CH.7 S.3
HSAs have triple tax benefits: 1) Deductible contribution limits of $________ for individuals and $________ for families plus an additional $1,000 catch up contribution for persons ____ and older 2) _____________ earnings 3) Within limits, can be used at any time for qualified _________ expenses and is _______ when used for such purposes
$3250 $6750 55 tax-deferred medical / tax free
Viatical settlement agreement - an investor buys a life insurance policy from a policy holder with a terminal disease with a life expectancy of less than ___ years at a substantial discount from the _________ _________ At the time of the transaction the purchase price of the policy will be more than the _________ __________ but less than the __________ __________, there for both the policyholder and the investor benefit. The investor continues to pay the ____________ and becomes the ___________ and collects the ________ ___________
2 / death benefit cash value / death benefit premiums / beneficiary / death benefit
EQUITY-INDEXED ANNUITIES: Valuation / computation on Modern indexed annuities Indexed annuities can measure the movement of the index in three distinct ways: 1. __________ ________ - beginning of year to end of year. The annuitant locks in gains every year that the index is positive 2. _____ ________ ________ - takes high point of index and Compares it to index value at the beginning of the period 3. ____________ - compares the change of the index at one point in time to another point in time. For example, beginning of one year to the end of the second year. The interest is credited at the end of the period based on the participation rate or cap rate
Annual Reset High Water Mark Point-to-Point
EQUITY-INDEXED ANNUITIES: There are three basic means of determining how the interest will be calculated and credited to the client's account. These include via: 3. _________ ________ ________ a. A set cap is placed on the amount of appreciation of the index
Interest Rate caps
______ _________ payments are generally tax exempt to the beneficiary but may be taxable under the transfer for Value rule if the policy had been sold to a third party prior to death ____________ payments will usually have a taxable interest element
Lump sum Installment
EQUITY-INDEXED ANNUITIES: There are three basic means of determining how the interest will be calculated and credited to the client's account. These include via: 1. ________ __________ - Any gains seen in the index will be credited to the annuity at a given participation rate while years of losses remain flat
Participation Rates
EQUITY-INDEXED ANNUITIES: 2. Modern Approach: ___________________ indexing - while annuities are most commonly calculated annually, some employ the point-to-point index valuation method. - Point to point is the term that refers to a fixed annuity crediting method. - This level of credited interests can be based on or linked to the performance of equity markets. - Point to point means that the level of credited interest is based on the difference (or a percentage of the difference) in an index value over some period of time
Point-To-Point
EQUITY-INDEXED ANNUITIES: 2. Modern Approach: In today's market most equity-indexed annuities are not considered ___________ but must be registered with each State's Insurance Commission
Securities
EQUITY-INDEXED ANNUITIES: There are three basic means of determining how the interest will be calculated and credited to the client's account. These include via: 2. ________ / _______ / _________ fees a. A set fee is taken from any gains instead of a participation rate-based equation
Spread / margin / asset fees
Types of permanent life insurance: ____________ life insurance - this type of policy has an investment component which allows the policyholder to allocate a portion of the premium paid into an investment fund of stocks, bonds, mutual funds, and other types of Investments
Variable
Types of permanent life insurance: Universal life insurance also called __________ life insurance
adjustable
Types of life insurance: For life insurance products, premiums are generally paid with __________ dollars and are not tax-deductible
after-tax
There are two basic types of Life Insurance: Term insurance = temporary insurance which is only good for a set amount of time - It provides a _________ ___________ ONLY - There are no ________ _________ - It can be level or decreasing death benefit 1) __________ benefit - the death benefit stays the same, but the amount of Premium paid for the policy will increase each year 2) _____________ benefit - the amount of Premium paid each year Remains the Same, but the amount of death benefit will decrease each year - Provide the highest amount of ______ __________ for every dollar of Premium paid - This policy is particularly suitable for _______ people on a _________ budget
death benefit only no cash values level benefit decreasing death benefit young / tight budget
Types of permanent life insurance: UNIVERSAL LIFE insurance also called adjustable life insurance - this type of policy allows the holder at certain times stated in the policy to adjust the amount of premium and the amount of the death benefit - - _____________ do not choose the Investments and therefore do not bear the investment risk
policyholders
Types of permanent life insurance: WHOLE LIFE insurance which is also called Ordinary and straight life insurance characteristics include: - ___________ do not choose the Investments and therefore do not bear the investment risk - lapsed policies may be reinstated with evidence of insurability and payment of unpaid premiums
policyholders
EQUITY-INDEXED ANNUITIES: 2. Modern Approach Recent developments in the equity-indexed annuity markets have created products which are structured like fixed annuities with fixed interest rates but also have a fluctuating interest rate which is linked to an index For EXAM purposes these products fall somewhere between a fixed annuity and a variable annuity • Remember that fixed annuities are not considered _________ and are Relatively _____ (as safe as the issuing Insurance Company) - _________ __________ takes the investment risk • Remember that variable annuities are considered _________ and are considered to carry more risk - _________ takes the investment risk
securities / safe insurance company securities investor
Capital needs analysis -- used to determine if an individual has enough life insurance to fund their future financial goals. When doing this you would not need to consider ________ _________ ___________
stock market fluctuations
There are two basic types of Life Insurance: _________ insurance = temporary insurance which is only good for a set amount of time
Term
EQUITY-INDEXED ANNUITIES: 1. Traditional Approach Equity Indexed Annuity- provides payments dependent upon the performance of a specific stock index, such as S&P 500. - If the index increased in value, the contract holder would be __________ with at least part of the gain (with a cap to how much they would receive) - If the index decreased in value, the contract holder would be __________ at least part of the decrease in value - All contract holders are guaranteed a ________ _________ on their annuity - Due to the ability to increase or decrease in value, these products were treated as _________ and had to be supervised like any other Securities transaction
