Louisiana Life and Health

divisible surplus

if fewer insureds have died than was estimated the company can return to policyowners a part of the premiums paid for participating policies.

NAIC Model Regulations

in an effort to promote state by state uniformity of insurance industry regulation, most states have adopted standard regulations.

Hazardous Occupation or Hobbies Exclusion

individuals who have hazardous occupations or engage in hazardous hobbies may find that their life insurance policies will not pay if death was a result of their occupation or hobbie. However sometimes these risks can be covered with an increase in premium charged.

Jumping Juvenile Insurance (Estate Builder)

insurance bought to protect a childs insurability. (Junior estate builder)

Requirments to reinstate a lapsed policy

All back premiums must be paid. Interest on past due premiums may be required to pay. Any outstanding loans on the lapsed policy may be required to be payed. Policy owner will typically be asked to prove insurability.

Fixed/Level Premium funding

Averages the single premium over the policy period. Policyowner pays more in the early years , which allows premiums to stay level throughout the life of the policy.

Exemption of proceeds from creditors

Beneficiaries and assignees are entitled to the proceeds upon the death of the insured and succeed the claims of the insured's creditors.

Dividend Options

Cash dividend option , accumulated at interest option, and paid-up additions option , reduced premium dividend option, one-year term dividend option.

Variable Universal Whole Life

Combines some characteristics of variablke whole life and universal life insurance. offers the holder with a combination of investment options with a flexible premium payment. Also possesses a guaranteed minimum coverage amount. It is an insurance and investment product with a flexible or variable premium.

Consideration Clause

Consideration is the value given in exchange for a contractual promise. clause states that the policyowners consideration consists of completing the application and paying the initial premium.

Paying Premiums from policy values

Depending on the type of policy, a policyowner may be able to use the policy's cash value and dividends to pay premium.

Assignment Provision

Giving away a policy. The provision sets fourth the procedure necessary for the transfer of ownership. Insured does not need insurers permission.

Hobbies effect on premium

High risk hobbies also increase the risk of loss.

Cash Surrender Option Characteristics

Insurers are required to make cash surrender values available for ordinary whole life insurance after the first three policy years. Some policies require a penalty to be paid if a policy is surrendered in its early years. These surrender charges, AKA rear-end load are deducted from the policy when the policy is discontinued. A partial surrender can allow the owner to withdraw the policies cash value interest free.

Variable Life Continued

By placing their policy values into seperate accounts, policyowners can participate directly in the account's investment performance, which will earn variable return.

3 Nonforfieture options

Cash Surrender option, Reduced paid up option, Extended term option.

Interest Factor

Insurance companies invest the premiums they recieve in an effort to earn interest. this interest is one of the ways an insurance company can lower the premium rates.

Variable Whole Life

Premium payments are fixed. Part of premium is placed into a separate account, which is invested in stock bond, or money market fund. Guaranteed death benefit, but cash values vary according to market. do not guarantee contract cash values and the holder assumes the risk.

Premium Collection and Reserves

Producers generally collect the intial premium from the applicant at the time of the application. All future premiums are billed to the insured by the insurer and are remitted by the insured to the company

Age effect on premium

The older the person , the higher the probability of death and disability.

Habits effect on premium

Tobacco use presents a higher risk than non-smokers.

Absolute Assignment

Transfer is complete and irrevocable and the assignee recieves full control over the policy and full rights to its benefits.

Stranger Owned Life Insurance (STOLI)

a person purchases life insurance only to sell to a third party with no insurable interest, who would therefore be unable to legally purchase the original policy. A way to circumvent the insurable interest requirment when purchasing a life insurance policy. To legally purchase insurance on someone else the purchaser must have an insurable interest in that persons life.

Net Single Premium

a premium that makes provision for mortality (death benefit) losses only, while being influenced by the interest rate assumed, gender, benefit to be provided and the morality rate.

Policy Dividends as non taxable income

a return of the premiums paid and are not taxable income.

Owner's Rights Provision

defines the person who may name and change beneficiaries, select options available under the policy, and recieve any financial benefits from the policy.

Accelerated Benefits Provision

in case of terminal illness. accelerated payments can be made in a lump sum or over a special period. This provision is given without an increazse in premium.

