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13 Cards in this Set
- Front
- Back
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Why sell life/health insurance? |
Protect clients (build wall around them) Help prevent E&O losses Many P&C carriers require you to sell it Generate commission |
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Identify the general uses of Life Insurance |
Create an Estate Pay estate (death) taxes Fund a business transfer / buy-sell agreement pay off home mortgage provide education fund protect business from loss of a key person create/supplement a retirement fund |
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List and describe the legal elements of a Life Insurance contract |
Agreement (offer and acceptance) - offer comes from insurance company. acceptance is when they pay the necessary premium. Consideration (premium) - Insured's consideration is the payment of the premium. Insurer's consideration is the promise to indemnify at the time of a claim Competent Parties - both parties must have legal capacity to enter the contract (can't be under the influence of alcohol/drugs, can't be mentally incompetent, can't be a minor) Legal Purpose - must be insurable interest between the parties. Insurable interest must be present at the time of the application |
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Explain the features of three types of Term Insurance (Level Term, Annual Renewable Term, Decreasing Term) |
Level Term - premium and face amount remain level. Policy is only for a specified # of years Annual Renewable Term (ART) - Face amount remains level, premium annually increases. Most go to age 65 or 70. Usually the lowest initial cost of all 3 types. Decreasing term - Don't see this one much anymore. Face amount decreases as the premium remains level. Normally this is used for mortgage insurance. |
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Identify the features and beneficial components of permanent Whole Life Insurance |
Whole Life Insurance - face amount is paid whenever death occurs. Policy will remain in force until death. Fixed premium and fixed death benefit. Good for permanent protection , college planning, estate protection. Premium remains the same. Non-forfeiture benefits: Cash: full surrender. cash it in. Reduced paid-up insurance: cash value used to purchase a reduced death benefit that is fully paid up. Extended Term: cash value is used to one-pay for a term contract. |
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List and describe the 6 components of a Universal Life Insurance Policy |
Cash - premium is paid into the policy account Mortality Charge - cost of term life insurance needed to pay the death benefit is deducted from the account Policy Expenses - to cover insurance co's administrative costs Cash Value - what is left after mortality charge and policy expenses are subtracted. This accrues Interest - this is credited to the cash value Death Benefit - maintained in the policy |
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Identify the flexibility choices afforded by Universal Life Insurance |
Premiums can be skipped. Contract may pay for itself if the level of cash value can cover mortality charges. Increase or decrease the face amount Lengthen or shorten protection period. Example make it look like a ten year term policy paying only mortality costs. Increase or decrease level of premiums Partial surrenders or loans (contribute or withdraw lump sums) |
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Compare and contrast the differences between a Universal Life contract and a Whole Life contract |
Universal: Face amount can vary. Flexible premium/mortality cost. Minimum guaranteed rate of interest plus additional rated tied to market. Option A or B. Loans or partial surrenders Whole Life Face amount fixed. Fixed premium/mortality cost. Guaranteed cash value. Cash values not paid in addition to death benefit. Loans only. interest charged |
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Explain the tax considerations for life insurance as it relates to the premium, cash value and death benefit |
Life insurance premiums are not tax deductible. Only exception is the premiums paid by an employer for an employee in a group life policy. Generally death benefits are not subject to federal income tax Cash value grows income tax deferred, and are not subject to tax until withdrawals exceed the basis. Cash values paid in addition to death benefit are not normally subject to income tax (considered part of the benefit) |
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Briefly explain the benefits provided by the major riders in life insurance policies |
Guaranteed Insurability Rider (GIR): policyholder can make additions to their insurance at standard rates. Can be at stated ages or events such as marriage or birth. Waiver of Premium: If the insured becomes totally disabled, premiums are waived. Normally a waiting period, but after the period you are reimbursed for the premium payments. Accidental Death: provides for the payment of a multiple of the face amount in the event of an accidental death. Payor Benefit: waives premium if the payor dies or becomes totally disabled. Normally terminates when the child becomes 25 Accelerated Death Benefit: Insured can collect if they are diagnosed with a terminal illness. One year or less to live. |
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Identify the dividend options of a participating life insurance policy |
C - Cash A - Accumulation of interest (taxable) R - Reduce premium: 2nd best option P- Paid up additional insurance - best option O - one year level term |
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Explain the types of and manner in which beneficiaries are named in a life insurance policy |
Primary: wife. May list more than one. If listing more than one, must list percentage to each. Contingent: wife if living, otherwise sister. Revocable: owner is free to change designation if desired Irrevocable: owner may change only with beneficiary's consent |
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Describe the function of a conditional receipt and how it impacts life insurance benefits from the time of application to the expected issuance of the policy |
Issued by the agent after receiving application and money. Coverage is in force as of the application date. If death occurs during underwriting, face amount is payable if the risk would have been accepted. |
