Life Insurance Premiums, Proceeds and Beneficiaries Flashcards
allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness and is certified by a physician as expected to die within 1-2 years
accelerated benefit rider
the person or entity designated in a life insurance policy to receive the death proceeds
beneficiary
the equity or savings element of whole life insurance policies
cash value
a beneficiary group designation (for example, all of my children), opposed to specifying one or more beneficiaries by name
class designation
ensures a policyowner if both the insured and the primary beneficiary die within a short period of time, the death benefits will be paid to the contingent beneficiary
the primary beneficiary must outlive the insured a specified period of time in order to receive the proceeds
common disaster provision
the beneficiary second in line to receive death benefit proceeds if the primary beneficiary dies before the insured
contingent beneficiary
aka secondary beneficiary
the amount of premium paid by the policyowner for policy coverage or insurance
protection already received
earned premium
a measure of what it costs an insurance company to operate
expense factor
aka loading charge
pays a fixed death benefit in specified installment amounts until the principal and interest are exhausted
fixed amount installment option
a concept of averaging what would be the total single premium for a policy over periodic payments
more periodic payments = higher total premium
level (fixed) premium
Pays the death benefit proceed in equal installments over a set period of years.
The dollar amount of each installment depends upon the total number of installments.
fixed period
aka period certain option
A premium funding option where the premium amount is lower in the beginning, during the introductory period, and increases each year.
After the introductory period, the premium increases above what the level premium amount would have been, then remains constant for the life of the policy.
Premiums increase gradually over time
graded premium
the net premium for insurance plus commissions, operating and miscellaneous expenses, and dividends
gross (annual) premium
a calculation for determining the amount of interest an insurance company can expect to earn from investing insurance premiums
interest factor
a death settlement option where the insurance company holds death benefit
for a period of time and pays only the interest earned to the named beneficiary
A minimum rate of interest is guaranteed and the interest must be paid at least annually
interest only option
A beneficiary which may not be changed by the policyowner without the written consent of the beneficiary
irrevocable beneficiary
A settlement option which guarantees that benefits will be payed on a life-long basis to two or more people
joint and survivor option
a death benefit settlement option which provides the beneficiary with an income that they cannot outlive
life income option
an agreement in which a policyholder sells or transfer ownership in all or part of a life insurance policy to a third party for compensation that is less than the expected death benefit of the policy
life settlement
A death settlement option where death benefit is paid in a single payment, minus
any outstanding policy loan balances and overdue premiums
considered the default option for most life insurance contracts
lump sum option
A premium funding option where the premium amount is lower in the beginning, during the introductory period.
After the introductory period, the premium increases above what the level premium amount would have been, then remains constant for the life of the policy.
Premium increases once
modified premium
demonstrates the incidence and extent of disability that may be expected from a given
group of persons
morbidity rate
a measure of the average number of deaths that are expected to occur each year for specific age groups
mortality rate
A cost comparison calculation formula used to determine the true cost of a policy for a policyowner
useful for comparing the cost of different life insurance policy options
net payment cost index
a premium calculation used to calculate an insurer’s policy reserves factoring in interest and mortality
net (single) premium
evenly distributes benefits among all named living beneficiaries
per capita
by the head
distributes benefits amongst a beneficiary’s heirs in the event that a beneficiary dies before the insured
per stirpes
by the bloodline
the frequency in which a policyowner elects to pay premiums
premium mode
the first beneficiary in line to receive benefit proceeds upon the death of an insured
primary beneficiary
the money set aside to pay future claims
required by the state’s insurance laws
reserves
a beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary
recovable beneficiary
optional modes of settlement provided by most life insurance policies
includes lump-sum cash, interest-only, fixed-period, fixed-amount, and life income
settlement options
a policy funding option where the policyowner pays a single premium that provides protection for life as a paid-up policy
single premium funding
a clause which prevents creditors from obtaining any portion of policy proceeds upon an insured’s death
can be selected by the policyowner to prevent a beneficiary from recklessly spending benefits
spendthrift clause
a cost comparison calculation formula where the net cost is averaged over the number of years the policy was in force to arrive at the average cost-per-thousand for a policy that is surrendered for its cash value at the end of that period
surrender cost index
the third beneficiary in line to receive death benefit proceeds if the primary and contingent beneficiaries both die before the insured
tertiary beneficiary
premium which has been paid by a policyowner for insurance coverage which has not yet been provided
unearned premium
states that if the insured and the primary beneficiary die at approximately the same time for a common accident with no clear evidence as to who died first, the law will assume that the primary beneficiary died first, which allows the death benefit proceeds to be paid to the contingent beneficiaries
Uniform Simultaneous Death Act
involves someone with a terminal illness selling their existing life insurance policy to a third party for a percentage of the death benefit
viatical settlement
