Life and Health Insurance

"Limited pay" other names

"10 pay life" "20 pay life" "paid up at 65"

Annuitization Period

(liquidation, pay-out period) income is paid to the annuitant -taking money out -3 diff types based on you withdrawing the money -straight life annuity(pure life/ life only)-pays biggest monthly check with no beneficiary, no guarantee it gets all paid out before death -life with period certain (life with guaranteed minimum)- always last for a period of time (ex- got monthly income for 20 years total, he dies after 15 yrs, wife gets check for 5 more years until its all paid out) -life with refund - (ex- jack gets a check for life, he dies, jill gets the money that's left), she can choose to get a cash refund or installment refund (ex payments of whatever is left or 50% of what jack was getting until its all gone)

Group Life Insurance features

- employer is policyowner (receives master contract); employees are insured (receive certificates of insurc) -no evidence of insurability -conversion- no evidence of insurability ; within specified number of days (usually 30/31 days of termination) to indiv WHOLE LIFE, not indiv term -noncontributory- employer pays 100% of premium; requires 100% employee participation -contributory- employer & employees share cost of premium; requires 75% participation -cost of coverage based on the ratio of men & women in the group

Key Person disability

- in key person disability insurance the BUSINESS is the contract owner, premium payor & the beneficiary

entire contract

- policy + - copy of the application + - any riders or amendments (if any)

Every health insurance application requires signature of

- proposed insured -policyowner (if different than insured) -agent who solicits insurance -applicant/insured must always initial changes to application

Payor Benefit

-"payer" of a minor -whoever is paying for the policy= parent/ guardian becomes disabled or dies -waives the premium until the child becomes an adult/dependent

Buy-Sell Agreement

-A legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled -AKA business continuation agreement -cross purchase- partnerships where each partner buys policy on the other (ex- value of buss is 1,000,000- each partner buys policy on other for 500,000) -entity purchase- used when partnership buys the policies on the partners -stock purchase- used by privately owned corporations when each stockholder buys policy on each of the others -stock redemption- used when the corporation buys one policy on each shareholder

Elimination Period

-A waiting period imposed on the insured from the onset of DISABILITY until benefit payments begin. -Deductible measured in days rather than $$ -designed to eliminate coverage for short-term disabilities (where person can return back to work) and reduce the filing of excessive claims -range from 30-180 days (enroll for 90 day elim period and can be eligible but wont receive payments till 30-180 days later)= longer elimination period= lower premium for DISABILITY INCOME INSURC. -insured determines how long he or she can go w/o benefit payments following disability when selecting duration of elimination period

Major Medical Expense Policy (Basic Hospital, surgical & medical policies, major medical policies)

-Basic expense provides coverage on a first-dollar basis (no deductable). -basic medical/hospital expense cov does NOT cover surgeons services -functions through reimbursement. The insurance company reimburses the medical service provider for any amount due. -after limits of basic policy's are exhausted- Insured MUST PAY corridor deductible (applied between basic coverage & major medical expense) before major medical coverage will pay its benefits ***** -broad range of coverage under one policy, these policies take over when the limits of basic insurance plan have been exhausted, lending the insured protection from unexpected high medical expenses. -provide comprehensive coverage for hospital expenses (room & board & miscellaneous expenses, nursing services and physicians services)*** and hospice!! -catastrophic medical expense protection AND benefits for prolonged injury or illness. *** -blanket limit for specific expenses stated in policy- also a lifetime benefit per-person limit.

3 basic coverages for medical expense insurance

-Basic hospital expense- cover hospital room and board and miscellaneous hospital expenses (lab, xray charges, medicines, use of operating room and supplies, while insured is in confined hospital) NO deductible/ limit on room & board are set at specified dollar amount per day up to max # of days. The insured is responsible for paying the expenses over the covered limit. -miscellaneous hospital expenses- have a separate limit- other miscellaneous expenses associated with hospital stay- can be multiple of a room and board charge (such as 10x the room and board charge) or as a flat amount. In addition, policy may specify a maximum limit for certain types of expenses- $100 for drugs or $150 for use of operating room. Same as basic hospital- insured pays remainder of extra charges over limit. -basic medical expense coverage- provides coverage for nonsurgical services a physician provides- benefits limited to # of visits per day, limit per visit, or limit per hospital stay. Can also be purch

