Brian Kolins - The Securities Guys · -Also known as Tax Sheltered Annuity. Life Insurance Exam 002 403(b) Plan-A policy provision that allows for some or all of the death benefit

Thank you for taking a look at our Life Insurance Study Cards. These are for the 85% general, not state specific.

Although I have far more experience in making classes and study materials for Securities Exams, I have been a licensed insurance rep for over 12 years.

When my wife decided to start pursuing her insurance license, I decided I wanted to try and help her by creating flash cards for her.

I figured I should share them with everyone, so people can see the kind of work we do, so if you have questions about any of the Securities Exams, you can let us know.

Please, if you have suggestions for the cards, additional topics/concepts you think should be added, please let me know!

Feel free to distribute these to anyone who needs them, just do not modify the file in anyway, and keep my credit.

www.TheSecuritiesGuys.guru

Brian Kolins -





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-A private sector qualified retirement plan.-Employees may set aside pretax dollars to invest.-Employers may match.

001Life Insurance Exam

401(k) Plan

-A Qualified Retirement plan for employees of non-profits, typically schools and churches.-Contributions made pre-tax.-Also known as Tax Sheltered Annuity.


403(b) Plan

-A policy provision that allows for some or all of the death benefit to be paid before the insured’s death.-Requires client terminally ill to receive benefit.


Accelerated Death Benefit

-A rider that increases the costs and requires the insurance company pay an additional benefit in the event insured dies from an accident or direct result of accident.


Accidental Death Benefit





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Acronym for Dividend Options: CRAPPO.

-Cash.

-Reduction of Premium.

-Accumulate at Interest.

-Paid Up Additions.

-Paid-Up Life.

-One-Year Term.


Acronym for Dividend Options: CRAPPO

Acronym for Elements of a Contract: LOCAL.

-Legal Purpose.

-Offer.

-Consideration.

-Acceptance.

-Legal Capacity.


Acronym for Elements of a Contract: LOCAL

Acronym for Exclusions: WASH.

-War.

-Aviation.

-Suicide.

-Hazardous occupation or Hobby.


Acronym for Exclusions: WASH

Acronym for Exposure: AMOS.

-Age.

-Medical History.

-Occupation.

-Sex (Gender).


Acronym for Exposure: AMOS





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Acronym for Methods of Handling Risk: STARR.

-Share.

-Transfer.

-Avoid.

-Reduce.

-Retain.


Acronym for Methods of Handling Risk: STARR

Acronym For Nonforfeiture Values: REC.

-Reduced Paid-Up.

-Extended Term.

-Cash


Acronym For Nonforfeiture Values: REC

Acronym for Premium Determination: MIX.

-Mortality.

-Interest.

-Expenses.


Acronym for Premium Determination: MIX

Acronym for Premium Payment Options for Whole Life: SLO.

-Straight Pay.

-Limited Pay.

-One Premium.


Acronym for Premium Payment Options for Whole

Life: SLO





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Acronym for Settlement Options: CLIFF.

-Cash.

-Life Insurance.

-Interest Only.

-Fixed-Period.

-Fixed-Amount.


Acronym for Settlement Options: CLIFF

Acronym for Social Security Benefit: DRMS.

-Disability.

-Retirement.

-Medicare.

-Survivors.


Acronym for Social Security Benefit: DRMS

Acronym for Types of Term Policies: LID.

-Level.

-Increasing.

-Decreasing.


Acronym for Types of Term Policies: LID

Acronym for Uses of Insurance: DIME.

-Debt.

-Income.

-Mortgage.

-Expenses.


Acronym for Uses of Insurance: DIME





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-Ambiguities in contract favor the party who did not write it.-That means that if there is a problem with the way the contract is written, it will generally benefit the insured.-Insurer wrote it, they are stuck with it.


Adhesion

-A policy that has additional options.-Potentially adjust face amount, premiums, types of protection, all without a new application.-Allows conversion from one type of insurance to another.


