• Cost Money
• Add only at time of application
• can be found on term and perm. insurance

• Policyowner and insured must be the same person
• If policyowner becomes disabled before a given age-the insurance company will decide the age-the insurance co will pay premium as long as disability continues
• as long as insured is still disabled, insurance co will go pat the given age
• All benefits continue, CV grows and loans still available
• waiting period of 3-6 months to determine if disability is serious. Insured still pays premium during this time.
• insurance co will pay back premiums during waiting period if insured is seriously disabled.

• If policyowner does not become disabled before the given age, rider gets removed from policy

• Found on universal and variable universal life insurance policies
• waives only the cost of insurance and expenses

• Pays a portion of the face amount
• Reduces death benefit
• pays you from death benefit if you are disabled
• Insured must meet the definition of disability found in contract

Payor Benefit Rider

• Policyowner and insured are NOT the same person
• Commonly used in juvenile policies
• If policyowner dies or becomes disabled before the insured reaches a certain age, the policyowner must prove insurability
• Insurance co will pay prem. until insured reaches a given age
• at given age, insured becomes the policy owner and is responsible for the prem. payments

• Takes face amount and doubles or triples it
• Insured dies in an accident:
• insurance co pays double or triple the death benefit
• Insured must die directly from accident, within 90 days
• Rider ususally ends at given age

Principal Sum

Accidental Death and Dismemberment Rider

• Insured picks a face amount
• If insured dies due to an accident, within 90 days, 100% of the the face amount gets paid

Capital Sum

Accidental Death & Dismemberment Rider

• Insured suffers a qualifying dismemberment due to an accident
• qualifying dismemberments include: loss of limb at or above the wrist or ankle
• loss of sight in one or both eyes, hearing, or speech
• Capital sum amount often upto one half of principal sum amount
• Full prinicpal sum amount is paid out if you loose two body parts

• Increases death benefit ususally within the consumer price index (CPI)
• form of increasing term
• premiums increase each year with increase of death benefit

Accelerated Death Benefit Rider

Living Benefit Rider

• Insured is diagnosed with a terminal illness
• death within 24 months-diagnosed by one or more physicans
• Insured can get access to death benefits while living.
• this will decrease death benefit
• money recieved is income tax free
• must keep premium payments going-cannot lapse policy

Accelerate Death Benefit Rider

Long-Term Care

• Insured is confined to a nursing home
• can get access to death benefit
• reduces face amount
• policyowner remains in control of policy

• Death within a specified period
• premiums will be returned plus face amount to beneficiary
• If living at end of specified period premiums are refunded to policyowner
• Form of increasing term
• expensive rider

1. Individual
2. Business

• Survivor protection
• Estate Protection
• Cash accumulation-not term insurance
• liquidity -Not term insurance
• Estate conservation

• Buy-sell agreements
• Key person
• Executive bonus 162
• Corporate-owned life insurance

• Legal document drafted by an attorney
• has three guarantees

1. guaranteed buyer
2. guaranteed seller
3. guaranteed price

• Based on the value of the business
• life insurance is a funding vehicle
• life insurance is used to buy out the others in case of death

Cross Purchase agreement

Buy-Sell Agreement

• used by small businesses

• Each partner/owner purchases a policy on the life of every other partner/owner

• number of policies = Partners (owners) x (Partners(owners)-1)

• Business is the owner of the policy and the owners of the company are the beneficiaries
• for larger organizations
• name each other irrivocable beneficiaries. take total premium and divide by owner

Replacement

MI Law

• Replacement is any transaction in which life insurance is to be purchased and as part of the transaction, existing life insurance is to be:

• lapsed, surrendered, forfeited, or terminated
• coverted to a reduced paid up policy or placed on extended term
• reduced in face value
• reissued with a reduced face amount

Replacement

Producer's Duties

1. Information Statement

• listing all existing life insurance policies to be replaced -get policy #s

2. Notice to Applications Regarding Replacement of Life Insurance

• Give it to applicant

3. Sales Proposals

• To be left with the applicant

• Fixed or variable annuities
• group term
• credit life
• life policies part of qualified pension plan
• replacing coverage with a new policy from same insurer (internally)
• policies distributed on mass merchandising basis
• nonrenewable, nonconvertible term policies that expire within five years

• contributions are not tax deductable
• does not need IRS approval
• may discriminate
• growth may be taxed or tax deferred
• excess over cost basis is taxed

• Contributions are tax deductable
• must follow IRS rules
• No discrimination
• growth is tax deferred
• taxed at distribution

• AKA: Old Age, Survivors, and Disability Insurance (OASDI)
• Contributions:
• employee pays in
• employer matches employee's contribution
• self-employed pays both

Fully Insured

Social Security

• Paid into Social Security
• Worked at least 40 quaters= 10 years
• one quarter for each yea after reaching 21 years of age
• minimum of six quarters
• all benefits available