NY Life, Accident, and Health Insurance Agent/Broker Exam Series 17-55| 200 QUESTIONS| GRA, Exams of Socialization and the Life Course

Download NY Life, Accident, and Health Insurance Agent/Broker Exam Series 17-55| 200 QUESTIONS| GRA and more Exams Socialization and the Life Course in PDF only on Docsity! NY Life, Accident, and Health Insurance Agent/Broker Exam Series 17-55| 200 QUESTIONS| GRADED A Process 2103 (d-i) - answers>1. The Superintendent may issue a license to any person, firm or corporation who has complied with the requirements of the Insurance Code, authorizing the licensee to act as agent of any authorized insurer. Every individual applicant for a license under this section and every proposed sub-licensee must be 18 years of age or older at the time of issuance of such license. The person must submit to and pass a written examination required by the Superintendent. Producer Definition (2101(k)) - answers>An insurance producer means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the insurance laws of this state to sell, solicit or negotiate insurance. Who Should be Licensed (2101(k)(1)) - answers>1. The term "insurance producer" does not include: An officer, director or employee of a licensed insurer, fraternal benefit society or health maintenance organization or of a licensed insurance producer, provided that the officer, director or employee does not receive any commission on policies written or sold to insure risks residing, located or to be performed in this state and: (a) the officer, director or employee's activities are executive, administrative, managerial, clerical or a combination of these, and are only indirectly related to the sale, solicitation or negotiation of insurance; (b) the officer, director or employee's function relates to underwriting, loss control, Inspection or the processing, adjusting, investigating or settling of a claim on a contract of Insurance; or (c) the officer, director or employee is acting in the capacity of a special agent or agency supervisor assisting licensed insurance producers where the person's activities are limited to providing technical advice and assistance to licensed insurance producers and do not include the sale, solicitation or negotiation of insurance. Home State (2101(l)) - answers>Home state means the District of Columbia or any state or territory of the United States in which an insurance producer maintains his, her or its principal place of residence or principal place of business and is licensed to act as an insurance producer. Negotiate (2101(m)) - answers>Negotiate or negotiation means the act of conferring directly with or offering advice directly to a purchaser or prospective purchaser of a particular contract of insurance concerning any of the substantive benefits, terms or conditions of the contract, provided that the person engaged in that act either sells insurance or obtains insurance from licensed insurers, fraternal benefit societies or health maintenance organizations for purchasers. Sell (2101(n)) - answers>Sell or sale means to exchange a contract of insurance by any means, for money or its equivalent, on behalf of a licensed insurer, fraternal benefit society or health maintenance organization. Solicit (2101(o)) - - answers>Solicit or solicitation means attempting to sell insurance or asking or urging a person to apply for a particular kind of insurance from a particular licensed insurer, fraternal benefit society or health maintenance organization. Agent 2101(a) - answers>In this section, insurance agent means any authorized or acknowledged agent of an insurer, fraternal benefit society or health maintenance organization issued a certificate of authority pursuant to the public health law, and any sub- agent or other representative of such an agent, who acts as such in the solicitation of, negotiation for, or sale of, an insurance, health maintenance organization or annuity contract, other than as a licensed insurance broker. Agent 2101(k) - answers>insurance producer means an insurance agent, insurance broker, reinsurance intermediary, excess lines broker, or any other person required to be licensed under the insurance laws of this state to sell, solicit or negotiate insurance. The applicant must be at least 18 years of age at the time of license issuance. An examination is required for each applicant, except where noted for applicants with a change in residency moving to New York (see code 2103 below). Brokers 2101(c) - answers>a licensed insurance representative who does not represent a specific insurance company, but places business among various companies. Legally, the broker is usually regarded as a representative of the insured rather than the insuring company. (b) the applicant has submitted a completed application in the form prescribed by the Superintendent or submitted the application for licensure submitted to his or her home state; (c) the applicant has paid the fees required by this chapter; and (d) the applicant's home state awards nonresident insurance producer licenses to residents of this state on the same basis as provided in this subsection. Business Entities 2101(p) - answers>A business entity means a corporation, association, partnership, limited liability company, limited liability partnership or other legal entity. Business Entities 2103(e) - answers>Before any original insurance agent's license is issued to a business entity, there must be on file in the office of the Superintendent an application by the prospective licensee in such form or forms and supplements, and containing information the Superintendent prescribes and for each business entity, the sub-licensee or sub-licensees named in the application must be designated responsible for the business entity's compliance with the insurance laws, rules and regulations of this state. Temporary License (2109; Regs. 9, 18, 29, Part 20.1) - answers>A temporary license may be issued in the case of death, service in armed forces or disability. The Superintendent may issue a temporary insurance agent's or insurance broker's license, or both, without requiring the applicant to pass a written insurance examination or to satisfy certain requirements except as to age in the following cases: (1) In the event of the death of a person who at the time of his death was a licensed accident and health insurance agent; (a) to the executor or administrator of the estate of such deceased agent or broker; (b) to a surviving next of kin of such deceased agent or broker, where no administrator of his estate has been appointed and no executor has qualified under his duly probated will; (c) to the surviving member or members of a firm or association, which at the time of the death of a member was such a licensed insurance agent or licensed insurance broker; or (d) to an officer or director of a corporation upon the death of the only officer or director who was qualified as a sub-licensee or to the executor or administrator of the estate of such deceased officer or director; (2) to any person who may be designated by a person licensed pursuant to this chapter as an insurance agent, or an insurance broker, or both, and who is absent because of service in any branch of the armed forces of the United States. (3) to the next of kin of a person who has become totally disabled and prevented from pursuing any of the duties of his or her occupation, and who at the commencement of his or her disability the license or licenses may be issued for a term not exceeding 90 days from the death of such additional term or terms of 90 days each, not exceeding in the aggregate 15 months. The Superintendent may issue renewal licenses for an additional term or terms of 90 days each exceeding the aggregate period of 15 months when in his judgment it will best serve the interests of any person serving in the armed forces of the United States. No person holding a temporary license is permitted to solicit new business under the temporary license. Renewal (2103(j); Reg. 5, Part 21.2) - answers>All individual insurance agent licenses must be renewed every two years. Individual licenses are issued with an expiration date determined by the date of birth: The license of an agent born in an even numbered year will expire on the agent's birthday in an even numbered year. The license of an agent born in an odd numbered year will expire on the agent's birthday in an odd numbered year Adjuster licenses are not determined on a birth date renewal. Adjuster licenses expire on December 31st of even-numbered years. Resident Licensees - answers>All licensed agents, brokers, consultants and public adjusters must complete continuing education (CE) requirements as a condition of renewing these licenses. Licensees must complete 15 credits of approved continuing education during each biennial licensing period. After your license has been renewed the first time, continuing education (CE) will always be required upon subsequent renewal or relicensing applications. Credits must be accumulated during the renewal period, which begins with the effective date of the license and ends with the expiration date. CE must be completed before processing the renewal or relicensing application. Assumed Names (2102(f)) - answers>Licensees must notify the Superintendent upon changing his, her or its legal name. Except for an individual licensee's own legal name, no licensee may use any name, in conducting a business regulated by this article that has not been previously approved by the Superintendent. Change of Address (All Addresses, including Email) - (2134; Reg. 5, Part 21.4; Reg. 6, Part 22.3; Reg. 7, Part 23.4) - answers>Licensees must inform the Superintendent by a means acceptable to