Life Insurance Flashcards
Basic Group Term Life
Types of Plans
- Flat Dollar
- Multiple of Earnings
- Salary Bracket
- Position (Insurance amount based on EE category)
Basic Group Term Life
Eligibility Provisions
- FTE
- Actively-at-Work
- Evidence of insurability
- Minimum participation
Basic Group Term Life
Continuity of Coverage and Conversion Rights
Insured’s right to convert group term insurance to individual policy upon termination of employment
Basic Group Term Life
Disability Provisions (List and Define)
- Waiver of Premium: coverage continues w/o premium when EE is disabled
- Total and Permanent Disability: Monthly benefit (Reduces DB)
- Extended Death Benefit: DB payable if coverage terms and EE is disabled and dies within 1 year
Basic Group Term Life
Benefit Payment Provisions: Settlement Options
- Lump sum
- Monthly installment
- Money Market-like account
Basic Group Term Life
Federal Income Tax: Employers
ER-paid premium = deductible on ER’s income tax
Basic Group Term Life
Federal Income Tax: Beneficiary
Benefits received are excluded from beneficiary’s gross income
Basic Group Term Life
Federal Income Tax: Employee
- US = Imputed Income on amounts above $50k
- Canada = All ER life insurance payments are taxable
Basic Group Term Life
Federal Regulations
- ERISA
- ADEA = protects against age discrimination
Basic Group Term Life
State Regulations
- No individual selection of face amount
- Maximum EE contribution
- Minimum participation
- NAIC model laws
Group Supplemental Life
Definition and Types
- Definition: EE-pay-all additional insurance that extends beyond basic group term
- Type: Flat amount or Multiple of Earnings
Group Supplemental Life
Eligibility Provisions
- FTE
- Actively-at-work
- Evidence of Insurability = more stringer than basic
- Minimum Participation = lower than basic
- Suicide Exclusion
Group Supplemental Life
Continuity of Coverage and Conversion Rights
Portability Provisions
- Allow participants to continue group coverage by paying premium directly to insurer
Group Supplemental Life
Disability Provisions
Waiver of Premium only
Group Supplemental Life
Benefit Payment Provisions
Same as basic group term
- Settlement options = lump, monthly, market account
Group Supplemental Life
Federal Income Tax: Beneficiary
Same as basic group term
- Benefits received are excluded from beneficiary’s gross income
Group Supplemental Life
Federal Income Tax: Employee
No imputed income
Group Supplemental Life
Federal Regulations
Same as basic group term
- ERISA
- ADEA
Group Supplemental Life
State Regulations
- No individual selection of face amount
- Maximum EE contribution
- Minimum participation = If basic plan meets requirements, then supp plan can be lower
- NAIC model laws
Group AD&D
Benefit Payment Provisions
Benefit amount = 100% group life amount
- 100% of Benefit Payable if EE dies or loses multiple members
- 50% of Benefit Payable if EE loses single member
Group AD&D
Definition and Types
- Definition: companion coverage to group term life
- Types: Non-occupational and 24-hour
Dependent Group Life
Eligibility Provisions
Same as health coverage
Dependent Group Life
Continuity of Coverage and Conversion Rights
- Coverage only continues while EE’s group term life coverage continues
- Conversion rights = same as EE’s
Dependent Group Life
Benefit Payment Provisions
- Benefit = Lump Sum
- Beneficiary = EE
Dependent Group Life
Federal Income Tax: Employee
- US = Imputed income on benefit amounts over $2000
- Canada = ER-paid amounts are taxable
Survivor Income Benefits
Definition
Monthly payments to EE’s family upon EE death
Survivor Income Benefits
Eligibility
Same as basic group term
- FTE
- Actively-at-Work
- Evidence of insurability
- Minimum participation
Survivor Income Benefits
Continuity of Coverage and Conversion Rights
Conversion rights apply to PV(monthly survivor benefit)
Survivor Income Benefits
Disability Provisions
Waiver of Premium Only
Survivor Income Benefits
Benefit Payment Provisions + Amount
Amount = % of EE monthly earnings
- Guaranteed or Maximum benefit period
- Remarriage provisions
- Social Security offset
- Last Survivor provisions
Survivor Income Benefits
Federal Income Tax: Beneficiary
Monthly Payment = Non-Taxable portion + Taxable interest portion
Survivor Income Benefits
Federal Income Tax: Employee
Same as basic group term
- US = Imputed Income on amounts above $50k
- Canada = All ER life insurance payments are taxable
Group Permanent Life
Types (List and Define)
-
Single-Premium Group Paid-Up Life
- Benefit = Level DB
- Premium = Single Premium
-
Group Ordinary Life
- Benefit = Level DB
- Premium = Level
-
Group Term and Paid-up Plan
- 2 components = EE-Paid Group Paid-Up + ER-Paid Group Term
Group Permanent Life
Continuity of Coverage and Conversion Privilege
- Group Paid-Up = No continuity needed because it is fully paid
- Group Ordinary Life = Conversion rights limited to (Face Amount - Cash Value)
Group Permanent Life
Disability Provisions
Waiver of Premium Only
Group Permanent Life
Federal Income Tax: Employee
US = Imputed income is calculated using conservative interest and mortality assumptions
Group Universal Life
Definition
Term Life Insurance + Accumulative Interest Side Fund
Group Universal Life
Eligibility Provisions
Similar to group supplemental
- FTE
- Actively-at-work
- Evidence of Insurability = more stringer than basic
- Minimum Participation = lower than basic
- Suicide Exclusion
Group Universal Life
Federal Income Tax: Beneficiary
- Cash Surrender = taxable
- Death Benefit = Not taxed
Group Universal Life
Federal Income Tax: Employee
Favorable tax laws; Interest accumulates on tax-deferred basis
Group Variable Universal Life
Definition
Same as GUL = Term Life Insurance + Accumulative Interest Side Fund
- Equity and fixed interest investment options available to invest side fund
Group Variable Universal Life
Statutory Considerations
- Considered investment product = subject to SEC regulation
- Limits on withdrawals and movement of funds among investment options