Beneficiaury designation provision

policyowner indicates who is to recieve the proceeds.

Policy Loan Provision

policyowners may borrow money from the cash values of their policies. If not repaid by the time the insured dies, the loan balance and any interest incured are deducted from the policy proceeds at the time of the claim. Policy loan + interest exceeds cash value the policy will no longer be in force.

Payor provision or rider

providing for waiver of premiums if the adult premier payor should die or, with some policies, become totally disabled.

Premium mode continued

the higher the frequencey of payments, the more the policy will cost the insured in total.

Health effect on premium

Poor health increases probability of death and disability.

Rights of ownership

The right to designate and change the beneficiary of the policy. to select how the death proceeds will be paid to the beneficiary. to cancel the policy and select the non-forfeiture option. assign ownership of the policy to someone else.

Reinstatement Provision

With reinstatement a policy is restored to its original status and its values are brought up to date.

Mortality Factor or mortality rate

a measure of the number of deaths (in general or due to a specific clause) in a given usually expressed as death per thousand. Insurance companies use mortality tables to help predict the life expectancey and probability of death for a certain group.

Minimum Deposit

a method of financing life insurance and not an actual type of policy. Best suited for individuals in high marginal tax brackets. Allows the holder to use policy loans to pay premiums due each year.

Minimum deposit financing

a method of financing life insurance best suited for individuals in high marginal tax brackets. Allows policyowner to use policy loans to pay premiums due each year.

Cost of living rider

ability to guard against the eroding effects of inflation. a cost of living adjustment or COLA rider can provide increases in the amount of insurance protection without regarding the insutred to provide evidence of insurability. The amount of increase is tied to an increase in an inflation index, most commonly the consumer price index.

Policy Rider

added options to the policy that meet unique needs. available at an extra cost that us justified due to increased value.

Options and Riders Effect on premium

adding options and riders will increase premium amounts.

Reduced Premium Dividend Option

allows a policyowner to use the dividend to pay all or part of the nect premium due on the policy. Sometimes called the reduction of premium dividend option.

Flexible Premium Funding

allows the policyowner to adjust the premiums throughout the life of the contract.

Suicide Exclusion

almost all policies exclude payment of the benefit if the insured commits suicide during the specific time period. After that period passed death by suicide is covered.

Expense Factor

also known as the loading charge is derived from operating expenses, or funds the insurer pays out these expenses include but are not limited to: death benefits paid, commisions or salaries to producers and other employees, and other administrative costs. Each state sets a minimum reserve or funds the insurer must set aside to pay future claims.

Waver of premium rider continued

an insured generally must be seriously disabled for a certain length of time, called the waiting period ( usually 90 days or six months. Insured must meet the policy definition of totally disabled.

Investor-Owned Life Insurance (IOLI)

an investor pays a person to take out a considerable life insurance policy for that person. the investor pays the persons premiums in exchange for the persons life insurance benefits. IOLI is always initiated by an investor.

Accumulation at interest option

another option is to leave the dividends with the company to accumulate with interest, available for withdrawal at anytime. Note that while policy dividends are not taxable , any interest paid on them is taxable income in the year the interest is credited to the policy, wether or not it is actually recieved by the policyowner.

Long-Term care ride

can helo safeguard against the financial burden of long-term care. this rider provides acceleration of the death benefit to help pay for costs involved with long-term care. have to require assistance for 3 Activities of Daily living ADL to be eligable to recieve benefits

Waiver of Premium Rider

can prevent a policy from lapsing for nonpayment of premiums while the insured is disabled or unablw to work. Available on both permanent and term insurance policies.

AD&D Accidental Death and Dismemberment

can provide financial benefits if an insured is killed, loses a limb, suffers blindness, or is paralyzed in a covered accident.

Modified Premium Funding

characterized by an initial premium that is lower than it should be during during an introductory period of time. after this time the premium will increase to an amount greater than what the initial level premium would have been , and then remains constant throughout the life of the policy.

Aviation Exclusion

few policies issued today exclude death as a result of commercial aviation , however some insurers will exclude aviation deaths for other than farepaying passengers.