the Superintendent of a change of business or residence address within 30 days of the change. This also includes e-mail addresses. Reporting of Actions (2110(i) - answers>Licensees must report to the Superintendent any administrative action taken against the licensee in another jurisdiction or by another governmental agency in this state within 30 days of the final disposition of the matter. This report must include a copy of the order, consent to order or other relevant legal documents. Cease and Desist Order (2405) - answers>Whenever the Superintendent has reason to believe that a person has committed or is committing a defined violation or has been engaged in or is engaging in any method of competition, or any act or practice, which could become a determined violation and that a proceeding thereon would be in the interest of the public, he shall serve upon that person a statement of the charges and notice of a hearing to be held at a time not less than 10 days after the date of service of the notice and at the place fixed in the notice. The person will be given an opportunity at the hearing to be heard personally or by counsel. Anyone violating a cease and desist order may be subjected to a fine of up to $5,000 for each violation. Penalties (2127): - answers>The Superintendent, in lieu of revoking or suspending the license of a licensee, may in any one proceeding by order, require the licensee to pay a penalty in a sum not exceeding $500 for each offense, and a penalty in a sum not exceeding $2,500 in the aggregate for all offenses. Upon the failure of such a licensee to pay such penalty ordered within 20 days after the mailing of such order, postage prepaid, registered, and addressed to the last known place of business of such licensee, unless such order is stayed by an order of a court of competent jurisdiction, the Superintendent may revoke the license of such licensee or suspend the same for such period as he determines. Superintendent's General Duties and Powers (2404, Financial Services 201, 202, 301) - answers>The Superintendent is empowered to: Examine and investigate into the affairs of any person in order to determine whether the person has violated or is violating the insurance and regulations of this state. Responses to requests for information by the Superintendent should be made not less than 15 business days. The Superintendent is authorized, after notice and hearing, to levy a civil penalty against such person in an amount not to exceed $500 per day for each day beyond the date specified by the Superintendent for response, but in no event will such penalty exceed $10,000. In the event the Superintendent levies five separate civil penalties against any one person within five years for failure to comply with this section, the Superintendent is authorized, after notice and hearing, to levy an additional civil penalty against not to exceed $50,000. The Superintendent is also authorized to levy additional civil penalties not to exceed $50,000, after notice and hearing, against such person for every five subsequent violations of this section within a five year period. Any licensee may surrender his or her license in lieu of payment of any civil penalty imposed by the Superintendent. Certificate of Authority (1102) - answers>The certificate of authority is an insurer's license to transact insurance in this state as an authorized insurer. Solvency (307) - answers>It is required that each insurer file annual financial statements for review by the Superintendent to determine the continued solvency of the insurer. Unfair Claim Settlement Practices (2601; Reg. 64, Part 216.3-216.6) - answers>Unfair settlement practices include: Knowingly misrepresenting to a claimant pertinent facts or policy provisions related to the coverages at issue. Failing to acknowledge within reasonable time, communications with respect to claims arising out of its policies. Failing to adopt and implement reasonable standards of prompt investigation of claims arising out of an insurer's policies. Claims must be promptly investigated to determine liability. Not attempting in good faith to effectuate prompt, fair and equitable settlements of claims submitted in which liability has become reasonable clear. Compelling policyholders to institute suit to recover amounts due under its policies by offering less than the amounts ultimately recovered in suit brought by them Appointment of Agent - answers>The appointment must be made 15 days from the date an agency contract is executed, or the first application is submitted Termination of Agent Appointment (2112(d); Regs. 9, 18, 29, Part 20.2) - answers>Every insurer, fraternal benefit society or health maintenance organization or insurance producer or the authorized representative of the insurer, fraternal benefit society, health maintenance organization or insurance producer doing business in this state must, upon termination of a certificate of appointment, file with the Superintendent within 30 days a statement, in such form as the Superintendent may prescribe, the facts relative to such termination for cause. Misrepresentation (2123; Reg. 64, Part 216.3) - answers>It is a violation for an agent to make false or misleading statements or unfair coverage comparisons. False Advertising (2603) - answers>It is a violation to make false or misleading statements regarding the advertising of insurance products. A producing agent may not issue any illustration or statement used to advertise his/her business unless the agent is authorized to transact those lines of authority. Defamation of Insurer (2604) - answers>It is any false or malicious communication, written or oral, that injures another's reputation, fame or character. Individuals and companies both can be defamed. Unethical agents practice defamation by spreading rumors or falsehoods about the character of a competing agent or the financial condition of another insurance company. Both of these actions are considered illegal. Unfair Discrimination (2606-2608, 2612) - answers>Neither agents nor insurance companies are permitted to discriminate against perspective insureds. This means that a person cannot be given a different rate for coverage than another person in identical circumstances. They may not discriminate against a person solely because of an applicants' race, religion, occupation, where they live or their financial status. Rebating (2324, 4224) - answers>Rebating occurs if the buyer of an insurance policy receives any part of the agent's commission or anything of significant value as an inducement to purchase a policy. State regulations are very strict in this respect and are designed to prohibit discrimination in favor of, or against, policyowners. In this state, the practice of rebating is illegal and the following are defined as illegal inducements: Offering, paying or allowing any rebate or other inducement not specified in the policy or any special favor or advantage concerning the dividends or other benefits that will accrue, in order to place, negotiate or renew the policy. Offering, selling or purchasing anything of value not specified in the policy. Offering, paying or allowing any rebate of any premium on any insurance policy or annuity contract. Controlled Business (2103(i)) - answers>The Superintendent may refuse to issue, suspend, or revoke a license if an applicant receives more than 10% of the aggregate net commissions during a 12- month period from insurance sold to a licensee's spouse or other family members or business associates or their immediate family. Sharing Commissions (2121, 2128) - answers>The sharing of commissions with an unlicensed person or entity is prohibited. If you are unable to work due to your work-related injury or occupational disease for more than seven days, your employer's workers' compensation insurance carrier will begin payment of cash benefits to compensate for your lost wages. These temporary disability benefits equal two-thirds of your average weekly wage, multiplied by the percentage of your disability. Cash benefits are subject to a weekly maximum established by the state each year. As of July 1, 2017, the maximum benefit is $870.61 per week. These payments are usually paid every other week. The insurance carrier will continue to make these payments to you until your workers' compensation claim is closed or you are able to return to work, whichever occurs first. If your doctor finds that your injury has caused a permanent impairment, you may also be entitled to a permanent disability award. When a work injury results in death, the worker's family members can receive weekly death benefits and reimbursement for funeral expenses. Death Benefit (face amount/face value/coverage) - answers>The amount paid to beneficiaries when a policyholder dies. Beneficiary - answers>The person(s) who receive the death benefit. They are selected by the policyholder. Premium - answers>The regular payment made toward the insurance policy. These are typically monthly. Cash value - answers>A tax-deferred savings account that are included in permanent life insurance policies. The cash value is basically an investment account inside of your straight life insurance policy. This account will grow according to a guaranteed rate over the course of the policy length. The rate of return will typically be large enough that when you turn 100 the cash value account will equal the value of the death benefit. At any point, you can use the cash value account for a variety of reasons, including: Universal life insurance - answers>has a cash value, just like a whole life insurance policy. Your premiums go toward both the cash value and the death benefit. But there's a twist: the