Adjustable Life Insurance

-The tendency that those in bad health will continue insurance more than those in good health.-Potentially creates pools of those still in products that are statistically sicker than designed and causes significant increases in premiums.


Adverse Selection

-The legal document between the agent and insurance company containing the terms of the agreement.-It defines what agent can and can’t do, and how they are to be paid.


Agency Agreement or Agency Contract





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Different forms of Authorities.-Expressed: Specifically granted in writing to agent by insurance company in Agency Agreement.-Apparent: What the public reasonably believes agents have based on the actions of the agent.-Implied: Not expressly granted by company but that can be assumed by the agent that they have in order to conduct business.


Agent Authorities

-Anyone who is selling or helps in selling insurance.-They legally represent the issuer.


Agent/Producer

-An unequal, imbalanced exchanged of value.-One side of the agreement could potentially benefit far more than the other.


Aleatory

-A Term Life Insurance policy in which policyowner can renew the contract each year without proof of insurability.-Generally premiums increase at renewal.


Annual Renewable Term





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-The person who receives the income from an annuity.-May or may not be the policyowner.


Annuitant

-The point when an annuity policyowner decides to turn the annuity from a bucket of money into a stream of income.-A settlement option is chosen.


Annuitization

-An insurance contract that guarantees an income for a specific period/term or for the life of the annuitant (life certain).-Prevents people from outliving their money.-3 types: Fixed, Equity Indexed, and Variable.


Annuity

-Authorization that the agent/producer represents the issuing company.


Appointment





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-Transferring some or all of the policyowner’s rights to another.-Absolute Assignment: Permanent and irrevocable transfer to another.-Collateral Assignment: Temporary/revocable transfer of benefits to another.


Assignment

-The person who receives the benefit in the event of death of insured/annuitant/other.-Secondary/Contingent would get benefit if primary beneficiary predeceases.-Tertiary would get benefit if both primary and secondary beneficiaries predecease.


Beneficiary

-A required publication every agent must provide to a potential client before application finished.-Doesn’t give specific information about specific products from specific companies, instead it provides general information about the different types of products.


Buyers Guide

-On Cash Value Policies only.-Policyowner surrenders the policy, thereby terminating insurance and receiving all available cash value.-If more cash is received than paid in, taxes will be assessed.


Cash Surrender





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-Only in Cash Value Insurance (Whole, Universal, Variable, Variable Universal, but never Term).-It is an equity portion of the insurance available to the policyowner.-Cash Value accumulates throughout duration of policy.-If Cash Value goes to $0 policy terminates (Only Universal and Variable Life).-Cash available for Loan to keep policy in force, or Surrender.


Cash Value

-Acronym:

-Cost

-Of

-Living

-Adjustment.-Used to determine increases in a policy for inflation.


COLA Rider

-Something of value.-Given as part of a loan to make sure repayment.-The consideration in insurance can sort of be considered collateral to guarantee interest and is used as the first month’s premium payment.


Collateral

-Official in charge of each state’s insurance department.-Each state has their own.-Charged with regulating insurance in their respective states and enforcing all appropriate insurance laws.


Commissioner





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-Intentionally withholding material information and facts that would affect an insurance policies issuance.


Concealment

-The policy may not automatically pay out.-It is “conditional”, that is certain conditions must be met.


Conditional

-An insuring agreement given with receipt of consideration.-Starts temporary coverage on date of application or date of medical exam if insured found insurable on that date.-Valid so long as insured did not lie on application.


Conditional Receipt

-A policy that is renewable after given terms, but may only be renewed if certain conditions are met.


Conditionally Renewable





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-Necessary element of the insurance contract.-Something of value exchange for the transfer of risk (typically first month’s premium).-Insured’s Consideration is payment of premiums and truthful statements on application.-Insurer’s Consideration is promises within the contract.


Consideration

-The company’s ability to try and deny a claim.-Usable only if the client lied or otherwise deceived the company into issuing the policy.-After a certain period of time, the policy is no longer contestable.


