commissioner may reject an application or revoke, suspend, or refuse to renew a variable contract license for:
Anything that would bar the applicant or agent from being licensed to sell life insurance contracts in this state; or A violation of federal or state securities laws.
Cash Surrender Values
Are stated in the policy's table on an annual basis. Typically, the tables show the cash surrender values for the first 20 years of the policy, at age 62, and at age 65 can be requested if the insured wishes to no longer keep the policy in force.
Unfair Discrimination
Charging different rates, having different policy terms/benefits for individuals of the same class and: Equal expectation of life (life insurance) Hazard (health insurance) Risk (property or casualty insurance) or basing rates on:Race, color, or national/ethnic origin; orSolely upon a property's age or geographic location, (unless the rate differential is based upon sound actuarial principles or is related to actual experience)
Boycott, Coercion, Intimidation
Entering into any agreement to commit any act of boycott, coercion, or intimidation resulting in restraint of, or monopoly in, insurance business.
Grace Period
For fixed premium policies, a grace period of one month (31 days) For flexible premium variable life policies, the grace period is 61 days from the mailing date of the notice from the insurer that the account values are insufficient to cover the internal costs to provide the coverage.
Reinstatement
For traditional whole life, reinstatement due to policy lapse can occur within 3 years of the due date of the unpaid premium For flexible premium variable life (variable universal life), the amount to be paid varies by company, but it must be enough to bring the policy to current status and to sustain it for a couple of months after.
Corporate Bonds Funds
Investors seeking stability and lower risk might select subaccounts that hold U.S. corporate bonds, which are interest-paying debt instruments. Higher bond ratings signify a high degree of security against default.
Rebating/Illegal Inducement
Knowingly permitting an agreement other than as expressed in the contract; offering anything of value not specified in the contract as an inducement to insurance, except a rebate approved by the Commissioner.
Misrepresentation
Making a false representation: Of a policy's terms, benefits, dividends, name, or title (these are misdemeanors) Of an insurer's financial condition or a life insurer's legal reserve system To induce a policyholder to lapse, forfeit, or surrender insurance (this misrepresentation is known as twisting)
Defamation
Making a statement that is false or maliciously critical or misrepresentative of an insurer's financial condition with intent to injure any person in the insurance business
False Information and Advertising
Making an advertisement or statement about the insurance business or any person in the conduct of his/her insurance business that is untrue, deceptive, or misleading.
Controlled Business
Obtaining a license for the purpose of purchasing insurance on the producer's: Self or a spouse Relative by blood or marriage within the second degree of kinship Employer or the firm of which a person is a member
Suitability Issues
Placing the majority of a client's liquid assets into an annuity, especially where withdrawals are limited Requiring a surrender penalty period that is greater than the client's life expectancy according to the commissioner's mortality and life expectancy tables Highlighting contract benefits while omitting or minimizing negative aspects such as surrender charges, fees, annuitization requirements, forfeiture of interest, etc. Failing to match the product and its features to the client's stated needs and goals Having to fulfill several contract requirements to obtain interest credited to the annuity Issuing lengthy contracts of 10 years or more, and high surrender charges, especially with the elderly Eliminating contract guarantees, nursing home, and death benefits when an annuity is replaced with a new annuity Offering bonuses which require the contract owner to meet complicated contract provisions to retain the bonus, especially with dual-tiered interest crediting methods
Modes
Refers to the frequency of premium payment
Premiums for Fixed Variable and Flexible Variable and deposited into the insures ----
Separate Account
Insuring Clause
States that the insurer promises to pay the death benefit to the named beneficiary upon receipt of proof of death of the insured as long as the policy was in force when received at the insurer's home office.
The following will be taken into consideration by the Commissioner:
The history and financial condition of the company The experience, character, responsibility, and fitness of the officers and directors of the company The law and regulation under which the company is authorized in its state of domicile to issue such policies
Replacing Insurer
The insurer that issues or proposes to issue a new policy or annuity that will replace existing life insurance.
Existing Insurer
The insurer whose policy is subject to being replaced.
Entire Contract
The policy itself and an attached copy of the application.
Changes
The policyowner has the right to name and change the beneficiary while alive unless this right has been waived. A written notice must be filed with the insurer in order for the change to become effective as of the date the notice is signed, regardless of whether or not the insured is alive at the time the insurer receives the notice.
Automatic Premium Loan
The policyowner may elect in writing at the time of application to allow the insurer to pay a late premium payment by taking a loan from the cash value of a policy. This will only occur at the end of the grace period and is treated as a policy loan.
Common Disaster
The primary beneficiary must survive the insured by a specified period of time (usually between 30 to 90 days) or it is assumed the insured died last. This allows the benefit to be paid to the contingent beneficiary instead of the primary beneficiary's estate.
