South Carolina Life Insurance Producer

spendthrift clause

A clause that prevents the debtors of a beneficiary from collecting the benefits before he/she receives them.

private insurer

A nongovernment insurance provider.

Guaranty Association

A state mandated association of all insurance companies designed to protect consumers from impaired or insolvent companies.

decreasing term

A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy.

Fair Credit Reporting Act

Act that protects privacy of background information and ensures that information supplied is accurate.

non-resident producer

Agents who hold an insurance license in a different state than the one they live

foreign insurer

An insurance company that is incorporated in another state.

alien insurer

An insurance company that is incorporated outside the United States.

domestic insurer

An insurer doing business in the jurisdiction in which it is incorporated.

government insurer

An organization that, as an extension of the federal or state government, provides a program of social insurance.

variable annuity.

Annuity that has a varying rate of return based on the mutual funds in which one has invested.

contract of adhesion

Any contract in which one party must either accept the agreement as written by the other party or reject it.

apparent authority

Authority created when the producer exceeds the authority expressed in the agency contract. this occurs when the insurer takes no action to counter the public impression that such authority exist. example would be the producers influence of a binder when, in fact, the producer has not been granted such authority.

Unfair Claims Settlement practices

Failing to approve or deny coverage of a claim within a reasonable period after a proof-of-loss statement has been completed or attempting to reduce the size of the claim.

policy review

Going over an application with the policy owner preferably in person. personal delivery allows agent to make sure insured understands all aspects of the contract; pointing out provisions or riders that may be different than anticipated, explaining how they affect the contract; explaining rating procedure and possible choices and provisions available to policy owner that may be active at this time.

whole life insurance

Insurance that is kept in force for a person's entire life and pays a benefit upon the person's death, whenever that may be.

term life insurance

Insurance that provides financial protection from losses resulting from a death during a definite period, or term.

Producer

Independent Insurance Agents also known as insurance sales agents that typically sell a variety of Insurance and financial products.

medical information bureau (MIB)

Information provided by this nonprofit organization helps insurance companies avoid adverse selection by applicants. it detects misrepresentations, helps identify fraudulent medical information, and controls the cost of insurance.

individual life insurance

Insurance that is issued on the life of one individual, with individual underwriting, rates, and coverage.

rollover

Movement of funds from a tax-deferred retirement plan from one qualified plan to another. this man boy taxation as an early withdrawal if completed within 60 days.

free insurance

Not permissible as an incentive to purchase another product.

participating insurance

Policyholders participate in the earnings and mortality experience of the insurer through dividend adjustments.

commingling

Producers must not mingle their funds with their own personal funds. producers are not required by law to open a separate bank account for such funds.

warranties

Promises by the insured party that material statements affecting the validity of the contract are true.

cost of living

Rider that provides for an increase in benefits due to changes in ___________. Increases are usually done because of the changes in the Consumer Price Index.

policy forms

State insurance commissioners have the authority to approve or disapprove new contracts or certificates before they are sold to the public.

representations

Statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true.

increasing term

Term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.

risk

The chance of loss from an event that cannot be entirely controlled during the policy term.

inspection

The director may examine books and records for any insurer, any pension fund, retirement system, or organization authorized in the state of SC every 5 years.

Law of Agency

The law that governs the relationship between a principal and his or her agent. an area of commercial law dealing with a set of contractual and non-contractual fiduciary relationships that involve a person, called the agent, that is authorized to act on behalf of another (called the principal) to create legal relations with a third party.

tax basis

The point from which gains and losses are figured for tax purposes.

pure risk

a category of threat that is beyond human control and only has the possible outcome of loss.

utmost good faith

a common law principle that every person who enters into a contract of insurance has a legal obligation to act with ______________ towards the company offering the insurance.

key person insurance

a company purchases a life insurance policy on his key employee, pays the premiums and is the beneficiary of the policy. If that person unexpectedly dies, the company receives the insurance payoff that they can use to train a new employee to replace the one they lost.

