On The Air Life Course
License Coach Cram Course Instructor: Bri3on Whitbeck
Announcements/Reminders • Class starts at 6PM Central / 7PM Eastern, every Tuesday, Wednesday, and Thursday. • If your copy of the slides don’t match the class, give me your e-‐mail address in the chat box, and I will send you updated copies. • If you have trouble with video or audio, try refreshing your screen. • SomeImes the video stream doesn’t work well with Google Chrome, but there are no problems with Internet Explorer, Safari, or Firefox.
Study Tips • Review STATE SUPPLEMENTS in general, life, and health secIon. • Go over DIFFICULT chapters and modules. • Retake as many QUIZZES and EXAMS as possible. • Look over the different LISTS of terms, provisions, and other informaIon in the modules. • Don’t worry about MEMORIZING, focus on LEARNING.
Test Taking Tips • Answer ALL the quesIons. • READ the quesIon thoroughly and watch out for key words (Except, All of the Above) • BE Conscious of your Ime. • Before you begin, write down on the paper given any acronyms you have memorized. • Focus, Visualize, and Celebrate!
The Night Before Your Exam • Relax, give your brain a rest. • Get a good night’s sleep. • Know when and where to go!
Schedule Your Exam • Is your exam scheduled? • Needs to be set within 2 weeks!
• “Do it” tomorrow!
Life Insurance
Insurance that is designed to protect against the risk of premature death. Life Insurance
What does Life Insurance Guarantee?
A specified sum of money upon the death of the insured.
The amount paid to the beneficiary under an insurance policy upon the death of the insured is called:
Death Benefit
In life insurance, the rate at which a specific populaIon dies.
Mortality
The 2 basic approaches used to determine the amount of insurance an individual needs are: Human Life Value Approach And *Needs Approach Most used today
An individual’s valid concern for the conInuaIon of the life or well-‐being of the person insured.
Insurable interest
Individuals That Have Insurable Interest
• Self • Family • Business Partners • Creditors
QuesIon:
When does insurable interest have to exist? Answer: At policy incepIon, at the Ime of the applicaIon.
Features of Buy/Sells Plans: • Buy-‐sell plans allows for a business to “buy-‐out” the interest of a deceased owner. The company owns the policy on the life of the owner and the premium are tax-‐deducIble. • Sole proprietors can also make it possible for an employee to buy their business. The employee owns the policy on the life of owner, but the premiums are not tax-‐deducIble.
Partnership Cross Purchase partners purchase insurance on each other individually; the partnership itself is not involved. The premiums are paid by the partners and are not tax-‐deducIble. How many policies would be required for 3 partners? 6 policies (They each buy 1 policy on each of the other partners)
QuesIon: What is Business InterrupIon insurance? Answer: Key-‐Person Insurance: the beneficiary is the business. The company owns the policy and the premiums are tax-‐deducIble.
Name and Describe 3 Basic kinds of Life insurance.
• Ordinary Life -‐ Temporary (Term) Permanent ( Whole, Universal, Variable)
• Industrial Life –Debit, Home Service • Group Life – Employee/Employer
Term insurance is: Temporary It provides insurance for: A specified Ime and pays only if the insured dies during that period.
Decreasing Term Premium stays level, Face amount systemaIcally decreases to zero by end of term
OpIon t o C onvert: allows an insured to convert a term policy to whole life without proof of insurability.
QuesIon: Which policy has lower payments the first years (usually 5 years) then higher than typical therealer? Answer: Modified Whole Life
Comprised of variable life and variable annuiIes. These products invest premium dollars in securiIes, which carry more risk due to price fluctuaIons. A securiIes license is required to sell these products.
Variable Insurance
What is the difference between a Joint Life Policy and a Joint and Last Survivor Policy?
• Joint Life covers 2 people, pays death benefit when the 1st one dies. • Joint & Last Survivor covers 2 people, pays a death benefit only when 2nd insured dies. (AKA) Second to Die policy.