policyholders of universal life policies can change the premium and death benefit amounts without getting a new policy. Basically, although you have a minimum premium to keep the policy in force, you can use the cash value to pay the premium. That means if you have enough money in the cash value, you can use that to skip premium payments entirely, letting the accrued interest do the work. the cash value of a universal life insurance policy has an interest rate that's sensitive to current market interest rates. If the interest rate being credited to your policy decreases to the minimum rate, your premium would have to increase to offset the reduced cash value. You can also adjust the death benefit within limits outlined in your policy. Increasing it may subject you to further underwriting, while there may be fees to decrease it. If your financial situation changes, the ability to change the death benefit amount within your policy is appealing. While this can be done with term life insurance policies, this feature is one of the main selling points of a universal policy. Variable Life Insurance - answers>similar to whole life insurance in that they both have a cash value, but the functions of the cash values are quite different. With a whole life insurance policy, the cash value component is a savings account. That's why, although the growth might be small compared to other investment options, there is a guaranteed minimum rate. It also includes dividend payments from the life insurance company. A variable life insurance cash value, though, is more akin to investing. The money paid into it goes into a series of mutual fund-like sub-accounts where you can get some decent growth, but you can also lose money depending on the market. The cash value is more or less placed in the stock market. While this makes variable life insurance policies a better investment option than whole life insurance policies - the potential for higher, tax-deferred growth makes it a "super-IRA" - you can only invest in the sub-accounts available through your policy. That means you don't get to choose from the wide variety of mutual funds that are available on the open market. As an investment vehicle, variable life insurance policies provide tax-free money to beneficiaries during the time that the policyholder is alive. Once that person dies, however, that money is retained by the insurance company. Like other types of life insurance, a variable policy can help cover funeral and end-of-life expenses. Variable universal life insurance - answers>If you think variable universal life insurance is just some aspects of universal and variable life insurance policies mashed together...well, you're mostly right. A variable universal life insurance policy takes the best (or worst, depending on how you look at it) of the other two policies: you can adjust the premium and death benefit amount while investing the cash value in the policy's cash value. But variable universal life insurance also comes with many of the same elements as the other two. Again, this policy is more complicated than most people need, and it isn't your best investment or insurance option. Simplified issue life insurance - answers>Typically when you apply for life insurance, you go through a paramedical exam as part of the underwriting process so the insurer can find out how risky you are to insure. Ultimately, it helps them set your premium rate. With simplified issue life insurance, though, you can skip the medical exam. That's the "simplified" part of this policy type. Known as a "no exam policy," a simplified issue policy gets you life insurance without the health exam. You're not out of the woods completely, though. You don't need to go through the medical exam, but you do need to fill out a health questionnaire, answering questions like if you smoke, have been diagnosed with serious illnesses, and so on. People in poor health may have to take the exam if they have too many health issues, and they could flat-out be denied by insurers. For those healthier people in a hurry, though, it might be a good option to skip scheduling the paramedical exam, which adds some time to the underwriting process. But with this benefit comes a major financial drawback. With a term life insurance policy, your premium rates are directly tied to your chances of outliving your policy. If you're young and/or healthy, you'll pay lower rates than someone who is older and/or in poor health. That's why the medical exam is important. Since there is no medical exam with simplified issue life insurance, the policies tend to be more expensive than term policies. Guaranteed issue life insurance - answers>Guaranteed issue life insurance takes the concept of simplified issue life insurance - forgoing the health exam - and takes it a step further in that you don't have to answer any questions about your health, either. As long as level-premium term insurance - answers>Level-Premium Insurance is a type of life insurance in which premiums stay the same price throughout the term, while the amount of coverage offered increases. Premium payments often start at a higher level than policies with similar coverage but are ultimately worth more than competitors as policyholders experience increased coverage over time at no additional expense. Terms are usually 10, 15, 20 and 30 years, based on what the policyholder requires. Whole Life Insurance - answers>considered a permanent life insurance policy because if does not expire. It has a death benefit but also a cash value, which is a tax-deferred savings account that is included in the policy. The cash value accrues interest at a predetermined fixed rate. Each month, a certain portion of your premium will go into the cash value of the policy, which offers a guaranteed rate of return (The exact amount that goes into savings is determined by your individual policy). The policy's cash value grows over time. Due to the fees and the extra feature, a whole life insurance policy can cost five to 15 times as much as a term life policy (for the same death benefit amount). Whole life lasts for as long as you pay the premiums. However, the cash value component can make whole life more complex than term life because you have to consider surrender fees, taxes, and interest as well as other stipulations. May be worth it if you need the cash value to cover things like endowments or estate plans, which might benefit from the greater options that a whole life policy provides. Continuous premium (straight life) - answers>Straight life insurance is a type of permanent life insurance that provides a guaranteed death benefit and has fixed premiums. Also known as whole or ordinary life insurance, the policy has a term length that lasts your entire life. This is different from term life insurance which expires after a set number of years. As a form of permanent life insurance, straight life insurance comes with a cash value account that will grow over the life of the plan. The cash value component of a life insurance policy is separate from the death benefit. Each month, part of the premium that you pay for a straight life policy will be added to the cash value account. The rest of the premium goes towards the company's costs for providing insurance limited-payment life insurance - answers>Limited pay life insurance is for an individual who owns a whole life insurance policy but chooses to pay for the total cost of their premiums for a limited number of years. With the limited pay life insurance option, you pay premiums in the first 10, 15, or 20 years of ownership, but the benefits last a lifetime. Single premium Life - answers>a type of life insurance that charges the policyholder a single up-front premium payment to fully fund the policy. It was once a popular tax shelter. Single-premium life insurance requires a large sum of money from the policyholder that puts this type of insurance out of reach of many applicants. The great advantage to single- premium life insurance is that the single payment fully funds the policy, immediately guaranteeing a sizable death benefit to the beneficiaries. Two popular single-premium policies are single-premium whole life and single-premium variable life. The two differ in how each policy accumulates a cash value. The first offers a risk- free fixed interest rate. The second invests the cash value in actively managed portfolios and comes with the risks and potential rewards of active investing. Flexible Premium or Adjusted Life Insurance - answers>Adjustable life insurance is a term and whole life hybrid insurance plan that allows policyholders the option to adjust policy features. These policies allow policyholders the ability to adjust the period of protection, face amount, premiums, and length of the premium payment period. These policies also incorporate an interest-bearing savings component or cash value account. Adjustable life insurance policies are attractive to those who want the protection and cash value benefits of permanent life insurance yet need or want some level of flexibility with policy features. Using the ability to modify premium payments and face amounts, policyholders may customize their coverage as their lives change. For example, a policyholder may want to increase the face amount upon getting married and having children. An unemployed person may want to reduce premiums to accommodate a restricted budget. As with other permanent life insurance, adjustable life insurance has a savings component that earns cash value interest. Today, most adjustable life insurance cash value accounts have a guaranteed rate of interest. Universal Life Insurance - answers>permanent life insurance with an investment