Certificate of Insurance

a document issued by an insurance company or broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals.

interest factor

a factor that is utilized to provide a simple calculation for determining the amount of interest insurance company can expect to earn from investing insurance premiums.

contributory

a group insurance plan issue to an employer under which both the employer and employees contribute to the cost of the plan. Generally, 75% of the eligible employees must be insured in most states.

buy-sell agreement

a legally binding agreement between the co-owners of a business. Is sometimes referred to as a buyout agreement. Governs the situation if a co-owner dies, is forced to leave the business, or simply chooses to leave the business.

certificate of authority

a license issued by the state to an insurance company that allows the company to conduct its business.

mortality factor

a listing of the life expectancy of individuals by age, calculates the average, how long a male or female of a given age group may be expected to live.

expense factor

a measure of what it cost an insurance company to operate. This is also known as a loading charge.

fraternal benefit society

a nonprofit corporation, society, or order without capital stock that have a representative form of government and are organized through a large system. They exist for the benefit of its members and their beneficiaries.

indemnity

a payment for damage or loss.

liquidity

a person or companies availabile cash reserve. also, an insurer's ability to make unpredictable payouts to policyowners.

absolute assignment

a policy assignment under which the assignee receives full control over the policy and also full rights to its benefits.

illustrations

a presentation, graph, or chart that includes non-guaranteed elements of the policy of life insurance over a period of years. a copy of this must be submitted with the application and a copy must be provided to the applicant when it is used.

Preferred Risk

any risk considered a better risk than the standard or average risk upon which premium rates are calculated. lower risk tend to have lower premiums.

modifications provision

a provision stating who is authorized by the insurer to waive, alter, or change any of the terms or conditions of the policy. It may also state that no agent has power or authority to waive, change or alter any of the terms or conditions of the policy.

misstatement of age or gender

a provision that if it is found that the age or sex of the insured has been misstated, any amount payable or benefit accruing under the policy is adjusted to what the premium would have been according to the corrected age or sex.

entire contract

a provision that states the insurance policy itself, any riders and endorsements or amendments, and the application comprise the entire contract between all parties.

grace period

a provision that the insured is entitled to a specified time of 31 days after failure to pay a premium but the policy is still enforce.

incontestability

a provision that the policy and any rider or supplemental benefits attached to the policy cannot be disputed after they have been enforced during the lifetime of the insured for a period of 2 years from their date of issue.

reinstatement

a provision that the policy may be restored at any time within 3 years after the date of default and the payment of any premium, unless the policy has been surrendered for its cash value or less the extended term insurance has expired. insured is required to show evidence of insurability.

interest on insurance proceeds

a provision that when a policy becomes a claim by the death of the insured, settlement must be made upon receipt of proof of death. must be completed within 30 days of submission.

payor benefit life

a provision usually found in juvenile policies. This provision states that the person responsible for paying the premiums calling for example the child's parent becomes disabled or dies before the child legally becomes an adult, the rest of the premiums are waived

estate creation

a purpose of life insurance to create an estate for one's heirs after he or she passes away.

waiver of premium

a rider that states that life insurance premiums will be paid off if the insured person becomes disabled.

Financial Industry Regulatory Authority (FINRA)

a self-regulatory organization and the largest non-governmental regulator of securities firms in the US; registers and provides qualification exams to industry professionals, writes rules for trading, educates the investing public, provides trade reporting, resolves disputes between customers and firms.

collateral assignment

a temporary assignment of a policy to a creditor as security for a debt.

Adjustable Life Insurance

a term and whole life hybrid insurance plan that allows policyholders the option to adjust policy features. These policies allow policyholders the ability to adjust the period of protection, face amount, premiums, and length of the premium payment.

one year term option

a type of dividend option for purchasing one year term protection.

paid-up additions option

a type of dividend option that allows policyholders to purchase a single payment whole life coverage.

accumulate interest option

a type of dividend option which allows dividends to accumulate interest. Interest is the only thing you can be charged tax on.

reduce premiums option

a type of dividend option with reduce premium payments.

deferred compensation

a type of non-qualified plan, a binding contract between an employer and an employee, where the employer makes an unsecured promise to pay an employee's future benefits, subject to the specific terms of the contract.

level premium insurance

a type of term life insurance for which the premiums are guaranteed to remain the same throughout the contract, while the amount of coverage provided increases.

risk retention

accepting that some risks simply arise in the course of one's life and consciously assuming responsibility for that risk.

