Term
|
Definition
| social device (legal contract, or policy) for the transfer of financial risk |
|
|
Term
|
Definition
| when a large group of people contribute money to a fund out of which their losses can be paid. The larger the group, the better it works financially |
|
|
Term
|
Definition
| Money paid by the policy owner to the insurance company in exchange for the policy. The premium must be sufficient to pay sales commissions and other marketing costs, pay administrative costs, and provide a loss reserve from which claims are paid. |
|
|
Term
|
Definition
| When a policy is terminated due to non-payment of premiums |
|
|
Term
|
Definition
| Person or organization that applies for the policy and pays the premiums. The policy owner is also known as a policy owner, or just owner. |
|
|
Term
|
Definition
| The person whose death the insurance company pays benefits to the beneficiary. |
|
|
Term
|
Definition
| The Person or organization to whom benefits are payable at the insured's death |
|
|
Term
|
Definition
| Form that can be added to an insurance policy. It is usually added for an extra premium charge to add coverage. It can, however, sometimes be added to limit (or restrict coverage.) |
|
|
Term
|
Definition
| Statistical tables that are used when calculating premium rates and mortality loss reserves. They tell insurance companies how many claims are likely to be made each year enabling the insurance companies to estimate what their losses will be |
|
|
Term
| Mortality actuarial tables |
|
Definition
| Statistical tables that tell the insurance companies how many people of each age and sex are likely to die each year |
|
|
Term
|
Definition
| The money set aside by the insurance company to pay life insurance claims |
|
|
Term
|
Definition
| Indicates that the larger the group, the more accurate the mortality tables will become and the losses will become more predictable and manageable. |
|
|
Term
|
Definition
| Dying before the normal age according to the mortality actuarial tables. also defined as dying with unsatisfied responsibilities |
|
|
Term
| What are the four premature death risks? |
|
Definition
1. loss of income
2. Unsatisfied Major Obligations (debts)
3. Incomplete Financial goals (i.e. family financial security, childrens education etc.)
4. Final Expenses (i.e. funeral expenses, burial expenses, etc. generally over 25k) |
|
|
Term
| Final expenses can be paid at an individuals death in what four ways? |
|
Definition
1.In cash out of the deceased's savings
2. By Borrowing
3. By Liquidating Property
4. With Life Insurance Benefits |
|
|
Term
|
Definition
| Issued by a life insurance company. Protects an individual against the financial risk of outliving a normal life expectancy according to the mortality actuarial tables and running out of money in old age. Guarantees monthly income benefits to the annuitant for the rest of his/her life no matter how old he/she lives. Intrest/earnings compound with any withdrawal for taxes (POWER of compounding interests) |
|
|
Term
|
Definition
| Person who applies for the plan and pays the premium |
|
|
Term
|
Definition
| Person to whom monthly income benefits are paid. |
|
|
Term
|
Definition
| contributions can be tax deducted |
|
|
Term
|
Definition
| contributions cannot be tax deducted |
|
|
Term
| tax deferred (postponed) plans |
|
Definition
| tax on the interest and/or earnings is postponed as it compounds and accumulates till it withdrawn |
|
|
Term
|
Definition
|
|
Term
|
Definition
| total contributions made to a plan |
|
|
Term
| Additional Premium Charges (rating up the policy) |
|
Definition
| Rated Table, Temporary Surcharge, Temporary flat extra charge, Graded Premiums (increased periodically, and also known as modified premiums) |
|
|
Term
|
Definition
| No benefits or low benefits for the initial specified period. Benefits increase by a specified amount as specified intervals until they equal face amount. Premium charge is fixed (level) |
|
|
Term
| When does a policy take effect |
|
Definition
| Immediately upon completion of the application including the medical report or physical that is required subject to the condition that the underwriter would have found the insured acceptable at the premium rate paid according to the insurance companies standard practices. |
|
|
Term
| When does a policy take effect when no premium is paid or receipt issued |
|
Definition
Policy must be PERSONALLY delivered
Insured must still be in insurable health
Must sign statement of continueing good health
Premium paid |
|
|
Term
Temporary Insurance Agreement
(Interim Term Insurance) |
|
Definition
| A.Temporary Term coverage from the date of application until the date the insured wants a permanent policy to take effect. B. Will pay death benefits if the insured dies prior to the effective date of the permanent policy. C. Guarantees convertibility to a permanent policy without evidence of insurability. |
|
|
Term
Ten Day Free Look Provision
(this is required by law) |
|
Definition
1.must give policy owner at least 10 days (some policies extend to 20-30 days).