Contestability

-Contributory or Noncontributory based on the employee.-Contributory plans have the employees contribute part of the payment of premiums.-Noncontributory plans the employees can’t contribute, only the employer pays the entire premium.


Contributory Plan v.-Noncontributory Plan

-A Term Insurance Policy that permits a term policy to “convert” or be turned into a permanent Cash Value plan without proof of insurability.


Convertible Term Insurance





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-A Term Insurance Policy where the face amount or death benefit decreases over time on a scheduled basis.-Usually used for debt obligation like a mortgage.


Decreasing Term Insurance

-Distributions paid out by insurance companies.-Never are can be guaranteed.-Stock Insurers: dividends (portion of profit) paid to stockholders and taxable.-Mutual Insurers: dividends (unneeded premiums) paid to policyowners and are not taxable.


Dividends

-The date the policy goes into force.-The first date the insured is covered by the policy.


Effective Date

-Not really sold anymore and not really insurance.-It does not have the tax benefits of insurance.-It looks like insurance, but at a preset maturity the death benefit is paid to the insured in cash.


Endowment





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-Fixed insurance, only insurance license needed.-An annuity with a guaranteed minimum interest rate (usually 0%) and allows the annuitant to gain benefit from an increase in a stock index.-Investments grow as index grows.


Equity Indexed Annuity

-Professional liability in which producers can be sued for bad policys.


Errors and Omissions

-Something that would prevent a potential client from being approved or a claim paid out.-War Exclusion prevents payments if death was due to act of war.-Several other types: WASH.-War.-Aviation.-Suicide.-Hazardous occupation or Hobby.


Exclusion (from coverage)

-The method for determining taxable portion during annuity payout phase.-The percentage of the account value that was earnings, is the same percentage of each monthly check that is taxed.-On all annuities.


Exclusion Ratio





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-The amount of insurance.-The amount payable to beneficiaries upon death of insured.-Also called Face Value, Death Benefit, Policy Proceeds, Coverage, Stated Amount, Proceeds for Beneficiary, or Indemnity Amount.


Face Amount

-The Federal Law designed to protect consumers regarding their credit history.-Has guidelines on how consumers credit reports can be accessed, by whom, and reasons along with what types of disclosures and other notifications are required.


Fair Credit Reporting Act

-A person in position of financial trust.-Must act in best interest of the client.


Fiduciary

-Method used to determine how much life insurance is needed.-Uses needs of surviving family as the basis for the recommendation.-Uses worksheet to determine needs ot surviving family members based on the insured’s current earnings.


Financial Needs Approach





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-An annuity given a guaranteed interest rate.-Money is put in general account of insurance company.-Has inflation risk.


Fixed Annuity

-A policy provision required by state law that sets a certain number of days for the new policyowner to review a newly issued policy.-The policyowner may return the policy during this time for 100% refund.-Also referred to as Refund Provision, Unconditional Refund Provision, Right to Examine, Return Provision, or Exchange Provision.


Free Look Provision

-General account is where money from Whole Life, Universal Life, Fixed Annuities, and Equity Indexed Annuities are kept by the insurance company. -There are guarantees of specific returns in all general account investments.-Separate account is where Variable Life, Universal Variable Life, and Variable Annuities monies are kept by the insurance company. -There are no guarantees of specific returns in the separate account.


General Account v.-Separate Account

-A minimum period of time where the policy must stay in force without the payment of premiums.-Mandated to be at least 30 or 31 days.


Grace Period





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-An insurance policy covering a group, more than 1 person.-They have to have some common interest, generally a job or similar.-A Master Policy is issued only the policyowner, the job or whatever.-Individuals insured get a Certificate of insurance.


Group Insurance

-Found in Cash Value plans, primary Whole Life, Fixed and Indexed Annuities.-Provide a guaranteed minimum interest and thus cash value.


Guaranteed Cash Values

-Anything that increases risks.-Examples could be previous injury.-Potential denial, or rating required.


Hazard

-A savings accounts for health expenses.-Invested assets grow tax-free and withdrawals are tax free if used to cover current and future qualified health care costs.