Broker

agents that work on behalf of life insurance companies to help potential customers navigate the process of buying life insurance.

automatic premium loan

allows the insurance company to deduct overdue premium from an insurance cash value by the end of the grace period if a payment is missed on a life policy.

accelerated benefit rider

allows the insurer to receive a portion of the death benefit prior to the death of the insured has a terminal illness and expected to die within 1 or 2 years. the amount that they give you now will be deducted from what your beneficiary will receive.

assignment clause

allows the policy owner the right to transfer policy rights to another person or entity.

cash surrender

allows the policyowner to receive the policy's cash value.

partial surrender

also called a withdrawal. Life insurance policy owners are allowed to withdraw some or all of the cash that is in the cash value portion of their permanent life insurance policies.

policy loan provisions

also called cash withdrawal provision. these policies must begin to build cash value after a certain number of years. In most states this is 3 years. These loans with interest cannot exceed the guaranteed cash value or the policy is no longer in force. The policy owner has the right to the policy's cash value. Policy loans are not taxable. Any loans with interest at the time of death will be deducted from the insurance policy proceeds.

variable life insurance

also known as an interest sensitive policy, these policies usually have a fixed level premium, but the cash value and death benefits can fluctuate according to the performance of its underlying Investment Portfolio. the investment account grows through mutual funds, stocks, and bonds. these policies help to offset inflation.

indexed universal life

also known as equity-indexed, this policy gives policyowners the opportunity to decide the percentage of cash value that is invested in traditional fixed income securities. the remainder of the cash value is invested in an equity index account linked to a stipulated stock index typically the S&P 500.

right to examine

also referred to as free look, states that the policy owner is permitted 10 days once the policy is delivered to look over the policy and return it for a refund of all premiums paid.

waiver

an agreement waiving the company's liability for a certain type or types of risk normally covered in the policy; a voluntary giving up of legal, given rights.

captive Insurance company

an alternative to self-insurance in which a parent group or groups create a licensed insurance company to provide coverage for itself.

single premium deferred annuity (SPDA)

an annuity established with a single payment featuring investment growth solely during the accumulation phase.

single premium annuity

an annuity for which the entire premium is paid in one sum at the beginning of the contract. this can be deferred or immediate.

single life annuity

an annuity that only provides payments to one person.

non-contributory

an employee benefit plan under which the employer bears the full cost of the employees benefits. in SC, the plan must ensure 100% of eligible employees

full and accurate disclosure

an ethical agent must inform consumers of the benefits and limitations of recommended products. Recommendations must be accurate, complete, and clear.

exposure

an individual's susceptibility to various risk encountered in daily life.

assumed names

an insurance producer doing business under any name other than the producers legal name is required to notify the insurance commissioner.

Lloyd's Association

an insurance syndicate that bases its organizational structure on the one used by Lloyd's of London. They are funded by subscriptions paid by members who participate in underwriting activities.

offer and acceptance

an offer that may be made by the applicant by signing the application, paying the first premium, and if necessary submitting to a physical examination. Policy issuance, as applied for, constitutes acceptance by the company.

sharing commissions

an option for splitting income with another producer only when the other producer is licensed in the same line of business.

equity-indexed annuity

annuities that are a fixed deferred annuity that offers the traditional guaranteed minimum interest rate and an excess interest. based on the performance of an external equities market index.

multiple life annuity

annuity covering the life of more than one person. an example would be joint life annuity.

straight life annuity

annuity income option that pays a guaranteed income for the annuitant's lifetime.

pure life annuity

annuity that pays periodic income over the life of an annuitant that stops only with his or her death.

fixed annuity

annuity that provides a guaranteed rate of return. the interest payable for any given year is declared in advance for the insurance guaranteed to be no less than the minimum specified in the contract.

exclusions

are features of an insurance policy stating that the policy will not cover certain risks. can include suicide, aviation, war or military service, commitment of a felony or illegal occupation, alcohol or narcotics, and hazardous occupation or hobby

implied authority

authority the public assumes the producer has. examples include providing quotes, completing applications and accepting premiums on behalf of the insurer.

needs analysis information gathered

calculate all financial needs caused by an immediate death, including debts, medical bills and final expenses. Provide income to the spouse. Payoff on mortgage or other debt. Provide funds for children's education. Create an emergency Reserve fund. And subtract any assets available to fun financial needs after death.

determining life insurance needs

calculate obligations by adding your annual salary plus your mortgage balance plus your other debts plus future needs such as college and funeral cost.

creditor

can be named as beneficiary if designated by assignment or by name in the application to cover indebtedness

types of dividend options

cash option, reduced premiums option, accumulate interest option, paid-up additions option and one year term option

types of nonforfeiture options

cash surrender, extended term options, and reduced paid-up option

peril

cause of loss.