3 Disability Income policies for businesses

-Business Overhead Expense= sold to small business owners who must continue to meet overhead expenses (rent, utilities, employee salaries, installment purchases, leased equipment following a disability) it reimburses the business owner for the overhead expenses listed while the business owner was disabled, not for their own salary or other forms of income lost as a result of disability. 15-30 day elimination period- payments limited from 1-2 yrs. Premiums for BOE are tax deductible- as business expense, but benefits received from BOE are taxable to buss received -Buy-sell agreement= buyout policy, specifies how the business will pass between owners when 1 of the owners dies or becomes disabled- these policies funding buy sell have a longggg elimination period of about 2 years, but policies funding these agreements also provide large lump-sum benefits to buy out the business rather than monthly benefits -**Group Disability Income= plan benefits are based on a % of the workers income;

Adjustable life

-Can be term or whole life and convert to the other -face amount set by policyowner/ can increase death benefit with proof of insurc -can borrow cash val/policy loan -only change 3 things (cant increase policy or change the insurer) -Plan (type of plan) -Coverage period -Premium period

What do renewable and convertible have in common?

-End of term insurance options -Both guaranteed insurability and -Increase based on attained age

Family Policy

-Family maintenance policy- combines whole life and level term, always for 20 years (maintain=level) (ex- Jack and Jill married, Jack dies, Jill gets a lump sum and a monthly check for 20 years) -Family income policy- combines whole life and decreasing term (ex- jack dies, Jill gets a lump sum and monthly check for the remaining number of years that she has left on the 20 year rider/ subtract number of years they've had the policy already/ aka jack dies after 9 years, jill gets lump sum and monthly check for 11 years)

Universal Life Insurance

-Flexible premium/Adjustable Life -Permanent insurance with renewable term protection -premium is flexible, minimum or target -Corridor of Insurance btw cash val & death benefit= save the tax "a"dvantages/ taking more of your premium to cover cost of insurance/ only goes to death benefit "A" -target premium= amount you need to pay to keep the policy from lapsing & covers cost of protection -cost value goes up, cash value comes down -2 death benefits= A-face amount only or level/ B-Both (face amount increases if the cash value increases) 2 components- Life Insurance and Cash Value minimum premium/ insurc component of UV life- Annual Renewable Term (1 year then premium increases) Cash value- Partial withdrawals/ surrenders if it ever goes to 0, policy lapses

MEC (Modified Endowment Contract)

-MEC is an overfunded life insurc policy, once a MEC, always a MEC -IRS established 7 day pay test (if failed= insurc policy is classified as MEC) -accumulation- tax deferred/ distributions- taxable last in, first out/ withdrawals & policy loans are taxable -loses standard tax benefits of a life insurc contract -cumulative premiums paid during 1st 7 years of policy exceed total amount of net level premiums that would be required to pay the policy up using guaranteed mortality costs & interest

Social Security

-Old Age Survivors Disability Insurance- OASDI -provides protection for eligible workers and their dependents against financial loss due to (((old age (retirement), disability, or death/ survivor)))) -anyone working in a job covered by SS or operating own business may earn up to max of 4 credits for each year of work -fully insured= 40 quarters (10 yrs of work) and can receive SS retirement, premium-free Medicare part A & survivor benefits, if eligible for A- automatically eligible for B but must pay monthly premium -can attain partially insured- meaning can qualify for benefits if earned MINIMUM 6 credits/ 13 quarters ending with quarter in which insured dies, becomes entitled to disability insurc benefits, or to old age insurc benefits

Joint-life

-Pays in the death of the 1st person/1st to die -keyword "both" covering death of 2 people-paying debts of 1 -premium rates for joint life based are determined by averaging the ages of both insureds -can also be used to insure the lives of business partners in the funding of a buy-sell agreement & other business needs

Joint and Survivor/ survivorship life

-Pays in the death of the 2nd person/2nd to die/last survivor -premium based on joint age -"cheaper premium than joint life" "offset liability of estate tax upon last death" -Jack and Jill dies, kids receive -also keyword "both" covering death of 2 people-paying debts of 1

