Test 1 Flashcards
1035 exchanges. Define. Six things.
A tax free exchange for an existing life insurance policy, endowment contract, or annuity contract for a new one.
Life insurance can be traded for life insurance
Life insurance can be traded for endowment contracts
Life insurance can be traded for annuities
Endowment contracts can be traded for endowment contract
Endowment contracts can be traded for annuities
Annuities can be traded for annuities.
Accelerated Death Benefits
Allow part or all of the life insurance to be paid to a chronically or terminally ill policyholder before he or she dies.
What are the advantages of life insurance?
.
Automatic Premium Loan Provision
Allows you to automatically borrow from the cash value in your policy at the end of a grace period to pay your premiums.
Change-of-Plan Provision
Allows policyholder the ability to change their present policies for different contracts.
Common Accident Provision
If two or more persons are injured in the same accident the deductible applies only once. Some travel accident plans will also have a common accident provision that will pay out no more than a certain multiple if a certain number of employees are killed in a common accident.
Contestable Period
Time during which the contract can be challenged by an insurer. Except in cases of material fraud.
Contingent Beneficiaries Rights
Entitled to the proceeds if the primary beneficiary dies before the insured.
Conversion Period
.Time period in which an investor can exchange a convertible security for a common stock.
Dividend Options
participating policy
- cash
- reduced premium payment
- Accumulation of dividends
- . Apply to purchase of paid up whole life insurance
- Apply to purchase of term insurance in one year
- Convert policy to a paid-up contract
- Mature policy as an endowment
Double Indemnity Rider
.doubles the face amount of life insurance if death occurs as a result of an accident.
Entire Contract Clause
The life insurance policy and attached application constitutes the entire contract between the parties.
FREEDS
.Final expenses Readjustment fund Emergency fund Education fund Debt Special needs or Bequests
Grace Period
A period, usually 31 days, in which that policyholder has to pay an overdue premium during which the policy does not lapse.
Guaranteed Purchase Option
Gives policyholders the right to purchase additional amounts of life insurance at specified times in the future without evidence of insurability.
Incontestable Clause
The insurer cannot contest the policy after it has been in force for two years during the insured’s lifetime.
Life Insurance Company Rating Services
.Best: A++, A+, A
Fitch: AAA, AA+. AA, AA-
Moody’s: Aaa, Aa1, Aa2, Aa3
S&P: AAA, AA+, AA, AA-
Life Insurance Policy Persistency
.number of clients paying premium over number of net active clients
Life Settlement
A financial transaction in which the policyholder who no longer needs or wants to keep a life insurance policy sells the policy to a third party for more than its cash value.
Misstatement of Age Clause
If the insured’s age is misstated the amount payable is the amount premiums paid would have paid at the correct age.
Mortality Assumptions
.projection of expected death rates used by actuaries to estimate insurance premiums
Net Amount At Risk
The difference between the legal reserve and the face amount of the insurance.
Nonforfeiture Options
Cash value
Reduced paid-up insurance
Extended term insurance
Nonparticipating Policy
A policy that doesn’t pay dividends.
Ownership Clause
The policyholder possesses all contractual rights in the policy while the insured is living.
Ownership of a Life Insurance
Policyholder can:
- Name and change beneficiaries
- Surrender the policy for cash value
- Borrow the cash value
- Receive dividends
- Elect settlement options