Flashcards
The age of the insured when they originally purchased the life insurance policy.
A term rider, covering a family member other than the insured, attached to a whole life policy covering the insured.
The owner of a life policy has the right to pay the premium, the right to select and/or change the beneficiary, the right to take a loan, and the right to choose a non-forfeiture option (such as cash surrender). The owner may or may not be the insured. The owner does not have the authority to change a policy provision.
This event occurs when a life insurance policy will not require any further premiums to keep the coverage in force.
Additional amounts of life insurance purchased using dividends; these insurance amounts require no further premium payments.
A partial surrender occurs when the owner takes a withdrawal from the cash value portion of the life insurance policy. When the owner does this the policy death benefit is permanently reduced, and there are no interest payments.
A life insurance policy under which the company agrees to distribute to policyowners the part of its surplus that its Board of Directors determines is not needed at the end of the business year. The distribution serves to reduce the premium the policyowners had paid.
The payor benefit rider is a rider that may be added to a juvenile life insurance policy. With the payor benefit rider if the payor should die or become disabled the policy will remain in force until the child reaches the age of majority in their state (18 or 21), or the payor is no longer disabled, whichever is first. When the payor benefit rider is enacted the juvenile life policy remains in force even though the premium is not paid.
Death proceeds are split equally among the living primary beneficiaries.
Under the per stirpes rule if one of the primary beneficiaries has died before the insured when the insured dies the proceeds are paid amongst the living primary beneficiaries, and the deceased beneficiary’s share is paid to their living decedants.
A peril is a cause of loss. Life insurance covers death due to two perils: accident and sickness.
The printed legal document stating the terms of an insurance contract that is issued to the policyowner by the company.
An advance made by a life insurance company to a policy owner. The advance is secured by the cash value of the policy.
The amount paid on a life insurance policy at death or when the policyowner receives payment at surrender or maturity.
The terms or conditions of an insurance policy as contained in the policy clauses.
The person who owns a life insurance policy. This is usually the insured person, but it may also be a relative of the insured, a partnership, or a corporation. The policy owner usually is the one who pays the premium and is the only person who may make changes to a policy.
A risk whose physical condition, occupation, avocation, mode of living, and other characteristics indicate a long life ahead.
The payment, or one of the periodic payments, a policyowner agrees to make for an insurance policy. Depending on the terms of the policy, the premium may be paid in one payment or a series of regular payments, e.g., annually, semi-annually, quarterly, or monthly. The premium charged reflects the expectation of loss, expenses, and profit contingencies.
The three main factors considered when determining the premium for life insurance include; mortality, interest, and expenses.
The primary beneficiary is the beneficiary that will receive the life insurance policy proceeds when the insured dies.
Net amount of money paid by the insurer to the beneficiary upon the insured’s death, or at policy maturity.
A general term applied to an agent, broker, or other person who sells insurance.
A qualified retirement plan that may be set up by any size business. The business can also have other retirement plans. A profit-sharing plan accepts discretionary employer contributions. There is no set amount that the law requires the business to contribute. The business can contribute in some years, on not in others. When the business does make contributions there must be a set formula for determining how the contributions are divided. This money goes into a separate account for each employee. A profit-sharing plan can be simple or complex. Profit-sharing plans must file a Form 5500 annually.
No change of gain, only chance of loss. Pure risk is insurable.
Qualified plan refers to employer-sponsored retirement plans that satisfy requirements in the Internal Revenue Code for receiving tax-deferred treatment. Qualified plans follow ERISA.
The process of charging a substandard risk a higher premium, assuming that they are older than they are.
A policy issued at a higher premium to cover a person classified as a greater-than-average risk, usually due to impaired health or a dangerous occupation.
Determined by the underwriter, the insured’s rating is their premium classification for life or health insurance.
Rebating occurs when the agent (producer) returns part of their commission to the insured as an inducement to buy the policy. Rebating is a prohibited trade practice under insurance law.
A form of insurance available as a non-forfeiture option. It provides for continuation of the original insurance plan, but for a reduced amount, without further premiums.
Restoring a lapsed policy to its original premium paying status, upon payment by the policy owner, with interest, of all unpaid premiums and policy loans, and presentation of satisfactory evidence of insurability by the insured.
Reinsurance occurs when the insurance company buys insurance on the risks it insures, done to reduce the insurance company’s risk.
Term insurance that may be renewed, regardless of health, by paying the next premium based upon the insured’s higher age.
The act of replacing one life insurance policy with another. Replacement is perfectly legal if the rules are followed. Replacement that is to the detriment of the insured is illegal and called twisting.
Representations are the truth to the best of your knowledge. Life and health insurance applications ask the applicant to make representations.
Funds held by the insurance company to help fulfill future claims.
Retention of risk is the net amount of any risk that an insurance company does not reinsure but keeps for its own account.
The return of premium rider when added to life insurance ensures that if the insured lives to the end of the policy period all premiums paid will be returned to the insured tax-free. This rider costs extra.
A beneficiary designation that does not affect the policyowner’s rights. A revocable beneficiary can be changed at any time.
An endorsement to an insurance policy that modifies clauses and provisions of the policy, including or excluding coverage.
Risk is the chance of loss. Pure risk is insurable. Pure risk involves no chance of gain.
The process by which a company decides how its premium rates for life insurance should differ according to the risk characteristics of individuals insured (e.g., age, occupation, sex, state of health) and then applies the resulting rules to individual applications.
The basic premise of insurance, a large number contribute to cover the losses of a few.
An individual retirement arrangement established with funds transferred from another IRA or qualified plan that the owner has terminated.
A retirement account that may be funded by individuals whose earned income is less than that year’s threshold. Roth IRAs are always funded with after-tax dollars. Qualified distributions are federally income tax-free.
Deferred compensation plans for employees of state or local governments. Funded with pre-tax employee contributions.
Simplified Employee Pension Plan. A SEP-IRA is a qualified retirement plan for the self-employed or a small business.
The several ways, other than immediate payment in cash, in which a policyholder or beneficiary may choose to have policy benefits paid. These options typically include the following:
Interest: Death benefit left on deposit at interest with the insurance company with earnings paid to the beneficiary annually.
Fixed Amount: Death benefit paid in a series of fixed amount installments until the proceeds and interest earned terminate.
Fixed Period: Death benefit left on deposit with the insurance company with the death benefit plus interest paid out in equal payments for the period of time selected.
Annuity (Life Income Payout): Death benefit plus interest paid through a life annuity. Income continues under a straight life income option for as long as the beneficiary lives or whether or not the beneficiary lives, under a life income with a period certain option.
Savings Incentive Match Plan for Employers. A SIMPLE is a qualified retirement plan for a business with up to 100 employees.
A type of limited-payment policy that requires only one premium payment.