savings element and low premiums like term life insurance. Most universal life insurance policies contain a flexible premium option. However, some require a single premium (single lump-sum premium) or fixed premiums (scheduled fixed premiums). Policyholders have the flexibility to adjust their premiums and death benefits. Universal life insurance premiums consist of two components: a cost of insurance (COI) amount, and a saving component, known as the cash value. The cost of universal life insurance is the minimum amount of a premium payment required to keep the policy active. can accumulate cash value, which earns interest based on the current market or minimum interest rate. Policyholders may borrow against the accumulated cash value without tax implications. Joint-Life (First to die) - answers>combines life insurance for you and your spouse into one joint policy. Both individuals are listed as insured parties on the policy. When the first person dies, the policy's death benefits will be paid out to the survivor. The policy also terminates at that point, leaving the surviving spouse with no life insurance coverage. Survivorship (Second-to-Die) Life Insurance - answers>Second-to-die insurance is a type of life insurance on two people (usually married) that provides benefits to the beneficiaries only after the last surviving person on the policy dies. This differs from regular life insurance in that the surviving partner doesn't receive any benefits after the spouse dies. Thus, second-to-die insurance is used for estate planning. Life insurance on minors (3207(b)) - answers>A minor above the age of fourteen years and six months shall be deemed competent to enter into a contract for, be the owner of, and exercise all rights relating to, a policy of life insurance upon the life of the minor or upon the life of any person in whom the minor has an insurable interest, but the beneficiary of such policy may be only the minor or the parent, spouse, brother, sister, child or grandparent of the minor. the loan. If your spouse or someone else is a co-signer on your mortgage, credit life insurance would protect them from making loan payments after your death. This could be appealing if you are the primary breadwinner in your family, and the loan co-signer would be unable to make payments in the event of your death. But in most cases, any heirs who are not co-signers on your loans are not obligated to pay off your loans when you die; debts are not generally inherited. The exceptions are the few states that recognize community property, but even then only a spouse could be liable for your debts, not your children. When banks loan money, part of their accepted risk is that the borrower could die before the loan is repaid. As such, credit life insurance really protects the lender, not your heirs. In fact, the payout on a credit life insurance policy goes straight to the lender, not to your heirs. Credit life insurance is a specialized type of life insurance policy intended to pay off specific outstanding debts in the case the borrower dies before the debt is fully repaid. Such a policy may be required by certain lenders for specific purposes. Credit life policies feature a term that corresponds with the loan maturity and decreasing death benefits that correspond with the reduced debt outstanding over time. Credit life policies, due to their specific nature, often have less stringent underwriting requirements. Qualified Retirement Plans - answers>A qualified retirement plan meets the requirements of Internal Revenue Code Section 401(a) of the Internal Revenue Service (IRS) and is therefore eligible to receive certain tax benefits, unlike a non-qualified plan. An employer establishes such a retirement plan on behalf of and for the benefit of the company's employees. It is one tool that can help employers attract and retain good employees. defined contribution plan - answers>retirement plan that's typically tax-deferred, like a 401(k) or a 403(b), in which employees contribute a fixed amount or a percentage of their paychecks to an account that is intended to fund their retirements. The sponsor company will, at times match a portion of employee contributions as an added benefit. These plans place restrictions that control when and how each employee can withdraw from these accounts without penalties. Defined contribution (DC) retirement plans allow employees to invest pre-tax dollars in the capital markets where they can grow tax-deferred until retirement withdrawals. 401(k) and 403(b) are two popular defined-contribution plans commonly used by companies and organizations to encourage their employees to save for retirement. DC plans can be contrasted with defined benefit (DB) pensions, whereby retirement income is guaranteed by an employer. With a DC plan, there are no guarantees, and participation is both voluntary and self-directed. Defined Benefit Plan - answers>employer-sponsored retirement plan where employee benefits are computed using a formula that considers several factors, such as length of employment and salary history. The company administers portfolio management and investment risk of the plan. There are also restrictions on when and by what method an employee can withdraw funds without penalties. Benefits paid are typically guaranteed for life and rise slightly to account for the increased cost of living. A defined-benefit plan is an employer-based program that pays benefits based on factors such as length of employment and salary history. Pensions are defined-benefit plans. In contrast to defined-contribution plans, the employer, not the employee, is responsible for all of the planning and investment risk of a defined-benefit plan. Benefits can be distributed as fixed-monthly payments like an annuity or in one lump-sum payment. The surviving spouse is often entitled to the benefits if the employee passes away. 401k - Tax Sheltered Annuities - answers>A 401(k) plan is a tax-advantaged, defined- contribution retirement account offered by many employers to their employees. It is named after a section of the U.S. Internal Revenue Code. Workers can make contributions to their 401(k) accounts through automatic payroll withholding, and their employers can match some or all of those contributions. The investment earnings in a traditional 401(k) plan are not taxed until the employee withdraws that money, typically after retirement. In a Roth 401(k) plan, withdrawals can be tax-free. A 401(k) plan is a company-sponsored retirement account that employees can contribute to. Employers may also make matching contributions. There are two basic types of 401(k)s—traditional and Roth—which differ primarily in how they're taxed. In a traditional 401(k), employee contributions reduce their income taxes for the year they are made, but their withdrawals are taxed. With a Roth, employees make contributions with post-tax income, but can make withdrawals tax-free. Self-employed Plans (Keogh plans) - answers>Type of retirement plan designed for self- employed individuals and their employees. It can be set up by small businesses that are structured as LLCs, sole-proprietorships, or partnerships. A Keogh is similar to a 401(k) for very small businesses, but the annual contribution limits are higher than 401(k) limits. Simplified Employee Pension (SEP) - answers>retirement plan designed for self-employed persons, partnerships, sole proprietors, independent contractors, and owner-employees of an unincorporated trade or business; however, it may be set up by any type of business. A SEP is an easy method for a small employer to establish a retirement plan for employees without the complex administration and expense found in qualified retirement plans. In fact, an employer may establish a SEP only if that employer has no qualified retirement plan in effect. Under a SEP, the employer may make a contribution of up to the lesser of 15% or $30,000 of compensation to IRAs established in each employee's name. Hence, such an arrangement is known as a SEP-IRA. When made, these contributions are owned in their entirety by the employee, and they may be withdrawn and/or transferred by the employee at any time. Contributions to a SEP by the employer are discretionary, but must be deposited into each eligible employee's IRA when made. Because these accounts are IRAs, the amounts therein are subject to all IRA rules regarding transfer, withdrawal and taxation. Savings Incentive Match Plan for Employees (SIMPLE) - answers>Established by the Small Business Protection Act of 1996, a SIMPLE may be set up by employers who have no other retirement plan and who have 100 or fewer employees with at least $5,000 in compensation for the previous year. They may be structured as an IRA or as a 401(k) plan. Employees may defer any percentage of compensation up to $6,500 per year to the SIMPLE, and the employer is required to make a matching contribution of up to 3% of the employee's pay based on that election. The employer may reduce the maximum matching percentage in any two years out A life insurance policy may typically be reinstated within 30 days of a lapse without additional paperwork, underwriting, or attestations of health. Insureds often pay a reinstatement premium, which is larger than the original premium. Insurance companies add the additional reinstatement premium to the accumulated cash value of the policy and pay administrative expenses incurred from the lapse. Incontestability - answers>An incontestability clause is a clause in most life insurance policies that prevents the provider from voiding coverage due to a misstatement by the insured after a specific amount of time has passed. A typical incontestability clause