Traditional Whole Life - Answer- -Ordinary (Straight) Life
-Limited-Pay & Single-Premium Whole Life
-Adjustable Whole Life
Ordinary (Straight) Life -
... [Show More] Answer- -Until 100 or Death, whichever comes first
-Permanent Protection
-Rates & benefits based on law of large numbers (Mortality Rate)
-Guaranteed, tax-deferred interest rate
-Premium level, company's risk goes down as cash value goes up
-Insurer keeps the cash value if death to offset risk
-Lowest net cost in long run
-Client has access to cash through cash surrender or policy loan
-Rates are per unit of protection (1,000 is 1 unit)---TEST
-Cash value is guaranteed
-Cash value will equal face amount at policy maturity
Limited-Pay & Single-Premium Whole Life - Answer- -Premium paying period is shorter
-Cash value still equals face amount at age 100
-20 pay life will be paid up in 20 years PL
-Life Paid up at age 65, will be paid up at 65 LP
-A single premium policy will have an immediate cash value (1-pay life)---TEST
Adjustable Whole Life----TEST - Answer- -Sold to clients with fluctuating incomes----TEST
-Combination of term and whole life----TEST
-Coverage may not be increased without physical exam---TEST
Interest/Market Sensitive Whole Life Products - Answer- -Universal Whole life
-Variable Whole life
-Variable/Universal Whole life
-Equity-Indexed Life
Universal Whole life - Answer- -Guaranteed minimum interest rates
-Extreme flexibility regarding premium PMTs----TEST
-Most flexible product
-Target premium based on projected earnings
-Option A UL has level death benefits
-Option B UL will pay beneficiary both face amount + cash value
Variable Whole life - Answer- -Cash value deposited into a separate account
-Requires FINRA series 6 or 7 to sell
-Used to be called NASD
-Regulated by SEC
-Regulated by FINRA (Financial Industry Regulatory Authority)
-NYSE license not required
-Minimum death benefit (face amount) is guaranteed---TEST
-Has fixed premium---TEST
Variable/Universal Whole life - Answer- -Requires Finra(series 6 or 7) licenses to sell
-Allows client to self-direct cash values into sub-account---TEST
-Flexible premium
Equity-Indexed Life - Answer- -cash value, where minimum death benefit is guaranteed as well as the minimum earning on the cash value in the general account
-Securities license is not required
-Fixed Premium
Term Life - Answer- -Level Term
-Decreasing Term
-Increasing Term
General Features of Term Insurance - Answer- -Premium goes up every year
-May be converted to whole life at current attained age regardless of health
-May be renewable up to certain age without physical
Level Term - Answer- Both premium and face amount are level for period of time
Decreasing Term - Answer- -Face amount goes down but premium remains the same
-Usually convertible to whole life regardless of health
-Premium stays the same but cost increases as face amount decreases
Increasing Term - Answer- -Face amount goes up instead of down
-Allows beneficiary to receive the face amount + premiums or cash values
-Also known as Universal Life option B
Special features of Term Insurance - Answer- -Renewable/Convertible to whole up to certain date or age regardless of health
-Conversion based on current age
-May only convert to more expensive option
-Cannot convert to term
-Cannot convert to more coverage than you have
Return of Premium under Term - Answer- The premium for a return of premium policy is generally more than that for a term policy, but less than that of a traditional whole life policy
General Features of Annuities - Answer- -Always have beneficiary during the pay-in or accumulation period
-May or may not have a beneficiary during the pay-out or annuity period
-During pay-out period all Pmt's are for the life of the annuitant
-Long-term investments subject to 10% early withdrawal penalties on withdrawals taken prior to 59.5
-Immediate annuities have no pay-in or accumulation period--single premium
-Variable annuities use a separate account (Like Mutual fund)
-Have 30-day grace period
Annuity Pay-Out Options - Answer- -Contractual; cannot be changed once selected
