Life, Accident and Health Insurance

owners rights

*assign or transfer the policy *receive cash value *borrow up to cash value *select or change the beneficiary *select premium mode (Annually cheapest) *if transferred so are all rights

delivering the policy

*coverage begins = on average risk the coverage is effective the date of the conditional receipt (application date). if the applicant has not paid or is a substandard risk the coverage would not be effective until the agent collects the necessary premium and gets the applicant to accept any restrictions places on the policy. also health status of applicant must be the same as it was on the application date. *when policy is mailed it is considered delivered *free look begins when the client receives the policy

contributory group plan

*employer and employee both pay premiums *insurer requires 75% of employees to sign up or there is not group. this helps protect the insurer against adverse selection *needs to prove insurability

Annuities

*guarantees a lifetime income to the recipient (annuitant). *check every month for life (stops the fear of running out of money) * is not life insurance * designed to liquidate a sum of money annuity period

Elements of a contract

*legal capacity must not be under duress, intoxicated or a minor to sign a contract *offer and the acceptance equals an agreement. when we send in the premium with the application that is an offer. when the insurer accepts the offer that is an agreement *consideration is the payment of the premium which validates the contract *legal purpose means the contract cannot be against the law. if it was its not enforceable

non tax qualified

*not approved by IRS *must be written down and communicated to participants *employer gets not tax deduction * may discriminate *not illegal *deferred compensation

social security

*old age survivors and disability insurance passed by congress in 1935 provides : 1. retimrement to workers and family 2. survivor 3. disability 4. medicare (65 and older) *40 quarters or 10 years to qualify

level or flexible

*same premium payment= level *different premium payments= flexible

rating factors

1. mortality 2. interest 3. expenses

completion of application

1. required signatures = all must sign: policy owner, insured or applicant, agent *the beneficiary is not required to sign (all dults must sign themselves including an adult child. the parent can sign for minor child.)

risk classification

1. standard risk = average risk 2. substandard = below average *must either pay more premium or get less coverage 3. preferred risk = better than average get best rate

changes in the application

2. it may be necessary that the insurer modify or amend a policy because the applicant is not a standard risk. sometimes a waiver may be added by insurer. this would say that the insured is not covered for a dangerous hobby

consequences of incomplete applications

3. this could delay the policy from being issued. the agent has great responsibility to applicant to complete application correctly and completely. the agent can be held liable for any errors and serious action could result. the company might have to pay a claim because of its agent *if an insurer issues the policy with blanks not filled in. the company is liable for claims

Grace Period

30 or 31 days *protects insured against the unintended lapse of insurance allows the insured additional time after its due date to get the premium paid before the insurance will lapse. *insurer must pay all claims that fall in this period *grace period begins the day the premium is due

do not call list

31 days to quit calling after notified *in charge is the federal trade commission

retirement plans (tax qualified)

401 K, is approved by the IRS *cannot discriminate *must be written and communicated to participants *employer gets tax deduction *income from plan is taxable when received by employee

Ordinary Whole Life

Also known as, Permanent, W.L, Continuous Pay, Ordinary, Straight, and Traditional. Coverage is for the whole of life or to age 100. the owner of the policy receives the cash value of the policy when the insured reaches age 100. 1. Guaranteed beginning 3rd year 2. Living benefit (cash value) belongs to owner 3. Loan = owner can borrow up to cash value and it becomes an indebtedness against the policy *face amount less loan and interest = amount paid to beneficiary

Variable Universal Life

Combination of both variable and universal life. * the insured directs the insurance company exactly where to invest their premiums * totally dependent on the performance of the insured's chosen investments * should have a lot of investing experience

Immediate and Deferred Annuity

Could not find****

Fixed and Variable Annuity

Fixed: guarantees the principal, interest, and amount of the payment Variable: up and down with stock market. Hedge against inflation. Not fully guaranteed.

disclosures at point of sale

HIPPA and HIV consent

Variable Life

Insurance company invests premium in stock market. *hedge against inflation *need series 6 or 7 to sell A) Scheduled Premium Variable Life: the amount being paid and the dates of payment are known. 1. minimum death payment guaranteed 2. can borrow up to 75% of cash value. Cash value not guaranteed because it is in stock market B) Flexible Premium Variable Life: the amount of premium to be paid and payment date are both unknown. Because of this flexibility we have: no guaranteed cash values/death benefit and owner cannot borrow on this policy

