Types of Policies
These are the two main types of private life insurance.
What are term life & whole life?
This rider provides a death benefit for a child, often with the option to convert it to permanent coverage later.
What is a Child Rider? (or Child Term Rider)
The legal contract in which one party transfers financial risk to another in exchange for payment.
What is an Insurance Policy?
The period during which money is paid into an annuity and interest is earned
What is Accumulation Period?
Life insurance death benefit proceeds paid in a lump sum are generally treated this way for federal income tax purposes.
What is income tax free?
The policy that covers two or more lives and pays on the death of the last insured
What is Survivorship Life (Second to Die)?
This provision gives the policyowner extra time after the premium due date to keep coverage active?
What is the Grace Period?
This requirement must exist between the policyowner and the insured at the time of application to prevent wagering on someone’s life.
What is Insurable Interest?
The person whose life expectancy determines the payments.
What is an Annuitant?
Cash value inside a life insurance policy grows under this tax treatment.
What is considered Tax Deferred?
This policy allows flexible premiums and adjustable death benefits
What is Universal Life?
If a policyowner doesn’t pay a premium, this optional feature automatically takes a loan from the policy’s cash value to cover the payment and prevent lapse.
What is an Automatic Premium Loan?
Statements believed to be true to the best of one's knowledge
What are Representations?
When you take money out of an annuity, the gains are considered withdrawn first, meaning you pay taxes on them before your original contributions. This method is known as what?
What is LIFO? (Last In, First Out)
Premiums paid for personal life insurance are generally treated this way for taxes.
What is a not tax deductible?
This Universal Life death benefit option costs more because the death benefit increases each year by adding the cash value.
What is Option B?
This rider allows access to a portion of the death benefit if the insured becomes terminally ill.
What is an Accelerated Death Benefit Rider?
This organization maintains producer licensing and appointment records electronically.
What is NIPR (National Insurance Producer Registry)?
This type of annuity’s growth is tied to a market index, such as the S&P 500, providing potential for higher returns while offering some level of protection.
What is an Indexed Annuity?
Overfunding a life insurance policy too quickly creates this contract, where withdrawals are taxed as LIFO but the death benefit stays tax-free.
What is a Modified Endowment Contract? (MEC)
Jessica wants a life insurance policy that will provide lifelong coverage, but she also wants the cash value to be invested in stocks and bonds so it can grow over time. She understands that the investment performance could make her death benefit go up or down. Which type of life insurance fits her needs?
What is Variable Life?
Maria wants the option to buy more life insurance later without proving she’s healthy again. This rider gives Maria that option.
What is the Guaranteed Insurability Rider?
This clause states that after a policy has been in force for a specified period (usually 2 years), the insurer cannot void it due to misstatements except for fraud.
What is the Incontestability Clause?
This IRS penalty may apply if annuity withdrawals are taken before age 59½.
What is the 10% early withdrawal penalty?
Although a life insurance death benefit is usually income tax-free, it may be included in the insured’s estate for tax purposes. A common way to avoid this is to place the policy in this type of trust.
What is an Irrevocable Life Insurance Trust (ILIT)?