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Life License > Module 2 > Flashcards

Module 2 Flashcards

1
Q

What is the hierarchy of Insurance needs?

A

Most important to least: Life, Disability, Critical Illness, LTC

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2
Q

What are the three sources of life insurance?

A

CPP, Group, and Individual plans

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3
Q

What is SMELL?

A

S: Spousal income - monthly payments beyond children dependency.
M: Mortgage - covers mortgage commitment
E: Education and Dependency fund related to the children.
L: Last expenses - Funeral, Bills, Loans, Lawyers
L: Last - Taxes.

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4
Q

What is the tax and credit status of Life Insurance Proceeds?

A

Exempt from creditors, received tax free unless registered as a retirement savings plan. BYPASSES PROBATE

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5
Q

What happens to assets at death?

A

Deemed disposition of all capital assets. Capital gains - 50% times the marginal tax rates. Registered Plans - 100% * Marginal.

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6
Q

What is the benefit of a Joint-last-to-die policy?

A

Tax free rollover of the life insurance to the second person. Less expensive than insuring two people.

Joint policies only pay out ONE death benefit.

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7
Q

What kind of insurance for Key person in a business?

A

Individual policy, Term to 65, Indexed Death Benefit.

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8
Q

What kind of insurance for Partnership buy/sell?

A

Joint and First, Term, Indexed

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9
Q

What kind of insurance Corporate Buy/Sell?

A

Individual policy/Policy with multiple lives, Universal life, Growing Death Benefit.

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10
Q

What is the ownership arrangement for a business policy?

A

The business owns the policy and therefore is the beneficiary.

Death benefit net of premiums creates cap dividend account. Can be used to pay expenses or to pay tax free dividend.

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11
Q

Are premiums tax deductible?

A

No. There are not. Benefit is put into a CDA.

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12
Q

What are the three types of Term Insurance?

A

Level, Increasing, Decreasing - always wrong.

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13
Q

What are the three types of Permanent Insurance?

A

T-100- Level Death Benefit - May provide cash value and coverage past 100. Used to protect against a risk that doesn’t end and doesn’t grow.
Whole Life - Non-Participating - insurance company assumes all risk, no dividends.
Whole Life - Participating - if company makes more money than anticipated, pays dividend. Offers base CSV. Used to protect against growing needs/inflation.

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14
Q

Explain Renewable and Non-Renewable Term Policies.

A

Non- terminates at the end of the current term, if continuing needs new app, new underwriting. Usually from bank/credit companies.

Renewable - guarantee allowed to start new term. Premium increases on renewal. Right to renew until certain age.

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15
Q

`What is convertible insurance?

A

Term -> permanent. No further underwriting. Incontestability and Suicide clauses do not need to be refulfilled.

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16
Q

What is re-entry term insurance?

A

2 options are available at renewal:
Healthy? Client re-enters medical underwriting process, proves good health. Policy will be renewed with a lower premium.
Not healthy? Policy will be renewed at the standard premium

17
Q

What are the main benefits of Whole Life?

A

Level premium throughout life. Higher than needed premiums early are invested and earns interest. Offers a Cash Surrender Value.

18
Q

What is CAPPIT?

A

Options with dividends from your policy.
C- Cash, A-Accumulate with interest, P- Premium Reduction, P-Paid-up insurance, I- Invest in Segs, T- Term insurance (1-year)
S- Special addition to insure the CSV.

19
Q

What does CARE stand for?

A 
Non-forfeiture rights - helps the policy stay in force.
C- Cash Loan/Cash Withdrawal
A- Automatic Premium Loan
R- Reduced paid-up insurance
E- Extended Term Insurance
20
Q

What are the strengths of Universal Life Insurance?

A

1 or more insured, different face amounts of coverage, amount and timing of premium payments, ability to borrow from policy, variety of investments.

On multiple lives, they insure each life, pay out on each life.

Weaknesses - Complex, high admin.

21
Q

What are the different UL types?

A

Level Death benefit
Level Death plus account value
Level death plus accumulated payments (return of Premium)
Indexed Death

22
Q

What are the different Mortality and Premium costs?

A

YRT - Premiums go up every year, like term insurance.

T-100- premiums are level for the life of the policy.

23
Q

What are the UL Investment Choices?

A

Guaranteed Investments- GDAs (GICs), Daily Interest Savings Accounts.

Variable Investments - Indexed Units - Indexed to a stock index but pays interest.

Seg Funds: For UL NOOO

Life License (6 decks)

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