NY Life, Accident, and Health Insurance Agent (Broker )Exam Series 17-55, Exams of Public Health

Download NY Life, Accident, and Health Insurance Agent (Broker )Exam Series 17-55 and more Exams Public Health in PDF only on Docsity! NY Life, Accident, and Health Insurance Agent (Broker Exam Series 17-55 Process 2103 (d-i) - answer1. 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)) - answerAn 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)) - answer1. 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)) - answerHome 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)) - answerNegotiate or negotiation means the act of conferring directly with or Nonresident 2101(e) - answerIn this section, "non-resident insurance broker", means an individual who is a non-resident of this state and who is licensed or authorized to act as an insurance broker in the state in which he resides, or in which he, or the firm or association of which he is a member or employee, or the corporation, of which he is an officer, director or employee maintains an office as an insurance broker. Nonresident 2103(g)(5) - answerIn the discretion of the Superintendent, no written insurance examination will be required of any individual seeking to be named as a licensee or sub-licensee who is a non-resident insurance agent. Nonresident 2103(g)(11) - answerNo written insurance examination will be required of any individual who applies for an insurance agent license in this state who was previously licensed for the same line or lines of authority in another state, provided, however, that the applicant's home state grants non-resident licenses to residents of this state on the same basis. Such individual shall also not be required to complete any prelicensing education. This exemption is only available if the person is currently licensed in that state or if the application is received within 90 days of the date of cancellation of the applicant's previous license and if the prior state issues a certification that, at the time of cancellation, the applicant was in good standing in that state or the state's producer database records, maintained by the National Association of Insurance Commissioners, its affiliates or subsidiaries indicate that the producer is or was licensed in good standing for the line of authority requested. An individual or entity licensed in another state that moves to this state must make an application within 90 days of establishing legal residence to become a resident licensee. No prelicensing education or examination will be required of that person to obtain any line of authority previously held in the prior state except where the Superintendent determines otherwise by regulation. Nonresident 2136 - Reciprocity - answerThe Superintendent shall waive any requirements for a nonresident license applicant otherwise applicable under this chapter if: (a)the applicant has a current and valid license in his or her home state and is in good standing in his or her home state; (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) - answerA business entity means a corporation, association, partnership, limited liability company, limited liability partnership or other legal entity. 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) - answerAll 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 - answerAll 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)) - answerLicensees 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) - answerLicensees 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) - answerLicensees 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) - answerWhenever 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. Hearings - Notice and Process (2405, Financial Services 305) - answerA 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. Suspension, Revocation, and Nonrenewal (2110) - answerThe Superintendent may refuse to renew, revoke, or may suspend, for a period the Superintendent determines, the license of any insurance producer, insurance consultant or adjuster, if, after notice and hearing, the Superintendent determines that the licensee or any sub-licensee has: 1. violated any insurance laws, regulation, subpoena or order of the Superintendent of Insurance or of another state's Insurance Commissioner, or has violated any law in the course of his dealings in such capacity; 2.provided materially incorrect, materially misleading, materially incomplete or materially untrue information in the license application; 3.obtained or attempted to obtain a license through misrepresentation or fraud; 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) - answerThe certificate of authority is an insurer's license to transact insurance in this state as an authorized insurer. Solvency (307) - answerIt 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) - answerUnfair 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 - answerThe 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) - answerEvery insurer, fraternal benefit society or health maintenance organization or insurance producer or the authorized representative of the insurer, fraternal benefit society, health maintenance contract. Controlled Business (2103(i)) - answerThe 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) - answerThe sharing of commissions with an unlicensed person or entity is prohibited. Fiduciary Responsibility - answerWhen someone has a fiduciary duty to someone else, the person with the duty must act in a way that will benefit someone else, usually financially. The person who has a fiduciary duty