Terms in this set (117)
IRAs may be funded with annuities, but NOT with the Whole life policies.Most annuities are used for retirement purposes.Modified Endowment Contracts (MECs) are classified that way for the life of the contract, if they fail the 7-pay test.Modified Endowment Contracts (MECs) have a 10% penalty for premature distributions.Gross Life Insurance premiums are based on mortality and expenses minus interest earned.Third Party Administrators (TPAs) are more common now due to the growth of self funded plans.Individual policies are usually more expensive than group.You can't form a group just to buy insurance.Group Life Policy is convertible for 31 days after job termination, without a physical exam.On cash surrender, amounts paid in excess of premiums paid are taxable.On the GIR, additional amounts of insurance may be purchased without a physical exam only on certain option dates. If the option date is missed, it is lost and cannot be made up.When you make an Absolute Assignment you are the assignor. The party you assign your policy is the assignee.Insurance companies have 6 months to defer a request for a loan or cash surrender, although they usually do NOT exercise this right.Your policy is the cole collateral for a policy loan. Policy loans may be taken during the Grace period.Suicide is covered after the suicide clause passes by. If you commit suicide before the suicide clause has passed by, no benefit is payable but all premiums are refunded to the beneficiary.An irrevocable Beneficiary has a vested interest in the policy (often is an ex-spouse)Under the common disaster provision, it is assumed that the insured died last.The less frequent the mode of payment, the lower the total annual premium will be, and vice versa.There is no service charge or fee if you elect the annual mode of payment.On reinstatement, the incontestability and suicide clauses start over.The misstatement of age provision runs for the duration of the policy. Discovery of a misstated age results in adjustment of the benefit amount, not cancellation of the policy.If the Interest option is selected, the interest paid is subject to taxes.Proceeds of a life policy left to a beneficiary may NOT be attached by creditors. If there is no beneficiary, proceeds will go into the estate, which MAY be attached by creditors.A client may exercise the free look provision without giving any reason.The Free Look starts upon policy delivery. If the policy is mailed to the client by the company, the Free Look starts on the date of mailing. This is called Constructive delivery.The owners right section of a life policy states who has the right to change the beneficiary, who can take a loan and who can take cash surrender.The owners of a Mutual insurance company are the policyholders. Dividends received by the owner of a mutual policy are NOT taxable.Dividends received by the owner of stock in a stock company are taxable as ordinary income; Dividends are NEVER taxed as capital gains.If a beneficiary selects the Interest option, interest payments (which are taxable) will vary, but the beneficiary may withdraw the principle at any time.The beneficiary does NOT have to be the age of majority (12 or 21 depending upon state) in order to receive policy proceeds. However, minors may not sign releases.Although the producer must sign the application, he/she is not a party to the contract. It is the responsibility of the producer to explain the policy provisions, riders, and exclusions to the client.The applicants consideration is both the answers on the application and the premium. In return the insurance company promises coverage. Consideration does not have to be equal.Coverage can NEVER begin unless the premium has been paid. And even though the premium has been paid, coverage will NOT start until the client has satisfied all of the conditions of the conditional receipt, if any.The earliest that coverage COULD start would be the day of the application, assuming the client paid the first premium, had no conditions to fulfill, and had not lied.Surcharges (rate ups) may be accomplished by using a rate charge for a higher age, a different sex, a flat fee, or a percentage adjustment to the manual rate.A surcharge is an example of a counteroffer. There is no coverage until the client accepts the policy at the higher rate and pays the increased premium.A rate-up or surcharge may be charged every year for a dangerous hobby. This is NOT a one-time fee, but a surcharge per $1,000 of coverage.An incomplete application is usually returned. However, should the underwriter approve it as is coverage begins. If this occurs the company gives up some of its ability to contest a claim.Although a conditional receipt may be issued, coverage does not begin until the client meets all of the conditions and the application is approved.Insurable Interests must exist at the time of application, but not necessarily at the time of a claim.An absolute guarantee of truth us called a warranty.A buyers guide and policy summary must be left with the applicant prior to accepting the initial premium.Insurable interest may be based on economics or family relationships.The underwriter determines the final rating classification, not the producer.A "standard risk" is one with an average life span.A "rated" policy is one issued to a sub-standard risk.Policy modifications must be in writing & signed by a company officer.The USA PATRIOT Act was designed to detect international money laundering and the financing of terrorism.The USA PATRIOT Act requires financial institutions to file a currency transaction report (CTRs) with FinCEN (part of the Department of the Treasury) for each cash transaction that exceeds $10,000.Upon death, amounts paid to beneficiaries in excess of premiums are tax free.Amounts contributed to qualified plans are limited by the IRS.Children cannot buy an IRA unless they have an earned income.There is a maximum annual contribution to an IRA (subject to change by the IRS), there is no minimum.Small firms often use SEP IRAs as tax qualified plans for employees.Death benefits paid to beneficiaries are tac free on all life insurance.Unpaid death benefits continue to earn interest for the beneficiary. The interest is taxable.Distributions from qualified plans may be rolled over into an IRA (no $ limit).A "trustee" to trustee" roll over eliminates the withholding tax requirement.Life insurers may discriminate based upon the "physical hazards" of the cleint.Life insurance advertising may stress honest contract differences."Experience rating" (based upon past claims) is often used in Group Insurance.Acquisition costs of life insurance companies are highest the 1st policy year.A keogh plan is sometimes also referred to as an HR-10 plan.There is no 10% IRS penalty for "annuitizing" an annuity prior to age 59 1/2. The penalty only applies to cash surrenders.TSAs are also called 403b plans.In a life insurance contract the beneficiary never has to sign anything.Deferred compensation is an example of a non- qualified plan.A keogh is a qualified retirement plan for the self employed.OASDHI includes coverage for old age (social security), survivor benefits, disability income and health insurance (medicare). It does not include medicaid coverage.An annuity does not have any underwriting.If you take cash surrender on your annuity under age 59 1/2 there is a 10% early withdrawal penalty on any earnings. This penalty would be in addition to the ordinary income tax rates owed on the earnings.If a husband and wife purchase a Joint Life policy, the policy will pay out the death benefit when the first party dies.If a husband and wife purchase a survivorship life policy, the policy will pay out the death benefit when the last party dies.Survivorship Life is commonly purchased to fund estate taxes.Clients funds invested in a variable life contract or variable annuity must be kept in the insurance companies separate account, which similar to a mutual fund.Clients funds used to purchase whole life and fixed annuities are kept in the insurance companies general account, which is invested more conservatively.Whole life policies must contain a table showing their guaranteed cash value at the end of each year (anniversary date) for the first 20 years. It is shown per unit (per $1,000). The Morality Table and interest rate used in determining those values must also be shown.The SEC is a federal agency that regulates securities.The NASD is an association that regulates it own members. The NASD is now known as FINRA.You must be registered with the NASD (FINRA) in order to sell a variable product.On a 20 pay life, the cash value will equal the face amount at maturity (age 100).Annuities tables are different than morality tables since there is no insurance protection.Whole life & limited pay life booth reach maturity at the same time (age 100)A single premium may buy a policy that is paid up for life.Annuities are often used as Life insurance settlement options.Universal life, variable life and Variable/ universal life are all interest sensitive whole life products (Adjustable whole life is NOT)UL has a choice of death benefits, options A or B.Variable whole life is an insurance and a securities product; hence it is regulated on the state level by the department of insurance and on the federal level by the SEC.In order to renew Renewable Term the insured only has to pay the premium.A flexible premium annuity allows the client to pay in whatever amount they wish, whenever they wish.A joint and Survivor annuity would pay while either party is alive.An immediate annuity would be funded with a single premium and would begin payments one month later.On a variable annuity, during the payout period, the annuity is valued in annuity units.On a return of premium term insurance policy, if the insured does not die during the term, the premium is returned to the insured tax free.Equity indexed life insurance offers a minimum guaranteed interest rate on cash value accumulation, as well as the ability to be credited with additional earnings depending upon the performance of the index (typically the S&P 500 index)A whole life insurance policy is designed to provide protection until you die or reach age 100.If your client buys a 20 pay life that means that they have purchased a whole life policy in which the premium will be paid up in 20 years.If your client is age 30 and buys a 20 pay life, the policy premiums will be paid in full by the time the client is age 50 (LP50)Variable life insurance does not have a guaranteed interest rate or guaranteed cash value.The USA patriot act also requires financial institutions to report wire transfers that are in excess of $3000.Stranger- originated life insurance and investor originated life insurance (STOLIs and IOLIs) are outlawed in many states. In a STOLI or IOLI the investor potentially profits upon the death of the insured.A STOLI is a life policy that strangers have an interest in.Martial status is not an allowable underwriting factor in life insurance.Avocation (hobby) is an allowable underwriting factor in life insurance.HIPPAA's Privacy Rule protects all individually identifiable health information, calling this information protected health information.Protected health information includes; Health data, name, address, SSN, and birth date.An insurer must have written pre-authorization to pull the applicants credit report.