Shared Flashcard Set

Details

Insurance
CIC Health Ins.
28
Other
Professional
09/11/2008

Additional Other Flashcards

 


 

Cards

Term

GENERAL

Definition
Term
GENERAL USES OF LIFE INSURANCE
Definition

CREATE ESTATE

DEATH TAXES

BUSINSESS TRANSFER

COLLEGE PLANNING

RETIREMENT

REWARDING EMPLOYEES

Term
CHARACTERISTICS OF TERM INSURANCE
Definition

DEF - FACE AMOUNT IF DEATH OCCURS DURING POILCY

PURPOSE - NEED IS GREAT, $$$ IS LITTLE

FEATURES - easy to understand low cost

DISADVANTAGE - no cash value, will end at some point

Term
3 TYPES OF TERM
Definition

LEVEL - premium & face amount remain level

ANNUAL RENEWABLE (ART) - face amt remains level

Premium increases

DECREASING - face amount decreases, premium goes up

Term
name & descibe characteristic of whole life
Definition

Definition - face amount paid regardless of age @ death, continuous payments, growth of cash values

PURPOSE & USE - perm portection, college planning, estate protection

FEATURES - cost stays same, policy stays in force, cash value avail for loans (borrow)

DISADVANTAGE - higher cost, cash val not paid in addition to death benefit

Term
LIMITED PAYMENTS
Definition

Cost more however after so many years its paid

Term

FLEXIBILITY & OPTIONS OF UL

Definition

Term or Whole

Insured helps design

Option a or b

A - includes cash value within death benefit

B - includes cash value in addition to death benefit

loans or partial surrender (whole life loans only)

Add or delete riders

Term

Endowment Ins Contracts

Definition

very little sold today

 

pays insuredif living at a stipulated age or date

Term

VARIABLE LIFE

(MUTUAL FUNDS)

Definition

whole life contract with the assets supporting the policy benefits being helad in a sep account

Must have series 7 license

Advantage - may have excellent cash value growth

Disadvantage - insured assumes risk

Term

Single Premium Policy

Definition
one single premium provides for a guaranteed level death benefit. guaranteed cash value that grows tax deferred
Term

TAX CONSIDERATIONS AS IT RELATES TO PREM CASH VALUE, AND DEATH BENEFITS

Definition

Life ins premiums are NOT TAX DEDUCTIBLE

Death proceeds are NOT SUBJECT TO FED INC TAX

Proceeds will be included in the estate of the owner for federal estate tax purposes

Cash values grow tax deferred until recd. FIFO When cash values are withdrawn, those that exceed the premium outlay are subject to income tax.

Gifted policy could result in the cash values being subjected to the federal gift tax. This would apply to the donor, not the recipient.

Term

MAJOR RIDERS IN LIFE

INSURANCE POLICIES

Definition

G.I.R. - Guaranteed Insurability Rider (rider can be attached to whole life , endowment, or UL contract. Guarantees the right wo medical exam to make additions up ot 50,000 (not over 40) option dates are 25, 28, 31,34, 27 & 40 Not expensive

Waiver of Premium - Pricey

If insured becomes disable waives the premium

Accidental Death - payment in the event of accident and death occures within 90 days of that accident

Cost of Living Rider - Allows death benefit to increase based on COLA or some set %

PAYRO BENEFIT - rider waives the premium should the payor (mom or dad) die or be totally disabled while paying the premium. terminates at age 25

 

Term

CONDITIONAL RECEIPT

Definition

FULLFIL ALL 4

PREMIUM PAYMENT - Entire premium must be equal or greater thatn the full initial premium.

INSURABILITY - as of the coverage date a co must find person to be an acceptable risk at standard rates wo exclusion

CONDITIONAL INSURANCE - if all conditions are met ins will be provided from the coverage date

MAXIMUM AMOUNT - the amt applied for or 500,000 of insurance & $100,000 of accid death benefits 

TERMINATION OF CONDITIONAL RECEIPT - if ins was provided under this receipt it will term whe policy is delivered. If declined premium will be returned.

SUICIDE - if any person proposed for ins commits suic the co liab under this rec will be limited to return or premiums

Term
WHAT ARE PAID UP ADDITIONS???
Definition
Paid up additions are amounts of permanent insurance with their own cash value, which generate their own dividends.   The base policy death benefit is then increased by the face amt of the paid up addition and the guaranteed cash value is increased by the cash value of the paid up addition. Since they are whole life ins they in turn earn dividends which are then credited in the same manner as the base policy dividend.
Term

Beneficiary

 

Owner may change anytime

Definition

Primary - wife

Contingent - if primary not alive otherise...

