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CFP - Tracie > 512 - Module 3 > Flashcards

512 - Module 3 Flashcards

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1
Q

Additional payout for accidental death. No longer double indemnity.

A

Accidental death benefit (ADB) rider

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2
Q

Built on the whole life insurance chassis and provides policyowners the option of making various adjustments to the policy as their needs change.

A

Adjustable life

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3
Q

Dividends are paid to policyowners in cash.

A

Cash option

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4
Q

Increases the benefit by inflation rates each year.

A

Cost of living rider

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5
Q

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.

A

Declarations page

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6
Q

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.

A

Decreasing term insurance

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7
Q

Based on the accumulation of funds for more than a year, rather than immediate payment of benefits.

A

Deferred annuity

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8
Q

Payouts begin at a later date, more than a year later.

A

Deferred income annuity (DIA)

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9
Q

Covers the life insurance premium if the policyowner becomes temporarily or permanently disabled.

A

Disability waiver of premium rider

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10
Q

Policy in which the death benefit and cash surrender value are equal at a specific date.

A

Endowment policy

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11
Q

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.

A

Equity-indexed universal life (EIUL)

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12
Q

Use of policy dividends to buy a one-year term policy that increases the death benefit without new underwriting.

A

Fifth dividend option

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13
Q

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.

A

First-to-die

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14
Q

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.

A

Fixed annuities

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15
Q

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.

A

Grace periods

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16
Q

Whole life policy that starts with a low premium that raises each year for 5-7 years before leveling off.

A

Graded premium life

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17
Q

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.

A

Guaranteed insurability option

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18
Q

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.

A

Guaranteed lifetime withdrawal benefit (GLWB)

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19
Q

Rider that guarantees there will be a minimum account value at the end of a specified guaranteed date.

A

Guaranteed minimum accumulation benefit (GMAB)

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20
Q

Rider that guarantees a minimum income to the annuitant, regardless of adverse investment performance. May require annuitization of the contract.

A

Guaranteed minimum income benefit (GMIB)

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21
Q

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).

A

Guaranteed minimum withdrawal benefit (GMWB)

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22
Q

Annuity that provides income as long as either one of two people survive.

A

Joint and survivor

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23
Q

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.

A

Life income option

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24
Q

Any type of product sold by agents who do not earn commissions, such as fee-based financial planners.

A

Low-load life insurance

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25
Q

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.

A

Modified endowment contract (MEC)

26
Q

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)

A

Modified whole life

27
Q

Provide a benefit payable to the policyowner if they discontinue premiums before the death of the insured.

A

Nonforfeiture options

28
Q

Dividend is used to buy one-year term insurance.

A

One-year term option

29
Q

Dividend is used to purchase small amounts of additional insurance that require no further payments, without additional underwriting.

A

Paid-up additions option

30
Q

The specific percentage of the index gain that is credited to the policy

A

Participation rate

31
Q

Rights within a fixed annuity contract to withdraw a certain amount without penalty (usu 10%).

A

Penalty-free withdrawals

32
Q

The minimum number of years that payments will be made, even if the recipient dies.

A

Period certain

33
Q

Waiver of premium for “loss of use” of specific named parts of the body (eyes, hands, feet).

A

Presumptive disability

34
Q

Provided with Variable Life products, which will include all info found in a mutual fund version, including the charges for fund management and admin.

A

Prospectus

35
Q

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.

A

Qualified longevity annuity contracts (QLACs)

36
Q

Limits the interest an EIUL can earn by placing an upper limit on the credited rate.

A

Rate cap

37
Q

Used to avoid forfeiture, cash value is used to purchase reduced death benefit as a single premium policy, with no further premiums due.

A

Reduced paid-up insurance

38
Q

Any dividends earned will reduced the amount of the annual premium due.

A

Reduced premium option

39
Q

Policy that allows the insured to be underwritten every 5 years or so, and the rate goes up or down accordingly.

A

Reentry term

40
Q

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.

A

Registered index-linked annuity (RILA)

41
Q

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.

A

Reinstatement clause

42
Q

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.

A

Section 1035 exchange

43
Q

Provides guaranteed income for the life of the annuitant, starts one month after purchase and continues for life.

A

Single premium immediate annuity (SPIA)

44
Q

Lump sum premium is paid, no further premiums needed. Special tax rates apply, as these are Modified Endowment Contracts (MECs)

A

Single premium whole life

45
Q

Allows a small amount of term coverage for a spouse or child on a policyowner’s cash value policy.

A

Spouse or children’s rider

46
Q

Annuity that will pay one amount as long as either person is alive.

A

Straight joint and survivor

47
Q

Basic annuity that pays for life once annuitized.

A

Straight life annuity

48
Q

The risk of running out of money before you die.

A

Superannuation

49
Q

When a mutual life insurance company has revenues in excess of expenses.

A

Suplus

50
Q

Policies that use a combination of term and cash value life insurance to cover more than one individual.

A

Surivorship life plans

51
Q

Joint life policies covering more than one individual.

A

Survivorship policies

52
Q

Life insurance that covers for a set number of years, cheap with no cash value.

A

Term life insurance

53
Q

Whole life policyowners can add a term policy for lower premiums because the underwriting is already done. Good for covering mortgage needs.

A

Term rider

54
Q

Gives policyowners the ability to adjust the premium, death benefit, and cash value to meet their goals.

A

Universal life (UL)

55
Q

Gives policyowners the ability to adjust the premium, death benefit, and cash value to meet their goals.

A

Universal life insurance

56
Q

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.

A

Variable annuity

57
Q

Designed to combine the protection and savings functions of traditional life insurance with the growth potential of mutual fund type investments.

A

Variable life (VL)

58
Q

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.

A

Variable universal life (VUL)

59
Q

Arrangement where a terminally ill person sells his life insurance policy at a discount from its face value for current cash.

A

Viatical settlement

60
Q

Provides a guaranteed death benefit for the life of the insured and requires premium payments to be made until death or policy maturity.

A

Whole life insurance

CFP - Tracie (11 decks)

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