Iowa Life Insurance: Final Exam

Incontestability

a provision stating that the insurer cannot dispute the validity of a policy after a specified period

Group Life Insurance

life insurance that provides a master policy for a group; each eligible group member receives a certificate of insurance

Limited Payment (LP) Whole Life Policies

the insured is covered for their entire life, but premiums are pad for a limited time.

Assignments

the right to transfer policy rights to another person or entity.

Single Premium Whole Life Policies

allows the insured to pay the entire premium in one lump-sum, & have coverage for the insured's entire life.

Ordinary (Straight) Life

basic whole life insurance with a level face amount, & level premiums payable over the insured's entire life.

Variable Universal Life

product that blends many features of whole life, universal life, and variable life. Key features are premium flexibility, cash value investment control, and death benefit flexibility.

Increasing Term

provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.

Single Premium Deferred Annuity (SPDA)

A deferred annuity purchase with a lump sum

Single Premium Immediate Annuity (SPIA)

A lump-sum payment is made w/ the insurer & payments to the annuitant start immediately,

Beneficiary Designation (Minor Beneficiaries)

A minor can be named, but b/c a minor cannot legally receive policy proceeds, a guardian must be appointed.

Equity-Indexed Universal Life

Equity-indexed universal life works the same way as universal life insurance except the interest rate is tied to a stock market index.

Special Features

Renewable Term: Policies that allow the policyowner to renew the term policy after the designated term expires w/o having to prove insurability. Convertible Term: Policies that allow policyowners to convert their term insurance into permanent policies w/o showing proof of insurability.

Riders

policy elements that "ride on" or add to the existing coverage by modifying provisions or coverage.

Accelerated Death Benefits

allows insured to receive a portion of the death benefit prior to death if the insured has a terminal illness.

Variable Annuities

- Payments fluctuate according to the value of an account invested primarily in common stocks - provides conservative to aggressive investments that are not guaranteed

Settlement Options

-Allow the policy to proceeds to be retained by the insurer & paid out gradually.

Policy Loans, Withdrawals, Partial Surrenders

-Cash Loan: Policyowners can make a policy loan in an amount up to the current cash value, less any existing indebtedness. -Automatic Premium Loan: Allows the insurer to automatically use the policy cash value to pay an overdue premium. -Withdrawals or Partial Surrenders: can be made from universal life policies. - Modifications: Policy Changes must be made by an authorized officer of the insurer & attached to the policy. -Medical Examination & Autopsy: Require the purposed insured to undergo a medical examination prior to issuing coverage at the insurer's expense if necessary, such as for large amounts of coverage. -Excess interest provision: When a life insurance policy's interest rate becomes greater than the assumed interest rate, the policy will build excess cash value.

Annually Renewable Term

-Renews each year without proof of insurability -Premiums increase due to attained age

Beneficiary Designations (Primary & Contingent)

3 levels of prioritized beneficiaries: primary, contingent, & tertiary. The lower beneficiaries don't receive the policy unless the higher dies.

Policy Provisions (Consideration)

A policyowner must pay a premium in exchange for the insurer's promise to pay benefits.

Joint Life

A single policy that is designed to insure two or more lives.

Policy Riders (Long-Term Care)

A type of accelerated benefit, which is used to pay long-term care costs.

Decreasing Term

A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy.

Policy Riders (Term Riders)

Adds term coverage to an existing life insurance policy.

Policy Riders (Waiver of Premium Rider)

Allows the policyowner to waive premium payments during a disability and keeps the policy in force. It does not provide cash payments to the policyowner. The disability must be total and permanent and have sustained through the waiting period (90 days or 6 months).

Dividends and Dividend Options

Cash Payment Options: The PO receives a check for the amount of the dividend. Reduction of Premium Payments Options: Allows the policyowner to use the dividend to offset the cost of a future premium payment. Accumulation at Interest Option: Allows the insurer to retain the dividend to be invested & grow in value. One-Year Term Option: Allows the PO to use the dividend as a single premium 1-year term protection. Paid-up Additions Option: Allows the PO to use the dividend as a single premium to purchase additional coverage. Paid-Up Insurance Option: Allows the PO to use the dividends to pay up the policy earlier.

First to Die / Joint Life

Covers 2 people and will pay out when the first of those 2 dies. The money can be used to pay off mortgage or in a buy sell agreement or debt protection.

Fixed Life vs. Variable Life

Fixed Life: policies earn a constant rate of interest, providing guaranteed minimum of benefits. Variable Life: policies earn a fluctuating rate of interest & don't guarantee a certain cash value.

Policy Riders (Payor Benefit)

If the individual paying the premiums on a juvenile life policy becomes disabled or dies, the Payor Rider ensures that premiums will be waived.

Term Life Insurance

Insurance that provides financial protection from losses resulting from a death during a definite period, or term.