is called the fiduciary, and the person to whom the duty is owed is called the principal or the beneficiary. License display - answeran insurance agent or broker must prominently display the license or licenses of the supervising person or persons responsible for that office. While the Insurance Law and regulations promulgated thereunder do not require other insurance agents or brokers in an office to display their licenses, the Department is of the view that it is a good practice for each licensee to do so. Commissions and compensation - answerA sales commission is a sum of money paid to an employee upon completion of a task, usually selling a certain amount of goods or services. Employers sometimes use sales commissions as incentives to increase worker productivity. A commission may be paid in addition to a salary or instead of a salary. Termination responsibilities of producer - answerhttps://www.nysenate.gov/legislation/laws/ISC/2112 Aiding Unauthorized Insurer (2117) - answerActing for or aiding unlicensed or unauthorized insurers or health maintenance organizations. (a) No person, firm, association or corporation shall in this state act as agent for any insurer or health maintenance organization which is not licensed or authorized to do an insurance or health maintenance organization business in this state, in the doing of any insurance or health maintenance organization business in this state or in soliciting, negotiating or effectuating any insurance, health maintenance organization or annuity contract or shall in this state act as insurance broker in soliciting, negotiating or in any way effectuating any insurance, health maintenance organization or annuity contract of, or in placing risks with, any such insurer or health maintenance organization, or shall in this state in any way or manner aid any such insurer or health maintenance organization in effecting any insurance, health maintenance organization or annuity contract. Producer Compensation Transparency - answer"Producer Compensation Transparency," requires all New York-licensed producers to offer unrequested information about their compensation to their clients. If a client asks for more information, the producer must make a second highly detailed disclosure. Cyber Security Requirements for Financial Services Companies (Reg 23 ) - answerIs designed to promote the protection of customer information as well as the information technology systems of regulated entities. This regulation requires each company to assess its specific risk profile and design a program that addresses its risks in a robust fashion. Senior management must take this issue seriously and be responsible for the organization's cybersecurity program and file an annual certification confirming compliance with these regulations. A regulated entity's cybersecurity program must ensure the safety and soundness of the institution and protect its customers. Fair Credit Reporting Act (FCRA) - answerfederal law that regulates the collection of consumers' credit information and access to their credit reports. It was passed in 1970 to address the fairness, accuracy, and privacy of the personal information contained in the files of the credit reporting agencies. Workers Compensation - answerEligibility - All work injuries that occur during the course of work are covered under New York workers' compensation law. New York, like most states, also covers occupational diseases, which are illnesses that arise during the course of employment. Typical occupational diseases include asbestosis and hearing loss. Industrial (work-related) injuries can include bone fractures, sprains, burns, cuts, amputations, and other injuries that cause immediate harm. If your injury requires more than simple first aid, and it occurred in the course of your employment, you likely have a workers' compensation claim. Activities that happen outside the scope of your employment, such as commuting to and from work, are not covered. In other words, injuries or diseases arises Universal life insurance - answerhas 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 - answersimilar 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 - answerIf 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 - answerTypically 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 - answerGuaranteed 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 you can pay the premium, the insurer will cover you, needing only your age, sex, and state of residence. That makes it appealing for older people, whose declining health makes it prohibitively expensive to get coverage with another insurance types. Guaranteed Level Term Life Insurance - answerA term life policy guaranteed to have the premium remain the same for the duration of the contract. This is what most people refer to as term life. Purchased for a set number of years (5, 10, 30 years, for example), the premium and the death benefit remains the same (level) until the end of the term. Many of these policies can be converted to a permanent policy at the end of the term, or can be canceled at any time. Annual renewable term life insurance - answerAnnual renewable life insurance works just like term life policies that have 10-, 20-, and 30-year terms. If you die while the term is active, your beneficiaries get a death benefit from the carrier. However, the term in an annual renewable term policy only lasts one year, after which it's renewed for another year, for a set number of years. Traditional term life insurance policies typically have a guaranteed level premium, meaning that