Whole Life Insurance

-Permanent -Builds cash value -Level premium to age 100 -"WELLS"

Social Security Riders/ Social Ins Supplement (SIS)

-Social Security pays survivor benefits during the family dependency period & retirement period, but during preretirement or the blackout period (until youngest child reaches 16 & continues until spouse retires) payments are suspended. -used to supplement or replace benefits that might be payable under social security disability . -can also be used to replace/ supplement benefits payable under other social insurance programs like Workers Compensation*** -provide for payment of income benefits in 3 situations: 1- insured is eligible for Social Security benefits but before benefits begin (usually 5 month waiting period for SS benefits) 2- insured has been denied coverage under Social Security benefits (75% get denied due to their rigid definition of total disability) 3-when the amount payable under SS is less than the amount payable under the rider (this would mean only the difference would be paid)

Purpose of life insurance

-To create an estate -die too soon

"WELLS"

-Whole= Traditional Life, Straight Life, Pure Life (all the same/ all have level premium to 100, lowest annual premium of all 3, build cash value after 3-5 yrs, endow @ 100 (meaning the cash value equals the face amount)) -Endowment= builds cash value faster than a traditional life, "E"xpensive, (ex- he can afford to "pay more", he wants to save money for retirement he can afford to pay "more", "build cash value faster for retirement) -Limited pay= pay for certain amount of time, but still covered to 100, other names for LP= "10 pay life" "20 pay life" "paid up at 65" -Limited benefit= only pays for certain causes (ex- cancer policy) -Single premium= builds immediate cash value, make 1 lump sum payment

Adhesion/ aleatory/ conditional/ unilateral

-adhesion- one party prepares contract, other accepts it as is -aleatory- exchange of unequal amounts (low premium high coverage/ high premium low coverage) -conditional- certain conditions must be met -unilateral- only one party of contract is legally bound to do anything (usually insurc company to pay claims)

Replacement

-agent must be careful when replacing insureds current health insurc policy with a new one -it is agents full responsibility to carefully compare benefits, limitations and exclusions found in current policy & proposed replacement policy -agent must make sure that the current policy is not cancelled before the new policy is issued/ cannot be any coverage gap between existing coverage and replacement coverage -underwriting is really important when replacement is involved/ insured might have to pay a different premium or not receive same benefits as before -pre-existing conditions are also important during replacement bc health conditions covered in the previous policy might not be covered in the new policy bc of pre-existing condition limitations/ new waiting periods in new policy (AFFORDABLE CARE ACT/ ACA eliminated pre-existing conditions for individual & group accident/ health insurc policies) it can still apply to Medicare, long-term care and disability income coverages

Reinstatement provision

-allows a lapsed policy to be put back in force -maximum reinstatement is 3 years after lapse -provide proof of insurability/ pay back all premiums + interest -benefit- policy is restored to original policy at age of original purchase

Guaranteed insurability rider

-allows insurer to purchase additional coverage at specified future dates (every 3 years) or events (marriage/ birth of child) without proof of insur for additional premium at attained age

Benefit Limitations of disability income

-amount of monthly benefit payable under most DISABILITY income policies based on % of the insureds past earnings. -ben limits are the max benefits the insurer is willing to accept for an individual risk (example- limit benefits to roughly 66% of insureds avg earning for 2 yrs) rarely 100% of lost income bc they don't want the insured to profit from the disability and not return back to work

probationary period

-another type of waiting period under some disability policies, DOESNT replace elimination period, but is an addition to it -often 10-30 days from policy issue date where benefits aren't paid for ILLNESS-related disabilities NOT accidents/ injury -reduces chances of adverse selection against insurer

PPO perferred provider organization

-answer to HMO's -PPOS are group of physicians and hospitals that contract with employers***, insurers or 3rd party organizations to provide medical care services at a reduced fee***. -all network providers are considered "preferred" even specialists without a referral -physicians paid fees for their services, members encouraged to visit approved member physicians that have agreed upon fees charged*** although can use any physician if they choose -but is more flexible than HMO's between in-network and out-of-network providers in exchange for higher premium -while members can utilize any physician they want, PPO may provide 90% of the cost of physician on their approved list/ while maybe only providing 70% of the cost if physician choosen is not on PPO list Different from HMO's in 2 ways- do NOT provide care on prepaid basis (PPOS are FEE FOR SERVICE) AND subscribers are NOT required to use physicians or facilities that have contracts with them- they'll just pay more if you do. PPOs