advertising code

code that specifies certain words and phrases that are considered misleading are not to be used in advertising of any kind.

field underwriting

completed by the agent. unlike the insurer, the agent has face-to-face contact with the applicant and can therefore aid the insurer and risk of selection.

hazard

condition or situation that creates or increases chance of loss.

policy summary

contains specific information on the provisions, benefits, and coverage of the policy applied for.

fixed life insurance

contracts that offer guaranteed minimum or fixed benefits.

survivorship life insurance

covers the lives of two individuals. the policy only pays the death benefit upon the death of the last person to die.

beneficiary succession

death benefits are given to the primary beneficiary first, the contingent or secondary beneficiaries second, and tertiary beneficiaries thereafter.

periodic payments

describes an annuity owner making multiple premium payments to accumulate principle. Typically, after the initial premium, these payments are flexible with frequency and amount.

life with period certain annuity

design to pay the annuity in an income for life, but guarantees a definite minimum period of payments. if the annuitant dies during the specified period, benefit payments continue to the beneficiary for the remainder of that period.

credit policies

designed to help the insured pay off a loan in the event they are disabled due to an accident or sickness or in the event they die.

buyer's guide

enables applicants to compare different life insurance policies and help them choose which policy is best for their needs. The content must be approved by the director.

common disaster provision

ensures a policyowner if both the insured and the primary beneficiary died within a short period of time, the death benefits will be paid to the contingent beneficiary it also states that the primary beneficiary must outlive the insured a specified period of time in order to receive the proceeds.

insurable interest

exists when an insured person derives a financial or other kind of benefit from the continuous existence or survival of the life of an individual.

insurance fraud

false claims made to an insurance company.

conversion privilege

for group insurance, allows the policyowner, before an original insurance policy expires, to elect to have a new individual policy issued that will continue the insurance coverage.

parts of the application

general information (age, date of birth, sex, address, marital status, occupation), medical information or health history, agents report/statement or agents personal observations of the applicant

HIV consent

generally informed consent for medical care that notifies the patient that an HIV test will be performed unless a patient declines. should be considered sufficient as informed consent for HIV testing.

ambiguity

if there is any of this in a contract of adhesion the courts always favor the insured over the insurer. because an insurance contract has been prepared by an insurance company with no negotiation, it is considered a contract of adhesion.

Universal Life Insurance

incorporates flexible premiums and an adjustable death benefit. The investment gains from a usually go through the cash value. The policy owner can use the cash value to manipulate the flexible aspects. A customer who wants a policy that gives them the most options in the most control should be looking for this type of policy. Gains are used to fund the cash value and give the policy owner options for flexible premiums and adjustable benefits

substandard risk

industry term for an individual considered below average or an impaired insurance risk due to his or her dangerous habits, health condition, family history of disease, hazardous occupation or hobby, and/or residence in unhealthy surroundings.

fixed amount installments

installment option pays a fixed death benefit and specified installment amounts until the principal and interest are exhausted.

mass marketing

instead of using agents, policies are marketed and sold through television and radio advertisements, print sources found in newspapers and magazines, by mail, and vending machines, and over the internet..

alien captive insurance company

insurance company form to write insurance business for its parents and affiliates and license pursuant to the laws of an alien jurisdiction.

permanent life insurance

insurance that gives a person protection for his or her entire lifetime.

unfair discrimination

is an illegal practice to do this against a person in anyway on an insurance related matter.

immediate annuity

is an insurance product that gives the buyer a guaranteed stream of income in exchange for a lump sum of cash. An _____________ has several advantages, such as long-term stability, tax-deferred income, and monthly income payments for the rest of your life.

Master policy

is provided to the employer under a group plan. Contains all the insuring clauses defining employee benefits.

level term

the death benefit remains level and the premiums remain level during the policy term.

premium receipt

issued by the agent to the applicant upon collecting the initial premium.

estoppel

legal principle that precludes a person from alleging facts that are contrary to her previous claims or actions. This principle prevents someone from arguing something contrary to a claim made or act performed by that person previously.

children's term rider

life insurance benefit if any of your children pass away. This includes your biological children, stepchildren and legally adopted children who are at least 15 days old and are named in the application.

variable life insurance

life insurance in which the benefits are a function of the returns being generated on the investments selected by the policyholder.

