Insurance live Class Deck Part 1

85

convertibility

100

flexibility- flexible premium adjustable life

partial CV withdrawals are allowed no loan needed to access CV
combo of a annually renewable term and cash value fund
guraranteed minimum rate
2 death benefits
1.level death benefit
2.level death benefit plus cash value

2 or more ppl under one contract
when the first dies the death benefit is paid to to the beneficiary (or other person under contract)

covers estate taxes over 12.06 mil
death benefit payable after last person die
no benefit payable on death of first person only last person
face amounts exceed 1mil

3 party contract
parent is the owner child is insured when

when child comes of age………..

has the same characteristics of ordinary whole life with one extinct difference

premiums are level and take a portion of premium and put it into a sub account to get invested

regulate as a mutual fund by the SEC according to the investment company act of 1940
-annual premiums are fixed(variable whole life)
-guaranteed minimum death benefit
-no guarantee regarding cash value because money is being invested

a universal life policy with the ability to invest in stocks, bonds, the most flexible of all life

goes to the estate, if there is no will

if trust is established it avoids lawyer and legal fees.

protects beneficiary from creditors
creditors cannot attache lien against death benefits left with insurer
lump sum benefits are not protected

false

false

true

false

compensate business due to death (disability) of key employee
-who is a key employee–someone critical to operation of business
cannot be business owner
provides funds that are needed to offset loss or hire replacement
thrid party contract-insurable interest?
premiums are not deductible;benefit is tax free

using life insurance, provides for business continuation in the event of a partners death

-makes money avaialable to purcahse interests of deceased partners beneficiaries
-pre-arranged purchase price; contractual agreement to sell

of owners= # of policies needed

cross purchase plan- # of partners -1x # of partners = # of policies

employer receives master contract
employee receives certificate of coverage

non contributory-employer pas all premium must cover 100% of employees
contributory-employee pas all or part of premium and must cover 75% employees

employer is owner and retains all ownership rights except
–right to change beneficiary

group as a whole is evaluated, generally no individual underwriting.
good risks outweigh bad risks (adverse selection)
impariments are covered
enrollment period

easier to predict losses with greater accuracy with larger group
individuals cannot form a group with the sole purpose of obtaining group insurance; must be a common bond

within 31 days without proof of insurability
death benefits are provided during 31 day period paid by group plan
term to whole life-attained age
no medical exam or health questions

an anuuity is account/investment vehicle established by and insurance company which allows for the tax-deferred growth of the contributions during the accumulation period
--a person invest funds on either a lump sun or periodic basis and can either immediate or deferred
-may contracts guarantee that the owner will not run out of money in retiremnet even if the funds are exhausted (when a lifetime payout is chosen)

purchased in one lump sun with the payout generally starting immediately

purchased with period payments and payout typically starts after retirement

a contract that provides income for a fixed period or an annuitants lifetime
systematic liquidation of an estate or pool of money
-product sold by life insurance
-protection against outliving ones income
-savings program-future income

pre determine monthly income for life
general assets account
interest rate guarantee
limits policy owner risk
insurer assumes the risk

monthly benefit varies per performance
separate accounts consisting of stocks and bonds
higher potnetial return- no guarantee
policyowner assumes the risk
requires FINRA SERIES 6 OR 7 registration to sell

lump sum or periodic (level or flexible)

immediate
-first payments begin in 30 days of deposit only as a lump sum
deferred
-defer paterments to later date (retirement)

income for life, with survivor benefit if annuitant dies before end of term or designated period 5, 10, 15, 20

income for life with no refund to survivor
no survivorship greatest risk to anuitants beneficiary
largest monthly income
greatest potential overall benefit

annuitant receives an amount at least equal to his original investment
at death any remaining amount is paid to beneficiary

payment to two or more annuitants which ceases on death of either party

payment to two or more annuitants
payment continues to surveyor often at a reduced amount 75%

(take a life insurance policy instead )

allows for stock market appreciation with downside protection
less risk for the insured
guaranteed 3% regardless of market performance
indexing method
-llinked to an equity index
participation rate
-percentage of the index "gain" that is kept by contract holder with remainder kept by insurer (90/10)

yes according to the number of lives on annuity

no. variable annuities are subject to market risks

no. premium payments may be periodic contributions

death benefit is received income tax free
cash value
-grows tax-differed
-upon surrender, not taxable unles the cash value exceeds the premiums paid (cost basis) then only the excess is taxable
-cost basis consists of premiums paid for base policy only and not premiums paid for riders

considered a return of overpaid premium and are not taxable
interest earned is taxable

not a taxable event

when death benefits are left with an insurer, interest is paid on the proceeds
the interest is taxable

not good to have a mic
-premiums paid are not in proportion to death benefit provided
-an mec is an irs classification of an insurance contract
-seven pay test- if the premiums paid in during thr frist seven years exceed the net level premium that should have been paid is a mec
-once a life insurance policy becomes a mec it stays- all withdrawls are taxable
-if taken out prior to 59 1/2 additional 10% penalty applies
-advantages Death benefit remains income tax free and the cash value growth is tax deferred until withdrawn

((things to note. have the person over contribute right before it qualifys as a mec and have them pay 4% tax vs 31% tax in the stock market)

-employer paid premiums are tax deductible as a business expense
-death benefit is received tax free

• cost of first 50K group life is tax exempt to employee
  -if coverage exceeds 50K will be taxable as ordinary income

IRS allow a tax free exchange of insurance product for another like kind
-life insurance for another or endownment for annuity
-endowmnet policy for another endowment or annuity
annuity for annuity
ANNUITY CANNOT BE EXCHANGED FOR LIFE INSURANCE POLICY

individual for whom the exchange is being made must benefit from at least some characteristics of the new product
-improve credit rate of new issuer
-better returns on the new product
-improved benefits on the new product
cash proceeds should not be received on the exchange
the exchange should be compelted within 60 days

non deductible

taxable

taxable

included

taxable

tax free

tax free

created to prevent missuse and mismanagement of pension plan funds
rules apply to private sector defined benefit and defined contribution plans
earnings are tax defered usually

-plans can not be discriminatory
-an approved vesting schedule must be followed
-specifies the percentage of employers contribution to which the employee is entitled when withdrawing formt he plan
-employees are 100% vested in their own contributions

full retirement benefit at full retirement age
averaged indexed monthly earning
determines what was contributed versus income payment