Primerica life insurance License chapter 2

Premium rates on a joint life policy are...

determined by averaging the ages of both insureds.

beneficiary

The person who receives annuity assets (either the amount paid into the annuity or the cash value, whichever is greater) if the annuitant dies during the accumulation period, or to whom the balance of annuity benefits is paid out.

nonforfeiture values

benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses

Because annuities are based on the life expectancy of an annuitant.....

the annuitant must be a natural person, regardless of who owns the policy.

The annuity income amount is based upon the following:

-The amount of premium paid or cash value accumulated; -The frequency of the payment; -The interest rate; and The annuitant's age and gender.

3 basic types of term coverage based on how the face amount (death benefit) changes during the policy

1)level 2) Increasing 3) decreasing

Annuiant

The person who receives benefits or payments from the annuity, whose life expectancy is taken into consideration, and for whom the annuity is written. The annuitant and the contract owner do not need to be the same person, but most often are. A corporation, trust or other legal entity may own an annuity, but the annuitant must be a natural person.

joint life=

first to die; survivorship life = second to die (last survivor).

longer life expectancy =

lower benefit

Level Premium

the premium for whole life policies is based on the issue age; therefore, it remains the same throughout the life of the policy.

securities

Financial instruments such as stocks, bonds, and mutual funds that are traded on a stock exchange.

Term Insurance

Life insurance coverage for a specified period of time, less expensive than whole

whole life insurance

Whole life insurance provides lifetime protection, and includes a savings element (or cash value). Whole life policies endow at the insured's age 100, which means the cash value created by the accumulation of premium is scheduled to equal the face amount of the policy at age 100. The policy premium is calculated assuming that the policyowner will be paying the premium until that age. Premiums for whole life policies usually are higher than for term insurance.

level benefit payment amount

With fixed annuities, the annuitant knows the exact amount of each payment received from the annuity during the annuity period.

Renewable provision

allows the policy owner the right to renew the coverage at the expiration date without evidence of insurability

annuity period

also known as the annuitization period, liquidation period, or pay-out period, is the time during which the sum that has been accumulated during the accumulation period is converted into a stream of income payments to the annuitant. The annuity period may last for the lifetime of the annuitant or for a specified period, which could be longer or shorter. The annuitization date is the time when the annuity benefit payouts begin (trigger for benefits).

Interest Sensitive Whole Life

also referred to as current assumption life, is a whole life policy that provides a guaranteed death benefit to age 100. The insurer sets the initial premium based on current assumptions about risk, interest and expense. If the actual values change, the company will lower or raise the premium at designated intervals. In addition, interest-sensitive whole life policies credit the cash value with the current interest rate that is usually comparable to money market rates, and can be higher than the guaranteed levels. The policy also provides for a minimum guaranteed rate of interest. Interest-sensitive whole life provides the same benefits as other traditional whole life policies with the added benefit of current interest rates, which may allow for either greater cash value accumulation or a shorter premium-paying period.

face amount

the amount of benefit stated in the life insurance

Death Benefit

the death benefit is guaranteed and also remains level for life.

attained age

the insured's age at the time the policy is issued or renewed

If an insured skips a premium payment on a universal life policy.......

the missing premium may be deducted from the policy's cash value. The policy will NOT lapse.

living benefits

the policyowner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered. The cash value, also called nonforfeiture value, does not usually accumulate until the third policy year and it grows tax deferred.

Adjustable life

was developed in an effort to provide the policyowner with the best of both worlds (term and permanent coverage). An adjustable life policy can assume the form of either term insurance or permanent insurance. The insured typically determines how much coverage is needed and the affordable amount of premium. The insurer will then determine the appropriate type of insurance to meet the insured's needs. As the insured's needs change, the policyowner can make adjustments in his or her policy. Typically, the policyowner has the following options: -Increase or decrease the premium or the premium--paying period; -Increase or decrease the face amount; or -Change the period of protection.

deferred

withheld or postponed until a specified time or event in the future

Shorter life expectancy =

higher benefit

A fixed annuity provides the following features:

-Guaranteed minimum rate of interest to be credited to the purchase payment(s); -Income (annuity) payments that do not vary from one payment to the next; and -The insurance company guarantees the specified dollar amount for each payment and the length of the period of payments as determined by the settlement option chosen by the annuitant.

permanent life insurance

A general term used to refer to various forms of whole life insurance policies that remain in effect to age 100 so long as the premium is paid.

cash value

A policy's savings element or living benefit

qualified plan

A retirement plan that meets the IRS guidelines for receiving favorable tax treatment.