Health Savings Accounts (HSAs)





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-Annuities can spend a long time or short time in the accumulation phase.-If after initial deposit the policyowner wants money within 1 year that is an Immediate Annuity.-If the policyowner wants and does wait more than 1 year before taking income, that is a Deferred Annuity.


Immediate/Deferred Annuity

-14 day - Free Look Period.-4 weeks - Grade period for industrial weekly life premium policies.-31 days - grace period of ordinary insurance policies.-60 days - Max time to roll over into new IRA to avoid taxes/penalties.-90 days - Time within which death must happen for an Accidental Death policy to pay.


Important Times (Days)

-6 months - Waiting period for waiver of premium.-1 year - Must file annual financial statement with Florida insurance).-2 years - Incontestablility period.-1 or 2 years - Suicide clause limitations.-3 years - companies required to make cash surrender values available and time to keep records.-5 years - companies required to make cash surrender values available for industrial policies.


Important Times (Months/Years)

-A mandated provision required to be in all contracts.-It sets a limit on the amount of time that an insurer can rescind, or “take back” the policy or contest the claim due to misrepresentation and/or concealment.


Incontestable Clause





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-Rare type of Term Policy.-Death benefit grows over time.-Could be issued as a rider for return of premiums.


Increasing-Term Insurance

-To make one financially whole again.-The purpose of insurance, to replace what is lost, to indemnify the insured/policyowner.-Insurance is not designed for the parties to profit, merely attempt to be made whole again.


Indemnify

-A type of account used for retirement.-There are multiple types.-Must have earned income, not just passive.


Individual Retirement Arrangement/Account (IRA)

-The idea that one would suffer a loss in the event of another’s death.-You must have insurable insurance on the insured to purchase insurance.-You cannot buy insurance on someone you do not know.


Insurable Interest





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-The person covered by the insurance policy.-When the insured dies, the beneficiary gets the death benefit.-The Owner and Insured can be the same.-The Insured and Beneficiary can never be the same person.


Insured

-The insurance company issuing the policy.-Underwrites the policy and assumes all risks.


Insurer/Principal

-The reason for an insurance policy.-It contains the insurer’s promise to the policyowner and describes coverage provided and the limitations of coverage.


Insuring Clause

-A Beneficiary the owner can not change.-Usually used in divorce or some other legal requirement to have insurance with a specific beneficiary that the owner may want to change, but the court order and the insurance prevents.


Irrevocable Beneficiary





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-An insurance policy covering 2 people.-Usually seen as a settlement option of an annuity where the annuity payments continue until the second dies.-Also could be done on life insurance where the benefit only pays to the beneficiary when the second party dies.


Joint Life

-Qualified retirement plan for self employed people and eligible employees.-Contributions pre-tax dollars.-Participation requirements: 21 years old, 1 year employment, and 1000 hours that year.


Keogh Plan

-A policy that is no longer in force and will not be paid due to unpaid premiums.-It can also be known as Forfeit, Surrender, Cancellation, or Termination.


Lapsed Policy

-Term Insurance Policy where the face amount remains level, stable, the same from the date of issue to expiration.-Potentially has renewable features, but on renewal premiums are likely to rise, potentially greatly.


Level Term Insurance





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-Document issued by a state’s insurance department to an individual verifying they are qualified to engage in insurance business.


License

-Only in Cash Value Insurance, principally Whole Life.-Pay off a life time of premiums, in a shorter period of time.-After that period policy continues until maturity, typically age 100, with no additional premiums required.


Limited Pay Insurance

-Some addition to a policy, almost always a rider, that gives benefits to the policyowner.-Living Benefits are very common in annuities that are sold today.-Differ company to company and product to product.


Living Benefit Provision

-Organization that stores info from insurance companies and makes it available to others for underwriting.-Purpose is to prevent fraud and concealment by applicants.


Medical Information Bureau





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-Making any claim, publishing circulating any illustration or other sales material that is false, untrue, misleading, or deceptive.-Including anything written or oral.