your premium rates at the time of purchase are the same throughout the term of the policy. (Guaranteed level premium policies average out the cost over the life of the policy.) Your premiums will only go up if you let your policy lapse and try to purchase the same policy again. Convertible term - answerA convertible life insurance policy is simply a term life insurance policy that can convert to a permanent life insurance policy. Here's how it works: Let's say a 35-year-old man buys a 30-year convertible term life insurance policy. At age 45, he decides to convert that policy to a permanent life insurance policy. He will pay a substantially larger premium as a result but have coverage for the rest of his life. Most convertible policies have a time limit to convert, usually 10 years. Often, when the conversion option is close to expiring, life insurance companies let policyholders know that time is running out to execute this option. level-premium term insurance - answerLevel-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 - answerconsidered 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 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 - answerAdjustable 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 - answerpermanent 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) - answercombines 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 - answerSecond-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)) - answerA 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. Fixed (equity) indexed life - answerEquity-indexed universal life insurance is a type of permanent life insurance policy that ties its accumulation to a stock market index. Unlike variable universal life insurance, which allows policyholders to invest a portion of the cash value into a range of funds and stocks with various risk profiles, equity-indexed universal life insurance offers policyholders the opportunity to place the cash value in an equity index account, which pays interest according to a market index without actually investing the money in the market. Types of Group plan sponsors - answera designated party—usually a company or employer—that sets up a healthcare or retirement plan, such as a 401(k), for the benefit of the organization's employees. The responsibilities of the plan sponsor include determining membership parameters, investment choices, and in some cases, providing contribution payments in the form of cash and/or stock. Some companies offer retirement savings plans, pension plans, or health plans to their employees as part of their employee benefits program. These companies are referred to as plan sponsors. Employers are typically plan sponsors, but unions and professional bodies could also be plan sponsors. Credit life insurance - answertype of life insurance policy designed to pay off a borrower's outstanding debts if the borrower dies. The face value of a credit life insurance policy decreases proportionately with the outstanding loan amount as the loan is paid off over time, until both reach zero value. typically sold by banks at a mortgage closing; it could also be offered when you take out a car loan or a line of credit. The pitch is to protect your heirs if you die, since the policy will pay off 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. 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 - answerA 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) - answerType 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) - answerretirement 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) - answerEstablished 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 of five. Alternatively, the employer may establish a uniform 2% of salary contribution per year for all eligible employees regardless of whether they contribute to the SIMPLE or not. 457 Plan - answerNon-qualified, deferred compensation plan established by state and local governments for tax-exempt government agencies and tax exempt employees. While governmental 457 plans have special catch-up provisions for those age 50 or older, they enjoy an even greater contribution amount in the three years before retirement. The catch-up provisions three years prior to retirement will amount to double the normal amount for allowable maximum contributions. Until withdrawn, 457 plan contributions and all earnings remain untaxed. The 457 plan assets of tax- exempt employers are subject to the claims of the employer's creditors, but those of plans sponsored by governmental entities are not. Plan distributions may occur at retirement; on separation from employment; as the result of an unforeseeable emergency; and at death. Distributions may be taken as a lump sum, in annual installments, or as an annuity. In 2002 and later years, proceeds from a governmental 457 plan may be transferred to an IRA or a new employer's 401(k), 403(b) or 457 plan that accepts transfers from an old employer's plan. On withdrawal from an IRA or from the new plan, the distribution will be subject to immediate taxation at ordinary income tax rates. ownership provision - answerprovision that states that a policy may be owned by a different person than the one insured. depend on how much time passed since the policy lapse and the type of insurance policy. Sometimes applying for a new policy may be less expensive than reinstating an old policy. After nonpayment of a life insurance premium, a policy enters its grace period. During the grace period, the insurance company remains responsible for paying death benefits on valid death claims. If the insurance company does not receive a premium payment during the grace period, the policy will lapse. At this point, the insurance company is no longer responsible for paying a claim. 