Juvenile life

-any insurance on the life of a minor

Employer sponsored qualified retirement plan

-approved by IRS -all qualified plans limit employee contributions annually based on inflation/ must be permanent/ vesting requirement -gives both employer and employee benefits such as deductible contributions and tax deferred growth (tax advantages!!!) -designed for the exclusive benefit of employees and their beneficiaries !!!! -examples (most common)- traditional IRA (must start receiving distributions (minimal annual amount= RMD) by no later than age 73, earliest 59.5) AND roth IRAS (do not have to begin distributions at specific age/ tax free as long is account is open 5 yrs) -traditional IRA contributions are tax deductible, but may be limited if owners income exceeds a level (made with pre tax $/earned income) , while roth IRAs are not taxable (made with after tax $), both have dollar limit- max amount allowed -SEP (simplified employee pension) is another example, small employer/ self employed (only diff from a IRA is much larger contributions allowed in SEP, (only employer con

FSA (Flexible Spending Account) = Health care Account & Dependent Care Accounts

-cafeteria plan benefit funded by salary reduction & employer contributions***. Employees allowed to deposit certain amount of their paycheck into an account before paying income taxes*** -then during the year employee can be directly reimbursed from this account for eligible health care & dependent care expenses. **** -subject to annual maximum "use-or-lose rule" only applicable during the year,*** does not carry over exempt from federal income taxes, Social Security (FICA) taxes, and state income taxes saving 1/3 or more in taxes. If the plan favors HIGHLY COMPENSATED/ FINANCIALLY SUCCESFUL employees= these guys are not exempt from federal income taxes -can be used to pay medical & dental expenses for employees & their dependents 2 types: -Health Care Account= out-of-pocket health care expenses -Dependent Care Account=subject to annual contribution limits to help pay for dependents care expenses which makes it possible for an employee & spouse to continue to work

Key person

-can be issued with term or perm insurance but whole and universal life used most often -lessen risk of financial loss bc of death of key employee -death of key employee= business uses money for the additional costs of running the business & replacing the employee, benefits paid to business are usually tax free when death occurs, can have more than one key person

Interest Sensitive Whole Life

-cash value varies based on the company's performance -insurer sets initial premium based on current assumptions about risk, interest & expense -allows for either greater cash val accumulation or shorter premium payments period based on interest rates/ money markets

Variable Universal Life

-combines whole life & flexible premium of universal life & investment component of variable life -flexible premium can be increased, decreased or skipped as long as cash value can cover death benefit -increasing and decreasing amount of insurc -cash withdrawals or surrenders -waiver of monthly deductions rider- actual cost of insurc charges (in VUL & UL) -unlike universal life most investments in this VUL do not guarantee return

POS (Point of Service Plan)

-combo of HMO and PPO -employees not locked onto 1 plan, allowed to choose depending on the need for medical services** -allows members to choose who they want to see -copays, coinsurance and deductibles substantially higher -AKA "open ended HMOS" -if out-of-network network provider is used- insureds out-of-pocket costs will be higher, if in network= lower out of pocket costs. -if non member physician is utilized under this plan- then attending physician will be paid fee for service, but member will have to pay higher coinsurance or % of privilege

COLA

-cost of living addresses inflation factor/ increases amount if insurc w/o proof of insur -face value increased by COLA tied to inflation index (CPI- consumer price index)

Accidental Death Benefit Rider

-death must occur as accident in policy -death 90 after accident -can double (double indemnity) or triple (triple indemnity) the face amount of the policy

Individual Disability Income

-disability income insurance is designed to replace lost income in the event of becoming totally disabled and not being able to work again/ pay bills. - can be purchased individually OR thro employer on group basis -most guaranteed renewable and include (time deductible in form of elimination period)

