Life Insurance (General Knowledge II)

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What is non-contributory for group life insurance?

Emloyes pay

What is misstatement of age or sex provision?

Over payed: Gives person refund and interest Under payed: Proportionally reduce to death benefit

What are the parties to an annuity?

Owner Insurer Annuitant Beneficiary

What are the impacts of riders?

premium, benefits, and/or contract language

What is consideration provision?

"Exchange of value" must be funded

What is the accumulation period for the income taxation of annuities?

-Tax deferral w/in the account -10% Penalty pre 59 1/2 Corporate owned: no tax deferral Withdrawals: LIFO method

What are the period certain for annuities?

10 years, 20 years and etc certain Age and sex are not factors

What is fully insured? (SS)

40 credits of eligibility eligible for death benefit, retirement benefit, disability benefit, and medical

What is the insuring provision?

4p's : Page 1, Parties Involved, Perils and Promise to Pay

What is currently insured?(SS)

6 of eligibility out of 13 credits immediate preceding your death Eligble for death benefit only

What are term insurance riders?

Build no cash-value

What is Keogh Plan (HR-10)?

Can use 25% of your money for life insurance

What is Joint Life insurance?

Protects both insureds, but only covers the first to die

What is pure life income?

Provides for annuity payments to the annuitant for as long as he or she lives. Upon the annuitant's death, no further payments are made

What is incontestability clause?

The insurer cannot contest a claim based on misrepresentation or concealment by the policyowner after the policy has been in force for 2 years

What happens in accelerated death benefit?

The insurers pays a percentage of the death benefit while the insured is still alive

What is automatic premium loans? (APL)

Because "cash value" is required, this feature is not available on the term insurance.

What is immediate annuity?

Converts principle sum into income stream shorty after purchase Funded w/a single premium payment

Group Life insurance: Premiums and Taxation

Death benefits are always income tax-free, but after $50k it's handled different

What is the annuity accumulation period?

Deferred annuities only (Collect sometime in the future) Similar to paying in

What is wavier premium for riders?

Disability protections of required premium payment before specified age

What is accidental death rider/multiple indemnity?

Double indemnity plan doubles death benefit The accident must occur before a specified age, usually age 65 For beneficiary to receive this additional benefit, the insured must die w/in a specified period of time after the accident, usually 90 days

How to surrender an annuity?

During Accumulation Period: Non-forfeiture value Surrender changes apply in decreasing amounts over time Bailout provision (Only fixed annuities): No surrender charge if interest rate drops below a certain point

What is split dollar plans?

Not for a business but employee

What are the nonforfeiture options?

Only on permanent policies cash policy loan reduced paid-up policy extended term

What is Guaranteed insurability rider or OPAI?

Option to Purchase Additional Insurance w/o medical exam or new medical application

What are Policy Dividends?

Option to receive: cash, interest only, apply toward premium, buy additional amount s of paid-up life insurance, buy annually renewable term Dividends are not taxable or guaranteed

What are the types of eligibility for Social Security?

Fully insured Currently insured

What is the annuity period?

Both IMMEDIATE and deferred annuities Similar to paying out

What is "free look" provision?

Begins when policyowner takes possession of the policy, commonly 10 days

What is deferred annuity?

Has an accumulation period No current taxes due on accumulating funds Maturity date (may or may not be annuitized) Funded w/a single payment or multiple

What are variable annuities?

Investments in separate accounts No guarantee of investment performance Gains, if any, and interest is tax-deferred until withdrawn FINRA and state insurance license required Monthly payments can fluctuate

What are the types of specialized whole life insurance?

Joint Life Survivorship Life Juvenile Life Jumping Juvenile Credit Insurance

What is Jumping Juvenile insurance?

Jumps in face amount Usually at the age of 21 Automatic covered regardless of the health condition

Group Life: Other Forms

Multiple Employer Trust (MET) backed by insurance Multiple Employer Welfare Arrangement (MEWA) - self insured plan Payroll deduct plan

What are the rights to ownership of a life policy?

Name or change name of beneficiary Cancel the policy Take a policy loan Decide how dividends are to be received Decide how death benefit is paid Assignment of the Policy

Roth Individual Retirement

Never tax deduction for contributing No age limit

Group Life Insurance: Underwriting

No medical questions Probationary Period: Period of time that you have to be on the job

What are the types of retirement plans?

Non-qualified (after tax dollars) Qualified (before tax dollars)

What are the standard exclusions?

Suicide (2 years) Aviation (Flight crew, not passengers) War Hazardous occupation and avovation Commission of a felony

What is Juvenile life insurance?

When the child of 18 or 25 years old becomes the policyowner

What is Indexed Annuity Investments?

A type of fixed annuity Guaranteed minimum interest rate applies for contract term Grate of index value or guaranteed minimum equals amount credited to contract

What is the blackout period?

When a widow or widower is under the age of 60 and his or her dependents are over age 16

What is contributory for group life insurance?

companies pays

Who can be a beneficiary?

individuals, businesses, trusts, estates, charities, minors

What are the types of assignment of the policy?

Absolute: Taken the ownership of the policy to someone else Collateral: Partcial ownership

What are the annuities benefit factors?

Age, sex, payout/income options, interest earnings, internal expenses, and annuity amount

What is the 403(b) plan? (Group Plans)

Aka Tax Sheltered Annuity (TSA) Voluntary Salary Deduction

What is Survivorship Life?

Always covers 2 people Pays out death benefit when the 2nd person in marriage dies Can have 3rd party ownership Used for estate plan

What is Primary Insurance Amount (PIA)? *SS

Amount used to determine retirement benefits at age 65, or 67, if born after 1937

What is payor benefit ride?

Applies to Juvenile only Applicant's waiver of premium is used when the premium payer is disabled or dies Protects adult premium payor

What is assignment clause?

Collateral assignment: temporary transfer for loan Absolute assignment: permanent transfer or irrevocable beneficiary

What are the benefits of Social Security?

Death, retirement, disability, medical, medicare

What is the annuity period for the income taxation of annuities?

Each payment is partially taxable Exclusion ratio (basis): Investment in contract divided by expected total return and term certain Vs life annuity

What are the annuity mechanics?

Premiums: Single (Collects right away) and Periodic (Fixed & Flexible) Annuitization: Immediate (Collects in the future) Deferred

Who is the annuity owner?

Purchaser/Annuitant

What is defined contribution plan?

Qualified Employer defines contribution Similar to a 401k

What is defined benefit plan?

Qualified Employer defines retirement benefit

What is Individual Retirement Account (IRA)

Qualified Contributions can be at made until the age of 70 1/2 Penalty if funds are withdrawn prior to age 59 1/2 May or may not get tax deduction for contributing

Who is the annuity beneficiary?

Recipient of death benefit (prior to annuity period)

Who is the annuity annuitant?

Recipient of income (during annuity period)

What are the Life Income options?

Straight (or pure) Joint or survivor life income

What is the conversation option for group life insurance?

From group term to individual whole policy -No proof of insurability -Age rated -Like face amount -Premiums direct build

What are fixed annuities?

Funds invested into the insurer's general account Guaranteed minimum interest rate Designed to produce a fixed income stream that is guaranteed Interest is tax-deferred until withdrawn

What are annuities?

Helps with retirement Earnings grow tax deferred There is usually a 5-7 year disappearing withdrawal penalty

Who is the annuity insurer?

Issuer

What is Joint and Survivor life income?

Pays until the second death

What is grace period?

Period of time after premium due date that the policyowner has to pay the premium 31 days

What is key employee/person protection?

Protects a valuable employee Business may be beneficiary


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