Chapter 9 Flashcards
Define the term beneficiary
The named individual who recieves life insurance payments upon the death of the insured
List characteristics of individual disability insurance
Able to select the definition of disability
benefits may be payable in the event of a total or partial disability
Benefits may be paid over the insured lifetime
Policies are portable
Mentions disability insurance provisions?
- definition of disability
Amount of coverage
Waiting period
Benefit period
What are the main differences between critical illness insurance and disability insurance
- CI benefits are paid in one lump sum whereas DI is a monthly benefit
- CI provides coverage for insured conditions whereas DI covers any injury or illness that prevents you from working
Generally CI pays a benefit only if you are able to survive life altering injury for how many days
30
List long term care insurance provisions
-eligibility to receive benefits types of services amount of coverage elimination period to receive benefits maximum period to receive benefits continued coverage inflation adjustment
List other factors that affect long term care insurance premiums
Age
Health condition
How to reduce your cost for long term insurance
- longer elimination period
purchase a policy that contains less provisions
Life insurance consists of two main categories?
Temporary or short term (e.g. term insurance)
Permanent
what is term insurance?
Life insurance that is provided over a specified time period (typically 10-20 years) and does not build a cash value
- cannot be renewed after a certain age
- strictly to provide insurance to a beneficiary in the event of death
In what circumstances would premiums be higher under term insurance
the longer the term of policy the older policy owner the greater the insurance coverage insured is male insured is a smoker insured family members have a history of medical problems
What is creditor insurance
A type of term life insurance where the beneficiary of the policy is a creditor
Who is a creditor
An individual or company to whom you owe money
Explain Group term insurance
Term insurance provided to a designated group of people with a common bond that generally has lower-than-typical premiums
What is permanent insurance
Life insurance available as long as premiums are paid
- part of the premium may be used to create a savings account
- rest of the premium is the cost of insurance-expenses incurred to provide the actual death benefit
What is death benefit
the total amount paid tax-free to the beneficiary on the death of the policy owner
explain the term whole life insurance
A form of permanent life insurance that builds cash value based on a fixed premiums that is payable for the life of the insured
What is Universal life insurance
A form of permanent life insurance for which you do not pay a fixed premium (pay a flexible one) and in which you can invest the cash value portion in a variety of investments
List the similarities between whole life and universal life insurance
permanent insurance policies that provide an opportunity to build cash value
accumulated growth is tax-sheltered until it is withdrawn
Useful tools for tax, retirement and estate planning
What are the differences between Universal Life and while life insurance
- whole life insurance premium is fixed whereas universal life premium is flexible between a minimum and maximum range
- in a whole life policy, insurance company selects the investments whereas the policy owner controls the investment choice in a universal life policy
- cash value guarantees are offered in a whole life policy, but not in a universal life policy
Explain the term non-forfeiture options
Options available to a policy owner who would like to discontinue or cancel a policy that has cash value
Mention sone non-forfeiture options
- cancel the policy and keep the cash value
- use the cash value to pay policy premium until the cash value runs out and the policy subsequently terminates
- use the cash value as a one time premium payment to purchase term insurance
- use the cash value as a one time premium payment to purchase permanent insurance
what is term to 100 insurance
A form of permanent life insurance that does not build cash value
- more expensive than term insurance but less that whole or universal life
List the classifications of life insurance?
Participating policy
Policy dividend
Non-participating policy
what is participating policy?
A life insurance policy that is eligible to receive policy dividends
what is policy dividend
A refund of premiums that occurs when the long term assumptions the insurance company made with respect to the cost of insurance, company expenses, and investment returns have changed
What is non participating policy
A policy that is not eligible to receive policy dividends
All life insurance policies are non participating
FALSE!. all life insurance except from whole life are non participating
How to determine the amount of life insurance needed
Income method
Budget Method
What is income method
a general formula that determines how much life insurance is needed based on the policyholders annual income
- specifies the life insurance amount as a multiple of your annual income
What is a disadvantage of the income method
- does not consider age or household circumstances (children vs no children)
What is the budget method
A method that determines how much life insurance is needed based on the households future expected expenses and current financial situation
- provides a better estimate of necessary coverage
what are some factors to consider when determining the amount of life insurance needed
annual living expenses special future expenses debt job marketability of spouse value of existing savings
List the contents of a life insurance policy
- Beneficiary
grace period
reinstatement
living benefits - policyholder to receive potion of death benefits prior to death
premium schedule
loans
suicide clause - benefits not payable if the owner commits suicide within two years of the effective date
incontestability date
Misstatement of age or sex
Renewability and coversion options
Riders - customize a life insurance policy for your specific needs
