Term. Life Insurance .WTF

Term
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What is the primary purpose of Insurance?
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Terms in this set (57)
What is the primary purpose of Insurance?
Insurance provides financial protection against the cost of Injuries, Illnesses and Death.

#iFlash4u [k, (1.3) p. 7]
What is the primary purpose of an insurance policy Application?
Underwriting Information.

Insurance policy applications provide insurers with the basic information needed to begin the underwriting process.

#TheInsuranceSchool
[k, (9.2.1) p, 175]
Applicant
Person acquiring the insurance policy.

[k (3.2.8) p. 39]
Insurable Interest - (Prove it)
Applicants MUST prove they'll incur a financial hardship if the Insured were to become disabled or die.

*[k, (9.1.1) p. 174], [k, (3.2.8) p. 39]
#iFlash4u
People have an insurable interest in themselves.
Employers have an insurable interest in "KEY-employees" who are crucial to the day-to-day operations of the business.

*[k, (9.1.1) p. 174]
Provide three (3) examples of people who have an insurable interest in each other.
a. Spouses
b. Parents / Children
c. Certain Business Relationships (Partners / Key-Person)

i. [k, (9.1.1) p. 174]
#iFlash4u
Insurable Interest is ONLY necessary when obtaining a policy.
Insurers have a legal responsibility to Verify Insurable Interest & make sure the insured has given consent to bind the policy.

i. [k, (3.2.8) p.39]
Third-Party Contracts
The Life Insurance Applicant IS NOT the insured.

[k, (9.1.1) p. 174]
#iFlash4u
Stranger-Oriented Life Insurance (STOLI)
*STOLI... Like the Vodka.
You're DRUNK if you think a STRANGER has an insurable interest.
#iFlash4u
Does a Stranger (OR) Investor with NO verifiable financial ties to the applicant, have an insurable interest in the applicant?
NO - STRANGER DANGER!

This is an example of a *Third-Party Life Insurance contract with NO Insurable Interest.

