Chapter 4 Premiums, proceed, and Beneficiairies Flashcards
1035 Exchange
Tax code allows owners to exchange policy for another one to avoid tax on gains
exchange life insurance policy for another life insurance policy, endowment policy or annuity contract
and endowment for an annuity
and annuity for another annuity
Accelerated Benefits
early payment of some portion of face amount if insured becomes terminally ill or badly injured
Cash Value
The “equity” of savings accumulation in a whole life policy
Level Premium Funding
used by all regular life insurance companies. equivalent level premium is paid.
Policy Reserves
Funds held by company for future claims
3 Premium Factors (for computing premium)
- Mortality
- Expense
- Interest
Settlement Options
optional settlements instead of lump sum.
ex. interest only, fixed period, lump sum cash, fixed amount, life income.
Viatical Settlement
policy owner sells to another person in exchange for a bargain payment. generally less than death benefit
Primary Purposes of Mortality Table
expectation of life at given ages
averages numbers of deaths for a group in given years
Net Single Premium
Mortality Cost - Interest
Gross Premium
Net Single Premium + Expenses
Policy Reserve belongs to _______
Cash Value belongs to ________
Insurer
policy owner
6 Settlement Options
- Single premium payment
- Installment payments
- income for life
- joint life incomes
- interest payments
- special payment plans
Optional modes of settlement (instead of traditional lump sum)
- lump sum cash
- interest only
- fixed period
- fixed amount
- life income
Spendthrift Trust Clause
policy proceeds are not subject to the claims of creditors. of the beneficiary or policy holder
Uniform Simultaneous Death Act
states when insured and beneficiary die at same time , it is presumed the insured survived the beneficiary.
Revocable Beneficiary
policy owner can change beneficiary at any time
Irrevocable Beneficiary
Policy owner cannot change beneficiary without written consent from beneficiary.
Per Capita
Death benefits divided equally among living beneficiaries
Per Stirpes
benefits divided equally among named beneficiaries, if named is deceased that share goes to their decendents
Facility of Payment Provision
Provision normally in industrial policies permitting issuer to chose who the beneficiary is if not listed in policy.
Common Disaster Provision
provides alternative beneficiary if insured and beneficiary die in same accident.
true or false
death benefits paid to beneficiary are tax free
True: but any interest earned in taxable
true or false:
If owner doesnt name a beneficiary or beneficiary dies before them proceeds go to insureds estate and are taxable
TRUE
