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Term
| GENERAL USES OF LIFE INSURANCE |
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CREATE ESTATE DEATH TAXES BUSINSESS TRANSFER COLLEGE PLANNING RETIREMENT REWARDING EMPLOYEES |
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| CHARACTERISTICS OF TERM INSURANCE |
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Definition
DEF - FACE AMOUNT IF DEATH OCCURS DURING POILCY PURPOSE - NEED IS GREAT, $$$ IS LITTLE FEATURES - easy to understand low cost DISADVANTAGE - no cash value, will end at some point |
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LEVEL - premium & face amount remain level ANNUAL RENEWABLE (ART) - face amt remains level Premium increases DECREASING - face amount decreases, premium goes up |
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| name & descibe characteristic of whole life |
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Definition
Definition - face amount paid regardless of age @ death, continuous payments, growth of cash values PURPOSE & USE - perm portection, college planning, estate protection FEATURES - cost stays same, policy stays in force, cash value avail for loans (borrow) DISADVANTAGE - higher cost, cash val not paid in addition to death benefit |
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Cost more however after so many years its paid |
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FLEXIBILITY & OPTIONS OF UL |
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Definition
Term or Whole Insured helps design Option a or b A - includes cash value within death benefit B - includes cash value in addition to death benefit loans or partial surrender (whole life loans only) Add or delete riders |
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Term
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Definition
very little sold today pays insuredif living at a stipulated age or date |
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VARIABLE LIFE (MUTUAL FUNDS) |
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Definition
whole life contract with the assets supporting the policy benefits being helad in a sep account Must have series 7 license Advantage - may have excellent cash value growth Disadvantage - insured assumes risk |
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Definition
| one single premium provides for a guaranteed level death benefit. guaranteed cash value that grows tax deferred |
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TAX CONSIDERATIONS AS IT RELATES TO PREM CASH VALUE, AND DEATH BENEFITS |
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Definition
Life ins premiums are NOT TAX DEDUCTIBLE Death proceeds are NOT SUBJECT TO FED INC TAX Proceeds will be included in the estate of the owner for federal estate tax purposes Cash values grow tax deferred until recd. FIFO When cash values are withdrawn, those that exceed the premium outlay are subject to income tax. Gifted policy could result in the cash values being subjected to the federal gift tax. This would apply to the donor, not the recipient. |
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MAJOR RIDERS IN LIFE INSURANCE POLICIES |
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Definition
G.I.R. - Guaranteed Insurability Rider (rider can be attached to whole life , endowment, or UL contract. Guarantees the right wo medical exam to make additions up ot 50,000 (not over 40) option dates are 25, 28, 31,34, 27 & 40 Not expensive Waiver of Premium - Pricey If insured becomes disable waives the premium Accidental Death - payment in the event of accident and death occures within 90 days of that accident Cost of Living Rider - Allows death benefit to increase based on COLA or some set % PAYRO BENEFIT - rider waives the premium should the payor (mom or dad) die or be totally disabled while paying the premium. terminates at age 25 |
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Definition
FULLFIL ALL 4 PREMIUM PAYMENT - Entire premium must be equal or greater thatn the full initial premium. INSURABILITY - as of the coverage date a co must find person to be an acceptable risk at standard rates wo exclusion CONDITIONAL INSURANCE - if all conditions are met ins will be provided from the coverage date MAXIMUM AMOUNT - the amt applied for or 500,000 of insurance & $100,000 of accid death benefits TERMINATION OF CONDITIONAL RECEIPT - if ins was provided under this receipt it will term whe policy is delivered. If declined premium will be returned. SUICIDE - if any person proposed for ins commits suic the co liab under this rec will be limited to return or premiums |
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| WHAT ARE PAID UP ADDITIONS??? |
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Definition
| Paid up additions are amounts of permanent insurance with their own cash value, which generate their own dividends. The base policy death benefit is then increased by the face amt of the paid up addition and the guaranteed cash value is increased by the cash value of the paid up addition. Since they are whole life ins they in turn earn dividends which are then credited in the same manner as the base policy dividend. |
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Beneficiary Owner may change anytime |
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Definition