2. It is from the date of receiving the policy. 3. It allows the policy owner to read the policy over and to return it to the insurance company for a full premium refund without giving a reason (think If you don't like it, bring it back!) |
|
|
Term
|
Definition
◘Business is policy owner and beneficiary
◘Life insurance on life of a key business employee
◘benefits are equal to 1-2 years of companies earnings
◘purpose is to keep the business going at the death of the key employee
◘premiums *usually* can't be tax deducted - usually no tax on the benefits when paid at the insured's death (tax free) |
|
|
Term
|
Definition
It is an agreement entered into by partners of a partnership or stockholders of a closely held corporation.
◘Each partner/stockholder agrees to buy out the other partner/ stockholder and each agrees to sell out to the other at his or her death.
Each buys life insurance on the life of the other partner/stockholder to furnish the purchase funds.
◘◘Premiums usually cannot be tax deducted, usually no tax benefits when paid at the insured's death (tax free) |
|
|
Term
| Split dollar life insurance |
|
Definition
◘cash value life insurance on the life of a key employee. The employer is the owner of the policy.
◘The employer and employee split the premiums
◘At the insured employee's death, the employer is paid either the premiums tehe employer has paid or the cash value, whichever is greater. The insured employee's beneficiary is paid the difference between face amount and the payment to the employer.
◘Premiums cannot be tax deducted. There is no tax on benefits when they are paid at the insured employee's death. (tax free) |
|
|
Term
|
Definition
Any type of life insurance (whole life, term, etc)
A. Based on Two Lives
B. the life insurance death benefit is paid at the first death.
It is often used to fund buy-out agreements. (Also called first to die life insurance) |
|
|
Term
| Survivorship life insurance |
|
Definition
any type of life insurance (whole, term, etc)
◘Based on two lives
◘Life insurance death benefit is paid at the second death
◘It is often used to pay estate taxes and legal expenses that occur at the death of the second spouse.
(second to die life insurance) |
|
|
Term
| Social Security Death/ Survivor (OASDI) benefits |
|
Definition
All employers, employed people and self employed people must pay social security taxes. To be elegible for this, a person must have contributed to social security enough quarters to achieve either fully insured or currently insured status.
◘every worker is assigned a Primary Insurance amount (PIA) based on how long and the amount the person has paid in. Social security benefits are always expressed as a percentage of the PIA.
$255 will be paid to a qualifying surviving spouse.
A monthly survivor benefit will be paid to dependent children under age 18
Widows/widowers with dependent children under 16. |
|
|
Term
|
Definition
| a person must have contributed to social security at least 40 quarters (10 years) |
|
|
Term
|
Definition
| a person must contribute to social security at least 6 quarters in the last 13 quarters immediately prior to their death. |
|
|
Term
| Social Security blackout period |
|
Definition
| Social Security blackout period is the 10, 15, or 20 year period from the time the youngest child has his or her 16th birthday until the widower achieves 66 |
|
|
Term
| Servicemembers group life insurance (SGLI) |
|
Definition
A. federal government program underwritten by private insurance companies
B. when a person enters the service, he/she becomes eligible for group term life insurance.
C. The face amount can be increments of 50k up to a max of 400k
D. The permiums are low and usually payroll deducted
E. face amount can be reduced or the benefit can be eliminated by written request.
F. Additional benefits to cover spouses and children are available.
G. upon separation from the service, the servicemember may convert his/her SGLI to veteran's group life insurance (VGLI) in an amount up to the amount of the SGLI carried.