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 - answerAn 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 - answera 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 - answerAn 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 - answerThe 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 - answerany 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 - answerPrimary beneficiaries are the account owner's first choice for a beneficiary. In the event of death, the first person who Trusts - answeran irrevocable, non-amendable trust which is both the owner and beneficiary of one or more life insurance policies. Upon the death of the insured, the trustee invests the insurance proceeds and administers the trust for one or more beneficiaries. If the trust owns insurance on the life of a married person, the non-insured spouse and children are often beneficiaries of the insurance trust. If the trust owns "second to die" or survivorship insurance which only pays when both spouses are deceased, only the children would be beneficiaries of the insurance trust. Revocable versus irrevocable - answerLife insurance policies can have either a revocable or irrevocable beneficiary designation. A revocable beneficiary can be changed by the owner of the policy without the signature of the beneficiary. Most life insurance policies in Canada have Revocable beneficiary designations. An irrevocable beneficiary requires the beneficiary to sign off on any policy changes. Therefore, should the policy owner wish to change the beneficiary on a policy where an irrevocable beneficiary exists, both the policy owner and the irrevocable beneficiary must sign off on it. Irrevocable beneficiary designations are often given as part of a separation agreement or a divorce settlement. Because irrevocable beneficiaries have extraordinary powers, it is crucial that the policy owner be made aware of these powers should such a designation be made. Common disaster clause - answerProvision in most life insurance policies (and some wills) under which the primary beneficiary of the policy (or will) must survive the insured (or testator) by a certain number (usually from 60 to 90) days to qualify to receive the policy's (or will's) benefits. Settlement options - answerA settlement is the way in which your life insurance policy proceeds are paid out. Fixed Period Option - answerThe fixed amount option, also known as the installment amount option, means your beneficiary will be paid a fixed amount for as long as the settlement proceeds last. Any remaining balance can be passed to a secondary beneficiary if the beneficiary dies before receiving all proceeds. Good for: This option is good for beneficiaries who need to supplement their income. Fixed Amount Option - answerThe fixed amount option, also known as the installment amount option, means your beneficiary will be paid a fixed amount for as long as the settlement proceeds last. Any remaining balance can be passed to a secondary beneficiary if the beneficiary dies before receiving all proceeds. Good for: This option is good for beneficiaries who need to supplement their income. Cash Payment Settlement Option - answertype of option for which actual physical delivery of the underlying asset or security is not required. The settlement results in a cash payment, instead of settling in stocks, bonds, commodities or any other asset. This type of option avoids the high costs of transport or transaction fees. Interest Only Settlement Option - answerthe insurer holds the proceeds and pays interest to the beneficiary until such time as the beneficiary withdraws the principal. Life Income Option - answerThe life income option means the beneficiary will receive payments for his or her entire lifetime. If the beneficiary chooses this settlement option, the insurance company will decide how much income the beneficiary will receive each year based on age and gender although the company may purchase an annuity instead. Payouts stop when the beneficiary dies. If the beneficiary dies sooner than expected, the insurance company can keep the unpaid amount in most cases. This option tends to work best for people who want guaranteed payments for life but do not need a large sum of money at once. 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. cash value. Reduced paid-up insurance - answerYou 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 - answerissued 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 - answeroften 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 - answerLife 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. option you seek. This dividend option is also how whole life policies accumulate non-guaranteed cash value. The non-guaranteed cash value of a whole life policy is simply the cash value created through paid-up additions. Some life insurers refer to this as building "dividend additions" and will even make reference to surrendering dividend additions if the policyholder chooses to withdraw money from the policy at some point. If this is the case, understand that the terminology means the same thing. Accumulation at interest Dividend Option - answerThe dividend option to accumulate at interest means the insurance company places the dividend payment in an interesting bearing account and adds interest to the account each year. The insurer sets the interest rate on these accounts annually