Permanent life insurance provides "living benefits" such as

-dividends (return of unused premiums/ only interest taxed) -cash value accumulation (can be borrowed/ or paid to policyowner upon surrender, grow tax deferred, surrender/endowment premium payments are taxable, upon death face amount is paid, no more cash val) -policy loan from cash value are not income taxable

nonqualified retirement plan

-do not require government approval -not tax deductible, can discriminate, earnings do still grow tax deferred, but excess over cost basis is taxed -examples- individual annuities, deferred compensation plans, Section 162 executive bonus plan -executive bonus plan- employer gives employee wage increase in the amount of the premium on new life insurc policy on employee, employee owns policy, tax deductible to employer and income taxable to employee

Insured can only change benefits when during the year

-during open enrollment -unless its a qualified life event life change: marital status, # of dependents, at least a 31 break period in employment status in insureds, insureds spouse or qualified dependent, change in dependent care provider or family medical leave

Conversion Privilege in group insurance

-employee terminates membership in insured group -employee can convert to an individual policy WITHOUT proving insurability at a standard rate based on attained age -usually transfers to whole life, but cannot transfer to term -face amount/ death benefit is equal to that of the group insur they had, but has to pay a higher premium -has 31 days after termination to convert and is still covered under original policy during this time -if employee dies during conversion period- will receive the master amount of the indiv policy even if its not issued in time -if master contract is terminated everyone working there for at least 5 years can transfer to indiv policy

Indexed Life

-equity index whole life -cash value dependent on equity index -"SP & 500" (standard & poor) / guaranteed minimum interest rate -face amount increases annually to keep up with inflation/ as CPI (consumer price index) increases w/o showing proof of insurability -in annuities- less risky than variable annuities or mutual funds & earn higher interest rate than fixed annuity

Guaranteed Interest Rate (money in annuity pays you an)

-fixed annuity

Annuity investment options

-fixed annuity- insurc company guarantees dollar amount, fixed payment amount, premiums in general account(level benefit/ inflation is a con) -variable annuities- goes against inflation, invested in stocks and bonds, no guarantee income payment, separate account- not general, considered a security and regulated by SEC -indexed annuities- interest rate tied to an index, earn higher rate than fixed annuities, not as risky as variable ann/ mutual funds

Graded Life

-has several increases in the first several years then it stays level -"in school its not good to repeat the same grade, need more grades"

Disability income rider

-if disability occurs, insurer will waive premiums AND pay monthly income to insured -amount paid based on percentage of face amount in policy

Provision- settlement option

-insurance company is paying the death benefit (they owe her the money) -beneficiary has 5 options on how they can take the money -Cash -Life income= you can annuitize the death benefit/ don't have to get it all at one time/ NOT a lump sum, its a monthly check (can choose to get straight life, life with period certain or life with refund) -Interest only= I don't need the money now just send me the interest off of the money (ex- jack died, jill gets $100,000, but she doesn't want the money now, she just wants the interest off of it later) (ON TEST look for "they want an "immediate income"/ "protect the principal") -Fixed amount= beneficiary chooses the amount & the insurance company gives you the period (ex- Jack dies, jill needs $5,000 a month, she chooses to send a check for $5,000 each month until all of the money is gone) -Fixed period= beneficiary chooses the period & insurance company decides the amount (ex- Jack dies and Jill decides she needs a check for 15 more years, so she c

Insuring Clause (or Insuring Agreement)

-insurer promise to pay death benefit upon insureds death. -policys face page -defines who the parties are, time of coverage, type of loss insured against.

Money inside annuity pays both guaranteed interest rate & can grow based on index/ variable rate

-invested or linked to an index -fixed index annuity

Provision- non forfeiture option

-non FORFEITure option= don't want to lose something/ for policy surrender or lapse (ex- have whole life policy that I don't want anymore but don't want to lose the cash value inside) -3 options -Cash- surrender= get cash but policy cannot be reinstated -Extended term= use cash value to buy an extended term, same face amount/coverage of what you had before and it will last for a period of time (usually shorter term of coverage) (however much you can buy based on your age) ""same cov=temporary period."" Gives you the most coverage & is the automatic option (ex- whole life policy, change banks forget to call insurc company, policy lapses, company automatically did extended term bc you never called until the money ran out) -Reduced paid up= use cash value to buy permanent policy for less coverage (but longest period)