exemption from claims of creditors

life insurance proceeds for insurance spouse, children, or dependents exempt from claims of insured's creditors. guidelines for exemptions is in title 38 section 63-40 of South Carolina code

group life insurance

life insurance that provides a master policy for a group; each eligible group member receives a certificate of insurance.

cash payment

lump sum option that states the death benefit is paid in a single payment, minus any outstanding policy loan balances and overdue premiums

lump sum settlements for annuities

many legal settlement offer a lump-sum payment option, which provides a one-time sum of money.

estate

may be the tertiary beneficiary in case the insured outlives all other beneficiaries.

replacement

occurs when a new policy or contract is purchase and in connection with the sale you discontinue making premium payments on the existing policy or contract or an existing policy or contract is surrender, forfeited, assigned to the replacing insurer, or otherwise terminated.

annuitant

one to whom in annuity is payable, or a person upon the continuance of his life further payment depends.

competent parties

one who is capable of understanding the contract being agreed to. all parties must be of legal age, mentally capable of understanding the terms, and not influenced by drugs or alcohol.

joint and full survivor annuity

option provides for payment of the annuity to two people. If either person dies the same income payments continue to the survivor for life. There's also joint and 1/2 survivor and joint and 2/3 survivor.

life income

option provides the beneficiary with an income that they cannot outlive. installment payments are guaranteed for as long as the recipient lives.

fixed installments

option that allows the death benefit proceed to be paid in equal installments over a set period of years.

interest-only

option that the insurance company holds death benefit for a period of time and pays only the interests gained to the named beneficiary

settlement options

optional modes of settlement provided by most life insurance policies in lieu of lump-sum payment.

nonforfeiture options

options you have for your cash value if you terminate a policy that has cash value.

accidental death

pays an additional sum to the beneficiary if the insured dies due to an accident. The amount paid is a multiple of the policy face amount such as double or triple the original benefit.

cash accumulation

permanent life insurance policies build cash value that can be tapped for use at retirement or if an emergency arises.

juvenile insurance

permanent life insurance that insures the life of a child generally under the age of 18.

guaranteed insurability rider

permits the policyowner to buy additional permanent life insurance covered at specific points of time in the future without submitting proof of insurability.

extended term option

permits the policyowner to use the policy's cash value to buy level, extended term insurance for a specified period

accumulation period

phase when an annuity investor is beginning to build up the cash value of the annuity.

variable universal life insurance

policy owner controls the investment of cash values and selects the timing and amount of premium payments. policyowner can control how much and when premium's are due, what investments accounts were used for funding, and where the returns from those investment accounts went.

revocable

policy owner may change the beneficiary at any time. The beneficiary does not have a vested interest in the policy. Most named beneficiaries have no rights.

reduced paid-up option

policy owner pays no more premiums but the face amount is decreased

spendthrift clause

prevents a beneficiary from recklessly spending benefits by requiring the benefits to be paid in fixed amounts or installments over certain period of time.

Securities and Exchange Commission (SEC)

primary responsibility for enforcing the federal Securities laws, proposing Securities rules, and regulating the Securities industry, the nation stock and options exchanges, and other activities and organizations, including the electronic Securities markets in the United States.

cash refund option for annuities

provide that, upon the death of the annuitant, before payments totaling the purchase price has been made, the excess of the amount paid by the purchaser over the total annuity payments received will be paid in one sum to designated beneficiaries.

defined benefit plan

provides employees with a fixed and known benefit at retirement, the amount of which depends upon length of service and highest attained salary.

defined contribution plan

provides employees with a retirement benefit based on the value of the employee's account at retirement. The employer and employee or both can make contributions. a certain amount or percentage of money is set aside each year by a company for benefit of the employee.

disability income benefit

provides financial protection to the owner of a life insurance contract that a disability will often incur. Usually will pay a monthly income of a certain percentage of the face value of the contract and will also waive the monthly cost of a life insurance contract.

deferred annuity

provides for a postponement of the commencement of an annuity until after a specified period or until the annuity retains a specified age.

spouse/other insured term Rider

provides level term insurance on your spouse. It can be converted to its own whole life policy at certain times and within certain age limits. This writer is when your policy ends or your spouse reaches a certain age.

payment of premiums

provision stating the amount of premium and the time and manner payable.