Growth and Income (Equity-Income) Funds
These subaccounts attempt to produce both capital appreciation and current income from dividend paying companies, with priority given to both appreciation potential in the stocks purchased and the income from dividends.
Aggressive Growth Stock Fund
These subaccounts focus mainly on unit-value appreciation with little or no concern for generating income.
Growth Funds
These subaccounts generally seek capital appreciation, with current income (dividends) as a secondary concern.
U.S. Government Bonds Funds
These subaccounts invest in direct and indirect U.S. government obligations. Government bond subaccounts are comprised of one or more of the following: Treasury bills, notes, and bonds issued by the U.S. government Government National Mortgage Association bonds (GNMA or Ginnie Mae's), which are considered an indirect obligation of the government, but are still backed by the full faith and credit of the United States Federal National Mortgage Association bonds (FNMA or Fannie Mae's), which are not issued by the government, but are considered historically virtually identical in safety to GNMAs
Waiver of Premium
This rider pays the scheduled premium starting 6 months from any total and permanent disability to the policyowner. The premiums are waived by the insurance company and any and all benefits of the policy remain in effect until such time as the policyowner recovers from their disability.
Waiver of Planned Premium
This rider waives an amount equivalent to the planned (flexible) premium, whether it had actually been paid or not, in cases where the policyowner becomes disabled. This rider will not only keep the death benefit in place but will also fund the policy in such a way as to allow the cash values to grow. The cash values will also be accessible and can be used as needed by the policyowner.
Reduced Paid-up
Using the cash values to purchase a paid-up policy with a reduced face amount.
Equity Indexed Annuities
a fixed annuity that ties its interest credit to the performance of one or more securities indices, primarily stock indices, such as the S&P 500 or the Dow Jones Industrial Average. The goal of this is to try to achieve an interest credit far greater than what an insurance company would declare on an annual basis.
Money Market Funds
a good parking place for funds that are not yet ready to be invested, an emergency fund, or to maintain a stable principal value while receiving a small return for the limited risk posed. They are not guaranteed.
Variable Life Insurance
a permanent life insurance policy with a fixed premium, a guaranteed minimum death benefit, and cash values that are not guaranteed.
Asset Allocation
a process where an investor spreads the risk not just through diversification but by allotting investments in pre-selected percentages to various asset classes, such as stocks, bonds, and money markets. This would include both large and small companies, as well as domestic and international.
Dollar Cost Averaging (DCA)
a technique typically used for buying mutual fund shares that can be used with equal effectiveness in variable contracts in which investments of the same dollar amounts are made on a regular basis over a period of time.
Balanced Funds
also referred to as total return subaccounts, is to provide both growth and income from stocks and bonds. Subaccount management purchases include: Common stocks for potential unit-value growth and dividends Preferred stocks for dividends Bonds for their income-generating interest payments Convertible securities for flexibility of choice, capital appreciation, and either dividends or interest Overall this is a conservative type of investment
FINRA
an independent, not-for-profit organization authorized by Congress to protect America's investors by making sure the securities industry operates fairly and honestly.
Accumulation Unit
analogous to a share of a mutual fund.
Flexible Premium
any amount at any time (unscheduled) subject to insurer restrictions to minimum and maximum amounts.
FINRA Rule 2821
applies to all securities licensed agent and brokers. It details their responsibilities in regard to client information gathering, records keeping, insurer oversight/audit responsibilities, and due diligence requirements for the sale of any variable annuity product. The same stringent requirements are extended to the suitability of sale of fixed or equity indexed products for those who are securities licensed.
Owner's Rights
assigning the policy making changes to the policy changing the beneficiary taking policy loans cash surrendering the policy selecting non-forfeiture and settlement options, make changes to the separate account selections.
Settlement Options for Variable Life
at least one must be offered on a fixed basis only
Flexible premium variable life Premiums
can be paid at any time for any amount with insurer limitations
Flexible premium variable life death benefit
death benefit is adjustable but will not fall below the minimum guaranteed which is usually 50, to 100 k
Asset Allocation Portfolios
designed to allow the money managers discretion to invest the portfolio assets among several asset classes within specified minimum and maximum ranges to try to achieve above average investment performance while reducing risk.
Most variable life polices rarely if ever receive ...
dividends and if so, they would most likely be paid in cash.
Consideration
exchange of an act (paying the premium) for a promise to pay.
Level Premium
fixed (continuous or scheduled), the same amount throughout the duration of the policy. Flexible is any amount at any time (unscheduled) subject to insurer restrictions to minimum and maximum amounts.