Modified Life

-one increase in premium (in the first 3-5 yrs) then is level to 100

Application for life insurance

-part 1- questions regarding current coverage being applied for & any other coverage including the same or other insurers -part 2-questions regarding applicants health history

Accumulation Period

-pay in period -money is being put in (annuity) -grows tax deferred (like an IRA/ do NOT pay taxes on it)= automatic 10% penalty on early withdrawal (before 59.5) -shorter life expectancy=higher benefit, longer life expectancy=lower benefit

AD&D

-pays the principal (face amount) for accidental death, and % of that amount or capital sum for accidental dismemberment -full amount (principal) paid for 2 limbs or vision capital sum/50% for loss of one limb

Variable life

-permanent insurance/ flexible premium/ min death benefit -works just like a whole life policy except is more flexible and can invest cash value in securities like mutual funds premium- level, fixed premium (if whole life), flexible (if universal life) investment based product -guaranteed minimum death benefit , but no guaranteed cash value -in variable contracts, POLICYOWNER bears the investment risk (assets (stocks, bonds, &other security investments) in SEPERATE account) -can borrow policy loan/cash val

HMO (Health Maintenance Organization)

-preventative care, limited service area, limited choice of providers, copayments, prepaid basis, PCP primary care physician- serves as gatekeeper, referral specialty physician- PCP referral required -1973 act forced employers with more than 25 employees to offer HMO as an alternative to regular health plans -main goal was to reduce cost of health insurance by utilizing PREVENTATIVE CARE= offer free annual checkups for entire family so it can catch diseases in early stages, when treatment has the biggest chance of success. Offer free or low- cost immunizations. -benefits in services rather than reimbursement for services of physician or hospital. Provides both the financing and patient preventative care for members. -(((offered to those ONLY within specific geographic boundaries, limited choice of providers/physicians to choose from, no deductible- only co payment required at each visit, operate on a capitated (prepaid basis) HMO receives flat amount each month by each member... PREP

Incontestability Clause

-prevents the insurer from denying a claim due to statements in the application after the policy has been in force for 2 years -does not apply in non payment of premiums, age, sex, identity

Presumptive Disability Provision

-provision found in most disability income policies -specifies conditions that will automatically qualify insured for full disability benefits -provides benefits for dismemberment (loss of any 2 limbs), total blindness, loss of speech/ hearing.

Agents selling variable life contracts must be

-registered with FINRA -be licensed by the state to sell life insurance -Received securities license

Fair Credit Reporting Act

-regulates what information may be collected on a consumer report and how it may be used -consumers credit, character, reputation, and habits collected by whoever can provide the info about the consumer

Conditions for Social Security

-retirement benefit: fully insured status & age 66 (or reduced benefits @ 62)= paid to retired individual and eligible dependents= payment is monthly benefit equal to primary insurc account (PIA) -diability benefit: fully insured status & total & perm disability prior to retirement age= paid to disabled worker & spouse & eligible dependents= payment is monthly disability benefit after 5 month waiting period -survivors benefit= workers death= paid to surviving spouse & dep children= payment is lump sum burial benefit if fully or currently (partially) insured, monthly income payments if fully insured

Provision- Dividend option

-return unused premium -not taxable -Cash -Reduction of premium= reduces next years premium -Accumulate interest= don't want to take it right now, keep it, but interest is taxable -Paid up addition= use dividend to purchase or add additional permanent insuc to your policy/ increase your coverage for life -One year term= use dividend and add temporary insurc, policy only lasts 1 year. Amount is always equal to the cash value.

Death benefit

-tax free if taken as lump sum -principal is tax free, interest is taxable if paid in installments (other than lump sum)

Rollovers and Transfers

-tax-free distribution of cash from one qualified retirement plan to another- completed in 60 days -direct rollover(no withholdings)= if plan transferred directly to trustee/ admin of new IRA plan, otherwise 20% holding by payor if from plan to the direct participant

Accelerated death benefits

-terminal illness, extensive surgery (organ transplant), cant do ADLS, confinement to LTC facility