Limited-pay and single-premium life

Limited-pay: premium is paid up before age 100 *premium is higher vs. continuous pay * cash value is higher vs. continuous pay Single-pay: premium is paid up in one payment. The policy still pays off at age 100

primary and contingent beneficiary

Primary: persons to receive life insurance at the insureds death Contingent: receives money only if the primary is dead when insured is dead

Indexed Life

Put premiums into S&P 500

Single and Flexible Premium

Single: one lump sum payment, person might convert their life insurance proceeds from the death of a spouse and fund the annuity in one payment Flexible: payment frequency and amount flexible

insurable interest

a legitimate reason to buy life on someone (spouse, next of kin, parent) *need this at time of purchase

incontestability

after 2 years the company agrees not to contest concealment, misstatements, or fraud. *all life claims are paid after 2 years *before important errors void the contract and refund premium

suicide

all claims paid after 2 years *premiums refunded before that time

warranties and representations

all statements made on the application are considered representations unless there is fraud. then they would be warranties and contract voided *warranty = statement of truth or fact, guaranteed to be true *representation = statement on the application true and accurate to your best knowledge

guaranteed insurability

allows the insured to add additional life insurance between the ages of 25 and 40 every three years without having to prove insurability (no physical). The insured can also add coverage when they get married or have children. *excellent rider to add to a child's policy at age 10. provide coverage even if it became uninsurable

Adjustable Life

allows the insured to adjust the: premium, face amount, and term (length of protection) *based on money purchase concept: the insured has only so much money they can spend on life insurance. They would tell the trusted agent to take care of them and spend their annual premium based on their circumstances and needs

misstatement of age and gender

allows the insurer to ignore the incontestable provision and change the policy to the right age/gender when paying a claim. this can result in a higher/lower claim payment. if the error was discovered on the death certificate, insurer would change the face amount to pay 105,000 instead of 100,000.

Convertible

allows the owner to convert or change their temporary or term coverage to whole life or permanent protection

term riders

allows you to add family members. *term policy must be attached to permanent policy (not term) * permanent policy's term must be equal or greater than the terms paying period

modes

annual, semi, quarterly, and bank draft

automatic premium loan

any time the policy owner fails to pay the premium on time, to keep the policy from unintended lapse, money is automatically borrowed from cash value and the premium paid

reserves

are an accounting measurement of an insurer liabilities to its policyholders

split dollar life

attractive way for a key person to buy life insurance because the employer pays part of the premium. employee pays most of premium in the earlier years then increases to employer

Free Look

begins at policy delivery. 100% of your money back when you return policy within: 10 days of delivery of your policy *no interest paid on money back

conditional

both parties must do something to make the contract legally enforceable. you must file a legitimate claim

business disability buyout

buy out partner who is permanently disabled and could no longer contribute. would go to business tax free

revocable and irrevocable

can be changed by owner of policy. Most policies are revocable. Cannot be changed when it is irrevocable unless you have beneficiaries permission

adhesion

deals with wording in the contract. cannot be unclear. insured cannot change any of the wording. sometimes they call it a take it or leave it contract of adhesion

Annually Renewable

expires each year, but is renewable for another year. the premium increases each year. You do not have to prove insurability

premium payment

frequency of payment

mode of payment

frequency of payment *when you reduce number of payments on your insurance, the total annual premium would be less *add a small service charge when making multiple payments

Reinstatement

getting back into force a policy that has lapsed for nonpayment. we can go back at least 3 years *a reinstatement application is usually required and all back premium must be paid plus interest and loans (do not have to pay back loan). unless the insured can prove their insurability, the insurer will not take them back

basic medical insurance

hospital, medical, and surgical provided in one policy or each coverage can be bought seperatly 1. hospital = limited benefits provided for daily hospital charges paid at flat rate per day pays first dollaw coverage = no deductible limited bumber of days paid per confinement (30 60 or 90 days) *miscellaneous hospital expense provided with basic hospital 2. medical = pays dr. fee while hospitalized physician visits in hospital are usually included, limited to flat dollar amount per day 3. surgical = provides benefits for a surgeon in or out of the hospital. the benefitspayable are shown as a flat amount for each operation(more serious, more amount paid) all surgery paid while listed in the policy or not *emergency room costs from an accident (300 to 500 *limited benefits for mental or emotional disorders and hospice *optional would be maternity, home health care, and outpatient care

