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