Variable life are dually regulated by state and federal GOV

-this is due to investment risk -variable contracts are securities

Purpose of Annuities

-to liquidate an estate (have a lump sum of money/ insurc company help you stretch that money to last the rest of your life) -protects the annuitant from outliving their money -payments stop upon death on annuitant -use mortality tables, to discover indiv in certain groups(smoking, gender), who are expected to be alive -must be a natural person no matter who owns it -mostly purchased for retirement income or help fund college education ex- jack and jill have some money that they give to insurance money and the insurance company give Jack and Jill their money back over a lifetime

Sources of insurability of applicant during underwriting process

-underwriter can request (APS attending physicians statement/report) from applicants Dr for best info on their medical history info -MIB report (med info bureau)- group of insurers able to exchange adverse medical info info about applicants to determine risk factor of applicant- applicant must be advised of sources used & how info is gathered -Credit Reports- contain factors related to a risks potential for a loss, including consumer reports, consumers credit, character, reputation, or habits collected from employment records, credit reports & other public sources) and Investigative Consumer Reports (info obtained thro investigation & interviews w associates, friends, family & neighbors of consumer) -medical examination report requirements are more common in life insurance underwriting, insurer is responsible for costs of exam (HIV/AIDS test requires applicants written consent/ strict confidentiality/ no discrimination) -all sources used to verify insurability must adhere to Fair Cre

High Deductible Health Plan (HDHP) & Health Savings Account (HSA)

-used in coordination with medical savings accounts (MSA), Health Saving Account (HSA) or Health Reimbursement Accounts (HRA) (contribution healthcare plans (((not defined benefit plans)) where funds set aside by employers to reimburse employees for qualified medical expenses like deductibles and coinsurance amounts// tax adv, "business expense" employees can rollover unused balances at end of year, balance group purchasing power of larger employers & smaller employers/ EMPLOYER HAS COMPLETE CONTROL over eligibility, contribution, rollover to next year, new benefits) - these 3 features higher annual deductibles and out-of-pocket limits rather than traditional health plans= lower premiums -HSA= help individuals save for qualified health expenses that they/ their spouse/ dependents incur. Individuals covered by a high deductible health plan can make tax-deductible contribution to HSA & use it to pay for out-of-pocket expenses. TO BE ELIGIBLE FOR THIS HSA PLAN, AN INDIV MUST BE COVERED B

Consideration provision

-value offered by insured- is premium & statements in application -offered by insurer- promise to pay whats in contract -included in entire contract provision

Variable rate/ based on stock market (money in annuity pays you an)

-variable annuity -have to have securities license to sell it

When does coverage begin

-when the insurer has approved the application and issued the policy if premium was paid with application submission -when agent collects premium upon delivery and obtain statement of good health if premium was not submitted with application -after initial paid premium and conditional receipt, agents take application to insurer since they cant bind coverage

AC&D

-written as rider or separate policy -most frequent part of group life & group health plans -provides payment in a lump sum in event that insured dies from accident- or event of loss of certain body parts caused by an accident -only pays for accidental losses and is thus considered a pure form of accident insurance- principal sum is paid for accident death (face amount) -in loss of sight or accidental dismemberment, % of principal sum will be paid- capital sum (verifies according to injury) -pays full amount/ principal for the loss of sight in both eyes/ 2 limbs 50% for loss of one hand or foot. -may qualify for double/triple indemnity (pays 2/3x more than face amount) in accidental death -will pay accidental death benefit as long as death is by accident within 90 days 2 types: limited risk policy= specific risk which AD&D occurs (travel accident policy ex) special risk policy= will cover unusual types of risks that aren't normally covered under AD&D- covers specific hazard or risk i

free look

10 days & starts when the policy is DELIVERED or RECEIVED for refund of premium/// not when its issued

Universal Life Insurance Death benefits

A-face amount only or level (IRS required corridor or gap between cash value & death benefit) B-Both (face amount increases if the cash value increases) death benefit includes annual increase in cash value so it increases each year w cash value increases

What is group life insurance usually written as?

Annually Renewable Term

Elements of a Legal Contract (CLOAC)

Consideration-premiums & representations of insured; payment of claims from insurer Legal Purpose Offer & (offer and acceptance = agreement) Acceptance Competent Parties

Term Insurance

Coverage for a specified period of time "Temporary" No cash value or dividends "DIAL"

What happens at the end of "term insurance?"

