Snapshot Questions Flashcards
1
No, policyowner owner must face possibility of losing $ or something of value in event of loss to purchase insurance
2
Your own life
A close blood relative, spouse, or adopted child
A business relationship or other financial obligation
3
When policy is sold, owner receives %’age of policy’s face value from one who purchases policy
New owner continues to maintain premium payments & will eventually collect entire death benefit
What does a viatical settlement allow?
One living w/ life threatening condition can sell existing life insurance policy & use proceeds when they’re most needed, b4 their death (they’re separate contracts in which insured sells death benefit 2 3rd party @ discounted rate)
What are the 6 personal uses of life insurance?
Survivor protection Estate creation Cash accumulation Liquidity Estate conservation Viatical settlements
Availability of cash to be insured
Liquidity; some policies offer cash values that can be borrowed @ any time & used for immediate needs
Example of product that provides cash accumulation?
Whole life policy that offers insured living benefits in form of cash values
How does estate conservation work?
Life insurance proceeds may be used to pay state inheritance taxes & federal estate taxes so that it’s not necessary to sell off assets from estate to pay these costs
Insureds who sell death benefit 2 3rd party?
Viators
Who represents that insureds/viators in a viatical settlement?
Viatical brokers
Who represents the providers in a viatical settlement?
Viatical producers
4
need
5
Loss of income in event of premature death of insured (agent uses probably future earnings, inflation, # of yrs to retirement & time value of $ to calculate one’s life value)
Needs approach is based upon what?
What does it attempt to identify/summarize?
Predicated needs of a family after premature death of insured; looks @ family’s income-expenditure equation
Attempts to identify allocation of income, unusual/non-regular expenditures, & additional expenses during readjustment & summarizes most critical prospective expenditures
Greatest benefit of graphic analysis of needs approach?
Helps ppl visualize amounts needed as a flow of income
4 categories of info that needs to be gathered
Debt
Income
Mortgage
Expenses
What costs are covered under lump-sums associated with death?
Final medical expenses of insured; funeral expenses; day-day expenses of maintaining family (rent/mortgage payments, car payments, utilities, groceries, etc.)
What is covered by lump-sum needs & objectives?
Estate taxes, day care, insurance premiums, etc.
What is the blackout pd for SS in which SS benefits would NOT be paid to surviving spouse?
After youngest child is 16 & before spouse reaches 60
Under this approach, enough insurance is purchased so that when added to other liquid assets, there’s enough to pay income benefits w/out invading the principal (home)
Retention of capital approach
6
It obligates business owners/partners (or their heirs) to w/draw from business & sell their interest to surviving partner(s)/key person @ predetermined price
It is a legal contract that determines what will be done w/ business in event that an owner dies/becomes disabled
7
Plan includes a policy in which (under corporate ownership) business owns policies, pays premiums & is beneficiary
In a partnership, it’s an entity plan & business itself is obligated 2 purchase interests of any disabled/deceased partner & increase interests of surviving partners
Describe a cross purchase plan
Buy-Sell agreement; policies owned by ind. business partners who pay premiums & are beneficiaries
Each partner agrees to sell business interest 2 surviving partners, & each surviving partner agrees 2 buy interest of deceased partners
8
In event of death of key employee who has specialized knowledge, skills or business contacts, this insurance would cover additional costs of running business/replacing employee
9
Key policy would be beneficial if one particular employee (who is sole expert on one aspect of the company) were to die unexpectedly. The insurance would lessen the financial loss that would be associated with such a premature death
10
If given as an executive bonus, a life insurance policy is tax deductible to employer & income taxable to employee
What is an executive bonus?
Arrangement where employer offers 2 give employee a way increase in amt of premium on new life insurance policy on the employee
What is Deferred Compensation Funding
Any employer retirement, savings, or other deferred compensation plan that’s not a qualified retirement plan (contractual commitment b/w employer & employee to pay compensation in future yrs)
In Addition Funding Plans
Deferred Compensation funding that’s designed to pay amt in addition to employee’s qualified retirement plan
Elective
Deferred Compensation funding plan that permits employee to defer part of salary/bonus as tax deferred savings
Change of insured provisions
Found in some life insurance policies that are owned by businesses 2 insure life of key employee (in event he/she quits or is terminated, business owner may transfer coverage to a replacement employee)