Return of Premium (ROP)

Life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid. The return of premium is paid if the death occurs within a specified period of time or if the insured outlives the policy term.

fixed life insurance

contracts that offer guaranteed minimum or fixed benefits

Liquidation of an estate

converting a person's net worth into a cash flow

liquidation of an estate

converting a person's net worth into a cash flow

During the accumulation period.....

funds are paid INTO the annuity

During the annuity period...

funds are paid OUT to the annuitant.

policy maturity

in life policies, the time when the face value is paid out

variable life

insurance (sometimes referred to as variable whole life insurance) is a level, fixed premium, investment-based product. Like traditional forms of life insurance, these policies have fixed premiums and a guaranteed minimum death benefit. The cash value of the policy, however, is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer. The policyowner bears the investment risk in variable contracts.

Universal life

insurance is also known by the generic name of flexible premium adjustable life. That implies that the policyowner has the flexibility to increase the amount of premium paid into the policy and to later decrease it again. In fact, the policyowner may even skip paying a premium and the policy will not lapse as long as there is sufficient cash value at the time to cover the monthly deductions for cost of insurance. If the cash value is too small, the policy will expire.

annuity

is a contract that provides income for a specified period of years, or for life. An annuity protects a person against outliving his or her money. Annuities are not life insurance, but rather a vehicle for the accumulation of money

target premium

is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.

joint life

is a single policy that is designed to insure two or more lives. Joint life policies can be in the form of term insurance or permanent insurance. The premium for joint life would be less than for the same type and amount of coverage on the same individuals. It is more commonly found as joint whole life, which functions similarly to an individual whole life policy with two major exceptions: -The premium is based on a joint average age that is between the ages of the insureds; and -The death benefit is paid upon the first death only.

Minimum Premium

is the amount needed to keep the policy in force for the current year. Paying the minimum premium will make the policy perform as an annually renewable term product.

accumulation period (pay in period)

is the period of time over which the owner makes payments (premiums) into an annuity. Furthermore, it is the period of time during which the payments earn interest on a tax-deferred basis

Annually Renewable Term (ART)

is the purest form of term insurance. The death benefit remains level (in that sense, it's a level term policy), and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the attained age, as the probability of death increases.

variable annuity

serves as a hedge against inflation, and is variable from the standpoint that the annuitant may receive different rates of return on the funds that are paid into the annuity. Listed below are the 3 main characteristics of variable annuities: -Underlying Investment: the payments that the annuitant makes into the variable annuity are invested in the insurer's separate account, not their general account. The separate account is not part of the insurance company's own investment portfolio, and is not subject to the restrictions that are applicable to the insurer's own general account. -Interest Rate: issuing insurance company does not guarantee a minimum interest rate. -License Requirements: a variable annuity is considered a security and is regulated by the Securities Exchange Commission (SEC) in addition to state insurance regulations. An agent selling variable annuities must hold a securities license in addition to a life insurance license. Agents or companies that sell variable annuities must also be properly registered with FINRA.

Endow

the cash value of a whole life policy has reached the contractual face amount

cash value

the cash value, created by the accumulation of premium, is scheduled to equal the face amount of the policy when the insured reaches age 100 (the policy maturity date), and is paid out to the policyowner. (Remember: the insured and the policyowner do not have to be the same person.) Cash values are credited to the policy on a regular basis and have a guaranteed interest rate.

level premium

the premium that does not change throughout the life of a policy

variable life insurance

contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance

suitability

a requirement to determine if an insurance product is appropriate for a customer

survivorship life

also referred to as "second-to-die" or "last survivor" policy) is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life, which pays upon the first death. This type of policy is often used to offset the liability of the estate tax upon the death of the last insured.

Indexed (or equity indexed) annuities

are fixed annuities that invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity, the indexed annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poor's 500.

Decreasing Term

policies feature a level premium and a death benefit that decreases each year over the duration of the policy term