Group 1 life and health ins ch2

annuities can be classified according to what?

1 how premiums are paid into the annuity 2. how premiums are invested 3 when and how benefits are paid out

key characteristics of whole life insurance

1. level premium 2. death benefit is guaranteed 3. cash value with a guaranteed interest rate (can borrow)4. living benefit (can borrow)

the annuity income amount based on the following

1. the amount of Premium paid or cash value accumulated 2. the of the payment 3 the interest rate 4. the annuitants age and gender

return of Premium

Premium cost are structure 25 to 50% more. if insured remains healthy and it's still alive once the term limit expires the insurance company guarantees a return of Premium that is not taxable

decreasing term insurance

a level premium and a death benefit that decreases each year over the duration of the policy term primarily used when the amount of need protection is time-sensitive or decreases over time and usually convertible but not renewable since the death benefit is zero at the end of the policy.

cash value

a policy's savings element or living benefit

suitability

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

qualified plan

a retirement plan that meets IRS guidelines for receiving favorable tax treatment

renewable provision

allows the policyowner the right to renew the coverage at the expiration date without evidence of insurability at new current age

universal life policy has two components

an insurance component and a cash component

the insurance component of a universal life policy is always what type of term insurance?

annual renewable term insurance

upon annuitization, the accumulation units are converted to what?

annuity units the income is then paid to the annuitant based on the value of the annuity units.

agent selling variable life insurance products must

be registered with financial industry regulatory Authority 2. have a Securities license 3. be licensed by the state to sell life insurance

adjustable life

can be term or whole life and can convert from one to another

variable universal life

combination of universal life and variable life provides policy owner with flexible premiums and an adjustable death benefit

annuity

contract that provides income for a specified period of years or for life

variable life insurance

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

fixed life insurance

contracts that offer guaranteed minimum or fixed benefits that are stated in the contract

liquidation of an estate

converting a person's net worth into a cash flow

annual renewable term (ART)

death benefit Remains the Same and is premiums are renewable each year without proof of insurability but premium increases annually according to attained age as the probability of death increases

single premium whole life

designed to provide a level death benefit to the insured's age 100 for a one-time lump-sum payment

securities

financial instruments that may trade for value for example stocks bonds options

indexed (or equity-indexed) annuities

fixed annuities that invest on a regular tively aggressive basis to aim for higher returns and has a guaranteed minimum interest rate often Thai 2 The Standard & Poor's 500

permanent life insurance

general term used to refer to various forms of life insurance policies that build cash value and remain in effect for the entire life of the insured as long as the premiums are paid.

indexed/ equity-indexed whole life

if the policy owner assumes the risk of inflation the policy premiums increase with the increase in the face amount if the insurer assumes the risk the premium remains level

policy maturity

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

return of Premium life insurance

increasing term insurance policy that pays an additional 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 insurer outlives the policy term

indexed life/ Equity indexed whole life

insurance that the cash value is dependent upon the performance of the equity index such as the S&P 500 although there is a guaranteed minimum interest rate. face amount increases annually to keep Pace with inflation without requiring evidence of insurability

term insurance premiums

level throughout the term of the policy regardless of what type of term insurance only the amount of death benefit May fluctuate

variable whole life insurance/ variable life

level, fixed premium, investment based product. VL has fixed premiums and a guaranteed minimum death benefit but policyowner Bears the investment risk in variable contracts

three basic types of term coverage available and it depends on how the face amount changes during the policy term

level, increasing, and decreasing

Limited Pay Whole Life

paying premiums for a specific number of years or up to a specific age where premiums are higher but cash value builds faster

universal life insurance/ flexible premium adjustable life

policy owner has the flexibility to increase the amount of Premium paid into the policy and two later decrease it again they may even skip it premium and the policy will not lapse as long as there sufficient cash value at the time to cover the monthly deduction for cost of insurance

variable annuity

serves as a hedge against inflation and is variable from the standpoint that the annuitants may receive different rates of return on the funds that are paid into the annuity.

joint life

single policy that is designed to insure two or more lives

ordinary whole life/ continuous premium whole life

straight life will have the lowest annual premium

survivorship Life (Second To Die or Last Survivor)

survivorship life insurance pays on the last death rather than upon the first death and used to offset the liability of the estate tax upon the death of the last insured

insurance policies two categories

temporary protection and permanent protection

term insurance policies

term insurance policies are renewable, convertible or renewable and convertible

the basic function of an annuity is?

