4 - What Type of Insurance Should I Have? Flashcards
What is the face page?
It is the schedule of the insurance policy and contains many details (effective date, face amount, expiry date, etc.)
What is the “effective date?”
The date the insurance policy takes effect.
What is the face amount?
It is the amount payable to the beneficiary should the life insured die while the insurance policy is in effect.
Define “Settlement Option.”
The way that the beneficiary receives the death benefit. A lump-sum cash payment is most typical
How does Level Term insurance work?
Premiums and Face Amount remain “level” over the term.
How does Increasing Term insurance work?
Premiums and Face Amount “increase” over the term. The death benefit is the face amount in force at the time of death.
How does Decreasing Term insurance work?
Premiums remain level. Face Amount decreases. The death benefit is the face amount in force at the time of death.
What is Renewable Term Insurance?
It guarantees renewability of the term insurance regardless of health. Premiums increase, but the Face Amount remains the same.
Define “Mortality Risk.”
The risk of death used in underwriting to determine premiums. A high mortality risk = high premiums.
What is Attained Age?
The age of the life insured at the time of renewal.
What is the Renewable and Convertible option (R&C)?
It allows the policy owner to either renew term insurance, or convert to permanent insurance. It is considered an extension of the original contract (incontestability, and suicide clause do not apply).
How does Incontestability apply to insurance policies?
A life insurance policy cannot be contested after it has been in force for two years
What is the “suicide clause?”
A death benefit will not be paid to the beneficiary of a policy if the life insured dies as a result of suicide within two years of the effective date of the policy.
What is the difference between whole life and limited payment life?
Whole life premiums are paid for life.
Limited payment life premiums are paid up to a certain age, or to a specified date.
What is the difference between participating and non-participating policies?
A participating policy receives dividends when available. A non-participating policy does not.
Define “policy reserve.”
It is created by the policy owner paying more in premiums than the coverage requires in the early years of the contract.
What are the 3 non-forfeiture options?
- Automatic premium loan (APL)
- Extended term insurance (ETI)
- Reduced paid-up insurance (RPU)
How long is the grace period?
Is 30 or 31 days after the premium due date. If the premium still has not been received, the policy lapses.
What are the 3 ways in which dividends are used to purchase more life insurance?
- Paid-Up Additions (PUAs)
- Special term additions
- Term Additions
How are dividends used to reduce premiums?
They can be used to directly, or the cash-value of a PUA purchased with dividends can be used to reduce the amount of premiums.
What are 4 needs answered by whole life insurance?
- Estate Planning
- Creditor Protection
- Tax-deferred Savings
- The Need to Build Collateral
What is the major advantage of term-to-100 insurance?
It offers insurance-for-life at a lower cost than whole-life (because there are no frills… CSV, dividends, policy loans, etc.)
Best used for estate planning.
What is unique about Universal Life Insurance?
It is a combination of insurance and investment that is highly flexible.
How is unbundling a benefit to a policy owner?
It makes all of the costs of the policy transparent.
What is the difference between yearly renewable term (YRT) and level cost of insurance (LCOI)?
YRT increase annually for life.
LCOI remain level for life.
What is meant by “disposed” in reference to insurance policies?
A policy can be disposed in several ways including: surrendering of the policy, absolute assignment, or lapsation. Disposition is a taxable event.
Define “compounding.”
Compounding is the term used to describe when investment growth earns growth. (The returns are said to be compounded).
What are the 3 features of Universal Life that are similar to whole life?
- Cash Surrender Value
- Policy Loans
- Premium offset
What are the 2 unique features of Universal Life?
- Cash Withdrawal
2. Death Benefit Choices
What are the 8 riders that can be attached to a life insurance policy?
- Guaranteed Insurability Benefit (GIB)
- Accidental Death Benefit (ADB)
- Accidental Death and Dismemberment (AD&D)
- Monthly disability income benefit
- Waiver of premium benefit (WP)
- Accelerated death benefit
- Parent Waiver
- Term Insurance
What are the 5 different policies and programs that disability insurance is provided through?
- Individual insurance policies
- Group insurance policies
- Federal government programs
- Provincial government programs
- Individual life insurance policies as a rider.
What are the 3 types of disability income policies?
- Cancellable or Commercial Policies
- Guaranteed renewable policies
- Non-cancellable and guaranteed renewable policies
What are the 4 definitions of disability?
- Total Disability
- Residual Disability
- Partial Disability
- Presumptive Disability
What is the difference between residual disability and partial disability?
Residual disability provides a proportional amount of wages lost. Partial disability pays a specified % (usually 50%).
What are the 3 periods for disability benefit payments and how are premiums affected?
- Elimination Period (how long to wait before payments begin) - the longer it is, the lower the premium
- Qualification Period (how long total disability must exist before residual benefits paid)
- Benefit Period (the longer it is the higher the premiums)
What are the 4 most common riders on a personal disability income policy?
- Future Purchase Option (FPO)
- Cost of Living Adjustment
- Waiver of Premium (WP)
- Rehabilitation Benefit
What are the 6 other common riders on a personal disability income policy?
- Return of Premium
- Lifetime Injury
- Lifetime Sickness and Injury
- Zero-Day Qualifying
- First-Day Hospital Coverage
- Accidental Death and Dismemberment (AD&D)
What are the 5 types of personal accident and sickness insurance?
- Extended Health Care
- Travel Assistance
- Prescription Drug Plans
- Dental Plans
- Accidental Death and Dismemberment (AD&D)
What is unique about critical illness insurance (CII)?
It provides specific insurance for dread diseases (cancer, heart disease, and stroke etc.)
What are the benefits of long-term care insurance?
Provides insurance against old age. (Specifically cognitive impairment, and 5 activities of daily living or ADLs).
What are the “5 Activities of Daily Living?”
- Bathing
- Eating
- Dressing
- Toileting
- Transferring positions of the body
What is the “Rescission Period?”
The 10-day period after the policy is delivered in which the policy owner can cancel the policy and get their money back.