QuesIon: What insurance protects against the risk that a person in debt cannot repay the debt to the creditor because of accident, sickness, disability or death? Answer: Credit Life insurance
What is Credit Life Insurance? Covers the Life of Debtor For amount of a loan. AKA Decreasing Term (Mortgage Insurance or Credit life)
What is another name for Whole Life insurance? Permanent and Cash Value Insurance
When does Whole Life insurance mature?
At age 100 If policyowner is alive, check is paid to them for Full Face Amount
The most common type of insurance used in a group policy is: Annual Renewable Term
Universal Life QuesIon: What is Universal Life? Answer: term insurance with a Defined as _______ policy value fund.
Universal Life Cash Value grow 2 ways: Current Interest Rates Or Guaranteed Minimum Rate
Universal Life Premiums
Universal Life -‐ MIX Premiums will be used for: M – Mortality (protecIon) element I – Interest (accumulaIon) element X -‐ eXpense (loading charges) element
What 3 things can be adjusted on a Universal Life policy without needing a new policy? • Face Amount • Payment Amount • Frequency of Payment Key word for Universal Life: Flexibility
Universal Life Higher interest rate than whole life,
cost is also higher than whole life. Basically Annual Renewable Term Insurance with a Cash Value account.
Universal Life If the Cash value account is not large enough to support monthly deducIons the policy terminates .
Describe the features of the policy Straight Whole Life Permanent Level ProtecIon Level Premium unIl death or 100
These policies earn a fluctuaIng rate of interest and do not guarantee a certain cash value. They have fixed level premiums and a guaranteed minimum death benefit.
Variable Life Insurance
What is it called when a policy owner transfers one or all of his rights of ownership of his policy? Assignment
Does an Insurable Interest have to exist to assign a policy?
No, the policy owner can give it to anyone.
What is it called when the assignee receives Full control of the policy?
Absolute Assignment
Must the insurance company be noIfied when a policy is assigned?
Yes, but no approval is needed.
What is it called when the policy proceeds are assigned to a creditor?
Collateral or ParHal Assignment
Once the debt is repaid, does the policy owner regain the policy’s benefits?
Yes
Whole Life Insurance Cash Value Non-‐Forfeiture OpIons
You can’t forfeit your Cash Values, Policy owner chooses how to receive them
There are 3 Non-‐forfeiture OpIons:
• R – Reduced, Paid-‐Up • E – Extended Term • C -‐ Cash
QuesIon: What is an Emergency Fund used for? Answer: Pays for maintenance, repairs, medical bills, loss of job, etc.
What does a Stock Insurance company doing business on a Mixed Plan mean? The company offers both ParIcipaIng (Dividends-‐more expensive $$) and
Non-‐parIcipaIng (No dividends) Insurance.
CRAPO Policyowner has 5 opIons to receive their Dividends. C – Cash Payout R – Reduce Premiums A – Accumulate w/ Interest (this is taxable) P – Paid Up AddiIons O – One Year Term (aka 5th Dividend OpIon)
QuesIon: Are dividends taxable? Answer: No, it is actually a refund of premium. The insured’s own money is being returned, it’s not a profit, so it’s not taxed. (BUT, interest paid on dividends is taxable.)
What does the “Free Look” provision provide?
A chance for the insured to reject the policy without forfeiIng his money Most life insurance policies provide a 14 day
“free-‐look” period to review and return the policy. BUT for the EXAM, check your state minimum “free look” requirement (could be 10 days).
How long is the grace period? Ordinary Life= 30 days Look at the frequency of premium payments
Reinstatement Requirements What 4 things may have to be done before a lapsed policy will be reinstated? Here’s a hint…..PAY x 3, PROOF
Reinstatement Requirements
PAY—PAY ALL PREMIUMS DUE PAY—PAY BACK OUTSTANDING LOANS PAY—PAY ALL INTEREST DUE PROVE—PROOF OF INSURABILITY
What does the (APL) AutomaIc Premium Loan provision provide? Insurer(company) can pay insured’s premium from Cash Value
What are the rules for an employee to convert his group insurance to an individual policy aler leaving a company?
• 31 days • No Insurability needed • Plan other than term
What is the difference between a Provision and a Rider? • A provision is part of the main policy. • A rider is an addition to the policy and frequently there is an additional charge.