that of liquidating a principal some, regardless of how it was accumulated

flexible premium annuities

the amount and frequency of each installment berries

face amount

the amount of benefit stated in the life insurance policy

level premium annuities

the annuitant or owner pays a fixed installment

fixed annuities level benefit payment amount

the annuitants knows exactly knows the exact amount of each payment received from the annuity during the annuity period so it doesn't adjust for inflation.

annuitization date

the time when the annuity benefit payouts begin (trigger for benefits)

interest-sensitive whole life/ current assumption life

whole life policy that provides a guaranteed death benefit to age 100 initial premium based on current assumptions about risk interest and expense

deferred

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

fixed annuity provides the following features:

1. guaranteed minimum rate of interest to be credited to the purchase payments. 2. income annuity payments that do not vary from one payment to the next. 3. the insurance company guarantees that specific specified dollar amount of each payment and the length of the period of payments as determined by the settlement option chosen by the annuitant

term life insurance /pure death protection

1. if insured dies during the term, the policy pays the death benefit to the beneficiary. 2. if the policy is canceled or expires prior to the insured's death nothing is payable at the end of the term 3. there is no cash value or other living benefits

universal life two types of premiums

1. minimum premium is the amount needed to keep the policy in force for the current year. 2. Target Premium is the 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

three main characteristics of variable

1. underlying investment the payments that the annuitant makes into the variable annuity are invested in the insurers separate account not their general account. 2. interest rate issuing insurance company does not guarantee a minimum interest rate. 3. license requirements a variable annuity is considered a security and is regulated by the Securities Exchange Commission in addition to State insurance regulations an agent selling variable annuities must hold a Securities license in addition to the life insurance is licensed agents or companies that sell variable annuities must also be properly registered with finra

equity-indexed annuities

are less risky than a variable annuity or mutual fund are less risky than a variable annuity or mutual fund but are expected to earn a higher interest rate than a fixed annuity

nonforfeiture values

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

deferred annuity

income payments begin sometime after one year from the date of purchase at some future date and can be funded with a lump sum or periodic payments

joint Life policies can be in the form of term or permanent insurance

more commonly found as joint life insurance which functions similarly to an individual whole life policy with two major exceptions: 1.the premium(lowe than 2 separate policies) is based on a joint average age that is between the ages of the insured. 2. the death benefit is paid upon the first death only

annuities

not life insurance but rather a vehicle for the accumulation of money and the liquidation of an estate and some can be sold by licensed life insurance agents

single premium immediate annuity SPIA

one that is purchased with a lump sum single payment and provides income payments start within one year from the date of purchase

single premium annuity

one-time lump-sum payment

periodic payment annuities

premiums are paid in installments over a period of time

periodic payment annuities can either be:

premiums are paid in installments over a period of time

variable universal life

producer must be licensed both Securities and life insurance in order to sell variable universal life

Term Insurance (Temporary/ Pure Life Insurance)

provides coverage for a specific period of time and the greatest amount of coverage for the lowest premium. term insurance usually has a maximum age above which coverage will not be offered

whole life insurance

provides lifetime protection (age 100) and includes a savings element for cash value

annuities I purchased for the most part to provide?

supplement retirement income, fund college education or anything that requires a steady stream of income at some point in the future.

endow

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

convertible provision

the convertible provision provides the policy owner with the right to convert the policy to a permanent insurance policy without evidence of insurability it's also based on the insured's attained age at the time of conversion

attained age

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

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

annuitants

the person who receives benefits or payments from the annuity whose life expectancy is taken into consideration and For Whom the annuity is written which must be a natural person

level premium

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

owner of an annuity

the purchaser of an annuity contract but not necessarily the one who receives the benefit. the owner of an annuity may be a corporation, trust, or other legal entity and they have all of5 the rights

annuity period, annuitization, liquidation period, or payout. period

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

variable life separate account

this separate account invests in stocks, bonds, and other Securities investment options

Joint Life Annuity

used to ensure the lives of business partners in the funding of a buy-sell agreement and other business life needs and determines what will be done with the business in the event that an owner dies or becomes disabled

accumulation units

variable premiums purchase accumulation units in the fund, which is similar to buying shares in a mutual fund and represent ownership interest in the separate account

the most common type of permanent insurance is?

whole life