credited debited minimum value securities
There are two basic types of Life Insurance: 2. Permanent life insurance - lifetime Insurance assuming premium are paid in full as they come due - Permanent life insurance provides a _________- benefit and a _____ ________ ________ also called a _______ benefit. - Some policies provide for __________ premium payments - Cash surrender value - amount of available in cash upon the voluntary termination of a policy if the policyholder surrenders or cancels the policy before it becomes payable by Death. Policyholders may take out _________ against the CSV. The amount paid is the cash value of the policy less any surrender charge or outstanding loan balance - Flexible premium payments means that the policyholder can pay the premiums _____________ or have the premiums __________ from the cash surrender value
death benefit / cash surrender value / living flexible loans out-of-pocket deducted
Types of permanent life insurance: Variable life insurance - this type of policy has an investment component which allows the policyholder to allocate a portion of the premium paid into an investment fund of stocks, bonds, mutual funds, and other types of Investments - offers a _________ level of Premium - the payments go into a _________ account. The separate account intern has sub accounts with _________ investment objectives. The investment returns are ______ ___________ The separate account has _________ investment potential than a general account - the cash surrender value must be calculated at least _______ Policyholders may borrow against the ________ __________ up to certain limits. _________ is charged on the policy loan
fixed / separate sub / various not guaranteed greater monthly cash value interest
EQUITY-INDEXED ANNUITIES: 2. Modern Approach Recent developments in the equity-indexed annuity markets have created products which are structured like fixed annuities with fixed interest rates but also have a fluctuating interest rate which is linked to an index For EXAM purposes these products fall somewhere between a _______ _________ and a ________ __________
fixed annuity and a variable annuity
VARIABLE UNIVERSAL life insurance - a type of permanent life insurance that has an investment component which allows the policyholder to allocate a portion of the premium paid into an investment fund of stocks, bonds, mutual funds and other types of investments - this is a good choice for a ________ ____________ client
high-risk tolerance
HSAS: Other features are: 1) They are ___________ accounts. DON'T confuse these with FSAs which must be est. through an employer 2) They can be established as a _________ or ________ accounts 3) Withdrawals before age 65 for non-health purpose will result in ______ ________ taxes plus a _____ penalty tax. Withdrawals after age ____ for non-health purpose will be taxed as ordinary income, but it will not be subject to the penalty tax
individual savings or investment 65 / ordinary income / 20% 65
policy loans are ______________ - policy loans must be repaid with _____________ Unpaid policy loans are subtracted from _______ _________
not taxable interest death benefits
Types of permanent life insurance: Whole life insurance which is also called ________ and ________ life insurance characteristics include:
ordinary and straight
A permanent life insurance policy can be participating or non-participating • A ____________ policy - pays dividends to the policyholder. The dividends can be used to reduce the premium • ______________ policy - does not pay a dividend
participating Non-Participating
There are two basic types of Life Insurance: 2. Permanent life insurance - lifetime Insurance assuming premium are paid in full as they come due - Permanent life insurance provides a death benefit and a cash surrender value, also called a living benefit. Some policies provide for flexible premium payments - Cash surrender value - amount of available in cash upon the voluntary termination of a policy if the policyholder surrenders or cancels the policy before it becomes payable by Death. Policyholders may take out loans against the CSV. The amount paid is the cash value of the policy less any surrender charge or outstanding loan balance - Flexible premium payments means that the policyholder can pay the premiums out-of-pocket or have the premiums deducted from the cash surrender value Note: If the cash surrender value is paid to the policyholder, policy is _________ and the death benefit _______
policy is terminated and the death benefit lost
Types of permanent life insurance: UNIVERSAL LIFE insurance also called adjustable life insurance - this type of policy allows the holder at certain times stated in the policy to adjust the amount of ___________ and the amount of the _________ __________
premium death benefit
EQUITY-INDEXED ANNUITIES: Valuation / computation on Modern indexed annuities Indexed annuities can measure the movement of the index in three distinct ways: 1. Annual reset - beginning of year to end of year. The annuitant locks in gains every year that the index is positive 2. High water mark - takes high point of index and Compares it to index value at the beginning of the period 3. Point to point - compares the change of the index at one point in time to another point in time. For example, beginning of one year to the end of the second year. The interest is credited at the end of the period based on the participation rate or cap rate Note: The ____________ and _______ _________ are protected from loss. This is called the ___ ______ __________
principal and credited interest no loss protection
Health savings account (HSA) - a ________________ medical savings account setup with a qualified HSA trustee, such as a bank or Insurance Company. Individual taxpayers can contribute to and withdraw money from the account for certain Medical, dental, vision expenses on a tax-free base. These accounts may only be established if the individual enrolls in a _________ _________ _________ ________ (_________) and has no other ________ coverage or _____________
tax-adv High deductible health plan (HDHP) health coverage or Medicare
________ __________ life insurance - a type of permanent life insurance that has an investment component which allows the policyholder to allocate a portion of the premium paid into an investment fund of stocks, bonds, mutual funds and other types of investments
variable universal
Replacing a policy with a new policy is permitted, but is highly regulated • State replacement requirements include a _________ ___________ of the new and old policies covering policy Provisions such as a suicide clause, the incontestability clause, and the conversion period • Replacements can avoid current taxation on any gain in the old policy by making a Sec. 1035 tax-free exchange. Such tax-free Exchange can only be done every ___ years
written comparison 3
