512 - Module 3 Flashcards
Additional payout for accidental death. No longer double indemnity.
Accidental death benefit (ADB) rider
Built on the whole life insurance chassis and provides policyowners the option of making various adjustments to the policy as their needs change.
Adjustable life
Dividends are paid to policyowners in cash.
Cash option
Increases the benefit by inflation rates each year.
Cost of living rider
Part of the contract that includes name of the insured and owner, type of policy, amount of insurance, policy date, date of issue, riders, and the premium schedule.
Declarations page
Term life in which the premium remains level but the amount of death benefit decreases. Usu. for home mortgages, so typically 15-year or 30-year policies.
Decreasing term insurance
Based on the accumulation of funds for more than a year, rather than immediate payment of benefits.
Deferred annuity
Payouts begin at a later date, more than a year later.
Deferred income annuity (DIA)
Covers the life insurance premium if the policyowner becomes temporarily or permanently disabled.
Disability waiver of premium rider
Policy in which the death benefit and cash surrender value are equal at a specific date.
Endowment policy
Fixed permanent life policy that provides a minimum fixed interest rate, but use an index option to potentially earn better returns than the guaranteed rate.
Equity-indexed universal life (EIUL)
Use of policy dividends to buy a one-year term policy that increases the death benefit without new underwriting.
Fifth dividend option
Policy pays the face amount on the death of the first of two or more covered persons. May be used to fund buy-sell agreements in business partnerships.
First-to-die
Simplest annuity, funded by single payment (SPDA) or many payments (FPDA), that offers a fixed interest rate minimum that will be credited on the account value.
Fixed annuities
Premiums received within 30 days after the due date are treated as though received on time. If not received in that time, the policy will lapse.
Grace periods
Whole life policy that starts with a low premium that raises each year for 5-7 years before leveling off.
Graded premium life
Life insurance rider that permits policyowners to purchase more life insurance on a younger insured at specified times and in specified amounts without providing evidence of insurability up to a specified age limit, usu 40.
Guaranteed insurability option
Most popular rider, guarantees the right to withdraw up to the specified percentage each year for life. Guaranteed compounding ends at first withdrawal or at 10 years. Important to know that date.
Guaranteed lifetime withdrawal benefit (GLWB)
Rider that guarantees there will be a minimum account value at the end of a specified guaranteed date.
Guaranteed minimum accumulation benefit (GMAB)
Rider that guarantees a minimum income to the annuitant, regardless of adverse investment performance. May require annuitization of the contract.
Guaranteed minimum income benefit (GMIB)
Rider that guarantees that either a return of principal or payout of a protected amount through systematic withdrawals over a specified time period in years (not life expectancy).
Guaranteed minimum withdrawal benefit (GMWB)
Annuity that provides income as long as either one of two people survive.
Joint and survivor
Proceeds are paid out in equal payments over the lifetime of the recipient and provides the maximum income that would be guaranteed not to run out as long as the annuitant lives.
Life income option
Any type of product sold by agents who do not earn commissions, such as fee-based financial planners.
Low-load life insurance
Policyowner deposits the equivalent of more than total net annual premium payments at any time during the first seven years. Withdrawals taxed as ordinary income, 10% early withdrawal penalty, and death benefit is tax-free.
Modified endowment contract (MEC)
Whole life policy that is preceded by a period of term life insurance with lower premiums for a number of years. Sometimes used for children, then converts to whole life at a particular age. (18-25)
Modified whole life
Provide a benefit payable to the policyowner if they discontinue premiums before the death of the insured.
Nonforfeiture options
Dividend is used to buy one-year term insurance.
One-year term option
Dividend is used to purchase small amounts of additional insurance that require no further payments, without additional underwriting.
Paid-up additions option
The specific percentage of the index gain that is credited to the policy
Participation rate
Rights within a fixed annuity contract to withdraw a certain amount without penalty (usu 10%).
Penalty-free withdrawals
The minimum number of years that payments will be made, even if the recipient dies.
Period certain
Waiver of premium for “loss of use” of specific named parts of the body (eyes, hands, feet).
Presumptive disability
Provided with Variable Life products, which will include all info found in a mutual fund version, including the charges for fund management and admin.
Prospectus
Provide an income stream that begins at an advanced age and continues throughout the individual’s life. Up to 25% of a 401k can be put here without the need for RMDs.
Qualified longevity annuity contracts (QLACs)
Limits the interest an EIUL can earn by placing an upper limit on the credited rate.
Rate cap
Used to avoid forfeiture, cash value is used to purchase reduced death benefit as a single premium policy, with no further premiums due.
Reduced paid-up insurance
Any dividends earned will reduced the amount of the annual premium due.
Reduced premium option
Policy that allows the insured to be underwritten every 5 years or so, and the rate goes up or down accordingly.
Reentry term
Like EIAs, these use an index/call option crediting strategy to determine the cash value of an annuity, but use participation rates and caps to limit the annuity holder’s overall participation in market upswings.
Registered index-linked annuity (RILA)
After policy lapse, the owner may reinstate it by paying all back premiums, paying off or reinstating policy loans, and providing proof of insurability satisfactory to the company. No coverage during lapse, and some companies begin a new full-term contestable period.
Reinstatement clause
Internal Revenue Code says qualified policies for life insurance, annuities and LT care can be exchanged for another without tax consequences. Exception is LTC/annuity to life insurance.
Section 1035 exchange
Provides guaranteed income for the life of the annuitant, starts one month after purchase and continues for life.
Single premium immediate annuity (SPIA)
Lump sum premium is paid, no further premiums needed. Special tax rates apply, as these are Modified Endowment Contracts (MECs)
Single premium whole life
Allows a small amount of term coverage for a spouse or child on a policyowner’s cash value policy.
Spouse or children’s rider
Annuity that will pay one amount as long as either person is alive.
Straight joint and survivor
Basic annuity that pays for life once annuitized.
Straight life annuity
The risk of running out of money before you die.
Superannuation
When a mutual life insurance company has revenues in excess of expenses.
Suplus
Policies that use a combination of term and cash value life insurance to cover more than one individual.
Surivorship life plans
Joint life policies covering more than one individual.
Survivorship policies
Life insurance that covers for a set number of years, cheap with no cash value.
Term life insurance
Whole life policyowners can add a term policy for lower premiums because the underwriting is already done. Good for covering mortgage needs.
Term rider
Gives policyowners the ability to adjust the premium, death benefit, and cash value to meet their goals.
Universal life (UL)
Gives policyowners the ability to adjust the premium, death benefit, and cash value to meet their goals.
Universal life insurance
Designed with the belief that the equities market will outperform inflation and fixed interest rate investments over time. Premium payments purchase units of a subaccount that reflects market performance.
Variable annuity
Designed to combine the protection and savings functions of traditional life insurance with the growth potential of mutual fund type investments.
Variable life (VL)
Flexibility of UL with investment selection of VL. However, it guarantees only the mortality rate and the right to keep the policy in force by paying whatever premiums are required to do so, should the cash value decline. Savvy investors only, due to expense and risk.
Variable universal life (VUL)
Arrangement where a terminally ill person sells his life insurance policy at a discount from its face value for current cash.
Viatical settlement
Provides a guaranteed death benefit for the life of the insured and requires premium payments to be made until death or policy maturity.
Whole life insurance