dividend and dividend options

if the policy pays a dividend the owner has 7 dividend options 1. cash to policy owner 2. application to reduce premium= reduces premium by dividend amount 3. accumulation at interest= dividends left to accumulate and interest paid on this money (dividends) 4. paid up additions= buys additional insurance with dividends 5. accelerated endowment= dividends accumulate along with cash value of policy until they equal face amount and can be paid as an endowment 6. paid up option= allows the policy to be paid up early 7. one year term option= allows the dividends to be used to purchase term up to the cash value which was borrowed on the policy. this would offset any loans and make the policy pay the face amount if the insured died

other insureds

in addition to adding family members (spouse, son/daughter, or non related person)

tax treatment of individual, group

individual = proceeds left to an individual/corp free from federal tax, all interest is taxable, dividends are not taxable on life insurance because it is considered a return of premium group life = maximum amount employer can give of group life is 50000 before benefits are taxable

collecting initial premium and issuing conditional receipt

initial premium must be received or the coverage will not pay conditional receipt = says that the coverage is effective the date *date of this application if the applicant is a standard risk. however if the applicant is not a standard risk, then the policy is null and void

Settlement options

insured dies or lives to age 100 1. cash = check to the beneficiary or the owner collects because the insured lives to be 100 2. interest only = interest earned on the proceeds paid to beneficiary (leaves most money) 3. fixed period installments = specified period of months or years set up 4. fixed amount installments = fixed amount paid until money is all paid 5. life income = pays income as long as you live (no benefits after death *life income only would pay a higher income to insured because the insurer would not have to set aside money to the cover the period certain 6. joint and survivor = two beneficiaries receive proceeds. when first dies, the second continues to receive proceeds for life

Renewable

insured has the right to renew the policy at the end of therm without proving insurability *Renewal limited an age 95 and if insured lives past that age there is no insurance. (premium and face amount stays same for its term, premium increases at renewal based on current age)

accidental death or dismemberment

insured is killed in an accident. the policy pays off double indemnity. this means that the death benefit and rider both pay. sometimes it will even pay triple. *double indemnity requires death to be an accident as defined by the policy, not by natural causes *principal sum= refers to the death *capital= dismemberment

aleatory

insurers obligation to pay is based on a contingency. if you do not suffer a loss then you dont get the money

accelerated death benefits

is a benefit that can be attached to a life insurance policy that enables the policy holder to receive cash advances against the death benefit in the case of being diagnosed with a terminal illness.

Return of Premium

is a rider that at death pays an additional amount of money equal to all premiums paid up to your time of death

policy loans, withdrawals, partial surrenders

make withdrawal as long as you don't receive more than you put in, no tax *insurer can defer loan request up to 6 months. give insurer time to raise the money if everyone wanted their cash value because they feared company was going under (insolvent)

unilateral

means one sided. the insurer must perform in the contract while the insured just pays the premium. we have the act of paying in the premiums in exchange for the promises in the contract

medical information and consumer reports

medical information bureau = MIB, nonprofit trade assoc. collects medical data for life and health companies. underwriters use this important data as part of their decision making *if denied based on this, must give an explanation

key employee policies

money come to company and supply temp

Universal Life

most all of the premium is invested in a cash value account (money market, CD's) earning competitive current interest rates; and the rest of the premium buys term for the face amount needed. *sold to client concerned about the low rate of return on whole life. Anyone who is interest sensitive

replacement

new life insurance replaces existing coverage

minor beneficiaries

not competent legally to receive life proceeds. company can insist that a trustee be appointed to receive/manage proceeds for the children *want to spell out clearly who are the beneficiary's with social security

policy exclusions

not covered by life policies *suicide before 2 years *act of war or military service *aviation caused death unless you are a fare paying passenger *dangerous hobby (auto racing, motorcycle racing, sky diving, scuba, diving, would not cover death by an of these hobbies)

Explaining the policy and its stuff

one of the advantages of you personally delivering the policy is so that you can explain the benefits and how that fits in with the clients insurance needs. at this time it is good to show the exclusions so that the policies owner will have a clear knowledge of what is and isn't covered