Riders
The waiver o f p remium rider prevents a policy from lapsing by paying the premiums when the insured becomes disabled.
How long is the waiIng period before this rider becomes effecIve?
3 months – 6 months (90 – 180 days)
How long will the company waive/pay the premiums?
UnIl disabled owner recovers. If disabled before 65 and does not recover, then for life.
What is the rider called that when the owner dies, the children’s premiums are waived unIl the child reaches 25?
Payor Provision, ONLY found in Juvenile Insurance
What is the Rider that can have more than one family member insured?
Other insured, Spouse or child rider
A required provision in a life insurance policy which sIpulates the rights of the policyowner.
Ownership Provision
Where is the EnIre Contract Provision found? Answer: At the beginning of the policy.
What does the EnIre Contract Provision mean?
• Policy Document • Azached Riders • ApplicaIon (all must be azached to the policy)
How does the EnIre Contract Provision protect the insured? Insurer (Insurance Company) can not add or change any part of the policy aler the delivery.
Incontestable Clause
How long can an insurance company challenge the validity of statements made on a policy? Two Years AKA Incontestable Clause
What are 3 situaIons to which the incontestable Ime does not apply? • I -‐ ImpersonaIon • I -‐ No Insurable Interest • I -‐ Intent to Murder
If a policy owners misstates his age, will the company be able to do anything about it aler the contestable period expires? Yes What can the insurer do? Adjust the proceeds to reflect correct age – Increase or decrease the face amount.
Where is the Insuring Clause found in a policy? Answer: On the cover of the policy
What does Insuring Clause promise? To pay the beneficiary at death or insured at age 100
No legal acIon may be taken prior to 60 d ays aler wrizen proof of loss is provided to the insurer.
Common Policy Exclusions Insurer will not pay:
• C -‐ Commission of a Felony • A -‐ AviaIon • W -‐ War • S -‐ Suicide
Suicide Clause QuesIon: How much money does Mary receive if John commits suicide within 6 months of the issue date? Answer: Only the Total Premiums Paid
Accelerated Benefits/ViaIcal Sezlements
The Accelerated B enefit is the provision/rider that allows for an early payment of a porIon of the death benefit to be paid to an insured that is terminally/chronically ill.
ViaIcal S ezlement C ompanies
are companies which purchase life insurance policies from the terminally ill.
QuesIon? What kind of assignment is it when a viaIcal company pays the original owner money and the owner assigns his policy to the viaIcal company? Answer: Absolute Assignment
Yes or No Are accelerated death benefits taxable? No Does a terminally ill person who sells her policy to a viaIcal company have to pay taxes on the money? No
A contract which protects against the risk of living longer than expected. They provide guaranteed life income to protect against the risk of depleIng reIrement funds.
AnnuiIes
Endowment Policy
Policy providing for payment of Face A mount at end of fixed period(Endowment Period), at a specified age of insured, or at insured’s death before the end of the stated period.
Federal social insurance program which provides reIrement, disability, and survivors benefits. OASDI
• O – Old • A – Age • S – Survivors • D – Disability • I -‐ Insurance
Basis for determining Social Security insured status. A maximum of 4 quarters can be earned in one year. Synonymous with quarters of credit.
Quarters of Coverage 40 Quarters=Fully Insured
Social Security
Social Security is an EnItlement Program, it is not a welfare program. (40 quarters = Fully insured.)
ReIrement Plans
What type of plan is exempt from current income taxaIon?
A qualified plan
Yes or No Does an employee pay taxes on money they contribute to their qualified plan at work? NO (ContribuIons are from pre-‐tax earnings)
What does ERISA mean? • E -‐ Employee • R -‐ ReIrement • I -‐ Income • S -‐ Security • A -‐ Act
What does an ERISA do for workers?
Protects the rights of workers
403b (aka Tax-‐Sheltered Annuity or TSA) These are specifically for employees of 501(c) organizaIons and public schools.
What are some 501(c) organizaIons? • Non-‐Profit • Charitable • EducaIonal, or • Religious • OrganizaIons
How many people can own an IRA account? (Individual ReIrement Account) A. 1 B. 2 C. 3 D. 0
Answer: A That’s why it’s called an “individual” reIrement account.
