Life Insurance 2

2 Types of Assignment:

1) Absolute 2) Collateral

Dividend Options: (DO = CRAP 5)

1) Cash 2) Reduce Premium 3) Accumulate Interest 4) Paid Up Additions 5) Dividend Option

Settlement Options made available in 2 ways:

1) Upon Death 2) while alive you use the values that have built up

Reinstatement Period

5 Years. If someone has gone past Grace Period (31 Days) Ins. Co. will Consider reinstating policy of insured.

A Contingent Beneficiary would only receive money if _____.

A Contingent Beneficiary would only receive money if the primary dies before the insured dies.

A policy loan could be based on ___ rate or ____ rate.

A policy loan could be based on FIXED rate or VARIABLE rate.

Accidental Bodily Injury is _______ Restrictive than Accidental Means.

Accidental Bodily Injury is LESS Restrictive than Accidental Means.

Beneficiaries can include:

Beneficiaries can include: individual, estate, trust, partnership, corporation, or "Class"

Dividend~ Paid Up Additions

Buys Paid Up Insurance of the same type as the policy.

Common Disaster (CD) & Short Term Survivorship (STS):

CD & STS: says Beneficiary must outlive insured by certain # of days before policy is payable. CD must be from same accident to apply. STS requires deaths to be from unrelated causes.

Aviation Clause

Can Limit or Exclude Coverage for Certain Types of Air Travel. (Not for Regular Commercial Airline)

Cash Surrender Value:

Cash Surrender Value: amount of money an insured could receive upon termination of policy prior to maturity, it is a GUARANTEED value

Cash-Surrender-Value: Adjustments: 1) 2) 3)

Cash-Surrender-Value: Adjustments: 1) Unearned Premium may be Credited 2) Unpaid Loan amount is Deducted 3) Interest from Loan is Deducted

Choosing to let Dividends Accumulate at Interest means the _____ is Tax Free and the _____ is Taxable.

Choosing to let Dividends Accumulate at Interest means the DIVIDEND is Tax Free and the INTEREST is Taxable.

Conditions for Reinstatement: 1) 2) 3)

Conditions for Reinstatement: 1) Evidence of Insurability 2) Payment of Back Premiums and Interest 3) Repayment of Loans

Second Beneficiary aka:

Contingent Beneficiary

Expense/Load Charges are:

Costs for running the company.

5th Dividend Option

Dividends Buy One Year Term Insurance Equal to Cash Value of the Policy

Endorsement Method effective:

Endorsement Method effective: When the home office types or attaches the change directly to the policy.

Excess Interest Provision

Excess Interest Provision: where the company credits additional interest over and above the min. guaranteed rate.

Extended-Term Insurance:

Extended-Term Insurance: uses value to provide TERM Ins. for as long as it will last (term ins. "purchased" is for SAME as ORIGINAL face value)

Filing/Recording Method effective:

Filing/Recording Method effective: date of signature of insured.

Primary Beneficiary aka:

First Beneficiary

Fixed Amount:

Fixed Amount: a given/fixed amount of money is paid out until no more principle remains

Fixed Period:

Fixed Period: for a fixed amount of time income will be paid. The contract states the amount of income to be paid.

Free Look Provision ___ Days from ____ Date to look over Policy.

Free Look Provision 10 Days from Policy Delivery Date to look over Policy.

Cash Value is the Sum of:

Guaranteed Cash Value + Dividends - Outstanding Loan - Loan Interest - Surrender Charges

In Collateral Assignment, the Insurer is ___ Responsible for the _____ of an assignment.

In Collateral Assignment, the Insurer is NOT Responsible for the VALIDITY of an assignment.

Incontestable Clause has ___ ___ Limit. EXCEPT FOR:

Incontestable Clause has TWO YEAR Limit. EXCEPT FOR Gross Fraud or Impersonation

Interest Only settlement option has a lot of _____.

Interest Only settlement option has a lot of FLEXIBILITY.

Interest Only:

Interest Only: Proceeds are retained by ins. co. and the Interest is Paid Out, the Principle is not spent usually.

Joint & Survivor:

Joint & Survivor: Income is paid throughout lives of 2 or more beneficiaries.

Life Grace Period

Life Grace Period: (28 or 31 Days). Grace Period to Pay Premium

Life Income with "PERIOD CERTAIN" clause:

Life Income with "PERIOD CERTAIN" clause: Life Income that is Guaranteed for certain time period even upon death the income would continue to a beneficiary.

Life Income:

Life Income: income for the life of the beneficiary.

War Clause

Limits the Coverage Provided to person in Military during Time of War.

Expense (in Premium Calculations) aka:

Load

Load is another term for ____.

Load is another term for EXPENSE.

