Life Insurance and Health Insurance

Section 529 Plans

- state provided - can be funded by after tax dollars - can pay prepaid tuition - All earnings exempt from federal taxes - If withdrawn for unqualified withdrawl, 10% penalty

Catch-up Contributions

-for those aged 50 or older -additional $1,000 annually **Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) - established the catch up provisions**

Employer qualified retirement plan employees must be

21 and worked for a year

Rollover time frame

60 days

Speculative Risk

A chance of loss, no loss, or gain.

Coordination of Benefits (COB)

A clause in an insurance policy that explains how the policy will pay if more than one insurance policy applies to the claim.

Keogh Plan

A federally-approved, tax-deferred savings program for self-employed people, allowing them to set money aside for their retirement.

Variable Universal Life Insurance

A form of universal life insurance that allows the policyholder to make fund choices for the investment component but that has no guaranteed cash value and no guaranteed interest rate.

limited pay life insurance

A form of whole life insurance characterized by premium payments only being made for a specified or limited number of years.

Insuring Clause

A general statement that identifies the basic agreement between the insurance company and the insured, usually located on the first page of the policy.

Adverse Selection

A high-risk person benefits more from insurance, so is more likely to purchase it.

Intermediate Care

A level of care that is one step down from skilled nursing care; provided under the supervision of physicians or registered nurses. Daily care but not 24 hour care

Accidental Death Benefit Rider

A life insurance policy rider providing for payment of an additional benefit when death occurs by accidental means.

Limited Partnership (LP)

A partnership consisting of one or more general partners and one or more limited partners.

Simplified Employee Pension (SEP)

A qualified plan in which a smaller employer contributes specified amounts directly into IRA accounts on behalf of eligible employees

qualified retirement plan

A retirement savings plan approved by the Internal Revenue Service that provides individuals with a tax benefit

Credit Life Insurance

A special type of coverage written to pay off the balance of a loan in the event of the death of the debtor.

Koegh plan

A tax-deferred retirement plan for self-employed people and qualified employees

Mutual Insurance Company

A type of insurance company owned by its policyholders.

Fair Credit Reporting Act

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

insurance benefit

Advantage, privilege, right, or financial reimbursement

Installment refund annuity

An annuity income option that provides for the funds remaining at the annuitant's death to be paid to the beneficiary in the form of continued annuity payments.

Deferred Annuity

An annuity that starts sometime in the future.

Cross-Purchase Buy-Sell Agreement

An arrangement between individuals who agree to purchase the business interest of a deceased owner

403(b) plan

An elective deferral plan for employees of organizations such as school systems, churches, and hospitals

Medical Information Bureau (MIB)

An information database that stores the health histories of individuals who have applied for insurance in the past. Most insurance companies subscribe to this database for underwriting purposes.

Mutual Insurer

An insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them.

Variable Annuity

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

Rebating

Any inducement offered in the sale of insurance products that is not specified in the policy.

Insurance Dividends

Considered to be a return of overpaid premiums and is not taxable. You can get the dividend in the form of CRAPPO - Cash - reduction of premium - allow the dividends to accumulate at interest (the money earned on the returned dividend is taxable as ordinary income - Paid up permament addition - you can purchase additional whole life policy and the price will change depending on dividend and age -paid up option - pay up policy earlier than expected - one year term - use dividends to purchase additional term insurance for 1 year (after 1 year, the term expires)

Joint Life Policy

Covers two or more lives and provides for the payment of the proceeds at the death of the first among those insured, at which time the policy automatically terminates.

Section 1035 (Policy Exchanges)

Due to the fact that life insurance, annuities and endowments are all similar in nature (though they have their differences), the IRS, under certain circumstances, allows for the exchange of one policy for another without taxation to the individual, as long as funds are not distributed to the individual in the process.

401(k) plan

Elective deferral plan that allows employee to reduce compensation by a stated percentage on a tax deductible/ tax differed basis; often the employer matches the employee contributions

Social security primary insurance amount

Equal to workers retirement benefit at full retirement age or disability benefit

ERISA (Employee Retirement Income Security Act)

Federal law that increased the responsibility of pension plan trustees to protect retirees, established certain rights related to vesting and portability, and created the Pension Benefit Guarantee Corporation

Employee Retirement Income Security Act (ERISA)

Federal law that increased the responsibility of pension plan trustees to protect retirees, established certain rights related to vesting and portability, and created the Pension Benefit Guarantee Corporation

Accidental death benefits

If a person dies within 90 days of an accident

Unpaid Premium Provision

If an insured has a claim in the grace period, insurer may subtract overdue premium from the amount of the claim paid

50 day notice

If an insurer is not renewing the health plan for a small employer

What effects the amount of the person premium?

If it does not effect their life span it does not effect their premium

Group health insurance Classifications

In group health insurance employees cannot be classified by age

Controlled business insurance

Includes the insurnace writting the the business of the licensees self or by virtue of the influence with the buyer (spouse, family member)

Insureds

Individuals who transfer risk to a third party

Replacement Insurance

Insurance that actually replaces an item that has been destroyed.

Errors and Omissions Insurance

Insurance which financially protects an architect against claims for damages resulting from professional negligence. Also called professional liability insurance.

Modified Whole Life

Level premiums for designated timeframe (typically 5 years); higher premiums thereafter

Fraternal Benefit Societies

Life or health insurance companies formed to provide insurance for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government.