H. VGLI is 5 year group term life insurance coverage. |
|
|
Term
|
Definition
A plan that protects against the financial risk of outliving a normal life expectancy
◘◘ An annuity is a method of scientifically spreading capital and income over an annuitant's lifetime, eliminating the possibility (risk) of running out of income in old age. A life annuity protects an individual against the financial risk of out living a normal life expectancy and, as a result, out living his/her savings. |
|
|
Term
| Three ways of classifying Annuities plans |
|
Definition
A. How Premiums are paid into the plan (single premium, level premium, flexible premium)
B. How soonmonthly annuity income benefits payments start out of the annuity plan after the last premium payment (immediate or deferred)
C. Variable Annuities, Equity Indexed, and Fixed Annuities. |
|
|
Term
|
Definition
During the premium pay in period, contributions are used to purchase accumulation units which continuously change in value according to a specified securities index or economic index or the value of a specific portfolio of securities managed by the insurance company.
◘◘The insurance company must keep its variable annuity premiums and investments in a separate (segregated) fund.
◘◘ Both a security representative license and a life insurance producer license is required to sell Variable Annuities. |
|
|
Term
|
Definition
An Equity Investment
An Equity Indexed investment
◘Policy Owner is credited with contributions plus interest. The interest rate changes based on the performance of a specified stock-market index which is also called an equity index.
◘A percentage of contributions (such as %80) is guaranteed should the index decline and then policyholder dies or withdraws annuity benefits.
◘Insurance company must keep its equity indexed annuity premiums and investments in a separate (segregated) fund. |
|
|
Term
|
Definition
| An investment in corporate stocks. |
|
|
Term
| Equity Indexed Investment |
|
Definition
| An investment that is linked to (indexed to) a stock market index such as the Standard and Poor's 500 Index. As the stock market index goes up, so does the value of the investment. As the stock market index declines, so does the value of the investment. |
|
|
Term
|
Definition
◘Policy owner is credited with his or her contributions and interest.
◘ When the monthly annuity income benefit amount paid to the annuitant is fixed (remains constant) the entire time the benefits are paid.
◘◘Fixed Annuities require only a life insurance producer license. |
|
|
Term
|
Definition
A. Fixed Period
B. Fixed Amount
C. Life Annuity
D. Life Annuity Fixed Period (life annuity period certain)
E. Cash Refund Life Annuity
F. Joint and Survivor Life Annuity
G. Joint and 2/3 Survivor Life Annuity. |
|
|
Term
| Fixed Period (Period Certain) |
|
Definition
1. The insurance company will pay level monthly benefits for the fixed period of time.
2. If the annuitant dies before the fixed period of payments have been paid, benefit payments will continue at the annuitants death to the beneficiary for the remainder of the fixed period. |
|
|
Term
| Fixed Amount (Amount Certain) |
|
Definition
1. The insurance company will pay monthly benefits in the fixed amount until the principal and interest has been paid.
2/ If the annuitant dies before the total account balance has been paid, then at the annuitant's death monthly benefit payments will continue to the beneficiary until the total account balance has been paid out. |
|
|
Term
|
Definition
1. The Insurance company will pay level monthly benefits for the annuitant's life.
2. At the annuitant's death, benefits stop and there will be no benefits to a beneficiary. |
|
|
Term
| Life Annuity Fixed Period (Life annuity period certain) |
|
Definition
1. The insurance company will pay level monthly benefits for the annuitant's life.
2. If the annuitant dies before the fixed period of payments have been paid, benefit payments will continue at the annuitant's death to the beneficiary for the remainder of the fixed period. |
|
|
Term
|
Definition
1. The insurance company will pay level monthly benefits for the annuitant's life.
2. If the annuitant dies before the total account balance has been paid, then at the annuitant's death, benefit payments will continue to the beneficiary until the total account balance has been paid out. |
|
|
Term
| Joint and Survivor Life Annuity |
|
Definition
1. The insurance company will pay level monthly benefits over the life of the annuitant and the annuitant's spouse.
2. After one spouse dies, benefits will continue to the surviving spouse for the rest of his/her lifetime.
3. At the second spouse's death, benefits stop and there will be no benefits to a beneficiary. |
|
|
Term
| Joint and 2/3 survivor life annuity |
|
Definition
1. The insurance company will pay a higher level monthly benefit while the annuitant and the annuitant's spouse are both alive.
2. After one spouse dies, a reduced monthly benefit equal to 2/3 of the original monthly benefit will be paid to the surviving spouse.
