Primerica Chapter 2
Substandard (High Exposure) Risk
applicants are not acceptable at standard rates because of physical condition, personal or family history of disease, occupation, or dangerous habits.
Declined Risks
applicants who are rejected
Retirement Fund
as a source of retirement income
Unconditional (binding) receipt
if a premium is paid, coverage will begin immediately for a specific length of time (such as 30-60 days) regardless of whether the applicant is approved by the insurer. Mostly for businesses.
Bequest
leaving funds to insureds, church,school, charity
Whole life Insurance
life insurance that pays a benefit on the death of the insured and also accumulates a cash value.
Medical Information Bureau (MIB)
A nonprofit association that maintains medical data on applicants for life insurance
Provider - Viatical Settlements
A person ,other than a viator ,that enters into a the contract
Buy sell Agreement
A legal contact that determines what will be done with a business in the event that an owner dies or becomes disable.
Beneficiary
A person who receives the benefits of an insurance policy
Estate
A persons net worth
Delivery Receipt
Agent hand delivers an individual policy or annuity to the policyowner,must recieved a signed
Viatical Settlements
Allows someone living with a life-threatening condition to sell their existing life insurance policy and used the proceeds when they are most needed, before death. Sold to third parties using separate contracts.
Lump Sum Needs Debt Canellation
An alternative to estate liquidation-paying off debt
Solicitation of Insurance
An attempt to persuade a person to buy an insurance policy, and it can be done orally or in writing
Life Insurance surrender cost index
An index that determines the policy's guaranteed cash surrender value available to the policy owner at the end of the 10th and 20th policy years,accounting for the annual cash dividends at 5% interest.
Replacement
Any transaction in which new life insurance or a new annuity is purchased and,as a result,the existing life insurance or annuity has been
Needs Approach
Based on the predicted needs of a family after the premature death of the insured. Need income,amount of debt,morgage,investments,expenses.
Life Insurance
Coverage on human lives
Cash value
Equity amount accumulated in pernament life insurance
Mode
Frequency the policyowner pays the premium
Human Life Value Approach
Gives the insured an estimate of what would be lost to the family in an event of the premature death of the insured. ex: insureds wages,inflation,years till retirement, time value of money
Preffered Risk
Individuals who meet certain requirements and qualify for lower premiums than the standard risk
Time value of money
Investment return on the insurance premium had it been invested elsewhere by applying an interest adjustment to yearly premiums and dividends.
Underwriting
Is the process in which an insurance company determines whether or not a particular applicant is insurable ,and,if so, what premium to charge.
Conditional Receipt
Is used only when the applicant submits a prepaid application. It will say that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found insurable as a standard risk, and policy is issued exactly as applied for.
Industrial /Home Service Insurance
LIfe insurance in small amounts,premiums are weekly/monthly and collected by represenative,no medical exam
Ordinary Life Insurance
Life Insurance in larger amounts, annually premium,paid directly to insurance, physical exam needed
Stranger-originated Life insurance -SOLI
Life insurance arrangemnet in which a person with no relationship to the insured (Stranger) purchases a life policy on the insured's life with the intent of selling the policy to an investor and profiting financially when the insured dies.
Key person Insurance
Life insurance that protects a firm against losses due to the death of a key employee
Lump Sum Needs emergency reserve funds
Paying for unexpected expenses
Lump-Sum
Payment of the entire benefit in one sum
Lump Sum Needs Education funds
Pays children schooling or spouse
Minor
Person under legal age
Standard Risk
Persons who are average.
Executive Bonus
Plan allows a business to provide life and/or disability income insurance to key executives using tax deductible dollars. Insurance policies are owned by the executives and are paid for through cash bonuses to the executives
Illustrations
Presentation or deception of nonguaranteed elements of a life insurance policy
Business LIfe Insurance
Provide business owners and their survivors, and even protect the business itself. Funding business continuation agreements , compensating executives, protect against financial loss resulting from death or disability of key employees.
Agents report
Provides the agents personal observations concerning the proposed insured
Life Settlement
Refers to any financial transaction in which the owner of a life insurance policy sells a policy that is no longer that is no longer needed to a third party for some form of compensation, usually cash.
Survivor Protection
The funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death
Viatical Broker
Represent the insureds
Viatical Producers
Represent the providers
Liquidation
Selling assets in order to raise capital
Mortality Tables
Tables help the insurers predict the expectation of life and the probability of death for a given group
Lumps Sum Needs Cost associated with death
Taking into account the final medical expense, funeral
Field Underwriting
The agent is the companys frontline to the potential client
Death benefit
The amount paid upon the death of the insured in a life insurance policy
Viators -Viatical Settlements
The insureds
Liquidity
The policy's cash values can be borrowed against at any time and used for immediate needs.
Comparative Interest Rate ( CIR )
The rate of return that must be earned on a "side fund" in a buy term invest the difference plan so that the value of the side fund will be equal to the surrender value of the higher premium policy at a designated point in time
Mortality
The ratio of the number of deaths in a specific population over a certain amount of time versus living people in that population
The Application
The starting Point and basic info used by the company in the risk selection process Part 1 - General Info Part 2 - Medical Information- If small amount of coverage no medical examination needed
Replacing Insured's Salary or Lost services
The surviving spouse have to train for job market , caregiver
Social Security Income "Blackout Period"
The time during which the surviving spouse/children do not receive any social security survivor benefits
Insurable Interest
To purchase insurance,the policy owner must face the possibility of losing money or something of value in the event of loss. In life insurance ,insurable interest must exist between the policyowner and the insured at the time of application;however, once a life insurance policy has been issued,the insurer must pay the policy benefit,whether or not an insurable interest exist.
Liquidation vs Retention of Capital
Under the retention of capital approach, enough insurance is purchased so that when added to other liquid assets, there is enough to pay income benefits without jeopardizing the insured's principal asset - such as a home.
Stock Purchase
Used by privately owned corporations when each stockholder buys a policy on each of the others
Cross Purchases
Used in partnerships when each partner buys a policy on the other
Stock Redemption
Used when the corporation buys one policy on each shareholder
Entity Purchase
Used when the partnership buys the policies on the partner
Premium Reciept
Whenever the agent collects premiums the agent mus first issue this
Solvency
ability to meet financial obligations
Rating Classification
used in deciding whether or not the applicant should pay a higher or lower premium