Revocable - the owner is free to change the designation as desired

IRREVOCABLE - Owner may change the disignation as desired

Classes - why do we name beneficiaries

estate? estate 1) creditors may attach proceeds, etc.

 

 

Term

Non-forfeiture Benefits

(whole life only) The owner wished to term the policy or needs cash

Definition

Cash - values are stated in the sch page of policy

Reduced paid up Ins. - death benefit is paid up

no future premiums are payable. Does have cash value

Extended Term Ins. - full death benefit for specified years and days.

Term

What is Annuity &

features

Definition

systematic liquidation of an amount of $$$

Following Features:

Tax Deferral on investment earnings

Protection for creditors

An array of investment options, including floors

Tax free transfers among investment options

Lifetime Income

Benefits to your heirs

Term
PROBATE
Definition

Getting deceased persons name off of property

use TOD, POD transfer upon death or Paid upon death

Term
Parties of Annuity
Definition

Owner - controls the contract

Annuitant - person on whose life annuity payments will be issued

Beneficiary - person who receives pmt in event of annuitants death

Ins. Co - one that guarantees the contract benefits

Term

Identify Classifications of an Annuity

Definition

A. # of lives covered

1. Single life annuity

2. joint life, or joint survivorship annuity

Term
Time when Benefits begin
Definition

USUALLY 30 TO 60 DAYS

 IMMEDIATE

 

 

DEFFERED IS USUALLY OVER 6 MONTHS TO A YEAR

Term

METHODS OF PURCHASE

Definition

Lump sum (single premium) sold most with deferred

 

Installment - (fixed or flexible premiums)

Term
Qualified vs Nonqualified (Tax Treatment)
Definition

Qualified - tax deductible

Nonqualifed - Nondeductible - annuities purchased outside qualified pension plans DO NOT receive tax favored treatment of premium payments.

Term
6 basic contract provisions found in most forms of annuities
Definition
  1. Surrender charges, or deferred sales charges - charges are designed to make moving $$ less attractive usually within a certain # of years.
  2. Interst Rates - fixed ann (co assumes risk) Variable (insured accepts risk) Not guaranteed.  Equity index (mix)
  3. Bailout Provision - Surrender the contract wo surrender charges if the interest rate drops below a certain % or level.
  4. Issue Ages - most companies will have max age limits which a contract cannot be issued usually 85
  5. Maximum age for benefits to begin - annuitant must begin receiving benefits before reaching a certain age.
  6. Nursing Home Waiver - provision waives the contract surrender charges in the event the annuitant is hospitalized or confined to a nursing home for a specified period of time.  Allows the contract owner to receive cash from the annuity to pay expenses assoc. with the hospital stay or the nursing home stay.
Term

FEDERAL TAX PROVISIONS OF

ANNUITY CONTRIBUTIONS

AND WITHDRAWALS

Definition

Income tax aspects of annuities

PREMIUM PAYMENTS - Premiums pd into a nonqualified annuity are generally NOT DEDUCTIBLE

Premiums pd into qualified annuities such as IRAs ARE DEDUCTIBLE subject to IRS rules.

CASH ACCUMULATIONS - Nat persons not taxable

Nonnatural persons - interest is taxable

LOANS - will incur tax & penalty

10% Premature Distribution Tax - 10% will be taxable also under the age of 59 1/2 will pay 10% penalty with some exceptions (death, disability)

Withdrawals - LIFO Last in First Out - withdrawals are recd as interest out first. (for persons over the age of 59 1/2 the tax penatly does not apply.

Section 1035A Exchange

 

Term

BENEFITS OF A

1035A EXCHANGE

 

AS IT APPLIES TO AN ANNUITY

Definition

Exchanges permit annuity owner to exchange an annuity contract for another annuity contract WITHOUT INCURRING ANY CURRENT INCOME TAXATION. Also permits exchange of life insurance policies or endowment policies.

Taxation of annuity benefit payments

Nonqualified interest portion is taxable as income

Qualified annuity - entire payment is taxable

Term

What Contracts Can Be

 

Exchanged

Definition

Life contract can be exchanged for a life, annuity, or endowment

Endowment can be exchanged for a an annuity or endowment

Annuity contract can be exchanged for an annuity only!

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