TYPES OF POLICIES

what does per capita mean

"By head" or per individual, distributes evenly among living beneficiaries

what is a level premium

- premiums that do not increase, but remain constant throughout the premium paying period - premiums are held "in trust" called a reserve to cover insurance obligations

If the insured commits suicide within _______ years following the policy effective date, the insurer's liability is limited to a refund of premium

2 years

what is the max time limit for reinstatement on a policy

3 yrs after policy has lapsed; will have to provide proof of insurability and pay back all premiums plus interest

how long is each insurer required to keep complete file of advertisements

4 years

what is an immediate annuity

A fixed annuity that can be purchased so that the income payments start immediately; single lump sum payment; payments start within 1 year of date of purchase

what is universal life insurance

A policy with a flexible premium and adjustable death benefit that accumulates cash value.

what is an accelerated benefit

A term rider allowing for the early payment of some portion of the policy's face amount if the insured suffers from a terminal illness or injury

What is the waiver of premium rider?

After insured has been disabled for a period of time (3-6 months) insurance company waives premiums for remainder of disability. Some wave premiums back to time disability began.

Life Income Settlement Option

Also known as straight life; installment payments guaranteed as long as recipient still alive; installments based off recipients life expectancy and amt of principal; if beneficiary dies shortly after they begin receiving installments, balance of principal forfeited to the insurer. recipient cannot outlive benefit payments

cash surrender value

Amount available to the owner when a life insurance policy is surrendered to the company. During the early policy years, the cash value is the reserve less a "surrender charge"; in later policy years, it usually equals or closely approximates the reserve value at time of surrender; if cash value exceeds premiums paid, excess is taxable as ordinary income

single premium annuity

An Annuity purchased with one lump sum payment.

variable annuity

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

When must insurable interest exist?

At the time of application

what is variable universal life insurance

Combo of universal life and variable life Provides the policy owner with flex premiums and an adjustable death benefit like variable life, the policy owner decides where the cash value is invested

what is an investigative consumer report

Contain information about a consumer's character, general reputation, personal characteristics and mode of living that is obtained through personal interviews by an entity or person that is a CRA.

what is a deferred annuity

Defers the income payment until a a later date providing income payments; payments begin sometime after 1 year of date of purchase

what is a conditional contract

Insurance contracts contain conditions that apply to both parties to the contract, the insured and the insurer. Most conditions, such as notice of claim and proof of loss have to do with claims An insured my not file a lawsuit against the insurer for their failure to pay a claim unless all conditions have been satisfied.

Paid-up Option (Dividend Option)

Pays off the policy more quickly than scheduled. If the company's overall performance declines, premiums may have to be resumed.

who has ownership rights under a policy

Policyowner

what is a return of premium rider

Provides amount of money equal to the premium paid for policy if insured dies during term. expires at age 60

Life income with period certain option

Provides an income to the beneficiary for life or a specified period, if longer

what is the disability income rider

Provides the insured with a monthly benefit check if they become disabled- based on % of face amt of policy

Accumulation at Interest Dividend Option

The insurance company keeps the dividend in an account where it accumulates interest. The policy owner is allowed to withdraw the funds at any time. The amount of interest is specified in the policy and compounds annually. Although dividends themselves are NOT taxable, the interest on the dividends is taxable to the policy owner when credited to the policy, whether or not the policy owner receives the interest.

Irrevocable Beneficiary

a beneficiary who has a vested interest in the policy and therefore, the policyowner may not exercise certain rights without the consent of the beneficiary

what is variable whole life insurance

a level fixed premium, investment based product Fixed premiums and a guaranteed minimum death benefit Cash value is not guaranteed and fluctuates with the performance of the portfolio

what is the cost of living rider do

addresses inflation by automatically increasing the amt of ins without proof of insurability

in GA, long term care benefits start when

after 90-day waiting period- benefits not taxed

what is absolute assignment

all rights

what is a flexible premium

allow policyowner to increase or decrease premium during policy period

what is the insurance component for universal life insurance

always annually renewable term insurance

what is a mimimum premium on a universal life policy

amt needed to keep policy in force- annually renewable term product.

what is the annuity period

annuitization period, liquidation period, pay-out period. period when money is converted into a stream of income that may last the lifetime of the annuitant or for a specified period

what is a fixed annuity

annuity that offers low, guaranteed rates of interest and fixed income payments in retirement

when does accidental death rider expire

at age 65

what does uniform simultaneously death law address

common disaster

Who does the common disaster clause protect?

contingent beneficiary

what is an annuity?

contract that provides income for specified period of years or life; vehicle of accumulation of money and liquidation of an estate; protects individual from outliving their money

what is a target premium in a universal life policy

covers the cost of insurance protection and keeps the policy in force throughout its lifetime

who do replacement regulations not apply to

credit life ins, group life ins, life ins in connection with pension, or replacement of annuity contracts

What does "level" refer to in level term insurance?

death benefit does NOT change, remains level

what is an indexed equity annuity

fixed annuities that aim for higher returns; guaranteed min interest rate; ins companies reserve initial returns for themselves but pay excess to anniutant

what is a level benefit payment amount

fixed annuity

what is universal life also called

flexible premium adjustable life

what is the premium mode

frequency of premium payments - monthly, semi monthly, quarterly, annual

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment?