Employee Retirement income Security Act (ERISA)

qualified plans must meet the requirements of _____ which is a federal law that sets minimum standards for pension plans in Private Industry.

standard risk

refers to an insurance risk that an insurance company's underwriting standards consider normal. Therefore, it would qualify for standard premium rates without special restrictions or extra ratings.

investigative consumer reports

report that provides information about the applicants character, lifestyle, Financial stability. are usually only requested for larger coverages because they add expense to the underwriting process.

limited payment life insurance

requires the payment of premiums for a limited time for a lifetime protection. at the end of the term, the insured does not pay any more premiums, but has lifetime protection.

medical report

sometimes used for underwriting policies with higher face amounts. If the information in the medical section warrants further investigation into the applicants medical conditions, the underwriter may need an attending physician statement (APS)

waiver of cost of insurance

states that the insurance company will not require the insured to pay a fee to maintain the policy under certain conditions.

concealment

the act of hiding or not putting forward any relevant fact in front of the insurer that need to be revealed.

cost basis

the amount of premiums paid into the policy less any dividends or withdrawals previously taken. as with other distributions made while the insured is alive, the sum in excess of the cost basis is taxable as ordinary income.

risk corridor

the amount of pure insurance protection above the accumulation value. the minimum separation between the cash value and the death benefit.

life with guaranteed minimum annuity

the common very popular type of variable annuity. it guarantees a minimum level of annuity payments by the insurance company, regardless of the performance of the annuity.

executive bonuses

the company provides a key executive with a bonus that is taxable as income to the recipient. The bonus is generally a deductible business expense for the company. The bonus is used to purchase a whole life or universal life insurance policy that builds cash value that grows tax-deferred.

effective date

the date on which an insurance policy or plan takes effect so that benefits are payable.

director's duties and powers

the director must follow the general policies and broad objectives enacted by the general assembly regarding the operation of insurance industry in this state. C-section 38 - 3 - 110 and the code for more info.

premium payment mode

the frequency in which a policy owner elects to pay premiums. can be paid annually, quarterly, or monthly.

human life value information gathered

the individual's age and gender, the individual's occupation, the individual's annual wage and employment benefits, the individual's planned retirement age, and inflation

loss

the injury or damage sustained by the insured which the insurer, in consideration of the premium, has undertaken to indemnify the insured.

dividend options

the options of policy owner has when receiving dividend payments from an insurance policy.

irrevocable

the policy owner may not change the named beneficiary unless the beneficiary dies or provides written consent for the change.

reinsurance

the practice whereby an insurer transfers portions of their risk portfolio to other parties by some form of agreement to reduce the likelihood of paying a large obligation resulting from an insurance claim.

survivor protection

the primary purpose of life insurance is to provide income to the descendant's surviving family members

conditional receipt

the producer issues to the applicant when the application and premium are collected. This type of receipt denotes that coverage will be effective once certain conditions are met.

estate conservation

the purpose of life insurance to preserve an estate and to help pay taxes after one dies.

insurance information and privacy protection act

the purpose of this act is to establish standards for the collection, use and disclosure of information gathered in connection with insurance transactions, by insurance institutions, agents or insurance support organizations.

convertible

the right to convert the existing term policy to a permanent policy without evidence of insurability during the conversion period specified in the contract.

Life Settlements

the sale of an existing life insurance policy to a third party for more than its cash surrender value but less than its net death benefit.

annual renewable term

the simplest form of term life insurance is for one year. The death benefit remains level in the premiums increase yearly as the policy renews up to a specified age.

application

the starting point and basic source of information used by the insurance company for risk selection. insurable interest must exist between the policy owner and the insured at the time when the _________ is made.

exclusion ratio

the way in which taxation of annuities is computed. the IRS has tables and formulas to determine which part of the benefit payment is tax-free return of premium and which part is taxable.

needs approach

this approach determines an need for coverage upon the premature death of an individual. It always assumes the death of the individual to be immediate.

human life value approach

this approach is a measure of the projected future earnings of a person at risk in the event of a premature death. The objective is to provide the proper amount of coverage. is determined by the value of the individual to his or her dependents.

class or classification

this designation is used in instances where each beneficiary is not directly identified by name. the rating of the class designation must be specific and carefully worded to remove any doubt of the owner's intentions.

individual or named

this designation is very specific. An individual is specified by name as the beneficiary. this prevents probate proceedings

interest-sensitive whole life

this is a form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates.

