Definitions (Chapter 5) Flashcards
Mortality Factor
Is a listing of the mortality experience of individuals by age; permits an actuary to calculate, on the average, how long a male or female of a given age group may be expected to live
Interest Factor
is a factor that is utilized to provide a simple calculation for determining the amount of interest an insurance company can expect to earn from investing insurance premiums
Expense factor
is a measure of what it costs an insurance company to operate. This is also known as the loading charge.
Premium Mode
is the frequency in which a policyowner elects to pay premiums
Viatical Settlement
Is an agreement under which the owner of a life insurance policy sells the policy to another person in exchange for a bargained for payment, which is generally less than the expected death benefit under the policy. They typically involve someone with a terminal illness selling their existing life insurance policy to a third party for a percentage of the death benefit. The new owner continues to make the premium payments and will eventually collect the entire death benefit. The original policyowner is the Viator and the third party owner is the Viatical or the Viatee. With Viatical Settlements, the new premiums are not tax deductible. The death benefit is tax-free if taken as a lump sum to a named beneficiary. Proceeds pass directly to the beneficiary and are not subject to attachment by the insure’s creditors. If the death benefit is paid in installments the principal is tax-free but the interest is taxable.
Class designation
is a beneficiary designation. Rather than specifying one or more beneficiaries by name, the policy owner designates a class or group of beneficiaries. For example “My Children.”
Beneficiary
The beneficiary of a life insurance policy is the person or entity designated in the policy to receive the death proceeds
Primary Beneficiary
The first in line to receive death benefit proceeds
Secondary (Contingent) Beneficiary
Is the second in line to receive death benefit proceeds
Tertiary Beneficiary
is the third in line to receive death benefit proceeds. If no one named, death benefit will go to insured’s estate.
Revocable Beneficiary
is a beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary.
Irrevocable Beneficiary
May not be changed without the written consent of the beneficiary. The irrevocable beneficiary has a vested interest in the policy, therefore the policyowner may not exercise certain rights without the consent of the beneficiary.
Per stirpes
(by the bloodline) means that in the event that a beneficiary dies before the insured, benefits from that policy will be paid to that beneficiary’s heirs.
Per capita
(by the head) evenly distributes benefits among all named beneficiaries.
Simultaneous Death Act
states that if the insured and the primary beneficiary die at approximately the same time for a common accident with no clear evidence as to who died first, the Uniform Simultaneous Death Act law will assume that the primary died first, this allows the death benefit proceeds to be paid to the contingent beneficiaries.