Know This Flashcards
Whole Life insurance
Provides lifetime (permanent) protection and accumulates cash value.
Variable contracts
The policyowner bears the investment risk (assets in a separate account)
Premium rates on joint life Policy
Are determined by averaging the ages of both insureds.
Joint Life =
First to die; survivorship life =second to die (last survivor)
Insured skips a premium payment on a universal lie policy
The missing premium may be deducted from the policy’s cash value. The policy will not lapse.
“Level” in level insurance
Refers to the death benefit, which does not change
Term insurance
A) provides the greatest amount of coverage for the lowest premium.
B) has no cash value.
Annuities are based on
The life expectancy of the annuitant, the annuitant must be a natural person, regardless of who owns the policy.
During the accumulation period
Funds are not paid into the annuity. During the annuity period, funds are paid out to the annuitant.
Shorter life expectancy
= higher benefit; longer life expectancy = lower benefit.
An immediate annuity
Is purchased with a single premium
Income payments from a deferred annuity
Begin sometime after 1 year from the date of purchase.
In fixed annuities
The premiums are deposited in the company’s general account
Pure life annuity
Provides the highest monthly benefit, but there is no guarantee that the entire principal will be paid out
The fixed -period option
Pays for a specific time only, whether the annuitant is living
The main use of annuities
Is to provide retirement income
Entire contract
= policy + copy of application + any riders of amendments
Absolute assignment is
Complete and permanent transfer of ownership right; collateral assignment is the partial and temporary transfer of rights.
No beneficiary is named
The policy proceeds go to the insured’s estate.
Common disaster clause
Protects the contingent beneficiary
Grace Periods
Protect the policyholders from losing insurance coverage if they are late on a premium payment
Misstatement of age
On the application will result in adjustment of premium or benefits.
Policy loans
Are only available in policies that have cash value (whole life)
Wavier of premium rider
Waives the premium for a total disability after a waiting period.
Children’s term rider
One premium for all children
Nonforfeiture options
Are triggered by policy surrender or lapse.
Available options
- Reduced paid-up
- Extended term (automatic)
- Cash
Extended term
Is the automatic nonforfeiture option: same face amount, shorter term of coverage.
Dividends
Are a return of excess premiums: therefore, not taxable when paid to the policyowner
Settlement options
Are triggered by the insured’s death or age 100
Available options
- Cash
- Reduction of premium
- Accumulation at interest
- Paid-up Additions (automatic)
- Paid-up Insurance
- One-year Term
Under life-income (straight life) settlement option
The recipient cannot outlive the benefit payments.
Indemnity
Means insureds cannot recover more than their loss
Representations
Are statements believed to be true. Insured’s statements on the application are representations.
Insurer’s consideration
Is the promise to pay for the losses; insured’s consideration is the payment of premium and statements on the application.
A Life insurance Producer
Is the company’s field underwriter.
Conditional receipt means
The applicant may be covered as early as the date of the application.
An insurance application
Is the key source underwriters use for information about the applicant.
No premium
No coverage
Group insurance is
Written as annually renewable term insurance
In group insurance
The master contract is the employer and certificates of the insurance are for individual insureds.
When converting from group life
To individual life insurance, evidence of insurability is not required
Credit life insurance
Cannot pay out more than the balance of the debt.
Lump-sum
Cash payment of life policy proceeds are tax-free for the beneficiary
Qualified plans
Have tax advantages
Traditional IRA and Roth IRA
Are for individuals with earned income
Contributions to a traditional IRA
Are with pre-tax dollars(tax-deductible); Contributions to a Roth IRA are with after-tax dollars (not tax-deductible)
Traditional IRA
Distributions are taxable; Roth IRA distributions are NOT taxable.
403 (b)
Plans are for nonprofits and public-school systems.
Contributions
To qualified plans are limited to a maximum amount (establish by IRS)
Domicile refers
To the location where an insurer is incorporated; not necessarily where the insurer conducts business.
Restricted license
A foreign military sales agent representing a life insurance company in North Carolina.
Pretext interviews
1) Pretends to be someone else
2) pretends to represent a person he or she is not, in fact, representing.
3) Misrepresent the true purpose of the interview; or
4) Refuses to identify him or herself upon request.
Misrepresentation
Issue, publish, or circulate any illustration or sales material that is false, misleading, or deceptive as to policy benefits or terms, or the payment of dividends.
Rebating
Any inducement offered to the insured in the sale of insurance products that is not specified in the policy.
Twisting
A misrepresentation persuades an insured/owner to his or her detriment to cancel, lapse, or switch policies from one to another
False advertising
Advertisements cannot include any untrue, deceptive, or misleading statement that apply to the business of insurance or anyone who conducts it.
Defamation
An unfair trade practice in which one agent or insurer makes an injurious statement about with the intent of harming the person’s or company’s reputation.
coercion
An unfair trade practice in which an agent uses physical or mental force with the intent of inducing an applicant to purchase insurance.
Broker
An individual who represents an insured in the process of purchasing and negotiating a contract of insurance.
Agent
An individual who is licensed to sell, negotiate, or effect insurance contracts on behalf of an insurer.
Dividend Options
Available options
- Cash * Reduction of Premium
- accumulation at Interest
- Paid-up Additions (automatic)
- Paid-up Insurance
- One-year Term