binding receipt

this is a temporary insurance agreement which provides coverage from the date of the application regardless of whether the applicant is insurable. The insurer is bound to coverage until the application is formally rejected.

producer report

this is where the agent reports personal observations about the proposed insured. Can also include the applicant's financial condition, character, background, purpose of sale, and how long agent has known the applicant

joint life policy

this policy covers the lives of two individuals. these policies pay the face amount after the first person covered on the policy dies.

fixed annuity

type of annuity that guarantees a certain rate of return.

cash options

type of dividend option where you take the cash.

single premium

type of insurance in which a lump sum of money is paid into the policy return for a death benefit that is guaranteed until you die.

non-participating insurance

type of life insurance where policyholders do not receive dividends but premiums are generally lower.

straight life insurance

type of whole life insurance also called ordinary life. Is a life insurance policy which is guaranteed to remain in force for the insured's entire lifetime, provided required premiums are paid on time or until the maturity date.

life insurance cost comparison methods

used to evaluate the cost of one life insurance policy in relation to another so that consumers can be better informed when shopping for the most competitive price offered for their particular needs.

surrender cost index

uses a complicated calculation formula where the net cost is averaged over the number of years the policy was enforce to arrive at the average cost-per-thousand for a policy that is surrendered for its cash value at the end of that period.

net payment cost index

uses the same formula as the surrender cost index with the exception that it doesn't assume that the policy will be surrendered at the end of the period. can be useful if one's primary concern is the amount of death benefit provided in the policy. Can help compare future cost if one will continue to pay premiums and does not take the policy's cash value.

Trust

when a recipient is not to have direct access to the death benefits, such as in the case of minor children, and the proceeds are to be distributed according to the insurance directions. can also be used for estate planning.

viatical settlement

when the policy owner becomes terminally ill, the policy owner may sell the existing life insurance policy to a third party for more than its cash surrender value, but less than its death benefit. Such a sale provides a policy owner with a lump sum.

minors

when underage individuals are named as beneficiaries, but no trust has been established, the funds are placed in a settlement option held with interest, with the insurer acting as trustee.

annuitization phase

where payments are dispersed following the end of the accumulation period

IRA withdrawals

withdrawals and retirement are taxed at ordinary income tax rates. Anyone under the age of 70 and a half with earned income may open a traditional IRA. Withdrawals must start no later than April 1st following the year in which the participant reaches the age of 70 and a half.

legal purpose

without this, the contract will be null in void. an insurance contract must not be in opposition of public policy or illegal. an insurance contract must have insurable interest and the insured must have provided written consent.

resident producer

An agent who holds an insurance license in the state in which they live

insurance fraud and reporting immunity

SC allows reporting of, grants immunity for reporting suspected, prescribes penalties for and requires restitution for victims of insurance fraud.

misrepresentations

a false or misleading statement that, if intentional and material, can allow the insurer to void the insurance contract.

aleatory

a feature of insurance contracts is that there is an unequal exchange. the dollar amount given by the policyholder (premiums) and the insurer (benefits) may not be equal.

insolvency

a financial state that occurs if liabilities are greater than assets. the director will suspend the Certificate of Authority for any insurer that falls into this category or is delinquent in claims payment.

unilateral contract

a one-sided agreement where only the insurer is legally bound. In an insurance contract only the insurance company is legally bound to do anyting.

reasonable expectation

a principle applied and insurance law which states whenever there is an ambiguity in an insurance policy, it is resolved in favor of the insured within reason.

reporting of actions

a producer must report any bankruptcy, felony conviction, and the other administrative action that occurs in South Carolina or another jurisdiction to the insurance department within 30 days.

records maintenance

all companies doing any kind of insurance business in this state shall make and keep a full and correct record of the business done by them for a minimum of five years.

stock companies

also called non-participating companies. Corporation owned by its stockholders or shareholders and its objective is to make a profit for them.

mutual companies

also called participating companies. Is an insurance company owned entirely by its policyholders.

insurer as principal

an agent is a person authorized to act on behalf of another person, who is called the principal. In the field of insurance, the principal is the insurance company and the sales representative or producer is the agent.

group annuity

annuity contract is issued by a life insurance company to a tax-qualified retirement plan. Employees do not own shares a specific funds, but own units and the underlining pooled investment.

penalties

any person who performs an act without a license is guilty of a misdemeanor and upon conviction must be fine not more than $10,000 or in prison for two years or both.

