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Continuous premium Whole Life - ✔️ ✔️ Most common type of Whole life insurance sold. These policies stretch the premium payments over the whole life of the insured. Often referred to as Straight life insurance. A stock purchase plan - ✔️ ✔️ A price is determined and each stockholder agrees to purchase a proportionate share of the deceased shareholder's stock Convertible Term Policy - ✔️ ✔️ Allows a policy-owner to convert or exchange the temporary protection for some form of permanent protection without evidence of insurability. The conversion must be made prior to expiration of the term. When a policy is converted, the premium will be based on attained age. Cost of Living - ✔️ ✔️ The purpose of a cost of living rider is to increase the death benefit to keep pace with inflation, tied to the CPI (consumer price index.) No proof of insurability is required. Accelerated Benefits - ✔️ ✔️ Allows the PO to receive their benefit earlier if they have a chronic disease (AIDS, Cancer, heart disease, Alzheimer's) This will help the insured pay bills, food, rent, med services as they treat their stressful last months. Accumulation Period - ✔️ ✔️ Annuity Period Adjustable Life Insurance - ✔️ ✔️ Adjustable Life insurance is a policy that offers the PO the option to adjust the policy's face amount, premium, type of protection, and/or length of protection, without having to complete a new application or actually exchange policies. The flexibility of adjustable life is accomplished by allowing conersion from one form of insurance to another, and by making appropriate premium adjustments, if necessary. Advantages and Uses of Term Insurance - ✔️ ✔️ One of the most common uses is to provide a substantial amount of coverage at a minimum cost. Advantages and Uses of Whole Life Policies - ✔️ ✔️ The principal advantage of whole life is that it is permanent insurance and can be used to satisfy permanent needs such as the cost of death, dying and final burial expenses. The level premium allows the PO to know exactly what the cost of insurance will be and offers a form of forced savings.
Whole life builds a living benefit through its guaranteed cash value, which enables to PO to use some of this cash for emergencies, as a supplemental source of retirement income, and for other living needs. Amendments - ✔️ ✔️ Insurer may amend (make changes) the policy's terms depending on the results of the underwriting process. Annuities - ✔️ ✔️ 10% tax penalty on deferred annuities when withdrawal before age 59 1/ Annuity Premiums - ✔️ ✔️ 1) Single Premium
- Level Premium
- Variable Premium Annuity settlement options - ✔️ ✔️ 1) Life annuity - no refund
- Refund Life Annuity
- Annuity Certain - certain for period of time.
- Life Annuity Certain - Guaranteed for life but if you die too soon, still paid out through certain period.
- Joint Life, Survivorship and Joint Life annuities.
- Temp Annuity Certain Appointments - ✔️ ✔️ All producers must be appointed by at least one insurer. Backdating - ✔️ ✔️ And insurer may not backdate a policy for more than 6 months before the original application was made to preserve age and reduce premium. Premium must be collected for each month the policy is backdated. `Policy loans - ✔️ ✔️ NOT taxable as income because they are treated as a debt against the policy. 2 Tiered Annuity - ✔️ ✔️ Lump sump or payments available at Maturity A producer cannot share commissions with: - ✔️ ✔️ Someone that is not a life insurance agent. Monies may not be commingled with the producer's personal funds Buy - Sell agreement - ✔️ ✔️ Legal document outlining the business continuation plan. Capital Retention - ✔️ ✔️ Only take out the interest of the policy and conserve the principal. Changes in the Application - ✔️ ✔️ Any changes made to an insurance applicant after it is completed must be initialed by the applicant.
Dividend options (Cash dividend option) - ✔️ ✔️ Dividend credited to a PO is paid in cash and usually a check is sent to the PO. Dividends - ✔️ ✔️ Participating policies - Policy that pay dividends Nonparticipating policies - policies that do not pay dividends. Endowments - ✔️ ✔️ Provides for the payment (to the beneficiary) of the face amount upon the death of an insured during a specified period or the payment of the face amount at the end of the specified period if the insured is still alive, whichever comes first. Not as popular today as they used to be. premiums are higher than traditional whole life contracts because their savings features and premium levels depend on the endowment period selected. Equity Indexed Life insurance - ✔️ ✔️ Some companies offer policies with face amounts that are linked to an equity index, for example S&P 500. The insurance company may simply increase the premium when it increases the coverage, or it might make advance assumptions about the rate of inflation and charge a slightly higher premium from the original inception date. Example of Whole Life Insurance - ✔️ ✔️ 20 - pay life means premium payments for 20 years but lifetime (to age 100) protection. Life paid up at 65 means premium payments up to age 65 but lifetime protection. A 20 pay life policy matures at age 100 or upon the death of the insured, whichever comes first. The principle difference with limited-pay policies is simply the length of the premium paying period. Fair Credit Reporting Act - ✔️ ✔️ Responsible for the opt-out opportunity, but the privacy notice must inform the customer of this right under the GLBA. False Advertising - ✔️ ✔️ It is illegal for any producer to formulate or use an advertisement or statement that is untrue, deceptive, or misleading regarding any insurance company or persons associated with that company. Family income policies - ✔️ ✔️ Not commonly sold, but sometimes appear on state license exams. combines whole life insurance with decreasing term coverage. Provides an income to be paid upon the death of the bread winner. Family Maintenance Policies - ✔️ ✔️ Combines ordinary life insurance and level term insurance. It affords the payment of a monthly income during a stated period, as selected by the insured. Monthly income is payable from the date of death to the end of the preselected period. Fiduciary - ✔️ ✔️ Person in a position of financial trust. It is the producer's duty to accurately and thoroughly complete all applications for insurance, collect initial premiums, and promptly submit them to the company.
