Life Insurance Cards Set 2

Set 2 for Idaho Insurnace

Who normally completes a Paramedical (Paramed) Report? What is gathered by this report?

A paramedical report is conducted by a nurse or paramedic; information gathered includes medical history, blood pressure and pulse, height and weight, specimens of blood, urine, and oral fluids.

What happens with the death benefit if the insured person does not die during a term life insurance policy?

No death benefit is paid out.

Why is term life insurance considered to be pure life insurance?

Term life insurance does not have any cash value, or any other benefits besides the death benefit.

With level term life insurance, which two things remain the same throughout the policy term?

The premium and the death benefit

With a decreasing term life insurance policy, which aspect of the policy decreases over time?

The death benefit

What does it mean if a whole life insurance policy has an endowment age of 100?

If the insured lives to be 100 years old, the policy’s cash value would reach the death benefit, and the policyowner would receive an amount equal to the death benefit.

Of the three main types of life insurance policies (term, whole, universal) which ones have cash value?

Whole life and universal life have cash value. Term does not

What is an advantage of continuous premium whole life insurance over limited payment whole life insurance?

The monthly premiums are lower with continuous premium whole life insurance.

What are two advantages of limited payment whole life insurance when compared to continuous payment whole life insurance?

The premium will automatically be deducted from the policy’s cash value.

What is meant by saying that an index(ed) whole life insurance policy is a fixed insurance product?

Although the cash value can increase with the market index, it has a guaranteed cash value (the policyowner cannot lose money that he or she puts into the policy).

With a universal life insurance policy (UL), what happens if the policyowner does not pay the monthly premium?

The premium will automatically be deducted from the policy’s cash value.

With a universal life option B insurance policy, What happens to the death benefit over time?

The death benefit increases over time because the death benefit is equal to the face value plus the cash value.

When a universal life insurance policy has flexible premiums, and the policyowner chooses to pay a premium that is higher than the cost of the insurance, what happens to the extra money that was paid?

It is added to the policy’s cash value.

With a universal life policy, what is the cost of the insurance based on?

Annual renewable term insurance

When is the death benefit paid out with a Fist-to-Die joint life insurance policy?

Upon the death of the first insured

What is another name for a Second-To-Die joint life insurance policy?

A Survivorship life insurance policy

Which aspects of an adjustable term life insurance policy are able to changed by the policyowner?

The type of policy, the premium, the protection period, and the death benefit.

For a group life insurance plan, what is the premium based on?

The risk (or mortality) of the group as a whole

If a group member leaves the group that was providing his or her life insurance, what happens to that individual’s life insurance policy?

The individual is no longer eligible for the group policy, but he or she has the option of converting the policy to an individual policy within 31 days.

In life insurance, what is an assignment?

When the rights and duties of a policy are transferred from the policyowner to someone else.

What right does the Right to Examine provision give a policyowner?

The right to look over and examine the policy for a specific number of days, and receive a full premium refund if he or she decides not to keep the policy for any reason.

In Idaho, how long is the Right to Examine (free look) period for a life insurance policy?

20 days

What term is defined as “the period of time that a policy premium can be past due and still pay a death benefit”?

Grace Period

In a life insurance policy has lapsed, what three things does the policyowner need to do to reinstate the policy?

1. Pay back any premiums plus interest, and any policy loans plus interest;

2. Prove insurability of the insured; and

3. Apply in writing within a certain amount of time after policy lapse.

Who has the right to change the beneficiary?

Only the policyowner

Why shouldn’t a minor be listed as a beneficiary?

A guardian or trust would need to be appointed by the court to legally manage the money for the minor. This would likely create unnecessary legal issues and fees, and delay the money from being used as intended.

What term is used to describe all of the assets that a person owns when he or she dies?

An Estate

After a life insurance policy has been in force for two years, the policy shall be what?

Incontestable

If the policyowner borrows from the cash value, must the loan be paid back?

NO, but when the insured dies, the policy loans (plus interest) will be deducted from the death benefit.

What are two reasons why it is not a good idea to have an estate be a beneficiary of a life insurance policy?

1. The death benefit will l8kely need to go through probate (costing time and money).

2. The death benefit might be subject to estate taxes.

If a trust is listed as a beneficiary on a life insurance policy for the benefit of a minor, what is the responsibility of the trustee?

The trustee must manage the death benefit funds for the benefit of the minor (as instructed in the trust)

What is another name for secondary beneficiary?

A contingent beneficiary

Which clause can be added to a life insurance policy to protect a death benefit from the beneficiary’s creditors and bad spending habits?

The spendthrift clause

What are the five possible settlement options for receiving a death benefit?

1. Cash Payment (Lump Sum)

2. interest only;

3. Life Income;

4. Fixed-Period; and

5. Fixed-Amount

When a life insurance settlement is paid out in installments (as with life income, fixed-period, and fixed-*amount), which portion of a death benefit settlement is considered taxable?