Discretionary Provision

gives discretionary authority to the insurer when determining the eligability of an insured for benefits under the policy. Designed to protect the insurance company.

Occupation effect on premium

hazardous job increases the risk of loss.

Automatic Premium Loan Rider

is a standard feature in some life insurance policies. its provisions are added to the policy by rider. available to the policyowner at no additional charge. it allows the insured to pay premiums if they are not paid at the end of the grace period. deductions from cash values treated as loans and are charged interest

Juvenille Insurance

is any type of ordinary life insuirance policy that insures the life of a minor. they do not require the minors consent. Applicant considered a juvenille if they are under age 15 or 16 depending on state law.

Premium Mode effect on premium

mode utilized by policyowner allows the insurer to assess an extra charge if premiums are paid quarterly, semiannualy or monthly, additional modes make it more convenient for policy owners to pay premiums.

A whole life with dividend options

must include a statement that dividends are not guaranteed.

Waiver of Monthly Deductions

pays monthly deductions whiule your disabled. 6 month waiting period. this rider wont pay the full premium or will it add to the cash value.

Insuring Clause

sets fourth the company's basic promise to pay benefits upon the insured's death. Generally this clause is not actually titled as such, but appears on the cover of the policy.

Commision of a felony exclusion

some contracts exclude death when it results from the insured commiting a felony.

Incontestable clause

specifies that after a certain period of time has elapsed (usually two years from the issue date ) the insurer no longer has the right to contest the validity of the life insurance policy so long as the contract continues in force. Allows an insurer to contect a claim during the contestable period.

Reduced paid-Up option

take a paid-up policy for a reduced face amount of insurance. by doing this the policyowner does not pay anymore premiums but still retains some amount of life insurance. In essance the cash value is used as the premium for a single-premiem whole life policy at a lesser face amount than the original policy. the paid up policy is the same kind as the original but for lesser coverage riders and accidental death benefits from original policy are excluded.

Entire Contract Provision

the policy document, the application(which is attatched to the policy), and any attatched riders constitute the entire contract.

Settlement Options Provision

the ways in which the proceeds can be paid out or "settled" are explained. Beneficiaries and settlement options are discussed later.

Guaranteed Insurability options rider

this rider allows a policyowner to purchase additional life insurance coverage at specific dates without providing evidence of insurability . costs for new coverages purchased under this rider are determined on the basis of the insured's attained age. this rider also allows the policyowner to purchase additional coverage at marriage or the birth of a child.

One year term divided option

use dividends to purchase as much one-year term insurance as possible.

Extended Term Option

use the policy's cash value to purchase a level term insurance policy in an amount equal to the original policy's face value, for as long a period as the cash value wil purchase. When level term insurance expires there is no more protection. all riders and supliments on original policy are dropped.

Types of exclusions

war, aviation, hazardous occupations or hobbies, commision of a felony, suicide,

Cash Dividend Option

when dividends become payable they usually are paid on policy anniversary dates. Policyowners who collect to take their dividends in cash automatically recieve their dividend check after the company approves the dividend.

Sex/gender effect on premium

women tend to live longer than men, so their premiums are usually lower.

Non forfieture Option

you are allowed to stop paying premiums and not forfeit any of the equity in the policy.

Mistatement of age or sec provision

the company reserves the right to make an adjustment if the age of the insured is mistated.

Benefits effect on premium

Higher the death benefit amount the more a policy will cost. Additionaly living benefits will also increase the cost of the policy.

Excess Interest Provision

If a beneficiary decides to leave life insurance proceeds with an insurer following the death of the insured, the insurance company must pay interest on the proceeds. The interest credited to or paid to the neneficiary is taxable as ordinary income.

Grace Period Provision

If an insured dies during the grace perios and the premium has not been paid, the policy benefit is payable. However, the premium amount due is deducted from the death benefits paid to the beneficiary.

3 situations when incontestable clause does not apply

Impersonation- when applicatipon for insurance is made by one person but another person signs the application or takes the medical exam, the insurer can contest the policy and its claim. No insurable interest- if no insurable interest existed between the applicant and the insured at the inception of the policy, the contract is not valid to begin with. Insurer can contest the policy. Intent to murder- applicant applied for the policy with the intent of murdering the insured for the proceeds.