Participating Life vs. Nonparticipating Life

Participating Life: policies that pay dividends to the policy holders. Nonparticipating Life: policies that pay dividends to shareholders.

(Policy Riders) Accidental Death & {AD & D}

Pays an additional sum to the beneficiary if the insured dies due to an accident. The amount paid is a multiple of the policy face amount such as double or triple the original benefit.

Permanent Life vs. Term Life

Perm Life: whole life insurance that is effective for the entire life of the insured up to age 100. Term Life: insurance that is effective for a temporary time period, designated by the policy.

Policy Riders (Guaranteed Insurability)

Permits the policyowner to buy additional permanent life insurance coverage at specific points in the future w/o requiring the insured to provide proof of insurability.

Reinstatement

Permits the policyowner to reinstate a policy that has lapsed- as long as the policyowner can provide proof of insurability and pays all back premiums, outstanding loans, and interest.

Interest Sensitive Whole Life

Premiums vary to reflect the insurer's changing assumptions with regard to death investment and expense factors.

Equity Indexed Annuity

allows for stock market appreciation with downside protection; guarantee of principal;

Policy Riders (Other Insureds)

Riders can be attached to protect the insured's spouse, children, etc.

Policy Exclusions

Suicide Clause: Policy is voided; if the insured commits suicide within a time period. Aviation: insurer won't pay claim if the insured dies in a plane accident. War/Military Service: Active Duty Status Clause: active military service Results Clause: Act of War Hazardous Occupation or Hobby: death by hazardous occupation or hobby.

Flexible Premium Deferred Annuity

The annuity purchased with multiple payments, whose benefit is paid more than one year after the purchase.

Provisions

The characteristics, privileges, duties of all parties, and rights of a policy.

Policy Provisions (Insuring Clause)

The insurer's basic promise to pay benefits in the event of a covered loss.

Return of Premium

The longer the term, the lower the premiums; premiums are returned to the insured if no death benefit has been paid & are not taxable.

Policy Provisions (Owner's Rights)

The ownership provision stipulates the rights of the policyowner.

Suicide

The policy will be voided & no death benefit will be paid if the insured commits suicide within a stipulated time period.

Beneficiary Designations (Revocable & Irrevocable)

The policyowner can change revocable beneficiaries w/o consent. The policyowner must receive their written consent to exercise any ownership rights except the right to pay premiums.

Policy Provisions (Free Look)

The policyowner is permitted a number of days from the date the policy is delivered (10 days) to look over the policy & return it, if dissatisfied for any reason, for a refund of all premiums paid.

Survivorship Life

Two or more insureds. Pays upon death of the last

Adjustable Life

a mix of whole & term life insurance. Changes that can be made to the policy: - raise/lower premium -raise/lower the face amount -change the coverage period - change the premium-paying period

Premium Payment

a. Modes: the frequency that premium payments are made. Accepted: monthly, quarterly, semi-annually, & annually. b. Grace Period: the stipulated period of time policyowners are allotted to pay an overdue premium during which the policy remains in force. c. Automatic Premium Loan: allows the insurer to automatically use the policy cash value to pay an overdue premium d. Level or Flexible: Level Premiums remain constant; Flexible Premiums can vary in amount or frequency.

Non Forfeiture Options

guarantees that are required by law to be part of life insurance policies that build cash -Cash Surrender Value: Allows the policyowner to receive the policy's cash value. -Extended Term Option: Permits the policyowner to use the policy's cash values to buy paid-up term insurance. -Reduced Paid-up Insurance Option: Allows the policyowner to purchase paid-up whole life coverage at a reduced face amount based on the amount of the policy cash vale.

Variable Whole Life

has fixed premiums & a guaranteed minimum death benefit just like OWL, but differs b/c it offers higher interest rates defending the policyowner against inflation

Fixed Annuities

have a guaranteed minimum interest rate at which the premium payments accrue interest during the accumulation phase & a fixed interest rate at which level annuity payments are paid during the annuity phase.

Misstatement of Age or Sex

if the insured's age or sex is misstated, the amount payable is the amount that the premiums paid would have purchased at the correct age and sex

Beneficiary Designations (Changes)

if they're revocable, can change beneficiaries at anytime w/o consent; if they're irrevocable, the policyowner must get written consent.

Options

involve how the policy funds are utilized

Policy Riders (Return of Premium)

pays the total amount of premiums paid into the policy in addition to the face value, as long as the insured dies within a certain time period specified in the policy.

Universal Life Insurance

permanent cash-value insurance that combines term insurance (death benefits) with a tax-sheltered savings/investment account that pays interest, usually at competitive money market rates

Level Term

premiums and death benefits stay the same for the life of the policy

Individual Life Insurance

purchased by individuals; usually greater face value

Policy Provisions (Entire Contract)

the insurance policy itself & the application, if attached to the policy, comprise the entire contract between all parties.