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27 Cards in this Set
- Front
- Back
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Applicant
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person making application for himself or another to be insured. applicant can be insured, owner or both
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applicaiton
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document for underwriting. unanswered questions are waived by insurer
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cash value.
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cash build up. surrender charges may be asses at policy surrender
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nonparticipating(nonpar)
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do NOT pay dividends
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policyowner
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individual who has ownership rights in policy. usually insured. any changes must go through policy owner in writing with signature
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personal uses of life insurance (7)
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1. survivor protection
2. estate creation 3. estate conservation 4. cash accumulation 5. liquidity 6. preneed plan 7. viatical settlements |
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preneed plan
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funds part of or all of a funeral
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viatical statments
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life policy purchased from a terminally ill
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two approaches to determine the need and amount
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human life value & needs analysis
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Human life value method
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measure of actual future earnings. proper coverage by the value of the individual to his dependents
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human life calculation factors(7)
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1. after tax salary
2. annual expenses(not hobby) 3. value of personal assets 4. # years left expected to work 5. ages of family 6. value of individ's dollar depreciation 7. present salary of all wage earners in house 7. |
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needs analysis approach
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need for coverage of premature death, but death is assumed immediate.
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need ana calc factors (5)
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1. all financial needs of immediate death - know age of chilren
2. subtract assets 3. purchase life insurance to fill gaps between needs and assets 4. some needs are permanent - retirement; some are dissaprearing mortgage 5. emergency reserve fund part of calc |
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whether uses human or needs...must used what 2 approaches to find income
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1. capital liquidation
2. capital retention |
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capital liquidation
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assumes principal and interest are liquidated over the relevant time period
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capital retention
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assumes income will be generated by the investment earnings ONLY, thus retaining principal invested.
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business uses of life insurance (7)
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1. buy-sell agreement
2. key person 3. deferred compensation 4. split-dollar plans 5. executive bonus plans 6. minimum deposit plans 7. supplemental executive retirement plan(serp) |
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buy-sell agreement
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establishes price with intent to purchase at predetermined value. legal, value is agreed, immediate transfer
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2 types of buy-sell
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1. cross purchase - purchase on each other
2. entity - business on policy is beneficiary |
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key person
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offset key person, does not provide employee retirement. written for employer
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deferred compensation
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incentive. pay employees at future date. tax deffered. employer is owner&beneficiary
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split-dollar
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NOT tax qualified. payments split b/t employee employer. employer receives some cash value if death equal to cash value
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executive bonus plan
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cross purcahse buy/sell - corp bonsues premium to sharholders to cover cost of policy on shareholders. premium is compensation to shareholder tax write off for corp
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minimum deposit
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policy loans are used to pay the premiums on cash value. loans ONLY for amount of premiums.
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SERP(supplemental executive retirement plan)
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nonqualified deferred comp allows corp to give additional retirement to to key people, beyond 401k. either lump sum or over period during retirement
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SERP facts (4)
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1. employer is owner/beneficary
2. if split-dollar, corp can choose to be beneficary 3. corp use cash value to recover after tax cost |
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Third party ownership
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policyowner, insured, insurer. parent owning policy on underage kid
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