guaranteed min interest rate

what does the policyowner of a universal life policy have the flexibility to do

increase or decrease the amt of premium paid into policy; can also skip payments and policy wont lapse as long as their are sufficient funds in cash value

what does the monthly deductions include

insurance charges, expense charges, endorsements or amendments

to be eligible for long term care benefits

insured must be unable to perform some of the activities of daily living (ADLs)

who receives benefits if no beneficiary named

insureds estate

what is a unilateral contract

insurer legally bound to pay losses covered by policy in force; only 1 party legally bound to do anything

What does per stirpes mean?

issues benefits of beneficiary that died before insured to the beneficiares heirs

what are the types of periodic premium annuities

level premium- annuitant/owner pays fixed installment flexible premium- amt and frequency of each installment varies

what does whole life ins provide

lifetime (permanent) protection and accumulates cash value

what is the basic function of an annuity

liquidating a principal sum, regardless of how it was accumulated

are minimum interest rates guaranteed on variable annuities

no

can a life ins policy be terminated as a result of change in interest rates?

no

can a policy that is surrendered be reinstated

no

is cash value guaranteed in variable whole life insurance

no

what does the accidental death benefit apply to

only the base face amount, not to any additional benefits that may be purchased from policy dividends

Life Income Joint and Survivor

option guarantees an income for two or more recipients for as long as they live. Most contracts provide that the surviving recipient will receive a reduced payment after the first recipient dies.

what is collateral assignment

partial Rights

what is the accumulation period of an annuity

pay-in period, when owner makes premium payments into annuity; payments earn interest on a tax-deferred basis

universal life insurance option a

pays a level death benefit during the early years, and the death benefit increases in later years to meet the corridor test required by the Internal Revenue Code

what is a variable annuity

pays a lifetime income, but the income payments vary depending on common stock prices; invested from seperate acct

what is a waiver of monthly deductions rider

pays all monthly deductions while insured is disabled after 6 month waiting period; usually found in universal life and variable whole life policies

Extended Term Option

permits the policyowner to use the policy's cash value to buy level, extended term insurance for a specified period. No premium payments are made. The coverage provided with the extended term nonforfeiture option is equal to the net death benefit of the lapsed policy.

Reduced Paid-Up Option

policyowner takes a paid-up policy for a reduced face amount of insurance. Policyowner does not make any more premiums and still retains some amount of life insurance. The cash value is used as the premium for a single-premium whole life policy at a lesser face amount than the original policy.

periodic premium annuity

premiums are paid in installments over a period of time

What does the incontestable clause of a life insurance policy do?

prevents insurer from denying a claim due to statements in application after policy has been in effect for 2 years

what is the payor benefit rider

primarily used in juvenile policies; if payor becomes disabled for at least 6 months or dies, insurer will waive premiums until minor turns 21yrs old

universal life insurance option B

provides for an increasing death benefit which is equal to a constant net amount at risk plus the accumulated cash value

What does the guaranteed insurability option allow an insured to do?

purchase additional coverage at specified future dates (usually every 3yrs) or at marriage or birth of a child w/o proof of insurability for additional premium; expires at age 40

what are annuities purchased to provide?

retirement income

what are variable annuities considered and what licenses must you have

securities; insurance license and securities license

what is a family term policy rider

spouse term + childrens term

what do annuities provide

structured settlements

what is a rollover

tax free distribution of cash from one retirement plan to another

what is a transfer or direct transfer

tax free tansfer of funds from one retirement plan to another

what type of ins provides the greatest amount of coverage for the lowest premium

term ins; has no cash value

what is consideration in life insurance?

the consideration offered by insured is the premium and statements made in the application; consideration by insurer is promise to pay in accordance with terms in the contract

Who does the Fair Credit Reporting Act protect?

the consumer against inaccurate or obsolete personal or financial information

Paid-Up Additions

the dividend is used to purchase a small amount of paid-up whole life insurance

what are settlement options triggered by

the insured's death or age 100

who are the parties to an insurance contract

the insurer, policyowner, insured and the beneficiary

in LTCs, the longer the waiting period

the lower the premium

who is the beneficiary of an annuity

the person who receives annuity assets, either amt paid into annuity or the cash value, whichever is greater

who is the annuitant

the person who receives the benefits of the annuity; MUST be a natural person; whos life expectancy is taken into consideration

who bears the risk in variable whole life insurance

the policyowner

what does the Accidental death and dismemberment rider pay

the principal face amount for accidental death and a % of that amt (capital sum) for accidental dismemberment

who is the owner of an annuity

the purchaser of an annuity contract; has all the rights including naming the beneficiary and surrendering the annuity; may be a corporation, trust or legal entity

how long can insurance companies defer a policy loan

up to 6 months

when do payments on annuities stop

upon death of annuitant

what does the accidental death rider do

ususally pays double indemnity if death has to occur within 90 days of accident

policy loans are only available in what type of policies

whole life

when does the consumer have to be advised in writing about a consumer report being requested

within 3 days of the date the report was requested

LTC benefits will reduce the amt payable to beneficiary upon insureds death- yes or no

yes

LTC policies must be guaranteed renewable- yes or no

yes

does childrens term rider have 1 premuim for all children

yes

are nonforfeiture options required by state law to be included in the policy

yes; table showing nonforfeiture options for 20 yrs must be included in policy