Life Insurance (General Knowledge II)
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