Modification Provision

any changes made to the contract must be in wrighting and endorsed or attatched to the policy. only an officer of the insurer or authorized home office personnel possess the authoprity to make any changes or modifications,m or waive a policy provision.

Automatic Premium Loan Provision

authorizes the insurer to withdraw from the policies cash value the amount of the overdue premium if the premium has not been paid by the end of the grace period. Policy does not lapse and coverage continues.

Variable life considered security contract as well as insurance contract

fall under the regulatory arm of state offices of insurance regulation and the SEC (Security and exchange commision). To sell variable life insurance products, an individual must hold a life insurance liscense and a financial industry regulatory authority (FINRA) regestered representative liscense.

Proof of Death

benefitas are paid when the insured has died, and the beneficiary must file a claim with the insurance company submitting a certified copy of the death certificate.

Graded Premium Funding

contract characterized like modified by a lower premium in the early years of the contract. However premiums increase annually or every year for the initial period. It then jumps to an amount higher than what the initial premium level would have been, and then remains constant throughout the life of the policy.

Other Insureds provision

dependent riders may be added to a primary policy to cover a spouse or another insured, children or adopted children.

Paid up additions option

dividends can also be used to purchase paid-up additions of life insurance. the amount of paid-up addition that is purchased each year is determined by the insured's attained age, the amount of dividend paid, and the type of coverage purchased.

Non-Medical Life Insurance

does not require a medical exam and tends to be more expensive than medically underwritten policies. The insurer will average out everyone's risk and charge accordingly. Insurers will not typically require medical exam, they still inquire about the applicants medical history and lifestyle.

Participating vs nonparticipating

participating life insurance policy is a policy that has dividend payments from the life insurance company. It is called participating because it is permitted to share or "participat" in the excess earnings of the life insurance company. a Non-participating policy does not have the right to share in excess earnings, and consequently does not recieve dividend payments.

Exchange Priviledge rider

permits a policyowner to exchange a life insurance policy for another in the fuiture if desired. As more advantageous policies are developed in the future.

Collateral Assignment

policy is assigned to a creditor as security or collateral for a debt. If the insured dies, the creditor is entitled to be reimbursed out of the benefit proceeds for the amount owed.

Single premium funding

policyowner pays a single premium that provides protection for life of the policy. Normally assosiated with single pay whole life insurance.

Cash Surrender option

policyowners may request an immediate cash payment of their cash values when their policies are surrendered. The amount the owner recieves is reduced by any outstanding policy loans or debts. .

Gross Anual premium

premium charged by an insurer that is comprised of or influenced by the aforementioned factors of morality, interests and expenses. its the actual premium paid by the policyowner for life insuance coverage. Gross premium= Net Premium + insurer expenses.

Accidental Death Benefit Rider

procides an additionakl amount of insurance usually equal to the face amount of the base policy if the cause of death was an accident. Double indemnity rider- is insured dies of accident benefit paid would be double the policies face value. Triple indemnity 3xs.

Suicide Provision

protects the insurer against the purchase of a policy in contemplation of suicide.

Accidental death rider

provides an adittional death benefit for a limited period of time at the lowest possible cost. no accidental death rider if older than 55-60. expires at age 60-65

Return of premium rider

provides that in the event of the death of the insured within a specific period of time the policy will pay in addition to the face amount an amount equal to the sum of all premiums paid to date.

War exclusion

provides that the death benefit will not be paid if the insured dies as a rewsult of war. The war exclusion prevents an insurer's financial catastrophie and typically applies to declared and undeclared wars.

Right to defer Loan

right to an insured to defer a policy loan or the payment of cash value. It is designed to protect an insurer if a large amount of policyholders desire to make withdrawals at the same time.

Free-Look Provision

the free-look provision required by most states, gives policyowners the right to return the policy for a full premium refund within a limited period of time after the delivery of the policy.

Policy Dividends

the major difference between participating and non participating are policy dividends.

Waiver of cost of insurance

waiver of cost of insurance for a universal whole life policy is a rider that civers the cost of the insurance, but not the other portion of the premium that pays for the investment component of the whole life policy.