Insurance Notes

Variable contract

A contract that must be on file with the Commissioner before it may be issued, unless the insurer is affiliated with an admitted life insurance company that has issued variable contracts for at least 3 years

Surrender charge

A fee imposed when a deferred annuity is surrendered prematurely

Waiver of premium rider

A rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled

Types of assignments

Absolute assigns the entire policy, while collateral assigns a part or all of the benefits

Fiduciary responsibility

An agent's fiduciary responsibility includes handling insurer funds in a trust capacity

Deferred annuity

An annuity that provides income payments at a future date

Insurer's financial status evaluation

An evaluation of an insurer's financial status often used by state departments of insurance, conducted by AM Best

Insurer's acquisition of information

Before obtaining information from investigators regarding an applicant, the insurer must present the insured with a Disclosure Authorization Notice

Contracts of adhesion

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis

Continuing education requirement

During the initial licensing period of 36 months, producers must complete a minimum of 60 hours of instruction, including 3 hours in ethics

Life insurance for installment loan

For a 5-year installment loan, a decreasing term life insurance policy would be best suited

Risk retention

Retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance

Insurance amount in a credit life policy

The creditor can only insure the debtor for the amount owed in a credit life policy

Life insurance death proceeds

The death benefits of a life insurance policy are generally not taxed as income

Cash payment settlement option

The option to receive the life insurance proceeds in cash, also known as a lump sum

Naming multiple beneficiaries

The policyowner can specify the way proceeds are split between beneficiaries in the policy

Insurance rate regulation

The purpose of rate regulation is to ensure that rates are not excessive, or unfairly discriminatory, and to promote the public welfare

Surrender charge determination

The surrender charge is generally a percentage that reduces over time until it ends

Complete distribution of an IRA

When a beneficiary is not named, the IRA must be completely distributed on or before December 31 of the year that contains the fifth anniversary of the owner's death

Proof of insurability

When converting to permanent insurance, the daughter of a couple with a Children's Term rider will need to provide proof of insurability

Default on loan from cash value policy

In most policies, failure to pay back a loan will result in termination of the policy if the total amount of the loan and accrued interest equals the cash value

Life insurance as an Executive Bonus

It is considered a nonqualified employee benefit, and the employer pays a bonus to a selected employee to fund the policy

Employer's selection in group life insurance

The employer may select the premium payor, the type of insurance, and the amount of insurance in a group life insurance policy

Qualified and nonqualified retirement plans

The taxation of withdrawals, taxation of contributions, and IRS approval requirements differ between qualified and nonqualified retirement plans

Nonforfeiture option

A provision in a life insurance policy that provides coverage for a certain period of time, with the reduced paid-up option providing coverage for the longest period