Misstatement of Age Clause has ____ ____ Limit.

Misstatement of Age Clause has NO TIME Limit.

Most policies are set up with Revocable/Irrevocable Beneficiaries

Most policies are set up with Revocable Beneficiaries

Option Applicable IF No Election Made

Normally if an insured does not choose an option after a certain period of time, the company will choose one for them. Generally the option will be for EXTENDED TERM.

PURE Life Income:

PURE Life Income: the Highest income payment Possible but no Refund Available upon death. Most choose "Period Certain" over "Pure" Life.

Paid-Up Insurance:

Paid Up Insurance: uses value to provide the largest possible policy that would be "paid up" with "no further payments required", this would be the same plan but with REDUCED coverage, provides coverage FOR LIFE

Paid Upon Death: Add the following: a) b) c) d) then subtract A) B) C)

Paid Upon Death: Add the following: a) Face Amount b) Dividends c) Unearned Premium d) Interest from 30th Day after Proof of Loss THEN subtract A) Outstanding Loan B) Loan Interest C) Unpaid Premium

Paid-Up Ins. provides ____ _____ of Protection.

Paid-Up Ins. provides LONGEST Period of Protection. (of NonForfeiture Values)

Collateral Assignment

Policy is Assigned to a Bank to cover a Loan.

Absolute Assignment

Policy is Totally Transferred from one person to another.

Premium Calculations =

Premium Calculations = Interest, Mortality, Expense (Expense aka Load)

First Beneficiary aka:

Primary Beneficiary

Change of Contract:

Provision that allows the insured to make certain changes to the policy.

Revocable vs. Irrevocable:

REVOCABLE: insured can change the beneficiary if desired without knowledge to beneficiary. IRREVOCABLE: beneficiary must sign before ANY significant changes to policy are made (change in beneficiaries, policy, borrowing, dividends, etc)

Automatic Premium Loan Clause

Says that a few days after the GRACE Period that the Ins. Co. will Automatically take/borrow the money from the policy to pay the Premium. This way the Insurance stays in Force.

Contingent Beneficiary aka:

Second Beneficiary

Settlement Option: "agreement..."

Settlement Option: an agreement between the policy owner and ins. company as to how values will be taken.

Settlement Options (JIFFL)

Settlement Options JIFFL: Joint & Survivor, Interest Only, Fixed Amount, Fixed Period, Life Income

Settlement Options are elected by either the ____ or the ____ IF ______.

Settlement Options are elected by either the OWNER or the BENEFICIARY IF THE OWNER LEAVES IT UP TO THEM.

Accidental Death Benefit:

States Policy will Pay Additional amount if someone dies by accident.

Misstatement of Age Clause:

States that any mistake with age/sex will make the policy subject to adjustment. It will be adjusted to what the premium would have purchased had the insured given the correct info. (NO TIME LIMIT)

Entire Contract Clause

States the Policy & Application Forms the ENTIRE Contract. No Outside Docs are part of the Contract and the Ins. Co. Can't change anything after Policy is issued.

Insuring Clause

States the Promise to Pay and Defines the Scope. "OVERALL" Description of the policy.

Suicide Clause says if the insured commits Suicide in 1st 2 years of policy that the Ins. Co. ONLY Obligation is to _______.

Suicide Clause says if the insured commits Suicide in 1st 2 years of policy that the Ins. Co. ONLY Obligation is to RETURN PREMIUMS TO BENEFICIARY.

Uniform Simultaneous Death Act, Common Disaster Clause, & Short Term Survivorship Clause ALL Protect the Rights of the _____.

Uniform Simultaneous Death Act, Common Disaster Clause, & Short Term Survivorship Clause ALL Protect the Rights of the CONTINGENT.

Uniform Simultaneous Death Act:

Uniform Simultaneous Death Act: If it cant be determined it's assumed that Beneficiary PRE-deceased the Insured. The the contingent/estate gets proceeds of policy.

With Interest Only Options, most ins. co. guarantee ____ , but normally ____.

With Interest Only Options, most ins. co. guarantee SMALL INTEREST RATE , but normally HIGHER "CURRENT" RATE.

You can borrow against your policy ____ number of times.

You can borrow against your policy UNLIMITED number of times.

Waiver of Premium:

a Feature that says if the insured is Permanently and Totally Disabled, then Premiums are waived for as long as the person remains in that condition. The Premiums would NOT have to be paid back if the Insured returns to work later.

Guaranteed Insurability:

a Rider that allows the Insured to buy additional insurance without evidence of insurability at certain specified ages. The rate will be based on current/attained age, and not on age at original policy.

Cost of Living Adjustment

a Rider that automatically buys Term Ins. as Cost of Living (Inflation) goes up

"Class" Beneficiary (example)

children