Misrepresentation

-Any type of cash value plan that builds cash value too fast.-Too fast as defined by the 7-day WL Contract.-MECs lose tax advantages of Life Insurance and are tried to be avoided.


Modified Endowment Contract (MEC)

-A type of whole life insurance policy.-Has reduced premiums early and higher premiums later.-Could be essentially term insurance during early years, changing to whole life at a later time.


Modified Life Policy

-The cost charged in Cash Value plans to cover the cost of death.-Can be thought of basically as an Annually Renewable Term Insurance, where the monthly premium in excess of the Mortality Fee goes into the Cash Value.-Either General or Separate account depending on type of Cash Value Policy.


Mortality Cost/Fee





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-A type of insurance company owned by it’s policyholders.


Mutual Companies

-A provision in life insurance that allows the continuation of some form of insurance as a form of surrendering.-Many options available including reduced-paid up insurance, decreasing term insurance, etc varying company to company.


Non-forfeiture Provision

-A retirement plan that does not qualify under the retirement law ERISA for special tax benefits.-“Deferred Compensation” is the primary example.


Non-qualified Retirement Plan

-“By branch” in Latin.-If children predecease, then their children would get their parent’s share.


Per Stirpes





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-The cause of the loss or a loss.


Peril

-In all Cash Value Policies.-Describes how the policyowner can borrow from the Cash Value in the policy.


Policy Loan Provision

-The person in the insurance contracts will all rights of the policy.-Designated on application.-May or may not be insured.-May or may not be beneficiary (Insured can’t be beneficiary though).-May simply be called the owner of the policy.


Policyowner

-Less risk than normal.-Generally will lower policies if they insured is of a Preferred Risk category.


Preferred Risk





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-The cost of the policy.-Usually paid monthly, but could be paid less often depending on the contract.


Premium

-Qualified Accounts are those that meet certain ERISA (retirement law) guidelines and receive special tax benefits.-Non-Qualified Accounts do not meet those ERISA guidelines and are taxed as normal accounts.


Qualified/Non Qualified Accounts

-The health classification given by an insurer after underwriting. -The better the rating, the lower the premium. -The worse the rating, the higher the premium.-Differs from company to company.


Rating

-An agent giving anything of value to potentially induce or convince someone to purchase insurance.-Includes giving portion of commission, or bonuses.-Never Allowed!-Unethical Practice.


Rebating





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-Generally a form a non forfeiture option in which the cash value is surrendered to effectively make a purchase of a single payment whole life policy.


Reduced Paid Up Insurance

-When a canceled or terminated policy is restarted.-Underwriting may be required depending on the company and the time since cancellation.


Reinstatement

-Insurance companies sharing the risk between themselves.-One insurance company sells part of it’s risk pool to another insurance company.-No one major accident then could destroy any one company.


Reinsurance

-Term Policies.-After the specified period is over, the policy can be continued for additional periods of time at an increased cost.-Guaranteed Renewable means there is no underwriting.-Conditionally Renewable may require underwriting or some other requirements.-Generally there is an age at which the policies are no longer renewable.


Renewable





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-When one policy is surrendered/terminated because another policy has been purchased.-Replacement regulations must be followed.-Cannot be done simply for commission.


Replacement

-A policy that will return the premiums paid.-Could be with many conditions.-Sometimes included as a rider on term insurance, where at the end of the term the owner gets their total premiums back (NOT including interest).


Return of Premium

-Revocable beneficiary is a normal regular beneficiary. -The status can be revoked and changed by the policyowner at anytime.-Irrevocable beneficiary cannot be changed by the policyowner. -Any change of a irrevocable beneficiary can only be made by the beneficiary.-Usually divorce and similar situations.


Revocable Beneficiary v.-Irrevocable Beneficiary

-Optional additional coverages or conditions that can be added to the policy.-Covers additional benefits and protections for the customer, potentially covering unwanted risk for the insurer.-Varies from policy to policy and company to company.-Could also be known as: Addendums, Additions, Amendments, or Additional Policy Benefits.