Fixed Amount option - ✔️ ✔️ This allows the Beneficiary to receive a fixed amount until the face amount and interest runs out. So instead of a period of years, like 10 per say, they just decide how much they want each month. Fixed Period Option - ✔️ ✔️ Allows the policy to be paid over a certain amount of years for a fixed period of time and interest rate. longer period of payout, the higher return on interest. Grace Period - ✔️ ✔️ This is the period of time following the date that each premium is due during which the insurance policy remains in force and coverage is provided, even though the premium has not yet been paid. Generally grace period is 31 days. Gramm-Leach-Bliley Act (GLBA) - ✔️ ✔️ Consumer - An individual about whom a company collects information is a consumer. Customer - A customer is a consumer that has developed an ongoing relationship with a financial institution. Guaranteed Cash Value - ✔️ ✔️ Whole life policies include a savings element that is guaranteed to accumulate and earn a specified rate of interest. usually the policy has little or no cash value during the first couple of policy years. In the third year, cash values begin to accumulate. Guaranteed Insurability option - ✔️ ✔️ Every 3 years or so, you can add more insurance to your policy without having to go through the health process. Some let you do it on special dates like birth of child or marriage. Human Life Vale Approach - ✔️ ✔️ Focuses on an individual's future stream of income. It considers such things as annual salary and expenses, years remaining until retirement, and future value of current dollars. (how much will the insured make?) Immediate Annuity - ✔️ ✔️ Deferred Annuity (payout begins within 12 months) Incontestability Clause - ✔️ ✔️ States that after a specified period of time, (two years), the insurer may not dispute or contest the validity of the contract or the statements. After the contract has been in effect for a specific length of time, the insurance company agrees not to challenge any statements made by the applicant on the application. Index Linked Policies - ✔️ ✔️ As a hedge against high inflationary periods, many companies offer policies with face amounts that increase by the amount of inflation. 2 ways, either premium is increased every year to cover the increased insurance amount, or the life insurance company makes assumptions about what it expects the increases to be at policy inception. Insured pays same premium over the life of the policy.
McCarran Ferguson Act - ✔️ ✔️ The fed govt had the right to regulate the business of insurance but only to the extent that such business is not regulated by state law (which most are) They did this with the intent of not having to regulate them against the provisions of the fed antitrust laws. MEC (Modified Endowment Contract) - ✔️ ✔️ A life insurance policy that fails the seven pay test will be considered an MEC, which makes the policy subject to less favorable tax treatment. Medical Information Bureau - ✔️ ✔️ Reports issued by the MIB are another source of information which may aid the underwriter in determining whether or not to accept a risk. This is a non-profit trade association that maintains medical information on applicants for life or health insurance. Applicants or are denied coverage due to information in an MIB report must be given explanations and an opportunity to challenge information about their medical history that may be inaccurate. Minimum Age to receive a license - ✔️ ✔️ 18 Misrepresentation - ✔️ ✔️ It is illegal to make any written or oral statement, sales presentation, or comparison that; misrepresents the dividends, benefits, advantages, conditions, or terms of any policy. Example: uses a name of any insurance policy that misrepresents its true nature. Morality Rate - ✔️ ✔️ The number of deaths per 1,000 people. More Whole Life - ✔️ ✔️ Because Whole life Policies include cash values in addition to net insurance protection, the premiums have to cover mortality costs, expenses, and the savings account. For this reason, whole life policies are more expensive than term life policies. Mortgage Redemption policy or rider - ✔️ ✔️ decreasing term insurance. Benefit amount of the term element is intended to be sufficient to pay off the unpaid remainder of the mortgage loan if the insured dies before paying it off. Needs Approach - ✔️ ✔️ This technique focuses on the needs of survivors. It considers such things as funeral expenses, final illness, continuing family income needs, children's education, retirement income etc. (How much will the survivor need?) Non forfeiture Value - ✔️ ✔️ The cash value in the policy belongs to the policyowner. If the PO wishes, some or all of the cash value may be withdrawn from the policy. Any withdrawal of cash value will reduce both the Face Value of the policy and the amount of cash value available.