and usually, announces it with other information regarding interest rates such as loan rates, universal life interest rates, and annuity rates. The rate can change annually, but most insurers establish a minimum guaranteed rate on these accounts. The policyholder cannot choose to place additional funds into the interest account. So for example, if a policyholder noticed that the interest rate paid on the account for the accumulate at interest option was far higher than his/her savings account, he/she would not have the option to move money from the savings account to the interest account at the insurance company. Only dividend payments can go to the account. The policyholder is free to withdraw funds from the interest account whenever he/she sees fit. But will not have the option to put the money back into the account at a later date. Once removed, the only way to build the account back up is through future dividend payments on the whole life policy. One Year Term Dividend Option - answer"fifth dividend option" which allows the policyowner to use the dividends to purchase one-year term insurance at net rates, usually limited to no more than the current cash value on the contract. Disability Riders - answerJust like cars have options that can be added to the standard model, so does disability insurance. Optional "add-ons" to the base policy of disability insurance are called disability insurance riders. Riders allow consumers to individualize—to add optional features—to their base policy, which address their specific income protection needs. Waiver of Premium Rider - answerThe waiver-of-premium rider allows you to stop paying premiums in the event that you are disabled. This rider provides that you will not be required to pay any further premiums once you have been disabled for a certain period of time. Once you are able to return to work full-time, the rider requires you to begin paying premiums on your policy once again. Waiver of Cost of Insurance Rider - answer Disability income benefit Rider - answerprovides financial protection to the owner of a life insurance contract that a disability will often incur. Usually a disability income rider will pay a monthly income of 1% of the face value of the contract, and/or will also waive the monthly cost of the life insurance contract Payor benefit life/disability (juvenile insurance) Rider - answermay 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) - answerrefers 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. 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) - answerA 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 - answerThe 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 - answerAdded 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 - answerThe 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 - To qualify for Social Security disability benefits, you must first have worked in jobs covered by Social Security. Then you must have a medical condition that meets Social Security's definition of disability. In general, we pay monthly benefits to people who are unable to work for a year or more because of a disability. Benefits usually continue until you are able to work again on a regular basis. There are also a number of special rules, called "work incentives," that provide continued benefits and health care coverage to help you make the transition back to work. If you are receiving Social Security disability benefits when you reach full retirement age, your disability benefits automatically convert to retirement benefits, but the amount remains the same. The listing manual, which has been updated for 2020, includes: musculoskeletal problems, such as back injuries cardiovascular conditions, such as heart failure or coronary artery disease senses and speech issues, such as vision and hearing loss respiratory illnesses, such as COPD or asthma neurological disorders, such as MS, cerebral palsy, Parkinson's disease, or epilepsy mental disorders, such as depression, anxiety, autism, or intellectual disorder immune system disorders, such as HIV/AIDS, lupus, and rheumatoid arthritis various syndromes, such four weeks following the 30th day of such employment. These 30 days of employment need not be consecutive days but must be work days of employment in one calendar year. In addition to the above-stated provisions, employers of personal or domestic employees in a private home are subject if they employ at least one employee who works 40 or more hours per week for that one employer. An employer who by operation of law becomes successor to a covered employer, or who acquires by purchase or otherwise the trade or business of a covered employer, immediately becomes a covered employer. Benefits - will pay 50% of your average wages (calculated over the prior eight weeks) up to a maximum of $170 per week. Benefits will begin on your eight consecutive day out of work; 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 - answera 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 - answerprovides 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. 