At the second spouse's death, benefits stop and there will be no benefits to a beneficiary. |
|
|
Term
| how can an annuity be purchased? |
|
Definition
| by itself, as a rider to a life insurance policy, or as part of a pension (retirement) plan. |
|
|
Term
| Tax penalties apply to all amounts withdrawn prior to what age |
|
Definition
|
|
Term
| Pension (Retirement) plans |
|
Definition
| established by a person for himself/herself or by any employer for the benefit of the employer's employees. |
|
|
Term
| Pension means the same as what? |
|
Definition
|
|
Term
| Three Steps to establishing a pension (retirement plan) |
|
Definition
1. Formal written plan must be established specifying eligibility requirements for participants, amounts of money that may be contributed, when and how mony may be withdrawn from the plan by participants, and who is responsible for administering the plan. The plan must be approved by the IRS.
2. Money must be contributed to the plan. When money is contributed to the plan, it is sometimes referred to as "funding" the plan.
3. Investments must be made with the plan funds. |
|
|
Term
| Investments that may be made with Pension plans are: |
|
Definition
1. Savings accounts or CD's established through banks or savings banks.
2. Government Bonds
3. Mutual Funds
4. Accounts established with securities firms
5. Cash value life insurance
6. Life insurance company issued annuity contracts. |
|
|
Term
|
Definition
| Individual Retirement Account |
|
|
Term
| Individual Retirement Account |
|
Definition
Eligible person may contribute up to %100 of earned income not to exceed maximum amounts that are allowed under IRS rules. The maximum contribution allowed increases from time to time, according to IRS Rules (Max contribution for 2014 is 5.5k)
A plan can also be established by an eligible person for a non working spouse. The same contribution rules that apply to the worker plan also apply to the spousal IRA plan.
Tax Penalties apply on all amounts withdrawn prior to age 59 1/2. There are also sometimes tax penalties for not taking benefits by age 70 1/2. These tax penalties are in addition to the tax on the gain.
Ira Plan funds can be invested in many forms of insurance plans and security investments including life insurance company annuity plans. |
|
|
Term
|
Definition
| Special type of IRA plan to which special tax laws apply |
|
|
Term
| Tax Sheltered Annuities (TSA or 403b) |
|
Definition
established by non-profit educational, religious, or medical organizations for the benefit of their employees.
◘The employer/sponser contracts with one or more life insurance companies and/or mutual fund companies to offer policies to the sponsor's employees. Plan funds can be invested only in life insurance company issued annuity contracts and/or mutual funds.
◘If an insurance producer represents a life insurance company and/or mutual fund company that offers a plan (or a group of plans that has been selected by the employer as an approved, sponsored plan, then the insurance producer can sell the approved, sponsored plans to qualifying employees.
◘The employer/sponsor payroll deducts the employee's contributions and remits them to the insurance companies and or mutual fun companies.
◘◘tax penalties apply on all amounts withdrawn prior to age 59 1/2 in addition to tax on gains. |
|
|
Term
|
Definition
Saves money:
Group underwriting
Master policy holder assists in administration
If the master policyholder is an employer, the part of the premium paid by the employer on face amounts of up to 50K can be tax deducted by the employer. There is usually no tax on benefits when paid at the insured's death. Usually Term Life insurance. Certificates issued to covered members. *Must have 10 members. |
|
|
Term
|
Definition
| insuring too many health conditions insured's have before the policy is issued causing premium rates to be inadequate to pay claims. |
|
|
Term
|
Definition
Can have different eligibility requirements:
A 31 day enrollment period usually applies after a new member becomes first eligible. During the enrollment period new members can enroll without health questions.
If a person does not enroll within the initial enrollment period, and later wants in the group, there may be health questions at that time. |
|
|
Term
| Franchise (Wholesale) group life insurance |
|
Definition
A. Issued to groups not eligible for group insurance.
b.◘◘ Individual policies to each covered person
C. Administered like group. |
|
|
Term
| Entire contract provision |
|
Definition
| says the policy along with the application, including the medical report, if attached, constitutes the entire contract. |
|
|
Term
| Insuring agreement (Insuring clause) |
|
Definition
| This clause states the insurance companies promise to pay. |
|
|
Term
| Consideration (Material Value) |
|
Definition
The legal requirement that there must be an exchange of something of material value on the part of both parties to the policy.
