Terms
level term
death benifits remains level
Universal life
flexible-premiums, death benefits ,cash value
variable life- separate account investments, owner bears investment
variable universal life-flexible premiums, investment options
indexed universal life-cash value
exam favorite-variable policies require a securities license
nonforfeiture options
cash surrender-receive cash value
reduced paid-up- lower death benefit, no more premiums
extended term- same death benefit for limited period
exam- extended term keeps original face amount
group life insurance
characteristics- master policy, employer owns policy, individual receives certificate
conversion privilege- convert to individual policy without evidence of insurability
decreasing term
death benefit decreases
often used with mortgages
life insurance riders
waiver of premiums-premiums waived during disability
payor benefit rider-premiums waived if payor dies or becomes disabled
guaranteed insurability rider- purchase additional coverage without proof for insurability
accidental death rider- pays extra benefit for accidental death
child rider- coverage for children
policy loan
borrow against cash value
interest charged
unpaid loans reduce death benefit
renewable term
renew without proof of insurability
policy provisions
grace period-usually 31 days, coverage remains in force
reinstatement- usually within 3 years, must prove insurability, pay overdue premiums
incontestability- after 2 years insurer cannot void policy for misrepresentation
misstatement of age- benefits adjusted to correct age
entire contract- policy+ application constitute contract
free-look period-policy may be returned for full refund
annuities
purpose- protect against living to long
parties- owner, annuitant, beneficiary
immediate annuity- income starts at 12 months
deferred annuity-income starts later
fixed annuity- guaranteed interest
variable annuity-investment risk on owner
indexed annuity- interest tied to index
exam- annuities protect against longevity risk
convert to permanent insurance
beneficiaries
primary beneficiary-first in line
contingent beneficiary- backup beneficiary
revocable- can be changed
irrevocable-requires beneficiary permission to change
taxation
life insurance- death benefit generally income-tax free, cash value grows tax deferred
modified endowment contract-fails 7-pay test, withdrawals taxed differently
annuities- earnings taxed when withdrawn