specifies that a contract will not be voidable after (usually two) or three years due to a misstatement. Misstatement of age provision - answers>a provision in a life insurance policy that adjusts the amount of insurance when the insured's age was misstated on the application to the amount that the premium would have purchased at the correct age based on the insurer's rates at the date of policy issuance. Exclusion provision - answers>An exclusion is a policy provision that eliminates coverage for some type of risk. Exclusions narrow the scope of coverage provided by the insuring agreement. In many insurance policies, the insuring agreement is very broad. Insurers utilize exclusions to carve away coverage for risks they are unwilling to insure. Catastrophic: Some risks are uninsurable because they are likely to affect a huge number of policyholders at once. An example is war. Covered Elsewhere: Many risks are excluded under one type of policy because they are covered under another. For instance, auto liability claims are excluded under a general liability policy because they are covered by a commercial auto policy. Easy To Control: Some risks are excluded because they are easily controlled by the policyholder. An example is damage to personal property in the open caused by rain, snow, ice or sleet. Such damage is excluded under most commercial property policies because it is easily prevented by the insured. Not Accidental: Most insurance policies cover fortuitous events. Thus, they exclude losses the insured caused intentionally. For example, both general liability and commercial auto liability policies exclude bodily injury that an insured inflicts on a third party intentionally. Maintenance Issues: Some risks are not practical to insure because they occur naturally. An example is wear and tear. Damage caused by wear and tear is excluded from both commercial property and auto physical damage coverage. Risks of this type can often be controlled through proper maintenance. Vehicle tires can be protected from wear and tear through proper rotation. Illegal: Many policies exclude losses that result from violations of the law or criminal acts. For example, general liability policies exclude bodily injury, property damage or personal and advertising injury that results from a violation of the Telephone Consumer Protection Act or CAN-SPAM Act. Partially Insurable: Some risks are insurable within specific parameters. For instance, many liability policies exclude liability assumed under a contract. However, coverage is provided for liability assumed under a contract that qualifies as an insured contract (as defined in the policy). Insurable for a Price: Some risks are insurable if you are willing to pay an additional premium. An example is a loss caused by theft committed by your employees. Such losses are routinely excluded under commercial property policies. However, you can insure such losses by purchasing employee theft coverage. Proof of Death - answers>The transfer on death designation lets beneficiaries receive assets at the time of the person's death without going through probate. This designation also lets the account holder or security owner specify the percentage of assets each designated beneficiary Beneficiary - answers>any person who gains an advantage and/or profits from something. In the financial world, a beneficiary typically refers to someone eligible to receive distributions from a trust, will, or life insurance policy. Beneficiary Designation Options - answers>Primary beneficiaries are the account owner's first choice for a beneficiary. In the event of death, the first person who can claim the assets is the primary beneficiary. Note that you can have multiple primary beneficiaries in some cases. For example, you could have three primary beneficiaries, all of which receive 33.3% of assets (assuming they are all still living at the time of your death). Contingent beneficiaries are used as a backup. In the event that there are no living primary beneficiaries, the contingent beneficiary claims the asset. Tertiary Beneficiary. Finally, the beneficiary next in line (should you choose to name one), is the tertiary beneficiary. This person or entity will receive the life insurance policy proceeds in the event that both the primary and the secondary beneficiaries are unable to do so. Classes (per stirpes/per capita) - answers>The estate planning terms "per stirpes distributions" and "per capita distributions" are commonly used in last wills and testaments and revocable living trusts. They describe how you want your property to be left to your beneficiaries. Per stirpes indicates that if any of your beneficiaries aren't living at the time of your death, their share of the estate will pass to their descendants. Per capita distributions can only go to the named beneficiaries and in equal shares. The term per stirpes is Latin for "by representation" or "by class." It means that each living beneficiary in a class of beneficiaries will receive an equal share. If a beneficiary is deceased and survived by any descendants, that beneficiary's descendants would take what their deceased parent would have taken "by representation." Per capita is Latin for "by total headcount" or "by a total number of individuals." All the living members of the identified group will receive an equal share if the beneficiaries are to share in a distribution per capita Estates - answers>property that an individual owns only through the duration of their lifetime. It is also referred to as a tenant for life and life tenant. A life estate is restrictive in that it prevents the beneficiary from selling the property that produces the income before the beneficiary's death. To understand how the straight life income option works, imagine a policy with a $100,000 death benefit. A 55-year-old male beneficiary chooses the life income option and receives $6,250 for life, based on his age and gender. Joint and Survivor - answers>Joint and survivor annuities provide fixed, periodic payments for as long as either of two beneficiaries is alive with payment ending when the surviving beneficiary dies. If a policy has a $100,000 death benefit, the beneficiary can choose the joint and survivor life income option for her life and her spouse's life. The couple will receive $5,600 per year until both die. If one spouse dies, the remaining spouse will still receive the $5,600 per year for life. spendthrift clause life insurance - answers>The spendthrift clause protects life insurance proceeds from creditors. The beneficiary's creditors are prohibited from claiming any of the policy's benefits before the beneficiary is paid. Payments are made to the beneficiary in lieu of receiving the policy proceeds in one lump sum. Policy proceeds are held in trust by the insurance company for the beneficiary's future payments. Policy distributions are not assignable or transferable and cannot be attached. The spendthrift clause prevents the beneficiary from changing the way in which the policy proceeds have been designated for payout. For instance, if the policy state the beneficiary is to receive a certain amount payable over a 15-year period, the beneficiary cannot assign or transfer the proceeds to another party in order to obtain a lump sum payment. Nonforfeiture options - answers>a clause in your policy that allows you to receive full or partial benefits from your life insurance if the policy lapses or you want to cancel the plan. Cash surrender value (net cash value) - answers>This is cashing your policy in. The insurance company will send you a check for the net cash value and then you can do whatever you want with the money. You'll use the cash surrender option if you need the cash. Extended term - answers>You can use the cash value to keep the original life insurance face amount but only for a specific term, or time period. How long the term is depends on the cash value of the policy. Once it's changed to extended term, you won't have to pay premiums anymore but you also won't build any more cash value. Reduced paid-up insurance - answers>You can use the cash value to purchase a whole life policy that is paid for. It will be less than the original face amount and since it is paid up, it won't require premiums. You'll just own that amount of life insurance from that point forward until you die. Policy loans - answers>issued by an insurance company and uses the cash value of a person's life insurance policy as collateral. Sometimes it is referred to as a "life insurance loan." Traditionally, policy loans were issued at a very low-interest rate, but that is no longer universally true. If a borrower fails to repay a policy loan, the money is withdrawn from the insurance death benefit. Automatic premium loans - answers>often associated with a life insurance policy that has a cash value. It is a specific clause, or rider, within the policy that allows the insurance issuer to withdraw premium payments from the accrued value of the policy when the policyholder is unable to or neglects to continue paying. Withdrawals or partial surrenders - answers>Life insurance policy owners are allowed to withdraw some or all of the cash that is in the cash value portion of their permanent life insurance policies. By withdrawing only some of the cash, the policy owner would be making a partial surrender, or a partial withdrawal. This partial surrender or withdrawal may come from the accumulation value or the amount of the death benefit relating to the policy. If the policy owner withdraws funds from the cash value portion of the policy, he or she may not have to pay taxes on all of these funds. This is because the portion of the withdrawal that is