◘The insured's premium and application is his or her consideration.
◘Issuing the policy is the insurance company's consideration. |
|
|
Term
|
Definition
| The first premium must be paid in advance to an office or agent of the insurance company. |
|
|
Term
|
Definition
| Annual, semi-annual, quarterly, monthly |
|
|
Term
|
Definition
| direct bill, coupon, preauthorized check, payroll deduction |
|
|
Term
| Accelerated benefit provision |
|
Definition
| This provision is sometimes included in some life insurance policies. If included in a policy, it allows the insured to receive part of the policy face amount while still alive. Also called Living Benefit Provision |
|
|
Term
| Long-term care accelerated benefit provision |
|
Definition
| if added, allows the insured to receive part of the policy life insurance benefits while still alive in monthly income benefits for long term nursing care. A reduced benefit amount is later paid at the insured's death. |
|
|
Term
| Terminal Illness accelerated benefit provision |
|
Definition
| If added, pays a reduced benefit amount before death in case of a terminal illness specified in the policy. A reduced benefit amount is later paid at the insured's death. |
|
|
Term
| Qualified condition provision |
|
Definition
| if added, provides that the insurance company will pay a benefit up to 75% of face amount for certain specified illnesses such as heart attack, stroke, coronary artery surgery, life threatening cancer, renal failure, Alzheimer's, paraplegic, or major organ transplant while the insured is alive. A reduced benefit amount is later paid at the insured's death. |
|
|
Term
|
Definition
| A. Optional rider that some (but not all) insurance companies offer which can be added to some (but not all) types of life insurance policies for an extra premium charge.) if added, for an extra premium charge, allows the insured person while alive to collect up to a specified portion of the life insurance face amount to pay nursing home expenses. A reduced benefit is paid to the beneficiary at the insured's death. |
|
|
Term
|
Definition
| Contract where an individual or organization buys a life insurance policy from a terminally ill insured person for a sum of money less than face amount. (also known as life settlements) |
|
|
Term
| Viatical settlement provider |
|
Definition
| Person or organization who is buying the policy. |
|
|
Term
|
Definition
| The insured who is transferring the life insurance policy to the viatical settlement provider. |
|
|
Term
| Viatical settlement broker |
|
Definition
| the person or organization who is negotiating the viatical settlement for the viator with the viatical settlement provider. |
|
|
Term
|
Definition
| the person who applies for the policy and pays the premium. Must have insurable interest at the time the policy is issued. |
|
|
Term
|
Definition
| Insured, Beneficiary-(the only time a beneficiary must have insurable interest is if he/she is the policyowner) or a Third Party Source. |
|
|
Term
|
Definition
A.Name and change beneficiaries unless an irrevicabke beneficiary has been named.
B. Select a settlement option
C. Select a dividend option (participating policies only)
D. Borrow against the policy (cash value policies only)
E. Surrender the policy and exercise a nonforfeiture option (cash value policies only)
Assign (transfer) the policy |
|
|
Term
|
Definition
| optional values from which the policy owner may select when a cash value policy is terminated and surrendered prior to it's maturity. |
|
|
Term
|
Definition
| 31 day period after premiums were due. The purpose is to avoid unintended lapse of the policy |
|
|
Term
|
Definition
| allows the policyowner to reinstate a lapsed policy usually within 3 years of the lapse. All back premiums must be repaid with interest. New evidence of insurability may be required. The insurance company can agree to reinstate parts of the policy and not others. New suicide and incontestability periods apply. |
|
|
Term
|
Definition
| a transfer of one or more rights in a policy to another. The policy owner has the right to assign the policy or policy benefits. |
|
|
Term
|
Definition
A. Lump Sum
B. held by the insurance company at interest
C. Any annuity options
D. and special option agreed to by the insurance company. Lump sum payment is usually the automatic settlement option. |
|
|
Term
|
Definition
| the legal proceeding through which property is distributed at a person's death under the supervision of a court. Life insurance benefits avoid probate. |
|
|