Death Benefit for Fixed Premium Variable Insurance
has a guaranteed minimum death benefit can be greater if there is a positive performance of the separate account
Revocable
has no rights and can be changed at any time by the owner.
Waiver of Monthly Deduction
he insurance company will waive its right to collect the monthly deduction from the cash values and the policy's death benefit will remain in force in the case of the policyowner's disability. It is likely that the cash values of the policy will stop growing and may in fact drop to minimum levels.
net investment return
in the separate account is the interest, dividends, and capital gains received minus any and all expenses.
Global (International) Stock Funds
invest in both U.S. and foreign stocks
Prospectus
is the most important and complete source of information about a variable contract's inner workings, including fees and charges, goals, government requirements, and investment options.Without this the sale of a variable contract is prohibited
Annuity Unit
is used to determine the income benefit payment to an annuitant during the annuitization phase
Premiums for Fixed Variable Insurance
level needs to be paid in full and on time
Variable Annuity Contracts
long-term investments primarily designed to meet retirement or other long-range goals.
Premium Payment
must be paid in advance, in full, and on time.
Cash Value valuation for Fixed Variable
must be valued at least monthly
Valuation of Death Benfit for Fixed Variable
must occur at least once a year
irrevocable beneficiary
no change can be made without the written consent of the beneficiary.
Fixed Variable Cash Values
not guaranteed
Variable universal life Death Benefit
not guaranteed duration and amount contingent on the performance of the separate account
Fund of Funds
operated as an investment fund consisting of and investing primarily in other funds rather than in individual securities.
Accelerated Death Benefit
provides early access to a death benefit if an insured becomes terminally ill.
Contingent Beneficiary
receives the death benefit if the primary beneficiary predeceases the insured.
Primary Beneficiary
receives the death benefit when the insured predeceases the primary beneficiary. The contingent beneficiary receives the death benefit if the primary beneficiary predeceases the insured.
The investment policy of the separate account cannot change without the consent of...
the Insurance Commissioner.
The policyowner has the right to exchange the fixed premium variable life insurance policy for a traditional whole life insurance policy where
the benefits do not vary with the investment performance of the underlying investment accounts. This opportunity is only available if the investment funds change the investment adviser or if there is a material change in the investment policies or objectives of the investment fund.
Separate accounts
the funding source for cash values in variable life and variable annuity products. These accounts are described as "separate" due to the fact they are not part of the general account or assets of the insurance company; they are held "separate" from the general assets of the insurer.
Separate Account Investment Policy
the investment policy of a separate account will not be changed without the Commissioner's approval. Any changes will be effective 60 days after the date it was filed with the Commissioner, unless the Commissioner disapproves the changes before the 60-day period ends.
The cash values of a variable life insurance policy equals...
the net premium minus fees, charges, and expenses, plus interest or dividends.
The minimum death benefit in most variable annuities is...
the premium paid or the account value, whichever is greater
Diversification
the process of investing in several different types of individual funds as a way to reduce investment market risk. It is based upon the fundamental aspect of "not putting all of one's eggs in one basket".
The Assumed Interest Rate (AIR)
the rate of investment return which is required to be credited to a variable life insurance policy after deduction of charges for taxes, investment expenses, and mortality and expense guarantees. It is the net rate of investment return required to maintain the variable death benefit amount from the previous year.
Variable universal life premiums can be skipped if...
there are sufficient funds in the cash value (accumulation) account to cover the monthly mortality costs and other charges.
High-Yield Bond Funds
these portfolios invest in corporate bonds rated below BBB, which are non-investment grade. The bonds can go into default.
Specialty/Sector Funds
these subaccounts primarily invest in the common stocks of a single industry or sector, such as natural resources (timber or mining), real estate (commercial buildings, hotels, or apartments), or utilities. They can be quite cyclical in their total returns.
Dodd-Frank Wall Street Reform and Consumer Protection Act
this act settled years of controversy among regulators by determining that, since indexed annuities are primarily insurance products, they will be regulated by state insurance departments. Therefore, they are considered a fixed type of an annuity and not a security.
Index Funds
unmanaged and typically is low cost. A portfolio of stocks or bonds is put together to replicate the performance of an index, which cannot be invested into directly. Indices are most often broadly diversified and are used as benchmarks to gauge investment manager's performance. They are considered a passive investment.
Extended Term
using the cash values to purchase a term policy with the same face amount for a specified number of years and days.
Annuitization
when the annuity is converted from the pay-in (accumulation) phase, over to the payout (annuity) phase
Fixed Account Funds
with its rate guarantees, is a good choice for the ultra-conservative investor. Most variable policies offer a fixed account, invested primarily in conservative, high-grade corporate and government bonds. It is supported by the general account of the insurer.