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) - answerMedicare 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-stage renal disease (ESRD) or amyotrophic lateral sclerosis (also known as ALS, or Lou Gehrig's disease). Enrollment - If you do not enroll during your initial enrollment period and do not qualify for a special enrollment period, you can also sign up during the annual General Enrollment Period, which runs from January 1 to March 31, with coverage starting July 1. You may have to pay a late enrollment penalty for not signing up when you were first eligible. Some people may get Medicare Part A "premium-free," but most people have to pay a monthly premium for Medicare Part B. Because Medicare Part B comes with a monthly premium, some people may choose not to sign up during their initial enrollment period if they are currently covered under an employer group plan (either their own or through their spouse's employer). Coverage's and cost-sharing amounts - 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. Medicare Part C (Medicare Advantage) - answerA Medicare Advantage Plan (like an HMO or PPO) is another Medicare health plan choice you may have as part of Medicare. Medicare Advantage Plans, sometimes called "Part C" or "MA Plans," are offered by private companies approved by Medicare. If you join a Medicare Advantage Plan, the plan will provide all of your Part A (Hospital Insurance) and Part B (Medical Insurance) coverage. Medicare Advantage Plans may offer extra coverage, such as vision, hearing, dental, and/or health and wellness programs. Most include Medicare prescription drug coverage (Part D). Medicare pays a fixed amount for your care every month to the companies Contribution limits -$2,650 per year per employer. If you're married, your spouse can put up to $2,650 in an FSA with their employer too. Health Savings Accounts (HSAs) - answerDefinition - 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 - answerprogram 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 - answerAn 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) - answer(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 - answeris 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) - answerA 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 - answeran 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 - answeran 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 Guaranteed Minimum Income Benefit (GMIB) - answeran optional rider that annuitants can purchase for their retirement annuities. When the annuity has been annuitized, this specific option guarantees that the annuitant will receive a minimum value of payments on a regular basis, regardless of other circumstances. A guaranteed minimum income benefit (GMIB) is an optional rider attached to an annuity contract that guarantees a minimum level of payments once it has annuitized. GMIBs are often found with variable annuities, which contain some level of market risk. While handy, these riders will come at an additional cost to the annuity buyer. single life annuity - answerAn annuity or pension that pays out to only one person is known as a single-life payout. Single-life payout is one of two payout options an employer uses to distribute retirement benefits. At retirement, a retiree has the choice of either a single-life payout or a joint-life payout. A single-life payout means only the employee will receive the payments for the rest of his/her life, but the payments stop upon his/her death. A single-life payout is an annuity or pension option that means that payments will stop when the annuitant dies. In a joint-life payout, payments continue after death to the annuitant's spouse. Single-life payouts are generally larger on a per month basis since the payments stop upon the death of the annuitant. Annuities certain (types) - answerThere are five major categories of annuities — fixed annuities, variable annuities, fixed-indexed annuities, immediate annuities and deferred annuities. Fixed annuities - answerThese are fixed interest investments issued by insurance companies. They pay guaranteed rates of interest, typically higher than bank CDs, and you can defer income or draw income immediately. These are popular among retirees and pre-retirees who want a no-cost, modest and guaranteed fixed investment. General account assets - answerThe general account is where an insurer deposits premiums from policies it underwrites and from which it funds day-to-day operations of the business. The general account does not dedicate collateral to a specific policy and instead treats all funds in aggregate. The general account is where insurance companies place their collected premiums. The account is treated as an investable asset and is allocated accordingly. General accounts invest in less risky ventures in case they need to make a large payout to their policyholders, as was the case with the Fukushima disaster or during large wildfires. Variable Annuities - answerA variable annuity is a type of annuity contract, the value of which can vary based on the performance of an underlying portfolio of mutual funds. Variable annuities differ from fixed annuities, which provide a specific and guaranteed return. The value of a variable annuity is based on the performance of an underlying portfolio of mutual funds selected by the annuity owner. Fixed annuities, on the other hand, provide a guaranteed return. Variable annuities offer the possibility of higher returns and greater income than fixed annuities, but there's also a risk that the account will fall in value. Level benefit payment amount - answerA level death benefit is a payout from a life insurance policy that is the same whenever the insured person dies, whether shortly after 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 - answerThese 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 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 - answerA 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 - answerrefers 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