Chapter 2, 7-10 Types of Life Ins; Business Uses; Retirement; Group Life Flashcards
Temporary life insurance for a temporary need with only a death benefit
Term Insurance
life insurance product that provides protection throughout one’s “whole life” or to age 100
Permanent Insurance
benefits available during the policy while the person is still alive
Living Benefits
term insurance that does not change in benefit or cost over the term
Level Term
term insurance where the death benefit decreases over the time
Decreasing Term
Life insurance where the death benefit increases each year during a set term
Increasing Term (Return of Premium)
Term insurance that can be renewed after a certain amount of time while insurability does not have to be established
Renewable Term
a product that can be converted from term to permanent without proof of insurability
Convertible Term
the ability to be insured
Insurability
the age of the insured at a specific time period throughout the policy
Attained Age
fixed premium term insurance
Level Premium Term
one year term policy
Annually Renewable Term
rate that is based on the date of purchase or conversion
Attained Age Rate
Rate based on the original date of purchase before conversion by making up the difference between the new rate and the original rate that has been paid since the original purchase date
Original Age Rate
permanent life insurance product that provides protection for one’s whole life or until age 100
Whole Life
equity of a life insurance policy
Cash Value
minimum interest rate guaranteed by the insurance company
Guaranteed Growth Rate
the amount you have PAID IN at the time you cash out your policy
Cost Basis
when you borrow money from the equity of a life policy
Loan
if a loan plus interest reaches the full cash value it is considered a full what?
Withdrawal
person(s) designated to receive the death benefit
Beneficiary
whole life premiums paid each year until the age of 100 at a lower rate
Continuous Premium/Straight Life Premium
payment into whole life for a set number of years at a higher rate per year, but still provides lifetime protection
Limited Pay Whole Life
One premium payment is made into the policy to pay up the protection for life
Single Premium
whole life policy that allows changes to be made without purchasing an additional policy subject to insurability
Adjustable Life Insurance
whole life policy that invests the cash value in a separate account chosen by the insured subject to investment risk and sold by a dually licensed rep
Variable Whole Life
FINRA
Financial Industry Regulatory Authority
investment account within a whole life policy
Separate Account
a form of whole life insurance in which the owner has both a flexible premium and death benefit amount
Universal Life
the period of time the owner has to pay the premium payment after the policy comes due
Grace Period
a change endorsement to the original policy
Rider
a rider found in UL policies that maintains the policy . It waives the cost of protection being deducted each month from the cash value account in the event that the insured becomes disabled
Waiver of Cost Rider
waives the premium on a policy, in the event of the insured becoming disabled
Waiver of Premium Rider
UL option with level death benefit up to age 95; risk decreases as cash value increases
Universal Life Option A
UL option with increasing death benefit ; risk stays constant
Universal Life Option B
designed by the IRS to insure the cash value in a policy does not exceed the death benefit
Risk Corridor
universal life where the insured assumes the investment risk while the cash value is invested in a separate account
Variable Universal Life
a permanent policy with cash value growth, fixed premium, but the cash value account is credited with an interest rate based on the company’s investment experience along with the company’s guaranteed minimum
Interest Sensitive Whole Life
a permanent policy that pays interest based upon the change in a particular equity index such as Dow Jones or S&P500
Equity Indexed Life
a single policy intended to insured multiple lives, but only pays one death benefit (after the first insured’s death)
Joint Life (First to Die)
a single policy intended to insured multiple lives, but only pays on death benefit (after the last insured dies)
Joint and Survivor Life (Last to Die)
a single policy that provides multiple death benefits for multiple insureds (covers each member of the family)
Family (Protection) Policy
Units
life product that modifies the premium structure; begins with a low premium and after a period of time, increases, then levels off
Modified Life
life product that modifies the premium by gradually increasing each year until it levels off after 5 years
Graded Premium
a life insurance product designed to provide coverage for the life of a child
Juvenile Life
rider that states if the payor (adult or parent) dies or becomes disabled, the premium will be paid up until the child is old enough to take over the premium payments
Payor Rider or Benefit
rider that allows the insured to purchase additional amounts of insurance at predetermined times without proving insurability
Guaranteed Insurability Rider
insurance used to pay off a debt in the event of the insured’s death
Credit Life
a permanent policy paid up (overfunded), in less than 7 years
Modified Endowment Contracts (MEC)
test used to determine if too much money was paid in too early; if the accumulated amount paid under the contract at any time during the first seven years exceed the total net level premiums that would have been paid
7-Pay Test
Life policy to protect the business if a key employee dies
Key Employee life policy
A contract agreement that will state in the event of an owner’s death their share will be bought for a pre-determined price and the heirs will sell their ownership for the agreed upon price.
Buy Sell Agreement
a plan that allows the corporation to buy out shares of a deceased owner, often financed by life insurance to fund the sale
Stock Purchase Plan
a plan where each owner has a life policy on all the other owners; at the time of death the remaining owners use the proceeds to buy out the heirs of the deceased owner
Cross Purchase Plan
method used to purchase permanent insurance by an employer and employee protecting the employee and the owner if the key employee dies
Split Dollar Plan
OASDI Act of 1935 funded by employers & employees
Old Age, Survivors, and Disability Income (Social Security)
benefit that provides a monthly check to a retiree after reaching retirement age
Retirement Income
If an individual meets the early disability requirements of SS, it is possible to qualify for this income earlier than retirement age
Disability Income
Survivors who have lost their spouses may qualify for a temporary income and/or death benefit
Survivor Benefits
The amount of social security a personal will receive is based on their __________________
Primary Insurance Amount (PIA)
the period of time in which a survivor no longer qualifies for the survivor benefit and is not old enough to receive the retirement benefit
Blackout period
A fully insured individual has worked how many quarters
40
retirement plans defined by the IRS with funding limitations, participation requirements and tax advantages
Qualified
retirement plan that does not get a full tax benefit
Non-Qualified
3 advantages of Qualified Plans
Tax Deductible Business Expense
Tax Deferred Contributions
Tax Deferred Growth
retirement plans that define the benefit the employee will receive upon retirement
Defined Benefit Plan
retirement plan that establishes the amount the is being contributed into the plan, the end result will not be known until it is time to use the plan
Defined Contribution Plan
deferred compensation plans that defer a portion of their paycheck into the retirement account
401K
401K or 403b plans are sometimes referred to as
CODA (Cash or Deferred Arrangement)
retirement plan for non-profit organizations
403b
retirement plan for self employed (farmers, doctors, etc)
Keogh
retirement plan for small or self employed that establishes separate IRAs for each employee
Simplified Employee Pension Plan (SEP)
retirement plans designed for 100 or less employees that establishes separate IRA accounts for the retirement money to be deposited into
SIMPLE Retirement Plan
retirement accounts established by the individual
IRA
individual plan that may be deductible, grows tax deferred, subject to early withdrawal penalties and withdrawals must begin after owner is 70 1/2
Traditional IRA
IRA that is post tax and the growth is tax free
Roth IRA
allows the employee to move money from an employer sponsored retirement fund into an IRA within 60 days without penalty
Plan Roll Over
roll over of retirement plan that omits the need for the company to send 20% to the IRS
Direct Transfer
group life made up of a group of small employers from a common industry purchasing insurance through a trust
MET (Multiple Employer Trusts)
group life with a made up of small employers self-insuring
MEWA Multiple Employer Welfare Arrangement
allows an employee to convert group life to whole life individual policy at attained age within 31 days with guaranteed insurability
Life Conversion Privileges
% of participation on contributory vs non-contributory group life
100% Non-Contributory
75% Contributory