considered a return of premium will not be taxable. As an example, if the policy owner paid a total of $20,000 in premiums into the policy, and they have a total of $25,000 in total cash value, then they can decide to withdraw $23,000 and only $3,000 of that amount will be taxable. If the policy owner withdraws less than what they have paid into the policy, then they will not be hit with taxes at all on the withdrawal. It is important to note that a partial surrender or withdrawal of a life insurance policy will lower the cash value of that policy - and, even though it is not typically required that these funds be repaid, if the insured dies while there is still an unpaid cash value balance, then the amount of that unpaid balance will be charged against the death benefit that is paid out to the policy's beneficiary. There may also be additional costs involved when taking a partial surrender or withdrawal, such as processing and / or administrative fees from the life insurance company. Dividend options - answers>varying ways in which insureds may elect to receive dividends under a life insurance policy. Dividends may be received in the form of cash payments, as increases to the policy's cash value, or as paid-up additional insurance. Cash payment Dividend Option - answers>The option to receive the dividend in cash is pretty self-explanatory. Each year the life insurer pays the policyholder the dividend in the form of a check. The payment comes directly to the policyholder who can then use the cash for whatever purpose he or she sees fit. Reduction of premium payments Dividend Option - answers>Choosing to reduce or pay the premium with the dividend means the policyholder chooses to pay a part or all of the premium due with the dividend. If the dividend payment is less than the total premium due, the policyholder will need to pay the rest of the premium either with money out of pocket or with cash values from the whole life policy. It's much more common for the policyholder to pay with out-of-pocket money. Once the dividend payment equals or exceeds the premium due amount, the dividend can pay the entire premium due and the policyholder does not need to make any payment to the policy with any out-of-pocket money. It's fairly common to see older whole life policies using Payor benefit life/disability (juvenile insurance) Rider - answers>may be added to the policy of a juvenile stating that if the payor (the one paying the premium) dies or becomes totally disabled prior to the juveniles reaching majority, the subsequent premiums due are automatically waived. Accelerated (living) benefit provisions/riders (3230) - answers>refers to a clause in certain life insurance policies that enable the policyholder to receive the benefits before death. Accelerated benefits are normally reserved for those that suffer from a terminal illness, have a long term high-cost illness, require permanent nursing home confinement or have a medically incapacitating condition. Some insurance companies differ on how much cash can be pulled out and how close to death the insured has to be in order to receive these benefits. Insurers offer anywhere from 25 to 100 percent of the death benefit as an early payment. Accelerated benefits are also referred to as living benefits. Accelerated benefit riders are essentially the modern equivalent of the viatical settlements that terminally ill policyholders used in previous decades to raise cash to pay their medical bills. Spouse/other-insured term rider - answers>Provides level term coverage on the life of the insurers spouse. Such rider will also provide a conversion provision permitting the spouse to convert to permanent coverage without evidence of insurability prior to the termination of the rider or upon the death of the insured under the basic policy. Children's term rider - answers>allows you to add term life insurance coverage on all children - natural, adopted and stepchildren. You may find this to be an affordable way to extend the benefits of your policy to your children. Coverage is typically available for children 15 days of age to 18-25 years of age, depending on carrier. Some of these common riders and endorsements come standard and may be automatically included with your policy at no additional charge, while others require you to pay an additional premium. There are also specific riders that can only be added at the time the contract is written and can't be endorsed onto the policy once it has been issued. Because life insurance products and companies differ, not all riders and endorsements presented here are offered under every life insurance policy contract or offered by every insurer. Family term rider - answers>an addition to a life insurance policy that provides the beneficiary with an amount of money equal to the policyholder's monthly income if the policyholder dies. A family income rider is a type of death benefit, and it specifies the term for the additional coverage. It eventually expires if not activated. In some cases, the beneficiary of a family income rider may choose a lump sum rather than receiving monthly payments. Accidental Death Benefit Rider - answers>This type of rider provides an additional benefit if you die or suffer a combination of loss of limbs, sight, and hearing as a result of accidental bodily injury. When you purchase this additional coverage, the insurance company provides a schedule that assigns a benefit amount to each specific type of injury. Guaranteed Insurability Rider (GI Rider) - answers>allows the owner of a life insurance policy to buy additional life insurance with no underwriting. The guaranteed insurability rider is usually available at a small additional charge. The guaranteed insurability rider gives the owner of a life insurance contract the opportunity to add death benefit coverage to the policy at certain points in the insured person's life. The amount that can be added is limited to an amount such as the face value, or a given amount such as $10,000. The owner does not need to add coverage at the option date, and they may have the option to add less than the full available amount. Usually the option to add death benefit coverage through the GI rider occurs at certain pre- determined ages (which may vary by company) throughout the insureds life, but may also occur during special life events such as marriage or the birth of a child. Usually there is a cap to the amount of total coverage that can be added, or a cap to the amount of qualifying events to increase coverage. Cost-of-living adjustment (COLA) - answers>A cost-of-living rider protects the purchasing power of your disability benefits against the effects of inflation. After you have received benefits for a year, this rider automatically increases the amount of your benefits to offset cost-of-living increases. Typically, increases in benefits occur annually and are tied to an established index that measures the cost of living, such as the consumer price index (CPI), or are a set percentage of your benefit. Some companies cap the increase amount to one or two times the original benefit. The insurance company lets you choose the CPI index or a fixed percentage at the time you purchase the rider. The cost-of-living rider is often very expensive, but it may pay off if you suffer a long-term disability. Return of Premium Rider - answers>The return-of-premium rider might appeal to you if, like most people, you don't believe that you will actually become disabled, but you are buying a disability policy just in case. The return-of-premium rider entitles you to get back the premium money you pay in the event you don't need to use the policy benefits. Depending on the type of rider you choose, you will get either a portion of the money back at certain ages or after a certain number of years, or all of your money back at age 65 when the rider expires. Any claims payments made to you will reduce the amount of premium that you get back. Also, this rider will substantially increase your premium. Because of this rider's high cost and limits on potential premiums return, you should be wary as it may not be the best value for your premium dollar. Term Riders - answers>Added to a Whole Life or Universal Life policy, a term insurance rider can provide a fixed amount of term insurance for a specified period of time. If you have a temporary need for additional life insurance above the current face value of your existing policy and want an affordable way to have coverage, considering a term rider might be a solution for you. Social Security Disability - answers>The Social Security and Supplemental Security Income disability programs are the largest of several Federal programs that provide assistance to people with disabilities. While these two programs are different in many ways, both are administered by the Social Security Administration and only individuals who have a disability and meet medical criteria may qualify for benefits under either program. Qualifications for disability benefits - the first seven days is an unpaid waiting period. You can receive benefits for a maximum of 26 weeks in a 52-week period. Medicaid - answers>a federal and state program that helps with medical costs for some people with limited income and resources. Medicaid also offers benefits not normally covered by Medicare, including nursing home care and personal care services. Eligibility - Low-income families, qualified pregnant women and children, and individuals receiving Supplemental Security Income (SSI). Benefits - States establish and administer their own Medicaid programs and determine the type, amount, duration, and scope of services within broad federal guidelines. Mandatory benefits