Investment Products Flashcards
What are the 4 Non-Forfeiture Options
Cash Surrender Value, Automatic Premium Loan, Reduced Paid up Insurance, Extended Term Insurance
When is Term Insurance Appropriate
Needs that have a definite end date, education funds, mortgages.
What is Special Term Addition (Dividend Option)
dividend is used to buy enough 1-year term insurance to match the cash value of the account.
What is a GIB rider?
Allows the policy holder to add stated amounts of life insurance on stated dates without evidence of insurability
What is a Future Purchase Option (FPO)
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
What is Waiver of Premium?
Optional rider that can be added to a life insurance policy. It waives the life insurance premium while a policy holder is disabled
Accelerated Death Benefits
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
On a whole life policy, the net amount at risk for the insurer is defined as?
Face Value - Cash Value
Child Term Riders
Only cover the newborn once it is 15 years old, covers all of a policy holders number of children under one single premium
Suicide Policy
Standard exclusion period of 2 years, suicide after that 2 years would be covered
Dividends on a Participating Policy
are a partial refund of the premium paid and are received tax free
Decreasing Term Insurance
appropriate when the need is temporary and will decrease over time ( saving for a childs education )
Reduced Paid up - Non Forfeiture Option
- Monthly Premium is Eliminated
- Amount of Coverage is Reduced
- Reduced Coverage remains whole life coverage
Extended Term Insurance - Non Forfeiture Option
- Monthly Premium is Elminated
- Coverage is no longer permanent
- Amount of coverage remains unchanged
Long-Term Care Insurance (LTC)
Reimburses the insured for costs that they incur whether staying in a facility or to have a caregiver
Mortality and Morbidity
Mortality - Risk of Death
Morbidity - Risk of Disability
Material Misrepresentation
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
Term Riders
Anytime you add a rider to an existing policy you need to provide evidence of insurability.
Absolute Assignment
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
Irrevocable Beneficiary
Cannot be absolutely assigned unless the existing beneficiary agrees
Renewable Term Insurance
Renewable up to a specific age ( usually 65 )
Renewal of Disability Plans (Types)
Non-Cancellable, Guaranteed Renewable, Conditionally Renewable, Optionally Renewable, Cancellable
Non Cancellable - Disability Insurance
Insurer is required to renew the policy as long as the insured keeps paying the premium
Guaranteed Renewable - Disability Insurance
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
Conditionally Renewable - Disability Insurance
The insurer has the right to cancel the policy at the end of a premium payment period if certain conditions are not met
Optionally Renewable - Disability Insurance
It is the insurers complete discretion as to whether or not it will let the insured renew the policy
Cancelable - Disability Insurance
Can cancel the policy at any time by notifying the policy owner and refunding any unused premiums paid
Notes Specific to Disability Plans
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
Benefit Period and Elimination Period
The longer the benefit period the higher the premium
The shorter the elimination period, the higher the premium
Disability Policy - Presumptive Clause
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
Disability Rider - Cost of Living Adjustment (COLA)
Increases the amount of coverage according to the rate of inflation, measured by the CPI.
The Different Definitions of Disabilty - Any Occupation
Any Occupation - only considered disabled if there isnt any occupation that he can do for which he is qualified by education and/or training
The Different Definitions of Disabilty - Regular Occupation
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
The Different Definitions of Disabilty - Own Occupation
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
Critical Illness Policy
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).
Elimination Period
The length of time the individual is required to be fully disabled before they will recieve benefits from the policy
Disability Rider - Partial Benefits
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
Disability Rider - Recurrent disability clause
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.
Grace Period
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)
Disability Rider - Qualified Exclusion
Also know as a partial exclusion, the policy will apply a longer elimination period and/or shorter benefit period for certain disabilities
Trigger Date
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
Business Overhead Policy
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
CPP Disability Plans
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
Group Plan Renewal Rate
Premium is renewed annually
Establishing Premiums on Group Plans - Manual Method
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
Establishing Premiums on Group Plans - Blended Method
Used when the insurer only feels partially reliable when considering previous and future claims
Refund Accounting ( Retention Accounting ) - Group Plan
If there is a surplus it shares the part of the surplus with the employer.
Non-Refund Accounting - Group Plan
If there is a surplus, the insurer keeps it all. In other words, it does not refund the surplus.
ASO Contracts - Group Plan
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 )
Request for Proposal (RFP)
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
Evidence of Insurability - Group plan
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
Non-Occupational Basis
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
Tax implications of Group Life insurance
Death Benefit received tax free, the premiums (paid by employer) would be a taxable benefit
Pro-Rata Basis
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
Employee Assistance Program (EAP)
allows employees to take advantage of professional counseling services to help deal and cope with problems with confidentiality
Probationary Period - Group Plan
How long a new employee must wait until they are eligible to join the plan
Eligibility Period - Group Plan
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
Waiting Period - Group Plan
(specifically for disability policies) - how long an insured member would have to wait for benefits after suffering a disability ( same as elimination period )
Non-Medical Questionnaire
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
Conditional Insurance Receipt
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.
TIA
Unlike a conditional insurance receipt, a payout under TIA does not depend on whether or not the main policy would have been approved.
Insurable Interest
Only exists at the time the policy is applied for and issued.
Jet Underwriting
Recieves smaller low risk policies that are easier to be underwritten and can be done so quickly
Medical Information Bureau (MIB)
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
Attending Physicians Statements (APS)
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
Collateral Assignment
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
Absolute Assignment
is a change in ownership. You would never absolutely assign a policy to a bank
Estimating needed Insurance
Income to be replaced / Investment Return = Insurance Required
Disabilty Coverage %
Normally 60 to 70%
Current Approach to Needs Analysis
Calculate the amount required at death less amount that will be available at death = amount of insurance required