Non-forfeiture options

owner has 3 options when the policy is turned in early 1. cash (surrender value)= check for cash value issued to owner 2. extended term insurance= same face amount as original policy but is it changed to term insurance (it is paid up - no more payments 3. paid up insurance= whole life with reduced face amount paid up

consideration

owner of policy must pay premium (something of value=consideration) in exchange for the benefits

business overhead

pays business overhead will not pay owner salary

credit life

pays off the balance of a loan at the death of the insured. mortgage insurance is a good example when the insured dies the house mortgage is paid off

individual disability income policy

periodic income to insured who is toally disbled from accident or illness benefits paid weeklu but at least monthly allows insured to receive 66 and two thirds % up to 70% makes them want to work again

Entire Contract

policy, application and any riders or endorsements. *any changes must be made by and officer of the company. they are to be in writing and agreed to by both parties *agent cannot make changes in the policy

Interest Sensitive Whole Life

premium and cash value amounts may change based on insurer's experience. You have minimum guaranteed rate of return and minimum cash values *excess premiums can lower premium and raise cash value

accidental death and dismemberment

principal and capital sum loss of one limb or one eye would pay 50% of the maximum payment required death to be from accident as defined by policy, not natural causes

Indexed Annuity

provide higher interest while protecting principal ( cannot lose). Safe money place (S&P 500 Index)

group disability income

provides periodic income to the insured while they are disabled from a covered accident or illness if employer pays premium then beneifts are taxable as income

payor benefit

provision waives the child's premium when a parent becomes disabled or deceased. the parent would be the owner and the child the insured (juvenile policy). *jumping juvenile life policy: face (1000) amount jumps 5 times (5000) at age 21. premium stays the same

keogh plan

retirement plan for self employed and IRAs *lets those under 70 and half deduct payments into this account reducing their taxable income up to a maximum of 5500 for an individual and 11000 for a couple

fair credit reporting act

sets up procedures for consumer reporting companies to follow in their dealings with businesses protects the consumer from unauthorized people getting at the conumers information

industrial life

sold to factory workers in face amounts of 1000 or less (students 2000)

Common Disaster (beneficiaries)

states that if primary does not live 30, 60, 90 days after insured dies then the life insurance are given to contingent beneficiary

business insurance (key employee)

taken out by company on a key person to compensate the company for lost profits that would occur if still there

buy sell life insurance

taken out on each partner so that when a partner dies the life insurance buys out spouse/family

insuring clause

the company's promise to pay the contracts benefits to the owner at maturity (age 100 or agreed upon date--age 65) or the beneficiary at the death of the insured (usually a death certificate is required)

noncontributory

the employer pays 100% of premium *insurer requires 100% participation

Level Term

the face amount and the premium stay the same for the policy period or term

Decreasing Term

the face amount decreases for the life of the policy down to zero at the end of the term or expiration date of the contract. The premium remains the same each year.

Increasing Term

the face amount increases for the life of the policy. it starts at zero so you will not see this sold very often

third party ownership

the insured is not the owner. the company may take out a life policy on an important manager. the insured would be that manager *corp would be both owner and beneficiary of the policy

changes with beneficiary

the owner can change the name of the beneficiary two ways *filing method= owner sends a letter with the new beneficiaries name *endorsement method= the policy is sent back to the insurer with a letter from the owner with the new beneficiaries name; and the change is made on the policy by an officer of the insurance company and sent back

conversion privelage

the right to convert the group term life policy upon termination of employment within 31 days

investigative consumer report

this provides financial and moral information about the applicant. may even interview friends or co workers *if denied based on this must be given name and address of the reporting company

Survivorship Life (second to die)

tow or more insureds, the policy pays off after the last insureds dies. sold to a couple who wanted to leave the money to their children (pay off estate tax).

assignments

transfer of the owners rights in a policy to another *absolute= giving away ownership of policy *collateral= temporary giving up only those rights necessary to scure a loan. *assignee= the bank or institution who gives the owner the loan. the assignee is not the owner and cannot borrow or have any of the owners rights. when the loan is paid off, the owner has all their rights returned

Joint Life (Combo Plan)

two or more insureds the policy pays off at the death of the 1st insured. Sold to man and his wife. The policy pays off to the survivor after one of them dies

Underwriting job

use all information gathered from amny sources to accept or reject the applicant for insurance. *sources = application, credit report, MIB, agents report, the applicants physical and medical history * purpose = protect insurer from adverse selection (poor risks)

Waiver of Premium

when the insured has been totally disabled from a covered accident or illness for 90 days. The insurer waives the premium *with disability income: guarantees regular monthly income while totally or permanently disabled

beneficiary designations

who the owner of the policy wants to receive their life proceeds