Nonforfeiture Options - ✔️ ✔️ Only available for life policies that accumlate cash value. Types are Cash surrender value, entended term insurance, and reduced paid-up insurance. Nonforfeiture Options - ✔️ ✔️ Surrender - bail out provision if interest rates drop a certain amount within a certain time period. Notice to Applicant - ✔️ ✔️ Notifies the applicant that a report will be ordered concerning their past credit history and any other life or health insurance for which they have previously applied. Paid up option - ✔️ ✔️ The PO uses the dividends to pay off their policy early Payor Rider - ✔️ ✔️ Provides continuance of insurance coverage on the life of a kid in the event of the death of total disability of the individual responsible for the payment of the premiums which normally is the parent or guardian. Per Capita - ✔️ ✔️ Means per person, or by the head. Policy proceeds are paid only to the named beneficiaries who are living. Per Stirpes - ✔️ ✔️ Means by the root or by the way of branches. A per stirpes distribution means that a beneficiary's share of a policy's proceeds will be passed down in equal shares should they predecease the insured. Premium Determination - ✔️ ✔️ Age, sex, assumed int rate, income amount/payment guarantee, Loading Premium Mode - ✔️ ✔️ Simply the frequency with which a policy premium will be paid. Privacy Notices must explain: - ✔️ ✔️ What info the company gathers about the customer. Where that info is shared How the company safeguards that info Rebating - ✔️ ✔️ Offering valuable consideration, other than that which is offered in the contract as an inducement to purchase a policy is illegal. Reduced pain up insurance option - ✔️ ✔️ Allows the insured to use his cash value to pay one big premium for the entire life policy so he doesn't have to pay anymore. It usually drops the face amount of the policy. Replacement - ✔️ ✔️ Is for the purchase of one life insurance policy to replace another.
The Family Policy (Family Protection Policy) - ✔️ ✔️ Consists of whole life on the breadwinner and convertible term on the spouse and children. Once issued, additional children are automatically included at no extra cost. Third-Party Ownership - ✔️ ✔️ Businesses that own policies on key employees. Two options available regarding the death benefit payable under a universal Life Policy
- ✔️ ✔️ Option 1 (or A): Provides a level death benefit equal to the policy's face amount. Policy's cash value increases, net death protection actually decreases over the life of the policy, making the structure similar to a whole life contract. Option 2 (or B): provides for an increasing death benefit equal to the policy's face amount plus the cash account. In terms of policy structure, this contract this contract Unconditional and Binding Receipts - ✔️ ✔️ The company liable for the risk from the date of application, regardless of the applicant's insurability. This coverage lasts for specified time, or until the insurer issues the policy. Unfair Discrimination - ✔️ ✔️ It is illegal to unfairly discriminate between individuals of the same class and equal life expectancy in the rates, dividends, benefits, or terms of any life or life annuity contract. Unfairly discriminate between neighborhoods within a municipality and of essentially the same hazard. Use sexual orientation in the underwriting process or in the determination of insurability. Universal Life - ✔️ ✔️ Developed in response to the relatively low interest rates (generally 3-5%) earned by traditional whole life insurance cash values, which made the whole life product less attractive during periods of high inflation. Makes Whole Life option less attractive during periods of high inflation. These policies pay higher interest rates during inflationary times. Also have greater flexibility because they allow PO to adjust the death benefits and/or premium payments. Similar to Whole life that it has death protection and cash value, but instead of being fixed and guaranteed amounts, the death protection resembles one-year renewable term insurance and the cash amount grows according to current interest rates. Variable Life - ✔️ ✔️ AKA Variable Whole Life. also developed because of low returns earned by traditional cash value policies. Policy has 2 elements, Death protection and savings/investment element. Instead of cash values being linked to interest rates, they are backed by equity investments and securities that are not guaranteed. They have the following characteristics: guaranteed minimum death benefit (actual death benefit may be higher and will vary with the success of the investments.) They have cash values that are not guaranteed. Contracts are regulated as securities.
For fully guaranteed contracts (such as whole life insurance), an insurer maintains a general account, also called a general asset, that consists primarily of safe and conservative investments (such as high grade bonds, real estate, and CDs.) The safety of those investments makes it possible for the insurer to guarantee its policies. In contrast, an insurer must establish a separate account, also called a separate asset, for its variable products. Premiums paid for variable life insurance must be put into the insurers separate account. There is considerable risk, and there are no guarantees as to its future value. Variable Policies have: - ✔️ ✔️ A level premium and Variable death benefit. Variable Universal Life - ✔️ ✔️ This product blends a combination of the variable and universal life insurance concepts. The policy has elements of variable life insurance because it is backed by equity investments. Waiver of Premium - ✔️ ✔️ Premium payments will be waived during the period of disability. Permanent Insurance - ✔️ ✔️ Whole life is also called this because the maturity date is beyond the life expectancy of most individuals. However a whole life policy actually consists of a combination of a savings element (the advancing cash value) and a decreasing amount of net insurance. When a whole life policy reaches its maturity date (age 100), the cash value would equal the face amount. Policy Loan - ✔️ ✔️ An insured may also borrow a portion of the cash value in this form. But it must be paid back (with interest) in order to restore policy values. Premium collection - ✔️ ✔️ Producer is encouraged to collect the insitial premium with the application. The coverage is not effective until the policy is delivered and the initial premium has been paid.
