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LLQP > Investment Products > Flashcards

Investment Products Flashcards

1
Q

What are the 4 Non-Forfeiture Options

A

Cash Surrender Value, Automatic Premium Loan, Reduced Paid up Insurance, Extended Term Insurance

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2
Q

When is Term Insurance Appropriate

A

Needs that have a definite end date, education funds, mortgages.

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3
Q

What is Special Term Addition (Dividend Option)

A

dividend is used to buy enough 1-year term insurance to match the cash value of the account.

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4
Q

What is a GIB rider?

A

Allows the policy holder to add stated amounts of life insurance on stated dates without evidence of insurability

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5
Q

What is a Future Purchase Option (FPO)

A

Can be added to a disability policy and allows you to add stated amounts of disability coverage without evidence of insurability, but must prove income warrents added coverage

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6
Q

What is Waiver of Premium?

A

Optional rider that can be added to a life insurance policy. It waives the life insurance premium while a policy holder is disabled

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7
Q

Accelerated Death Benefits

A

Allows for part of the death benefit to be paid prior to the annuitants death.

Terminal Illness - life expectancy less than 1 year
Dread Disease - diagnosed with a dreaded disease named in the rider
LTC - unable to do two or more daily living activities

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8
Q

On a whole life policy, the net amount at risk for the insurer is defined as?

A

Face Value - Cash Value

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9
Q

Child Term Riders

A

Only cover the newborn once it is 15 years old, covers all of a policy holders number of children under one single premium

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10
Q

Suicide Policy

A

Standard exclusion period of 2 years, suicide after that 2 years would be covered

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11
Q

Dividends on a Participating Policy

A

are a partial refund of the premium paid and are received tax free

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12
Q

Decreasing Term Insurance

A

appropriate when the need is temporary and will decrease over time ( saving for a childs education )

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13
Q

Reduced Paid up - Non Forfeiture Option

A
  • Monthly Premium is Eliminated
  • Amount of Coverage is Reduced
  • Reduced Coverage remains whole life coverage
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14
Q

Extended Term Insurance - Non Forfeiture Option

A
  • Monthly Premium is Elminated
  • Coverage is no longer permanent
  • Amount of coverage remains unchanged
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15
Q

Long-Term Care Insurance (LTC)

A

Reimburses the insured for costs that they incur whether staying in a facility or to have a caregiver

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16
Q

Mortality and Morbidity

A

Mortality - Risk of Death

Morbidity - Risk of Disability

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17
Q

Material Misrepresentation

A

Any information that provided that would have otherwise impacted the underwriting decision in any way is considered a material misrepresentation. Must be noticed within 2 years, after 2 years the insurer would have to prove fraud

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18
Q

Term Riders

A

Anytime you add a rider to an existing policy you need to provide evidence of insurability.

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19
Q

Absolute Assignment

A

constitues a change in ownership, the new owner obtains all rights and privilleges to the policy which means they automatically become the new beneficiary as well

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20
Q

Irrevocable Beneficiary

A

Cannot be absolutely assigned unless the existing beneficiary agrees

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21
Q

Renewable Term Insurance

A

Renewable up to a specific age ( usually 65 )

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22
Q

Renewal of Disability Plans (Types)

A

Non-Cancellable, Guaranteed Renewable, Conditionally Renewable, Optionally Renewable, Cancellable

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23
Q

Non Cancellable - Disability Insurance

A

Insurer is required to renew the policy as long as the insured keeps paying the premium

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24
Q

Guaranteed Renewable - Disability Insurance

A

Insurer is required to renew the policy as long as the insured keeps paying the premium. The insurer has the right to increase the premium rate, as long as it does so for the entire class of policies

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25
Q

Conditionally Renewable - Disability Insurance

A

The insurer has the right to cancel the policy at the end of a premium payment period if certain conditions are not met

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26
Q

Optionally Renewable - Disability Insurance

A

It is the insurers complete discretion as to whether or not it will let the insured renew the policy

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27
Q

Cancelable - Disability Insurance

A

Can cancel the policy at any time by notifying the policy owner and refunding any unused premiums paid

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28
Q

Notes Specific to Disability Plans

A

If the insured has changed job classifications ( doctor to a underwater welder ) the insurer can adjust the premium , if the insured has changed to an unacceptable job class, the insurer can even cancel the policy

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29
Q

Benefit Period and Elimination Period

A

The longer the benefit period the higher the premium

The shorter the elimination period, the higher the premium

30
Q

Disability Policy - Presumptive Clause

A

The insured suffers from a presumptive disability (loss of use of limbs, loss of sight, loss of hearing, loss of speech) the policy will pay out the full benefit for the full benefit period, even if the insured returns to work

31
Q

Disability Rider - Cost of Living Adjustment (COLA)

A

Increases the amount of coverage according to the rate of inflation, measured by the CPI.

32
Q

The Different Definitions of Disabilty - Any Occupation

A

Any Occupation - only considered disabled if there isnt any occupation that he can do for which he is qualified by education and/or training

33
Q

The Different Definitions of Disabilty - Regular Occupation

A

The insured is considered disabled if she is unable to perform the essential duties of her normal occupation, but she is not allowed to be gainfully employed in another occupation

34
Q

The Different Definitions of Disabilty - Own Occupation

A

The insured is considered disabled if he is unable to perform the essential duties of his normal occupation, even if he is gainfull employed in another occupation

35
Q

Critical Illness Policy

A

Pays out a benefit if the insured suffers from a critical illness named in the policy and survives a certain period of time (usually 30 days).