Riders





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-Not tax deductible private individual retirement account.-After Tax money.-Grows tax deferred.-Withdrawals tax free if held for 5 years and meet other conditions (typically over the age of 59.5, but also disability/death/etc).


Roth IRA

-The national body in charge of all Securities business.-They have jurisdiction over all variable insurance products.


Securities Exchange Commission (SEC)

-Qualified retirement plan for small business.-Only the employer contributes.-Requirements, 21 years old, worked 3 of last 5 years for employer, made a certain minimum amount in that time.


SEP

-For all Annuities.-Chosen at Annuitization.-Life-Only: only for life of annuitant.-Life and Period Certain: for life of annuitant or period whichever longer.-Joint/Last Survivor: payments until 2 people die.-Period Certain Only: payments for fixed period of time then cease.


Settlement Option





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-Qualified retirement plan for small business.-100 or less employees.-Any employee who makes more than $5,000 can contribute.


SIMPLE

-A Whole Life Insurance plan funded with 1 single premium.-Think about this, you have 40 years to live, think someone might be willing take $10,000 from you to guarantee $40k to your heirs? They have likely 40 years to make more than that.


Single Premium Whole Life

-Single Premium Insurance is insurance (annuity or life) that is funded with one lump sum payment, and no further payments will be needed.-Periodic Payment Insurance is insurance (annuity or life) that is funded with periodic, generally monthly, premium payments.-Periodic Payment Life can be canceled if payment is not made, Period Payment Annuities will not be canceled, their account growth likely will suffer though.


Single Premium/Periodic Payment Annuity or Life

-The possibility or probability of expiencing some loss or gain.-Gambling and skydiving could both be seen as speculative risks.


Speculative Risk





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-An insurance company that is publically owned.-It is controlled by the holders of its stock.-Stockholders elect a Board of Directors to manage the company.


Stock Insurer

-A Qualified Retirement plan for employees of non-profits, typically schools and churches.-Contributions made pre-tax.-Also known as 403(b) plans.


Tax Sheltered Annuity (403B)

-Temporarily insurance for a specific period or term.-The cheapest form of insurance.-Does not build cash value.


Term Life Insurance

-Individual retirement account, not employer.-Pre-Tax Dollars.-Same annual limits as Roths.


Traditional IRA





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-The process where an insurer evaluates a potential customer and based on risk calculations either accept them as a client or rejects them based on risk.


Underwriting/Underwriter

-Flexible Premiums.-Cash Value Plan.-Is designed to be interest sensitive.


Universal Life Insurance (UL)

-Insurance and Securities license required.-Money grows in separate account with no guarantees of return.-Annuity will make monthly payments for life like all annuities, but the payments are variable and could drop considerably.-The value of the annuity and the monthly payments depend on the performance of the investments in the separate account.


Variable Annuity

-Fixed Premiums.-Cash Value Plan.-Minimum Death benefit guaranteed and could increase as investments.-Cash Value grows in Separate Account.-Requires Insurance and Investment Licenses.


Variable Life Insurance (VL)





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-Flexible Premiums.-Cash Value Plan.-Minimum Death benefit guaranteed and could increase as investments.-Cash Value grows in Separate Account.-Requires Insurance and Investment Licenses.


Variable Universal Life Insurance (VUL)

-When someone purchases someone else’s life insurance as an investment.-When the insured dies, the new owner who has now purchased the insurance, would get the money, which would be the return on their investment in purchasing the plan.


Viatical Settlement/Arrangement

-Relinquishing something.-Used often as a “waiver of premium” in which the client will not have to pay the premium, typically for total disability and inability to work.


Waiver

-Fixed Premiums.-Cash Value Plan.-Level Coverage until death or age 100 (possibly sooner).-Also known as straight life, ordinary life, fixed, rigid or permanent.


Whole Life Insurance

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Documents

Brian Kolins - The Securities Guys · -Also known as Tax Sheltered Annuity. Life Insurance Exam 002 403(b) Plan-A policy provision that allows for some or all of the death benefit