-Amount received in excess of cost are taxable as ordinary income
-For life
-Cash surrender under age 59.5 subject to IRS 10% penalty
-Non-qualified=Funded with after tax dollars
Specific Annuity Pay-Out Options (Annuitization) - Answer- -Life Income
-Life Income with period certain
-Life Income with refund
-Joint life annuity
-Joint survivor annuity
Life Income - Answer- -Type of Annuity pay out-option
-Also known as straight life option
-Has no beneficiary, considered risky
-Highest monthly pay out---because of risk
Life Income with Period Certain - Answer- -Type of ---Annuity Pay out-option
-5,10,15, or 20 years-----TEST
-Guarantees PMT's
-Longer the period certain, the lower the monthly PMT
-Has beneficiary during the period certain only
-Less risk than life income option, payout lower
-Doesn't guarantee all monies, just those that would have been paid out during the certain period
Life Income with Refund - Answer- -Type of Annuity pay-out option
-If annuitant dies before recovering all monies, refund goes to beneficiary
-Beneficiary may choose cash refund or installment refund
-Will pay as long as annuitant lives
Joint Life Annuity - Answer- -Type of Annuity Pay-out option
-Pays only until first annuitant dies
Joint and Survivor Annuity - Answer- -Pays until the last party dies
-Payment often adjusted upon the death of the first party because of age difference
Types of Annuities - Answer- -Single Premium Deferred Annuity (SPDA)
-Level Premium Annuity
-Flexible Premium Annuity
-Immediate Annuity
-Fixed Annuity -Regular
-Variable Annuity
-Indexed Annuity
Immediate Annuity - Answer- -No accumulation period
-Pays in single premium
-Annuitizes right away
Variable Annuity - Answer- -Goes into separate accounts
-Valued in annuity units---TEST
-Buyer bears risk
-Need FINRA/securities license and annuity course
-Subject to state and federal regulation
-Insurance under state law
Indexed Annuity - Answer- -Pays 2% on cash value
-Securities license not required
-Cash accumulation usually linked to an index (S&P)
-If index outperforms guaranteed interest rate, difference credited to cash value
-Premiums do not change
Combination Plans & Life Insurance Policy Variations - Answer- -Joint Life Policy
-Survivorship Life Policy
Joint Life Policy (First to Die) - Answer- -Type of Combination Plans & Life Insurance Policy Variations
-Covers 2+ on same policy
-No further coverage for remaining party
Survivorship Life Policy (Last to Die) - Answer- -Usually used to pay estate taxes
-Used in estate planning--TEST
Life Insurance Policy Riders - Answer- -Waiver of Premium & Waiver of Premium with Disability Income(WP)
-Guaranteed Insurability Rider(GIR)
-Payor Benefit Rider
-Accidental Death Benefit Rider
-Term Insurance Rider
-Long-Term Care Rider
-Other Insured Rider
-Return of Premium Rider
Waiver of Premium & Waiver of Premium with Disability Income (WP) - Answer- -Type of Insurance Rider=Add on to coverage
-Disability income insurance added to a life policy
-6-month waiting period; if satisfy waiting period insurer will reimburse insured for paid premiums within that period
-Premiums waived, and policy still enforced as long as insured is disable
-If added with disability income, policy pays insured's net income during disability
Guaranteed Insurability Rider(GIR) - Answer- -Type of Insurance Rider
-Enables insured to increase coverage later regardless of health
-Option dates usually occur at 2 or 3 year intervals, if skipped the date is lost
-At each increase, rates are based upon current age
Payor Benefit Rider - Answer- -Type of Insurance Rider
-Added to policy on child
-Waives premium if payor dies or becomes disabled
-Expires when child reaches age 18-----TEST
Accidental Death Benefit Rider - Answer- -Type of Insurance Rider
-Death must occur within 90 days of accident or it is assumed to be form of natural causes
-Doesn't cover death due to sickness only accidents
Term Insurance Rider - Answer- -Type of Insurance Rider
-Often added to whole life policy to increase coverage
-Some whole, some term
-Term portion will not cover unless insured dies within the term period