law of large numbers

as the number of exposure units, or policyholders, increases, the probability is higher that the actual lost for will equal the expected loss for that exposure unit.

appointment

authorized insurers have the right to appoint any number of producers to take risk for transact any business of insurance in the state. Notice of appointments must be filed within 15 days.

risk avoidance

avoiding an act that would create a risk.

representing an unauthorized insurer

considered a misdemeanor, producers are personally liable for transacting business on behalf of an insurer that is not licensed to do business in the state of South Carolina.

individual retirement annuity (IRA)

contracts are essentially tax-deferred a pre-tax personal retirement plans. They can be used to generate income in retirement for an annuitant/owner and may be invested in either a fixed annuity or a variable annuity.

independent rating services

credit rating agencies that rate or grade the financial strength and stability of insurers based on claims, reserve, and company profits.

qualified retirement plans

is a retirement or employee compensation plan established and maintained by an employer that meet specific guidelines spelled out by the IRS and consequently receive favorable tax treatment.

Roth IRA

is an individual retirement account allowing a person to set aside after-tax income up to a specified amount each year. Both earnings on the account and withdrawals after age 59 and a half are tax-free. The funds are taxed as income before the contribution is made.

defamation

is illegal practice to make any public statement or advertisement that contains false and malicious information or unsubstantiated criticisms about an insurance company.

fraud and false statements

it is against federal law to lie, falsify, or conceal information whether orally or in writing from a federal official.

boycott, coercion, and intimidation

it is an illegal practice to commit or coordinate any act with the intent to restrain or monopolize the business of insurance.

misrepresentation

it is an illegal practice to do this for any facts about an insurance policy such as a policy, terms, benefits, value, cost, effective date, or existence of a contract of insurance

false advertising

it is illegal practice to do this with insurance products or services in any way this included circulating statements, letters, or statements in newspapers, magazines or other solicitation materials.

rebating

it is illegal to offer a refund in premium or a special advantage of any kind to consumers as an inducement to purchase a contract of insurance.

false financial statements

it is illegal to publish any _________ regarding a person or an entity.

rates

life insurance cost usually paid as a premium for a set amount of time. this is regulated by the director of insurance.

risk reduction

lowers the chance of loss by taking measures to lessen the frequency or severity of losses that may occur.

conditional contract

means certain conditions must be met by all parties in the contract. This is needed when a loss occurs in order for the contract to be legally enforceable. All insurance contracts are these.

prohibit inducements

no person may make, issue, circulate any estimate, illustration, statement that misrepresents the terms of the policy issued or to be issued, the benefits or advantages promised there by, or the dividends or share of the surplus to be received.

change of address

producer must report to the insurance commissioner within 30 days any changes to legal name or address.

continuing education

producers are required to have 24 hours of this training every two years.

fiduciary responsibility

responsibility of producers when collecting funds.

risk transfer

risk management technique where risk shifts from one party to another.

adverse selection

situations in which an insurance company extends insurance coverage to an applicant whose actual risk is substantially higher than the risk known by the insurance company.

consideration

something of value that each interested party gives to each other. The insured provides this with payment of premium and the insurer provides this by promising to pay the insurance benefit.

risk sharing

spreading ownership of a risk over a group of policyholders.

education IRA

tax advantage investment account for higher education.

twisting

the act of making a false written or oral statement made by a producer for the purpose of replacing an existing policy to the detriment of the insured.

express authority

the authority of an agent, stated in the document or agreement creating the agency.

notice of hearings

the director make call and hold a ________ for any purpose deemed necessary. The notice must be given to a person cited at least 30 days prior to the designated date.

Reinstatement

the process of putting the insurance policy back after a lapse. is allowed up to three years after the policy has lapsed.

misappropriation of funds

the use of money for a purpose other than that for which it was intended or legally required to be used

marketing systems

the various methods for selling and marketing insurance products.

cease and desist order

this order is given by a government administrative agency or the courts to stop any suspicious or illegal activity.

IRA contributions

traditional IRA contributions are tax-deductible on both state and federal tax returns for the year you make the contribution.

speculative risk

uncertainty about an event under consideration that could produce either profit or loss.

blank forms

unless otherwise stated, no producer may sign any blank application, contract, or policy of insurance

termination of appointment

when a contract of a producer is canceled by the represented insurer, that insurer shall notify the department of the cancellation within the guidelines and time period listed in section 38 - 43 - 55.