i. [k, (3.2.9) p. 39]
*Stranger-Oriented Life Insurance (STOLI)Investors pay applicants to take out new life policies and, pays all policy premiums. Once incontestable, the insured assigns ownership to investor. i. [k, (3.2.9) p. 39]Incontestable ClauseTWO (2) Years! The insurer loses the ability to dispute a death claim once the policy has been in-force for at least 2-Years. i. [6.2.8) p. 117]Preferred RiskFANTASTIC! Applicant is an exceptionally overall low risk to insure. [k, (9.2.9.1) p. 180]Standard RiskAVERAGE - Applicant meets the insurers guidelines without special restrictions. i. [k, (9.2.9.2) p. 180]Sub-Standard RiskBELOW Standard. Highest premium category. IF issued... restrictions typically apply. [k, (9.2.9.3) p. 180Term Life InsuranceOnly provides a death benefit for a specified period of time like 10, 20 or 30-Years. [K, (5.2) p. 84]Level Term InsuranceLevel Term Life Insurance policies where the premium and benefit remain the same during the period of coverage. Policy benefits don't increase or decrease. [K, (5.2.1.1) p. 85]Decreasing Term InsuranceDecreasing Term Life policies have a benefit which decreases over time. Typically used to collateralize a loan - *Mortgage [K, (5.2.1.2) p. 85]Increasing Term InsuranceIncreasing Term Life policies have a benefit designed to address Cost of Living increases *Inflation [K, (5.2.1.3) p. 86]Consumer Price Index (CPI)The inflation prediction resource life insurance companies use to calculate death benefit increases for Increasing Term policies. [k, (6.6.9) p. 130]#iFlash4u Provisions Provide Policy-Owner Rights for FREE!RIDERS allow policy-owners to ENHANCE their policies... FOR A FEE.Cost of Living Rider (COL)Allows policy-owners to INCREASE death benefit amounts to compensate for inflation WITHOUT providing Evidence of Insurability. [k, (6.6.9) p. 130]Option to RenewAllows the policy-owner to RENEW their policy before the termination date -> WITHOUT providing Evidence of Insurability. [K, (5.2.2.1) p. 86]Guaranteed Renewable PolicyAllows the policy-owner to renew a term life policy before the due date -> WITHOUT providing Evidence of Insurability. [K, (5.2.2.1) p. 86]Annually Renewable Term (ART)Most basic type of term life policy. Only provides coverage for one year at a time. [K, (5.2.2.1) p. 86]#iFlash4u Step Rate - The premium on a $100,000 10-Year renewable term policy will increase every time the policy is renewed even though the benefit amount isn't increased.When you chart the 10-Year premium increases, it looks like stairs. The premium increases while the benefit remains the same. [k, (5.2.3) p. 88]Term Life Re-Entry OptionA Reentry Option allows policy-owners to RENEW their existing Term Life Policy without providing Evidence of Insurability. [K, (5.2.2.1) p. 86]Option to ConvertOption to Convert allows policy-owners to EXCHANGE (Convert) their Term Life Policy for a Whole Life Policy WITHOUT providing Evidence of Insurability. [k, (5.2.2.2) p. 87]Whole Life InsuranceWhole Life provides protection until the policy-owner turns 100-Years old and has cash values which can be collateralized (or) borrowed against.COMPARE What are three (3) Ordinary Whole Life Insurance features NOT available with Term Life Insurance policies?a. Protection until death or the policy-owner turns 100 Years Old. b. Cash Values c. Policy MATURES at age 100. [k, (5.3.1) p, 89]#iFlash4u Term Life policies typically include the Option to Renew & Option to Convert.[Example] Kelli has a 10-Year term life policy with options to Renew & Convert without providing evidence of insurability. The only stipulations are she must exchange (convert) her policy before age 55 and renew before age 65. [k, (5.2.2.2) p. 87]Term Life Conversion How does the Original Age method of calculating premiums impact the newly converted policy premiums?*Lower Premiums in comparison to the Attained Age method - Original Age method calculates new converted policy premiums using the policy-owners age when they Originally purchased the policy. [k, (5.2.2.2) p. 87]Term Life Conversion How does the Attained Age method of calculating premiums impact the new policy premium?*Higher Premiums in comparison to the Original Age method - Attained Age method calculates new converted policy premiums using the policy-owners age at the time of conversion. i. [k, (5.2.2.2) p. 87]COMPARE Whole Life Insurance provides policy-owners protection from the date of issue until the policy-owner dies (or) turns 100 years old.Term Life Insurance policies only provide coverage for a specified period like; 10, 20 or 30-Years.COMPARE Term Life Insurance ONLY provides a death benefit.Whole Life policies COMBINE a death benefit with a saving component called the CASH VALUE.What is the correlation between applicant's age and policy premiums?Policy premiums increase with age.#iFlash4u The probability of death increases with age.Life insurance Mortality Charges pertain to the insurers actual cost for providing insurance coverage so... Mortality Charges also increase with age. [k, (5.6.3) p. 100] *Universal Whole LifeWhich regulatory entity is responsible for overseeing insurers who operate in Florida?OIR | Office of Insurance Regulations [k, (26.3) p. 406]Which regulatory entity audits the financial soundness of insurers in Florida?OIR | Office of Insurance Regulations [k, (26.3.3) p. 407]How often must the Office of Insurance Regulations audit insurers for financial stability?At least once every FIVE (5) Years. [k, (26.3.2) p. 406]How long must insurance agents retain documentation relevant to the sale of a policy?FIVE (5) Years [k, (26.6.5.3) p. 420]What are Standard Policy Provisions?Standard Policy Provisions identify policy-owners rights. Provisions Provide FOR FREE. [k, (6.2.1) p. 115]Entire Contract ProvisionOnly the terms and conditions identified in the contract are enforceable. Nothing may be included after issue UNLESS, both parties agree to the change. [k, (6.2.1) p. 115]Insuring ClauseIdentifies the insurers promise to pay a benefit when the policy-owner dies. [k, (6.2.2) p. 115]Consideration ClauseSpecifies the amount and frequency of premium payments. [k, (6.2.4) p. 115]Free Look Provision14-Days - TWO WEEKS to review the policy and return it for a full premium refund. [k, (6.2.3) p. 115]Grace Period Provision30-Day period after the premium due date where premiums can be paid without the policy lapsing from non-payment. [k, (6.2.5) p. 116]Accelerated Benefits ProvisionProvides the policy-owner with a partial face value benefit if they have a terminal illness or injury. [k, (6.2.10) p. 120]What are Optional Policy RidersSpecial features you can add to a life insurance policy for an Extra FEE. [k, (6.6) p. 126]What is the ONLY Optional Policy Rider you DO NOT need to pay for?Automatic Premium Loan Rider - Allows the INSURER to use the policy cash value to pay premiums before the standard 30-Day Grace Period expires. [k, (6.6.4) p. 128]Why is the Automatic Premium Loan Rider NOT available for Term Life Policies?Term Life insurance DOES NOT have a Cash Value to borrow from.Disability Income RiderPays the policy-owner a portion of the policy face amount if they're deemed "Totally Disabled" by a physician. [k, (6.6.3) p. 128]DismembermentThe loss of a body part. [k, (6.6.6) p. 129]Accidental Death and "Dismemberment" RiderAlso called a DOUBLE INDEMNITY Rider because, it pays DOUBLE the face amount when policy-owner dies under specific circumstances like a car accident, etc. Also pays a lump-sum if the policy-owner loses a qualifying body part in an accident. [k, (6.6.6) p. 129]What is the purpose of a Payor Provision (Rider)?Payor -> PARENTS, they Pay for Everything! Payor Riders & Provisions WAIVE premiums if, the adult payor responsible for the Juvenile's policy dies or, becomes TOTALLY Disabled. [k, (6.6.5) p. 129]Long-Term Care RiderProvides the policy-owner with a set monthly income to help pay for Nursing Home Care. The LTC Rider is ONLY a percentage of the initial death benefit and may not cover the cost of confinement. [k, (6.6.7) p. 130]Return of Premium RiderA Return of Premium Rider RETURNS 100% of the premium paid with the Death Benefit (OR) when the Term expires. [k, (6.6.8) p. 130]