Either or both -Renewable- Policy goes from "term to term" so renews for same term after previous term expires -Convertible- Policy goes from "term to perm" (ex- what type of term policy goes from one that does not build cash value to a type of policy that does build cash value) term ins > permanent insurance -BOTH renewable and convertible are "guaranteed insurability" (no matter what can renew and/or convert your policy) and "increase in premium based on attained age"

Main types of annuities

Immediate annuity- single lump sum/ any withdrawals less than < 12 months of date of purchase (ex- Jack has $100,000 and he put the money in January and starts taking it out in February= Immed. Ann) (ON TEST- jack is starting an annuity/ started an income- they do not use the word immediate, but it is the answer- just know when you take that money immediately) Deferred annuity- can be single lump sum/ or periodic payments, any withdrawals over > 12 months of date of purchase (ex- Jack got an annuity started putting money in January and didn't take it out until the next February/etc= deferred annuity)

Uniform Simultaneous Death

Insured and primary bene die at the same time, primary is noted as dying first

NAIC

National Association of Insurance Commissioners, an organization composed of insurance commissioners from all 50 states, formed to resolve insurance regulatory issues, create uniformity among insuc policy provisions.

What 2 things is a person paying for that buys a whole life policy? And what 1 thing are they actually getting from it?

Paying for-face amount (what they're covered for) and cash value that accumulates inside the policy. Get- at death- family ONLY gets face amount insurance company GETS cash value

ADL (Activities of Daily Living)

Self-care activities; Eating, bathing, dressing, transferring and toileting, continence. Assessment in the function in the ability to perform ADL's assesses their quality of life.

"DIAL"

Term insurance -Decreasing- face amount decreases, wants it to cover MORGAGE/ loan/ bank note -Increasing- face value increases, return of premium (ROP) policies, get face amount and increases by the amount of premiums you pay -Annual renewable term = ART- coverage stays the same, but the premium goes up every year when renewing it on attained age, know for test (AKA level term life) bc the face amount stays the same, cheapest the 1st year (but not as better value as level bc can cost more after more time passes) -Level term- coverage stays the same for however long (best value in long run), most expensive 1st year

What do fixed amount and fixed period have in common?

They both pay until all of the money is exhausted

indemnity

a principle of reimbursement on which insurance is based; in the event of loss, an insurer reimburses the insureds or beneficiaries for the loss

absolute/ collateral assignment

absolute ass- transfer all rights/ ownership/ new policyowner doesn't need to have insurable interest on insured -collateral ass- partial/ temp transfer of rights to another person/ done to secure loan/ transaction. Once debt/loan is repaid, ownership rights returned to policyowner

Common Disaster Clause

insured and primary died in a common disaster- same accident (primary dies anywhere from 14-30 days later) ex- insured and primary get in wreck insured dies, primary dies 4 days later

Policy loans are only allowed in

policies that have cash value (whole life)

Premium mode

premiums paid monthly, quarerly, semi annual, or annual annual is most common and cheapest

Keogh plans/ HR-10 (employer sponsored qual plan ex)

self- employed persons who works part or full time & owns at least 10% of the incorporated business - tax deductible contributions until withdrawal - tax deferred interest & return on investments - taxed as income withdrawals - contributions are voluntary -anyone age 21+, worked for self employed person for at least 1,000 hrs per year (full time), must be included in Keogh plan. -employer must contribute same % of funds in employees account as they contribute into their own account

Classify annuities based on how they are paid for (accumulation)

single premium- 1 time lump payment periodic payments- premiums paid in installments over period of time (can either by level payments (fixed installment) or flexible premium (where amount and frequency of payment varies)

SIMPLE plan

small employer (no more than 100 employees) -tax deferred on contributions % earnings until funds are withdrawn -employer makes matching contribution up to amount equal to 3% of employees annual compensation

principal

the face value of the policy, original amount invested before earnings

Waiver of Premium Rider

waives the premium for the policy if the insured becomes totally disabled coverage remains in force until insured can return to work if cant return to work/ premiums continue to be waived 6 month "waiting period" between injury until first premium is waived, if still injured after 6 months- premiums returned for that time expires at age 65