Primary - wife Contingent - if primary not alive otherise... Revocable - the owner is free to change the designation as desired IRREVOCABLE - Owner may change the disignation as desired Classes - why do we name beneficiaries estate? estate 1) creditors may attach proceeds, etc. |
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Non-forfeiture Benefits (whole life only) The owner wished to term the policy or needs cash |
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Definition
Cash - values are stated in the sch page of policy Reduced paid up Ins. - death benefit is paid up no future premiums are payable. Does have cash value Extended Term Ins. - full death benefit for specified years and days. |
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What is Annuity & features |
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Definition
systematic liquidation of an amount of $$$ Following Features: Tax Deferral on investment earnings Protection for creditors An array of investment options, including floors Tax free transfers among investment options Lifetime Income Benefits to your heirs |
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Term
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Definition
Getting deceased persons name off of property use TOD, POD transfer upon death or Paid upon death |
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Term
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Definition
Owner - controls the contract Annuitant - person on whose life annuity payments will be issued Beneficiary - person who receives pmt in event of annuitants death Ins. Co - one that guarantees the contract benefits |
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Identify Classifications of an Annuity |
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Definition
A. # of lives covered 1. Single life annuity 2. joint life, or joint survivorship annuity |
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Definition
USUALLY 30 TO 60 DAYS IMMEDIATE DEFFERED IS USUALLY OVER 6 MONTHS TO A YEAR |
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Term
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Definition
Lump sum (single premium) sold most with deferred Installment - (fixed or flexible premiums) |
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| Qualified vs Nonqualified (Tax Treatment) |
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Definition
Qualified - tax deductible
Nonqualifed - Nondeductible - annuities purchased outside qualified pension plans DO NOT receive tax favored treatment of premium payments. |
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| 6 basic contract provisions found in most forms of annuities |
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Definition
Surrender charges, or deferred sales charges - charges are designed to make moving $$ less attractive usually within a certain # of years. Interst Rates - fixed ann (co assumes risk) Variable (insured accepts risk) Not guaranteed. Equity index (mix) Bailout Provision - Surrender the contract wo surrender charges if the interest rate drops below a certain % or level. Issue Ages - most companies will have max age limits which a contract cannot be issued usually 85 Maximum age for benefits to begin - annuitant must begin receiving benefits before reaching a certain age. Nursing Home Waiver - provision waives the contract surrender charges in the event the annuitant is hospitalized or confined to a nursing home for a specified period of time. Allows the contract owner to receive cash from the annuity to pay expenses assoc. with the hospital stay or the nursing home stay.
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FEDERAL TAX PROVISIONS OF ANNUITY CONTRIBUTIONS AND WITHDRAWALS |
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Definition
Income tax aspects of annuities PREMIUM PAYMENTS - Premiums pd into a nonqualified annuity are generally NOT DEDUCTIBLE Premiums pd into qualified annuities such as IRAs ARE DEDUCTIBLE subject to IRS rules. CASH ACCUMULATIONS - Nat persons not taxable Nonnatural persons - interest is taxable LOANS - will incur tax & penalty 10% Premature Distribution Tax - 10% will be taxable also under the age of 59 1/2 will pay 10% penalty with some exceptions (death, disability) Withdrawals - LIFO Last in First Out - withdrawals are recd as interest out first. (for persons over the age of 59 1/2 the tax penatly does not apply. Section 1035A Exchange |
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BENEFITS OF A 1035A EXCHANGE AS IT APPLIES TO AN ANNUITY |
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Definition
Exchanges permit annuity owner to exchange an annuity contract for another annuity contract WITHOUT INCURRING ANY CURRENT INCOME TAXATION. Also permits exchange of life insurance policies or endowment policies. Taxation of annuity benefit payments Nonqualified interest portion is taxable as income Qualified annuity - entire payment is taxable |
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What Contracts Can Be Exchanged |
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Definition
Life contract can be exchanged for a life, annuity, or endowment Endowment can be exchanged for a an annuity or endowment Annuity contract can be exchanged for an annuity only! |
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