Other Insured Rider---TEST - Answer- -Type of Insurance Rider
-Added to whole life policy under certain circumstances
-Adds coverage for new spouse on whole life
-Subject to insurability (Physical Exam)
-Could be used to add coverage on newborn, on current policy, term insurance rider on child
Long-Term Care Rider - Answer- -Type of Insurance Rider
-Costs extra and may be added to a cash value policy
-Allows policy owner to take money out of policy's cash value to pay for qualifying nursing home or home health care
Return of Premium Rider - Answer- -Type of Insurance Rider
-Same as term
-Could be added to term depending upon company
-Also called return of premium term insurance (ROPT)
-If insured should live to end of term, premium is returned tax-free
Life Insurance Policy Provisions & Options - Answer- -Entire Contract Clause
-Insuring Clause or Agreement
-Free Look
-Consideration Clause
-Owner's Rights
-Beneficiary Designations
-Premium Payment Provisions
-Reinstatement Provision
-Policy Loan Provisions
-Nonforfeiture Provisions or Options
-Dividend and Dividend Options
-Incontestability Clause
-Assignments
-Suicide Exclusion
-Misstatement of Age & Gender Clause
-Settlement (Pay-out) Options
-Accelerated Death Benefits
Entire Contract Clause - Answer- -Defines what is admissible in court
-Only policy, endorsements & attached papers if any
-Prevents company from changing the policy after policy delivery
Insuring Clause or Agreement - Answer- -Promise to pay
-States that coverage is provided in accordance with the terms of the policy
-Located on first page
-States coverage, effective date, and parties
-Promise can be legally enforced
Free Look - Answer- -Enables insured to examine policy after delivery
-May return policy and get full refund if not satisfied---TEST
-15 days to do so
Consideration Clause - Answer- -An exchange of values
-Pays first premium then answers questions on application
-Representation is truth to the best of your knowledge
-Company agrees to provide coverage in exchange
-No coverage unless premium is paid
Owner's Rights---TEST - Answer- -Must pay premium-usually
-May designate beneficiary, may also change beneficiary
-Can assign ownership rights to others
-May select dividend options and nonforfeiture options
Beneficiary Designations - Answer- -Primary beneficiary receives proceeds when insured dies
-Can have as many primaries as wanted
-Guardian must be appointed for children
-Company may designate irrevocable beneficiary
-Common disaster clause
-Applies if insured and primary beneficiary both day as a result of the same accident
-Insured always dies last even if not the case
-Primary beneficiary must die within 10 days for clause to be enacted
Premium Payment Provisions - Answer- -Mode of payment
-The more frequent the mode, the higher the premium
-Annual mode of payment has lowest cost
-Grace periods
-30 day grace period for individual life insurance
-31 day grace period for group life
-Automatic Premium loan rider
-Will automatically borrow the amount of the premium if insured does not pay by end of grace period
-Creates a policy loan
Policies with Level Premiums - Answer- -Ordinary whole life
-Limited-pay whole life
-Single premium whole life
-Variable whole life
-Equity indexed whole life
-Term insurance -could be 1 year or more
Policies with Flexible Premiums - Answer- -Adjustable whole life
-Universal whole life-Target premium
-Variable/universal whole life
-Interest sensitive whole life
Reinstatement Provision - Answer- -Applies when a policy lapses at the end of the grace period
-Allows insured to apply for reinstatement for up to 5 years after lapse
-Insured maintains original age
-A policy surrendered for cash may not be reinstated
Policy Loan Provisions - Answer- -Applies only to polices with cash value-not term
-Maximum fixed interest rate usually 8% might have dropped
-Loans need to be paid back while insured is still alive
-Interest will accrue if loan is not paid---TEST
Nonforfeiture Provisions or Options - Answer- -3 options
-Cash Surrender; most up front---TEST
-Tax on profit only
-Amount received in excess of premiums paid is [Show Less]