The interest portion is taxable income.

Which life insurance settlement option provides monthly income for the rest of the beneficiary’s life?

The Life Income settlement option

How does a whole life insurance policy non-forfeiture clause protect eh policyowner?

It says that the policyowner will not lose the value of the policy if it is cancelled.

What is a life insurance policy called if it can provide annual dividends to its policyholders?

A participating policy

Which life insurance rider allows the policyowner to increase the policy’s death benefit at specific life events or times in the future, without evidence of insurability?

The guaranteed insurability rider

Which rider allows the policyowner to receive an early death benefit (or percentage of the death benefit) if the insured is diagnosed with a medical condition that is expected to cause the insured to die within 12 months?

The accelerated death benefit rider (also called the living benefit rider, or the advanced death benefit rider)

What is it called if an accidental death rider causes the payout on the policy to be twice the death benefit amount?

Double indemnity

What is an irrevocable beneficiary?

A beneficiary that cannot be changed without consent of the irrevocable beneficiary.

What does the disability income benefit rider do (when added to a life insurance policy)?

It requires the insurer to pay a monthly income to the policyowner if the insured becomes unable to work due to a disability.

With the cost of living adjustment rider, what is the amount of death benefit increase based on?

A cost of living index

With an interest-only death benefit settlement option, how long does the insurer keep the death benefit?

As long as the beneficiary chooses.

What is the primary purpose of annuities?

To protect people from outliving their assets (due to living a long time)

With annuities, what is the name for the person whose life expectancy determines the duration or amount of annuity payments, and who typically receives the annuity payments?

The annuitant

What is the period of time called when premium payments are paid into the annuity, and the money grows tax-deferred?

The accumulation period (also called the pay-in period, or the deferred period)

What are the three main benefit payment options for an annuity?

1. Pure Life;

2. Life with Guaranteed Minimum; and

3. Annuity Certain

Which annuity benefit payment option is not a life contingent option?

Annuity Certain

For which annuity benefit payment option will the annuitant receive regular payments until he or she dies, and then no more payments are paid out?

Pure Life

Which annuity benefit payment option pays regular payments to the annuitant for his or her life, and also pays payments to the annuitant’s beneficiary if a minimum number of payments have not been met before the annuitant dies?

Life with Guaranteed Minimum

What type of multiple life annuity is described as, “While both annuitants are alive, a specified amount of monthly benefit is paid out; when the first annuitant dies, the same or lessor amount (e.g. 100% or 50%) is paid to the surviving annuitant until h.

Joint Life and Survivorship

With an Annuities Certain annuity, what happens if the annuitant dies before the pre-determined number of payments have been paid by the carrier?

The annuitants beneficiary(s) will receive the remaining payments.

Which type of deferred annuity does not have a minimum interest rate set by the carrier?

A variable annuity

With which type of fixed annuity is the interest rate linked to an index annuity, but a minimum interest rate is guaranteed?

An equity indexed annuity

What happens during the annuity period of an annuity?

A regular series of payments are paid out from the annuity

Why does a producer who sells variable annuities need to be compliant with the Financial Industry Regulatory Authority (FINRA) and the Security and Exchange Commission (SEC) ?

Variable annuities are considered securities and producers who sell them must follow federal regulations

What is the annuity feature called that allows annuitants to make one or more withdrawals during the accumulation period without a charge?

A free withdrawal feature

What are two main attractions or advantages of annuities?

1. Money grows tax--deferred; and

2. The money is safe because insurance companies are very secure financial institutions.

Are life insurance premiums tax-deductible?

Life insurance premiums are not tax deductible when paid by an individual; however, life insurance premiums paid by an employer are considered tax deductible business expenses.

As the cash value accumulates inside a life insurance policy, is the increase taxable?

No, it accumulates tax-free and is NOT considered taxable income.

An insurance company owned by its customers and pays dividends to its customers, is what type of insurer?

A mutual insurance company

If a life insurance policy with cash value is surrendered, is the money received considered taxable income?

if the cash value received exceeds the total amount of premiums paid into the policy, the difference (the profit) is taxable income.

If the beneficiary receives a lump-sum death benefit, is it considered taxable income?

No. The beneficiary does not have to pay income tax on lump-sum death benefits.

What term is used to describe the sale of an existing life insurance policy to a third party?

Life Settlement (or Viatical Settlement)

If too much premium is paid into a life insurance policy too soon, the policy turns into a what?

Modified Endowment Contract (MEC)

What test is used to determine if a life insurance policy has become a modified endowment contract (MEC), because too much premium has been paid into the policy too soon?

The Seven Pay Test (or the Seven Pay Limit)

What is a Section 1035 Exchange?

A federal tax law that allows the owner of an annuity contract or life insurance policy to exchange one product for another without being taxed.