Announcements/Reminders • Class starts at 6PM Central / 7PM Eastern, every Tuesday, Wednesday, and Thursday. • If your copy of the slides don’t match the class, give me your e-‐mail address in the chat box, and I will send you updated copies. • If you have trouble with video or audio, try refreshing your screen. • SomeImes the video stream doesn’t work well with Google Chrome, but there are no problems with Internet Explorer, Safari, or Firefox.
Study Tips • Review STATE SUPPLEMENTS in general, life, and health secIon. • Go over DIFFICULT chapters and modules. • Retake as many QUIZZES and EXAMS as possible. • Look over the different LISTS of terms, provisions, and other informaIon in the modules. • Don’t worry about MEMORIZING, focus on LEARNING.
Test Taking Tips • Answer ALL the quesIons. • READ the quesIon thoroughly and watch out for key words (Except, All of the Above) • BE Conscious of your Ime. • Before you begin, write down on the paper given any acronyms you have memorized. • Focus, Visualize, and Celebrate!
The Night Before Your Exam • Relax, give your brain a rest. • Get a good night’s sleep. • Know when and where to go!
Schedule Your Exam • Is your exam scheduled? • Needs to be set within 2 weeks!
• “Do it” tomorrow!
Life Insurance
Insurance that is designed to protect against the risk of premature death. Life Insurance
What does Life Insurance Guarantee?
A specified sum of money upon the death of the insured.
The amount paid to the beneficiary under an insurance policy upon the death of the insured is called:
Death Benefit
In life insurance, the rate at which a specific populaIon dies.
Mortality
The 2 basic approaches used to determine the amount of insurance an individual needs are: Human Life Value Approach And *Needs Approach Most used today
An individual’s valid concern for the conInuaIon of the life or well-‐being of the person insured.
Insurable interest
Individuals That Have Insurable Interest
• Self • Family • Business Partners • Creditors
QuesIon:
When does insurable interest have to exist? Answer: At policy incepIon, at the Ime of the applicaIon.
Features of Buy/Sells Plans: • Buy-‐sell plans allows for a business to “buy-‐out” the interest of a deceased owner. The company owns the policy on the life of the owner and the premium are tax-‐deducIble. • Sole proprietors can also make it possible for an employee to buy their business. The employee owns the policy on the life of owner, but the premiums are not tax-‐deducIble.
Partnership Cross Purchase partners purchase insurance on each other individually; the partnership itself is not involved. The premiums are paid by the partners and are not tax-‐deducIble. How many policies would be required for 3 partners? 6 policies (They each buy 1 policy on each of the other partners)
QuesIon: What is Business InterrupIon insurance? Answer: Key-‐Person Insurance: the beneficiary is the business. The company owns the policy and the premiums are tax-‐deducIble.
Name and Describe 3 Basic kinds of Life insurance.
• Ordinary Life -‐ Temporary (Term) Permanent ( Whole, Universal, Variable)
• Industrial Life –Debit, Home Service • Group Life – Employee/Employer
Term insurance is: Temporary It provides insurance for: A specified Ime and pays only if the insured dies during that period.
Decreasing Term Premium stays level, Face amount systemaIcally decreases to zero by end of term
OpIon t o C onvert: allows an insured to convert a term policy to whole life without proof of insurability.
QuesIon: Which policy has lower payments the first years (usually 5 years) then higher than typical therealer? Answer: Modified Whole Life
Comprised of variable life and variable annuiIes. These products invest premium dollars in securiIes, which carry more risk due to price fluctuaIons. A securiIes license is required to sell these products.
Variable Insurance
What is the difference between a Joint Life Policy and a Joint and Last Survivor Policy?
• Joint Life covers 2 people, pays death benefit when the 1st one dies. • Joint & Last Survivor covers 2 people, pays a death benefit only when 2nd insured dies. (AKA) Second to Die policy.
QuesIon: What insurance protects against the risk that a person in debt cannot repay the debt to the creditor because of accident, sickness, disability or death? Answer: Credit Life insurance
What is Credit Life Insurance? Covers the Life of Debtor For amount of a loan. AKA Decreasing Term (Mortgage Insurance or Credit life)
What is another name for Whole Life insurance? Permanent and Cash Value Insurance
When does Whole Life insurance mature?