Franchise Insurance

Life or health insurance plan for covering groups of persons with individual policies uniform in provisions, although perhaps different in benefits. Solicitation usually takes place in an employer's business with the employer's consent. Generally written for groups too small to qualify for regular group coverage. May be called wholesale insurance when the policy is life insurance.

HSA's Do not include

Medical supplement premiums

social security disability

Medically determinable physical or mental impairment that can result in blindness, death or last at least 12 months

The factors for premium rates

Mortality, Interest earnings, expenses

NAIC

National Association of Insurance Commissioners

Does group insurance require medical examinations?

No there are not and medical examinations to guard against adverse selection

Insurable Interest

Only allowed when contract is issued and does not have to be maintained throughout the life of the contract

Straight whole life insurance

Policy where premium is paid for the whole lifetime of the insured

Refund Life Annuity

Provides annuity payments for the annuitant's lifetime with the guarantee that in no event will total income be less than the purchase price of the contract. If the annuitant dies before receiving this amount, the difference is paid to a named beneficiary either as a cash refund or in installments.

Dread Disease Policy

Provides coverage for specific disease(s), such as cancer or leukemia.

variable contracts

Regulated seperately but in a coordinated fashion between the Department of Insurance, the SEC, NASD

Keogh Plan

Retirement plan for self-employed individual and their qualified employees

Accelerated Benefits

Riders attached to life insurance policies which allow death benefits to be used to cover nursing or convalescent home expenses.

intermediate vs skilled care

Skilled care is 24 hours a day and intermediate is daily but not 24 hour

Rollover

Tax free withdrawal of cash or other assets from one retirement program and its reinvestment in another program. It is not considered income and it is not taxable until a later withdrawal. Has to be completed in 60 days

Health Savings Account (HSA)

Tax-sheltered savings account similar to an IRA but created primarily to pay for medical expenses.

Insurable Interest

The applicant has more to gain if he lives then if the insured dies

Insurance Considerations

The easiest way to protect yourself and your organization from the legal liability and financial loss associated with environmental safety risks is through insurance. Coverage by insurance allows the facility to transfer the potentially devastating financial risk of a future loss for the cost certainty of a monthly or yearly payment (i.e., premium).

Straight Life Annuity

The payout option that will guarantee an annuity payment for the remainder of an individual's life. This option typically provides the largest monthly payment.

Tertiary Beneficiary

The third in line to receive the benefits of a life insurance policy.

HR-10 plan

What is another name for a Keogh plan?

Insurance twisting

When a person knowingly makes misleading statements about the policy, to make a sale

Transfer

When amounts of a qualified plan are transferred to another qualified plan

profit-sharing plan

a benefit whereby employees may share in the profits of the business

Aleatory Contract

a contract where the values exchanged may not be equal but depend on an uncertain event

class beneficiary

a member of a group, e.g., children of the insured

current assumption whole life insurance

a nonparticipating whole life policy in which the cash values are based on the insurer's current mortality, investment, and expense experience. Low interest rates increase premiums

Pure Risk

a risk that presents the chance of loss but no opportunity for gain

Tax sheltered annuity

a savings plan where pre-tax money is deposited to earn interest over a period of time. Available to employees of certain non profits

Flexible Premium Annuity

allows the owner to vary the premium payments

Medicare Part A (Hospital Insurance)

covers Medicare inpatient care, including care received while in a hospital, a skilled nursing facility, and, in limited circumstances, at home. Starts November first

Policy Replacement

if a policy is to be replaced then you must provide in writing the information about the policy that is going to be submitted with the application

Life Income Option

installment payments are paid only while the beneficiary is alive and cease on the beneficiary's death

skilled care

medically necessary care given by a skilled nurse or therapist, Must be available 24 hours a day

Elements of a Contract

offer, acceptance, consideration

annuity

payment received every year

Joint Life Annuity

payment to two or moer annuitants which ceases upon death of either

level term life insurance

premiums remain the same thoughout the life of the policy

Roth IRA

private retirement plan that taxes income before it is saved, but which does not tax interest on that income when funds are used upon retirement Distributions don't have to start before 70.5

Unilateral Contract

promise in exchange for an act

Certificate of Insurance (COI)

proof that the insured has insurance

State Guaranty Association

protect policy owners in the event of any insurance company going out of business, becoming insolvent, or the in ability to pay claims

Individual Life Insurance

purchased by individuals; usually greater face value Has 10 day return policy upon delivery

Market conduct

refers to the marketing practices of insurers and agents that involve interaction with insureds, claimants, or consumers

Gramm-Leach-Bliley Act

requires financial institutions to ensure the security and confidentiality of customer data

Simple Plans (IRA)

retirement plan often offered to employees of smaller businesses; the business matches funds placed in the retirement fund by the employee up to a certain % of the salary; tax-sheltered, tax deferred, or pre-tax

Decreasing Term Insurance

term insurance in which the annual premium remains constant but the face amount of the policy declines each year

expense loading

the amount needed to pay all expenses, including commissions, general administrative expenses, state premium taxes, acquisition expenses, and an allowance for contingencies and profit

Whole Life Insurance Policy

the cash value is greatest at the end of the policy period, and the insurance protection is greatest at the start of the policy

Annuity Period

the payout period of an annuity

Viatical Settlement

the sale of a life insurance policy by a terminally ill insured to another party, typically to investors or investor groups, who hope to profit by the insured's early death