Life Insurance Basics Flashcards

1
Q

Family dependency period

A

The period when, should the insured die prematurely, the surviving spouse will have dependent children to support. The family’s income need will be greatest during this period.

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2
Q

Pre-retirement period

A

The period after the children are no longer dependent upon the surviving spouse for support, but before the surviving spouse qualifies for Social Security survivor benefits. The income needs of the surviving spouse lesson during this period; however, until the surviving spouse reaches the age of 60, Social Security benefits are not available.

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3
Q

Retirement. Period

A

The surviving spouse is working income ceases and his or her Social Security benefits begin. Since the surviving spouse is standard of living does not listen, he or she will require an income comparable to the pre-retirement During this time

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4
Q

Types of information that needs to be gathered falls under four categories

A

Debt, income, mortgage, expenses.

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5
Q

Debt cancellation

A

Insurance maybe use to create a fund to pay off Debts of the insured such as home mortgage or auto loans

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6
Q

Emergency reserve funds

A

Insurance proceeds maybe used to assist in paying for sudden expenses allowing the death of the insured, such as travel expenses and lodging for family members coming from a distance.

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7
Q

Retirement funds

A

Insurance proceeds maybe use a source of retirement income

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8
Q

Bequests

A

And insured may wish to the funds to their church, school, or other organization at the time of their death.

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9
Q

Creates an immediate Estate

A

The purchase of life insurance creates an immediate estate.

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10
Q

Liquidity

A

The policies cash values can be borrowed against at any time and used for immediate needs.

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11
Q

Human life value approach

A

Gives insured in the estimate of what would be lost to the family in the events of the premature death of the insured. It calculates and then visuals life value by looking at the insured’s wages, inflation, the number of years to retirement, and the time value of money.

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12
Q

Needs approach

A

Based on the projected needs of a family after the premature death of the insured. Some of the factors considered by the needs approach our income, the amount of debt, investments, and other ongoing expenses.

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13
Q

Business uses of life insurance

A

Key person insurance, Buy sell agreements, other uses. It creates an immediate payment upon the death of the insured.

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14
Q

Key person insurance

A

The key employee is the insured and the business is the: applicant, policy owner, premium pay year, and beneficiary.

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15
Q

Buy sell insurance

A

Agreements is a legal contract that determines what will be done with a business in the event that an owner does or becomes disabled.

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16
Q

Cross purchase

A

Partnerships with each partner buys a policy on the other

17
Q

Entity purchase

A

When the partnership buys the policies on the partners

18
Q

Stock purchase

A

Used by privately owned corporations with each stockholder buys a policy on each of the others

19
Q

Stock redemption

A

The corporation buys one policy on each shareholder

20
Q

Business overhead expense BOE

A

Sold to small business owners. The business overhead expense policy reimburses the business owner for the actual overhead expenses that are incurred while the business owner is totally disabled.

21
Q

Executive bonuses

A

And the arrangements were the employer offers to give the employee a wage increase in the amount of the premium of a new life insurance policy on the employee. The employee owns the policy and therefore has all control.

22
Q

Business continuation

A

In the arrangement between business owners that provides for shares owned by any one of them dies or becomes disabled to be sold to, and purchased by, the other co owners or the businesses.