At age 100 If policyowner is alive, check is paid to them for Full Face Amount
The most common type of insurance used in a group policy is: Annual Renewable Term
Universal Life QuesIon: What is Universal Life? Answer: term insurance with a Defined as _______ policy value fund.
Universal Life Cash Value grow 2 ways: Current Interest Rates Or Guaranteed Minimum Rate
Universal Life Premiums
Universal Life -‐ MIX Premiums will be used for: M – Mortality (protecIon) element I – Interest (accumulaIon) element X -‐ eXpense (loading charges) element
What 3 things can be adjusted on a Universal Life policy without needing a new policy? • Face Amount • Payment Amount • Frequency of Payment Key word for Universal Life: Flexibility
Universal Life Higher interest rate than whole life,
cost is also higher than whole life. Basically Annual Renewable Term Insurance with a Cash Value account.
Universal Life If the Cash value account is not large enough to support monthly deducIons the policy terminates .
Describe the features of the policy Straight Whole Life Permanent Level ProtecIon Level Premium unIl death or 100
These policies earn a fluctuaIng rate of interest and do not guarantee a certain cash value. They have fixed level premiums and a guaranteed minimum death benefit.
Variable Life Insurance
What is it called when a policy owner transfers one or all of his rights of ownership of his policy? Assignment
Does an Insurable Interest have to exist to assign a policy?
No, the policy owner can give it to anyone.
What is it called when the assignee receives Full control of the policy?
Absolute Assignment
Must the insurance company be noIfied when a policy is assigned?
Yes, but no approval is needed.
What is it called when the policy proceeds are assigned to a creditor?
Collateral or ParHal Assignment
Once the debt is repaid, does the policy owner regain the policy’s benefits?
Yes
Whole Life Insurance Cash Value Non-‐Forfeiture OpIons
You can’t forfeit your Cash Values, Policy owner chooses how to receive them
There are 3 Non-‐forfeiture OpIons:
• R – Reduced, Paid-‐Up • E – Extended Term • C -‐ Cash
QuesIon: What is an Emergency Fund used for? Answer: Pays for maintenance, repairs, medical bills, loss of job, etc.
What does a Stock Insurance company doing business on a Mixed Plan mean? The company offers both ParIcipaIng (Dividends-‐more expensive $$) and
Non-‐parIcipaIng (No dividends) Insurance.
CRAPO Policyowner has 5 opIons to receive their Dividends. C – Cash Payout R – Reduce Premiums A – Accumulate w/ Interest (this is taxable) P – Paid Up AddiIons O – One Year Term (aka 5th Dividend OpIon)
QuesIon: Are dividends taxable? Answer: No, it is actually a refund of premium. The insured’s own money is being returned, it’s not a profit, so it’s not taxed. (BUT, interest paid on dividends is taxable.)
What does the “Free Look” provision provide?
A chance for the insured to reject the policy without forfeiIng his money Most life insurance policies provide a 14 day
“free-‐look” period to review and return the policy. BUT for the EXAM, check your state minimum “free look” requirement (could be 10 days).
How long is the grace period? Ordinary Life= 30 days Look at the frequency of premium payments
Reinstatement Requirements What 4 things may have to be done before a lapsed policy will be reinstated? Here’s a hint…..PAY x 3, PROOF
Reinstatement Requirements
PAY—PAY ALL PREMIUMS DUE PAY—PAY BACK OUTSTANDING LOANS PAY—PAY ALL INTEREST DUE PROVE—PROOF OF INSURABILITY
What does the (APL) AutomaIc Premium Loan provision provide? Insurer(company) can pay insured’s premium from Cash Value
What are the rules for an employee to convert his group insurance to an individual policy aler leaving a company?
• 31 days • No Insurability needed • Plan other than term
What is the difference between a Provision and a Rider? • A provision is part of the main policy. • A rider is an addition to the policy and frequently there is an additional charge.
Riders
The waiver o f p remium rider prevents a policy from lapsing by paying the premiums when the insured becomes disabled.