include services including inpatient and outpatient hospital services, physician services, laboratory and x-ray services, and home health services, among others. Optional benefits include services including prescription drugs, case management, physical therapy, and occupational therapy. Child Health Plus - answers>provides free or low-cost health insurance to children under the age of 19 who do not qualify for Medicaid and do not have other health insurance coverage. Eligibility - To be eligible for either Children's Medicaid or Child Health Plus, children must be under the age of 19 and be residents of New York State. Whether a child qualifies for Children's Medicaid or Child Health Plus depends on gross family income. Benefits - Well-child care. Immunizations. Treatment for illness or injury. Inpatient hospital medical or surgical care. Short-term physical therapy; occupational therapy, Radiation therapy. Therapeutic outpatient services (chemotherapy, hemodialysis). Inpatient and outpatient treatment for alcoholism and substance abuse, and mental health. Prescription and non-prescription drugs if ordered by a physician. Emergency care. Emergency ground transportation. Emergency, preventative and routine dental care. Limited orthodontic services are available for children with a severe medical condition such as cleft lip or cleft palate. Preventive and routine vision care (including eyeglasses). Speech and hearing services (with limits). Durable medical equipment. Hospice services. Medicare - answers>Nature - national health insurance program financing - taxpayers administration - begun in 1966 under the Social Security Administration and now administered by the Centers for Medicare and Medicaid Services or Social Security Administration. Medicare Part A (Hospital Insurance) - answers>Individual eligibility requirements - Most people are automatically eligible for Medicare Part A at age 65 if they're already collecting retirement benefits from the Social Security Administration or the Railroad Retirement Board. You may qualify for Medicare Part A before 65 if you have a disability, end-stage renal disease (ESRD), or amyotrophic lateral sclerosis (ALS). You must be either a United States citizen or a legal permanent resident of at least five continuous years. Coverages and cost-sharing amounts - Medicare Part A covers Medicare inpatient care, including care received while in a hospital, a skilled nursing facility, and, in limited circumstances, at home. Hospital care (inpatient) Limited home health services Skilled nursing facility care, provided that custodial care isn't the only care required Hospice care Medicare Part A also does not cover the cost of blood. Medicare Part B (Medical Insurance) - answers>Medicare Part B (medical insurance) is part of Original Medicare and covers medical services and supplies that are medically necessary to treat your health condition. This can include outpatient care, preventive services, ambulance services, and durable medical equipment. It also covers part-time or intermittent home health and rehabilitative services, such as physical therapy, if they are ordered by a doctor to treat your condition. Individual eligibility requirements - Anyone who is eligible for premium-free Medicare Part A is eligible for Medicare Part B by enrolling and paying a monthly premium. If you are not eligible for premium-free Medicare Part A, you can qualify for Medicare Part B by meeting the following requirements: You must be 65 years or older. You must be a U.S. citizen, or a permanent resident lawfully residing in the U.S for at least five continuous years. You may also qualify for automatic Medicare Part B enrollment through disability. If you are under 65 and receiving Social Security or Railroad Retirement Board (RRB) disability benefits, you will automatically be enrolled in Medicare Part A and Part B after 24 months of disability benefits. You may also be eligible for Medicare Part B enrollment before 65 if you have end- Health Savings Accounts (HSAs) - answers>Definition - A type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. By using untaxed dollars in a Health Savings Account (HSA) to pay for deductibles, copayments, coinsurance, and some other expenses, you may be able to lower your overall health care costs. HSA funds generally may not be used to pay premiums Eligibility - You must be covered under a qualifying high-deductible health plan (HDHP) on the first day of the month. You have no other health coverage except what is permitted by the IRS. You are not enrolled in Medicare, TRICARE or TRICARE for Life. You can't be claimed as a dependent on someone else's tax return. Contribution limits - For 2019, the maximum contribution amounts are $3,500 for individuals and $7,000 for family coverage. If you're 55 or older, you can add up to $1,000 more as a "catch-up" contribution. Healthy New York - answers>program designed to make reduced-cost, comprehensive health insurance available to working uninsured individuals, sole proprietors, and small employers with no more than 50 eligible employees that do not provide health insurance to their employees. Annuity - answers>An annuity is an interest-bearing financial contract that combines the tax-deferred savings and investment properties of retirement accounts with the guaranteed- income aspects of insurance. "Annuities are sometimes described as the flip side of life insurance," stated Stephen Blakely in Nation's Business . "Whereas life insurance is designed to provide financial protection against dying too soon, annuities provide a hedge against outliving your retirement savings. While life insurance is designed to create principal, an annuity is designed ultimately to liquidate principal that has been created, typically in regular payments over a number of years." Some annuities stop payments when the owner dies, while others will continue to pay a spouse or other beneficiary. Annuity (Accumulation period versus annuity period) - answers>(pay in period) is the period of time over which the owner makes payments into an annuity. Furthermore it is the period of time during which the payments earn interest on a tax deferred basis (annuitization period, liquidation period or payout period), is the time during which the sum that has been accumulated during the accumulation period is converted into a stream of income payments to the annuitant Annuity income period is based upon the following - amount of premium paid cash value frequency of the payment interest rate annuitants age gender Immediate Annuities - answers>is purchased with a single, lump sum payment and provides income payments that start within one year from the date of purchase. first payment typically one month from start date Single premium immediate annuities (SPIAs) - answers>A single premium immediate annuity, or SPIA, is a contract in which you pay an insurance company a lump sum, or a premium, in exchange for guaranteed, periodic payments for life. A SPIA can begin paying out income almost immediately after you purchase it. People purchase SPIAs to fund retirement. Deferred annuities - answers>an insurance contract designed for long-term savings. Unlike an immediate annuity, which starts annual or monthly payments almost immediately, investors can delay payments from a deferred annuity indefinitely. During that time, any earnings in the account are tax-deferred. Non-forfeiture - answers>an insurance policy clause stipulating that an insured party can receive full or partial benefits or a partial refund of premiums after a lapse due to non- payment. Standard life insurance and long-term care insurance may have nonforfeiture clauses. Surrender and withdrawal charges - answers>a penalty charged by an investor for withdrawing funds from an insurance or annuity contract early or cancelling the contract. Surrender fees act as an incentive for insureds to maintain their contracts and reduce the frequency of early withdrawals. Deferred Annuity Death benefits - answers>If you die during the accumulation period, a deferred annuity includes a basic death benefit that pays some or all of the value of the annuity to your beneficiaries. You don't pay taxes on those earnings during the accumulation phase. Taxes are not due until you reach the payout phase. Life contingency options Annuity - answers>an annuity payout option that provides a death benefit in case the annuitant dies during the accumulation stage. The terms and features of the life contingency option will vary from contract to contract. Straight Life Annuity - answers>A straight life annuity, sometimes called a straight life policy, is a retirement income product that pays a benefit until death but forgoes any further beneficiary payments or a death benefit. Like all annuities, a straight life annuity provides a guaranteed income stream until the death of the annuity owner. What makes a straight life unique is that, once the annuitant dies, all payments stop and no more money or death benefits are due to the annuitant, their spouse, or heirs. This has the effect of making the straight life annuity less expensive than many other types of annuities and retirement income products. Pure Life Annuity - answers>A pure life annuity is a type of annuity that provides guaranteed periodic payments until your death. They are commonly used to provide a purchasing the policy or many years later. Compared to a policy that provides an increasing death benefit, one that provides a level death benefit will be less expensive (that is, the premiums will be lower for the same amount of initial benefit). However, inflation will diminish the value of the level death benefit over time. Fixed (equity) indexed annuities - answers>These are essentially fixed annuities with a variable rate of interest that is added to your contract value if an underlying market index, such as the S& P 500, is positive. They typically offer a guaranteed minimum income benefit, and the chance of principal upside pegged to a market-based index. A drawback is that upside potential is limited by a so-called participation rate, caps or a spread — all methods in which your return in a rising stock market is trimmed. Consequently, buyers of these annuities never keep pace with a robust market. These appeal to retirees and pre-retirees who want to conservatively participate in potential market appreciation without fuss and with downside principal protection. Tax-deferred growth - answers>You will pay no income taxes on the earnings from your annuity investments until you begin making withdrawals or receiving periodic payments. Note that withdrawals prior to age 59½ may be subject to an additional 10% tax.Footnote 1 Retirement Income Annuities - answers> Guaranteed Minimum Withdrawal Benefit (GMWB) - answers>A Guaranteed Minimum Withdrawal Benefit (GMWB) is a type of rider or contract attached to some annuity insurance policies. It guarantees the policyholder a steady stream of retirement income regardless of market volatility. A Guaranteed Minimum Withdrawal Benefit, or GMWB, guarantees a policyholder's income through all types of market activity. Maximum withdrawals are usually between five and ten percent. These types of riders are designed to protect policyholders during market downturns. Taxation of personal life insurance - answers>Tax implications are important to consider when buying life insurance. The Internal Revenue Service (IRS) imposes different tax rules on different plans, and sometimes the distinctions are arbitrary. Life insurance premiums, under most circumstances, are not taxed—i.e. no sales tax is added or charged. These premiums are also not tax-deductible. If an employer pays life insurance premiums on an employee's behalf, any payments for $50,000 or more in coverage is taxed as income. Interest earned for prepaid insurance is taxed as interest income. Returns generated from whole life insurance policies are not taxed until the policy is cashed out. Employer-Paid Life Insurance When a person's employer provides life insurance as part of an overall compensation plan, the IRS considers it income, which means the employee is subject to taxes. However, these taxes only apply when the employer pays for more than $50,000 in life insurance coverage. Even in those cases, the premium cost for the first $50,000 in coverage is exempt from taxation. Prepaid Life Insurance Some life insurance plans allow the policyholder to pay a lump sum premium upfront. That money gets applied to the plan's premiums throughout the plan's duration. The lump-sum payment also grows in value because of interest. The growth of that money is considered interest income by the IRS, which means it can be subject to taxation when it is applied for a premium payment or when the policyholder withdraws some or all of the money he has earned. Similar to retirement accounts, such as 401(k) plans and IRAs, the accumulation of cash value on a whole life insurance policy is tax-deferred. Even though this money qualifies as income, the IRS does not require the policyholder to pay taxes on it until he cashes out the policy. Life Insurance Premiums Not Tax-Deductible. Section 1035 Exchange - answers>A 1035 exchange is a provision in the Internal Revenue Service (IRS) code allowing for a tax-free transfer of an existing annuity contract, life insurance policy, long-term care product, or endowment for another one of like kind. Section 1035 of the tax code allows for tax-free exchanges of certain insurance products. Life insurance policyholders can use a section 1035 exchange to trade an old policy in on a new one with better features. The 2006 Pension Protection Act modified the law to allow exchanges into long-term care products. Business of Life settlement - answers>refers to the sale of an existing insurance policy to a third party for a one-time cash payment. Payment is more than the surrender value, but less than the actual death benefit. After the sale, the purchaser becomes the policy's beneficiary and assumes payment of its premiums. Life Settlement Broker - answers>Life settlement brokers are state licensed professionals who represent life insurance policyholders in the life settlement process and negotiate on their behalf with life settlement providers. Financing transaction (Entities) - answers>Life settlement investors are known as financing entities because they are providing the capital or financing for life settlement transactions (the purchase of a life insurance policy). A financing entity is an accredited investor whose principal activity in connection with the transaction is providing funds to establish the life settlement contract or to purchase one or Insurable interest provisions - answers>A person or entity has an insurable interest in an item, event or action when the damage or loss of the object would cause a financial loss or other hardships. To have an insurable interest a person or entity would take out an insurance policy protecting the person, item or event in question. The insurance policy mitigates the risk of loss should something beset the asset. Insurable interest is an essential requirement for issuing an insurance policy that makes the entity or event legal, valid and protected against intentionally harmful acts. People not subject to financial loss do not have an insurable interest. Therefore a person or entity cannot Insurable interest is the basis of all insurance policies. An insurable interest is an object which, if damaged or destroyed, would result in financial hardship for the policyholder. To exercise insurable interest, the policyholder would buy insurance on the person or item in question. The policy must not create a moral hazard, in which a policyholder would have a financial incentive to allow or even cause a loss. Trust owned policies - answers>Trust-owned life insurance (TOLI) is a type of life insurance that resides within a trust. TOLI is an estate planning tool mainly consumed by high-net-worth individuals, who rely on it to ensure the responsible distribution of inheritance assets among their heirs, reduce estate tax liability, and meet their charitable objectives. Trust-owned life insurance (TOLI) is a type of life insurance housed inside a trust. TOLI is favored by high-net-worth individuals who use this tool for estate planning needs. The assets housed within the trust that are bequeathed to beneficiaries can sidestep onerous tax obligations. TOLI policies demand regular reviews to make sure they adequately meet the current needs of the trust. If not, the products should be replaced with superior offerings. Decreasing Term Insurance - answers>Decreasing term insurance is renewable term life insurance with coverage decreasing over the life of the policy at a predetermined rate. Premiums are usually constant throughout the contract, and reductions in coverage typically occur monthly or annually. Terms range between 1 year and 30 years. Decreasing term insurance is a more affordable option than whole life or universal life insurance. The death benefit is designed to mirror the amortization schedule of a mortgage or other high personal debt not easily covered by personal assets or income. Decreasing term insurance allows a pure death benefit with no cash accumulation. As such, this insurance option has modest premiums for comparable benefit amounts to either a permanent or temporary life insurance. Conditional Receipt - answers>a document given to someone who applies for an insurance contract and has provided the initial premium payment. This receipt means that the person can only be insured if he or she meets the standards of insurability and is given approval by the insurance company. Elements of a Contract - answers>offer and acceptance (Agreement) consideration competency and capacity Legal Purpose Morbidity - answers>Morbidity is a table used in calculating accident and health premiums. COBRA (Consolidated Omnibus Budget Reconciliation Act) - answers>gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events. Qualified individuals may be required to pay the entire premium for coverage up to 102% of the cost to the plan. generally requires that group health plans sponsored by employers with 20 or more employees in the prior year offer employees and their families the opportunity for a temporary extension of health coverage (called continuation coverage) in certain instances where coverage under the plan would otherwise end. Superintendents Powers - answers>The Superintendent shall have the power to prescribe and from time to time withdraw or amend, in writing, regulations: governing the duties assigned to the members of the staff of the department; effectuating any power, given to him to prescribe forms or otherwise make regulations; and governing the procedures to be followed in the practice of the department. Annuitant - answers>The person that buys an annuity; may or may not be an annuity's policyowner. Dread Disease Policy - answers>A dread disease policy, which is also known as a critical illness policy, is a type of insurance policy that pays out a tax-free lump sum in the event that you fall ill with one of the major illnesses, diseases, or events that the policy covers. These conditions can include things like: Cancer Heart-attacks By-passes Strokes Blindness Deafness Alzheimer's Parkinson's Organ Failure or Transplant Severe Burns Loss of Limbs Paralysis