Chapters 3-4 Annuities & Life Provisions Flashcards
liquidation of an estate
Annuity
the party that controls the policy
Owner
the party the annuity is based upon; when they die the policy ends
Annuitant
the time period in which the annuitant makes payment into the annuity
Accumulation Period
owner of the annuity makes a single payment into the plan and requests income right away
Immediate Annuity
the process of moving the accumulated money from the accumulation side to the income stream sid
Annuitize
an annuity in which annuitization is delayed; the owner decides at what time, if ever, to cross the line of annuitization
Deferred Annuity
annuity funded with after-tax dollars
Non-Qualified
annuity funded with pre-tax dollars (IRA or 401K)
Qualified
Money from an annuity is distributed in what order
LIFO
annuity companies fee for early withdrawal
Surrender Charge
time period when the annuitized product is paid out or liquidated
The Annuity Period (pay-out/liquidation)
annuities designed to pay out as long as the annuitant is alive
Life Annuities
pays an income stream of both principal and interest until the annuitant dies; at death the income ends
Straight Life/Life only
guarantees an income for life with a minimum guarantee based upon a period of time chosen by the annuitant
Life Annuity w/Period Certain
guarantees an income for life with a minimum guarantee based upon the amount the annuitant annuitized
Refund Life Annuity
guarantees payment throughout two lives; payment ends at death of survivor
Joint and Survivor Life Annuity
does NOT guarantee an income for life; the total principal and interest earned throughout the liquidation phase will be paid out by the company
Annuity Certain
annuity that pays out over a specific period of time
Fixed Period
annuity where the annuitant chooses the amount and the company establishes the term based on how long the funds will last
Fixed Amount
the formula used on the annuity side to determine which portion of the payment is taxed vs not taxed
Exclusion Ratio
annuities in which the insurance company pays an interest to the owner for the use of his/her money
Fixed Annuities
annuity that takes the cash value in the product and invests it in a separate account chosen by the insured
Variable Annuities
an annuity that takes the cash value in the product and pays an interest based upon the change in a particular equity index
Equity Indexed Annuity
annuity product that calculates a different interest rate on the funds if they are cashed in versus annuitized
Two Tiered Annuity
annuity that combines the accumulation of retirement funds within an annuity with decreasing term to age 65 life insurance policy
Retirement Income Annuity
pays a fixed interest rate, but if surrendered early, the contract will be recalculated based upon the market performance throughout the policy term.
Market Value Adjusted Annuity
provisions required to be written into the insurance contract according to state law
Required Provision
the clause states the parties, promise and perils covered
Insuring Clause
the policy and any attachments (including the application) compromise the contract-states what makes up the total contract-only the executive office of the company can make changes
Entire Contract/Changes
the period of time the company has to challenge the information on the application (2 years)
Incontestable Clause
the clause allows the insurer to adjust the death benefit, to reflect the actual age that the contract should have been based upon
Misstatement of Age and Sex
period of time the owner has to pay the premium after the due date
Grace Period
clause that allows the insured, after dropping coverage, to get the policy reinstated if the rules set forth by the company are satisfied
Reinstatement Clause
clause says the owner has all the rights in a policy
Ownership Clause
to give rights of the policy to another party
Assignment
total relinquishment of rights and ownership
Total Assignment (Permanent)
the owner gives up some of his/her ownership rights for a temporary period of time
Partial Assignment (Temporary assignment)
What is the Time Limit on Lawsuits
the company has 60 days to pay the claim and the insured has 3 years (some states 2) to sue
what is the rule on backdating
6 months in order to save age (does not change incontestability clause)
10 day time period that begins when the policy is delivered
Free Look Provision
provisions that may be added by the company
Discretionary Provisions
the company will not pay if the insured commits suicide within the first ???? years
Suicide Clause- 2 years
if occupations or hobbies are dangerous the company may add this exclusion
Hazardous Occupation Clause
when the insured charges a higher premium to cover a higher risk
Rate Up
first person designated to receive the death benefit
Primary Beneficiary
if the primary beneficiary has died, who is next in line?
Contingent Beneficiary
beneficiary designation that may only be changed if the beneficiary agrees to give up their designation
Irrevocable Beneficiary
a beneficiary designation that can be changed by the owner
Revocable Beneficiary
the process of determining and transferring ownership of an estate
Probate
in a simultaneous accident, when the order of death cannot be established, it will be assumed that the insured outlived the primary beneficiary
Uniform Simultaneous Death Act
beneficiary designation distributes the benefit to the surviving beneficiaries on an equal basis
Per Capita
beneficiary designation that distributes the deceased beneficiary’s portion of the proceeds to his/her heirs in descending order; through the root
Per Stirpes
condition written into the policy that is designed to protect the proceeds from the beneficiary and their creditors
Spendthrift Clause