How long is the waiIng period before this rider becomes effecIve?
3 months – 6 months (90 – 180 days)
How long will the company waive/pay the premiums?
UnIl disabled owner recovers. If disabled before 65 and does not recover, then for life.
What is the rider called that when the owner dies, the children’s premiums are waived unIl the child reaches 25?
Payor Provision, ONLY found in Juvenile Insurance
What is the Rider that can have more than one family member insured?
Other insured, Spouse or child rider
A required provision in a life insurance policy which sIpulates the rights of the policyowner.
Ownership Provision
Where is the EnIre Contract Provision found? Answer: At the beginning of the policy.
What does the EnIre Contract Provision mean?
• Policy Document • Azached Riders • ApplicaIon (all must be azached to the policy)
How does the EnIre Contract Provision protect the insured? Insurer (Insurance Company) can not add or change any part of the policy aler the delivery.
Incontestable Clause
How long can an insurance company challenge the validity of statements made on a policy? Two Years AKA Incontestable Clause
What are 3 situaIons to which the incontestable Ime does not apply? • I -‐ ImpersonaIon • I -‐ No Insurable Interest • I -‐ Intent to Murder
If a policy owners misstates his age, will the company be able to do anything about it aler the contestable period expires? Yes What can the insurer do? Adjust the proceeds to reflect correct age – Increase or decrease the face amount.
Where is the Insuring Clause found in a policy? Answer: On the cover of the policy
What does Insuring Clause promise? To pay the beneficiary at death or insured at age 100
No legal acIon may be taken prior to 60 d ays aler wrizen proof of loss is provided to the insurer.
Common Policy Exclusions Insurer will not pay:
• C -‐ Commission of a Felony • A -‐ AviaIon • W -‐ War • S -‐ Suicide
Suicide Clause QuesIon: How much money does Mary receive if John commits suicide within 6 months of the issue date? Answer: Only the Total Premiums Paid
Accelerated Benefits/ViaIcal Sezlements
The Accelerated B enefit is the provision/rider that allows for an early payment of a porIon of the death benefit to be paid to an insured that is terminally/chronically ill.
ViaIcal S ezlement C ompanies
are companies which purchase life insurance policies from the terminally ill.
QuesIon? What kind of assignment is it when a viaIcal company pays the original owner money and the owner assigns his policy to the viaIcal company? Answer: Absolute Assignment
Yes or No Are accelerated death benefits taxable? No Does a terminally ill person who sells her policy to a viaIcal company have to pay taxes on the money? No
A contract which protects against the risk of living longer than expected. They provide guaranteed life income to protect against the risk of depleIng reIrement funds.
AnnuiIes
Endowment Policy
Policy providing for payment of Face A mount at end of fixed period(Endowment Period), at a specified age of insured, or at insured’s death before the end of the stated period.
Federal social insurance program which provides reIrement, disability, and survivors benefits. OASDI
• O – Old • A – Age • S – Survivors • D – Disability • I -‐ Insurance
Basis for determining Social Security insured status. A maximum of 4 quarters can be earned in one year. Synonymous with quarters of credit.
Quarters of Coverage 40 Quarters=Fully Insured
Social Security
Social Security is an EnItlement Program, it is not a welfare program. (40 quarters = Fully insured.)
ReIrement Plans
What type of plan is exempt from current income taxaIon?
A qualified plan
Yes or No Does an employee pay taxes on money they contribute to their qualified plan at work? NO (ContribuIons are from pre-‐tax earnings)
What does ERISA mean? • E -‐ Employee • R -‐ ReIrement • I -‐ Income • S -‐ Security • A -‐ Act
What does an ERISA do for workers?
Protects the rights of workers
403b (aka Tax-‐Sheltered Annuity or TSA) These are specifically for employees of 501(c) organizaIons and public schools.
What are some 501(c) organizaIons? • Non-‐Profit • Charitable • EducaIonal, or • Religious • OrganizaIons
How many people can own an IRA account? (Individual ReIrement Account) A. 1 B. 2 C. 3 D. 0
Answer: A That’s why it’s called an “individual” reIrement account.
