Chapter 4 - Group Policies Flashcards
Life Settlement
when an owner of a policy sells to a third party.
How is group insurance written?
As annually renewable term insurance.
Conversion Privilege
If an employee terminates membership in a the insured group and has been on plan for 5 years, the employee has the right to covert to an individual policy without proving insurability, at a standard rate for the employee’s age.
How long is the conversion option window?
31 days from terminating from the group.
What is non contributory plan?
When the employer pays all of the premiums.
What is contributory plan?
When premiums are shared between employer and employees. 75% of employees must be on the plan.
What are two individual qualified plans?
Traditional IRA and Roth IRA
Difference between ira and roth?
ira is funded with pre tax dollars, roth ira are with after tax dollars.
What is 403(b) plan?
A tax sheltered annuity plan available to non profits and public school employees.
Survivor Protection
Provide necessary funds for survivors of insured to maintain their lifestyle.
Buy sell arrangments
Used to contractually establish the intent of someone to buy the business in the event of a death.
Executive bonus:
Employer agrees to pay for premium of a policy of an employee.
How are lump sum death benefits taxed?
Tax free, if in installments the principal is tax free but the interest is paid on the returns.
Is interest charged on policy loans?
Yes, the insurer will charge interest on outstanding policy loans.
Are group life employer paid premiums tax deductible if employer is not beneficiary?
Yes
If the business is the beneficiary of a group life policy, are the premium payments tax deductable?
No
MEC
Modified endowment contract. When a policy fails a 7-pay test, it looses the standard tax benefit of a life insurance contract.
FIFO and LIFO
Insurance follows FIFO. Annuities follow LIFO.
What are Keogh plans?
They are retirement plans for self employed. Must work more than 1000 hours per year to be eligible.
Common types of business life insurance:
- Key person
- Buy-sell agreements
- Executive bonus arrangments
3 types of social security benefits:
- Retirement
- Disability
- Survivors
Details of SIMPLE plan?
Retirement plan available to companies who employ no more than 100 employees and employees must receive at least $5,000 a year.
What percentage of employees must be in employer contributory and noncontributory plans?
75% and 100%
What is a stoli policy?
A stranger originated policy that acts as an investment.
List characteristics of key person insurance:
- Can be any type of insurance.
- The employer is the owner, payor and beneficiary.
- No limitation on the number of key person insurance.
- Employer receives benefits tax free.
What is the name of the policy issued to the an employer in a single employer group plan?
Master contract.
How is cost of coverage in group life determined?
Based on the ratio of men and women in the group.
