State Exam Outline (Part 1 - Types of Policies and Features) - 8%
What questions should you ask yourself when qualifying a client?
1. What are the client's needs? 2. What product can help meet those needs? 3. Does the client understand the product and its provisions? 4. Does the client have the capability, financially and other, to manege the product? 5. Is this product in the client's best interest?
Indexed Annuity
A fixed annuity contract which uses a crediting index such as the standard and poor's 500
Indexed Life Insurance
A whole life plan of insurance that provides for the face amount of the policy and, correspondingly, the premium rate, to automatically increase every year based on an increase in the Consumer Price Index (CPI) or another index as defined in the policy.
Renewable Term Life Insurance
Allows policyowner to renew the term policy before its termination date, without having to provide evidence of good health
Single Premium Whole Life Insurance
Allows the insured to pay the entire premium in one lump-sum and have coverage for the insured's entire life
Single Premium Annuity
An Annuity purchased with one lump-sum payment, generally with after tax dollars. You can buy either a Single Premium Immediate Annuity, which allows you to "annuitize" right away, or you can buy a Single Premium Deferred Annuity, where you annuitize sometime in the future, perhaps at retirement age.
Flexible Premium Annuity
An annuity contract that permits the owner to vary the size and frequency of premium payments. The amount of retirement income depends on the accumulated sum in the annuity at retirement
Deferred Annuity
An annuity in which the income payments begin SOMETIME AFTER THE FIRST YEAR, funded by a single lump sum or through periodic payments
Interest Sensitive Whole Life Insurance
Characterized by premiums that vary to reflect the insurer's changing assumptions with regard to its death, investment, and expense factors (has cash values that MAY BE greater than guaranteed levels, policyowners has 2 options: lower premiums or higher cash values, PO may be able to withdraw cash value interest-free)
Adjustable Life Insurance
Combines both term and whole life coverage with the length of coverage PO has options for increasing or decreasing the premium or the face amount (face amount requires proof of insurability) for financial needs and objectives change, more expensive than conventional term or whole life policies
Limited Pay Whole Life Insurance (Limited Pay Life)
Covered for entire life, but premiums are paid for a limited time. As the premium payment period shortens cash values increase faster and the fixed premiums are higher. (which can be of any duration, like a 20 pay life policy, you pay premiums until up to 20 years and you ow no more, or a life paid-up to 65, you pay until you hit age 65)
Joint Life Insurance
Covers 2 or more people. Pays death benefit at the first insured's death, survivor(s) then have option of getting a single individual policy without evidence of insurability, cheaper with joint than separate, multiple policies
Convertible Term Life Insurance
Gives right to the insured to convert or change the term policy for a whole life (permanent) plan without evidence of insurability (if you sign up for this policy first)
What is Life Insurance?
It guarantees a specific sum of money to an individual/business (called the beneficiary) when someone dies
Name all types of Term Life
Level Decreasing Return of Premium Annually renewable
Level Term Life Insurance
Level amount (a fixed amount of money, like only $100k if that's your poicy) of protection for x amount of years
Straight Whole Life (Straight Life)
Life insurance with a level face amount and fixed premiums payable over the insured's entire life - Premium payments made until death of insured or age 100 (maturity of policy)
Immediate Annuity
One that is purchased with a SINGLE LUMP SUM PAYMENT (a single payment) and provides income payments that start within one year from the date of purchase
Return of Premium Term Life Insurance
Protection and Cash back temporary insurance, if policyowner outlives that level premium payment period, you'll get all the policy premiums you've paid back at the end of the term.
Term Life Insurance
Protection for a specific number of years, and insurance expires if the insured survives after that period (could be 10, 20, or 30 years)
Fixed Annuity
Provide a fixed guaranteed payout, payments that do not vary to another and guaranteed minimum rate of interest
Annually Renewable Term Life Insurance
Provides coverage for one year and allows the policyowner to renew coverage each year, without evidence of insurability
What is Health Insurance?
Provides funds to cover medical bills due to sickness or injury and to also cover the loss of money because of a disability
What's are Annuities?
Provides income for a specific number of years or for life, as well as protects a person against outliving their money (not life insurance, but a way of accumulating money and liquidating an estate)
Variable Annuity
Serves as a hedge against inflation, and is variable because there is not a guarantee of payout, payments can vary from one payment to another, and there is not a set rate of interest (this annuity is considered a security and regulated by the SEC, agent needs securities license + life insurance license to sell this)
Decreasing Term Life Insurance
The benefit amounts decrease gradually over the term protection (so it'll start at $50k at beginning of 10 year policy, $49k after a year, etc until it hits $0 at the end of term) (good for people with mortgages, cuz it decreases over time)
Increasing Term Life Insurance
The benefit amounts that increases at period intervals over the term (may be tied to a cost-of-living index like a Consumer Price Index, normally sold as a separate policy)
What happens if there is not an insurance system in place?
Then the costs of the loss would be covered solely by the individual who suffered the loss.
What is the role of Insurance?
To transfer the risk of financial loss from an individual/business to an insurance company (basically spreads the cost of the unexpected financial loss to many individuals)
Universal Life Insurance
Variation of Whole life, allows its POs to determine the amount and frequency of premium payments which will adjust the policy face amount, characterized by considerable flexibility
Survivorship Life Insurance (second to die)
Variation of the joint life policy called last survivor policy, this plan also covers two lives, but the benefit is paid upon the death of the last surviving insured (useful in estate planning because they can provide money to pay taxes on assets)
Variable Whole Life Insurance
fixed premiums, a guaranteed minimum death benefit which fluctuates over the minimum, and cash values which fluctuate and are not guaranteed (cuz in investments like stock, bonds, money markets, and other securities), created to help offset effects of inflation on death benefits
Variable Universal Life Insurance (VUL)
form of cash-value insurance that offers both a death benefit and an investment feature, PO can change premium amount as it is flexible, although can result in a change in the coverage amount (also invested in stock and/or bond markets), type of life insurance that builds cash value
Ordinary Whole Life Insurance
provides permanent protection for one's entire life with a cash value and a level face amount (premiums are set at the time of policy issue, and remain level/keeps the rate the same) - Basically Ordinary = Individual