36
Q

Elimination Period

A

The length of time the individual is required to be fully disabled before they will recieve benefits from the policy

37
Q

Disability Rider - Partial Benefits

A

Appropriate when it is difficult to determine if or by how much the individuals income will be affected if they come back to work in a reduced capacity

38
Q

Disability Rider - Recurrent disability clause

A

Policy owner does not have to re-satisfy the elimination period should the disability occur within a certain time period. However the benefit period picks up from where it left off.

39
Q

Grace Period

A

For life insurance policies it is always 30 days. For A&S policies it depends on whether the premium is paid monthly (10 day grace period) or annually (31 days)

40
Q

Disability Rider - Qualified Exclusion

A

Also know as a partial exclusion, the policy will apply a longer elimination period and/or shorter benefit period for certain disabilities

41
Q

Trigger Date

A

Exclusive to a disability buy-out policy. Pays out a lump sum in the event that the insured is disabled for the required elimination period

42
Q

Business Overhead Policy

A

Purpose is to keep the business afloat while the business owner is off on disability. Only business overhead costs are covered. Nothing that would result in the equity of the company increasing would be covered. Maximum benefit period is usually 2 years

43
Q

CPP Disability Plans

A

A flat rate amount and a variable amount based on how much and for how long the applicant has paid into the Canada Pension Plan

44
Q

Group Plan Renewal Rate

A

Premium is renewed annually

45
Q

Establishing Premiums on Group Plans - Manual Method

A

Used to establish the first premium. This is because the insurer would have no previous claims experience with the group and therefore it would be impossible to use the experience or even the blended approach

46
Q

Establishing Premiums on Group Plans - Blended Method

A

Used when the insurer only feels partially reliable when considering previous and future claims

47
Q

Refund Accounting ( Retention Accounting ) - Group Plan

A

If there is a surplus it shares the part of the surplus with the employer.

48
Q

Non-Refund Accounting - Group Plan

A

If there is a surplus, the insurer keeps it all. In other words, it does not refund the surplus.

49
Q

ASO Contracts - Group Plan

A

Only appropriate for large companies

  • the employer pays claims out of its own pocket
  • the employer pays an insurer to handle the administrative services
  • One of the services the insurer will provide is helping the employer understand how much money should be set aside to cover potential death benefit claims ( known as actuarial services )
50
Q

Request for Proposal (RFP)

A

sent to various insurers asking them to bid on establishing a plan for the group. The agent will help the group assess bids and choose the insurer whose proposal best meets their needs

51
Q

Evidence of Insurability - Group plan

A

1) member is requesting additional optional coverage
2) group is too small to provide sufficient spread of risk
3) Member is requesting coverage after the eligibility period

52
Q

Non-Occupational Basis

A

the usual death benefit will be paid if the annuitant dies, but the accidental death benefit will only be paid if the accidental death occurs away from work

53
Q

Tax implications of Group Life insurance

A

Death Benefit received tax free, the premiums (paid by employer) would be a taxable benefit

54
Q

Pro-Rata Basis

A

When both plans offer coordination of benefits, they are both born on the same day, and neither of their first names comes earlier in the alphabet.
- each plan would pay 50% of what they would normally pay

55
Q

Employee Assistance Program (EAP)

A

allows employees to take advantage of professional counseling services to help deal and cope with problems with confidentiality

56
Q

Probationary Period - Group Plan

A

How long a new employee must wait until they are eligible to join the plan

57
Q

Eligibility Period - Group Plan

A

Specific time frame in which they must join once they become eligible. If they join after this period, they would have to provide evidence of insurability

58
Q

Waiting Period - Group Plan

A

(specifically for disability policies) - how long an insured member would have to wait for benefits after suffering a disability ( same as elimination period )

59
Q

Non-Medical Questionnaire

A

Asks questions about the insured’s health and family health history. It is called a non-medical because it is not completed by a nurse or a doctor

60
Q

Conditional Insurance Receipt

A

Potentially covers the insured during the underwriting process. If the insured dies while the policy is being underwritten, a death benefit will be paid provided that the policy was likely going to be approved one underwritten.

61
Q

TIA

A

Unlike a conditional insurance receipt, a payout under TIA does not depend on whether or not the main policy would have been approved.

62
Q

Insurable Interest

A

Only exists at the time the policy is applied for and issued.

63
Q

Jet Underwriting

A

Recieves smaller low risk policies that are easier to be underwritten and can be done so quickly

64
Q

Medical Information Bureau (MIB)

A

Information from past policies are sent to the MIB including how much insurance was applied for and whether or not the policy was approved along with the reasons

65
Q

Attending Physicians Statements (APS)

A

The insurer cannot use infomration recieved in the MIB to decline a policy without substantiating the information recieved. This is done by requesting an APS

66
Q

Collateral Assignment

A

states that if the annuitant dies, the death benefit will be used to pay out the loan. Any excess funds would then go to the beneficiary

67
Q

Absolute Assignment

A

is a change in ownership. You would never absolutely assign a policy to a bank

68
Q

Estimating needed Insurance

A

Income to be replaced / Investment Return = Insurance Required

69
Q

Disabilty Coverage %

A

Normally 60 to 70%

70
Q

Current Approach to Needs Analysis

A

Calculate the amount required at death less amount that will be available at death = amount of insurance required

LLQP (7 decks)

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