tekuhuwe's version from 2015-08-31 06:01


Question Answer
FIXED PREMIUMcan have two meanings. Fixed can mean level, or it can mean the premiums are set in the contract and the policy holder must pay those amounts in order to keep the coverage in force.
FLEXIBLE PREMIUMalso has two meanings. The most common meaning is that the insured is in control (within limits) of what they are paying. In a universal life or a variable universal life insurance policy, for example, the insured can pay a minimum amount of premium, a target premium, extra premium, and after the policy has been in force for a certain period of time, they may be able to even skip paying the premium.
GUARANTEED LEVEL POLICYIf a policy is guaranteed level, then the premium will remain level (the same) throughout the life of the policy. If a policy is guaranteed at initial level, then the premium will remain level only through a certain time frame such as 5 or 10 years. Once the initial level is over, then the premium will rise either to the amount that is stated in the policy, or the policy may state that it will be determined at the time that the increase is due.
MORTGAGE REDEMPTION RIDERSare simply a decreasing term life insurance policy. The benefit amount of the coverage is designed to pay off the unpaid balance of one's mortgage loan, should the insured pass away prior to the loan being paid off. Here, the amount of insurance coverage will decrease as the amount of unpaid balance is reduced over time.
THE FAMILY PROTECTION RIDERIn order to provide protection to more than one member of a family, insurers may offer a rider that insures either all, or just selected, members. The family protection rider is also referred to as a family policy or simply as the family rider. The coverage that is available on family protection plans is usually sold with reference to "units" of insurance. A unit may equal an amount such as $2,000 of coverage. Therefore, when a family plan is purchased, the policy schedule may show five units ($10,000) of whole life coverage for the principal insured, and two units ($4,000) of level term for the spouse, along with one unit ($2,000) of level for each child that is on the policy.
THE "RETURN OF PREMIUM LIFE INSURANCE POLICYwas designed for those who are seeking affordable life insurance coverage like term coverage, yet also want to receive some type of "return" back if they do not die within the policy's in-force period. Rather than being forced into purchasing a permanent life insurance policy in order to build up cash value, these individual can now consider a return of premium policy option. With a return of premium, or ROP, plan, an individual can purchase a policy for a set amount of time such as 20 years. Should the insured die during that time, the death benefit proceeds would be paid to their named beneficiary. However, should the insured outlive his or her policy's in-force term, then the insurance company will send them a tax-free check for the full amount that the person spent on their policy premiums over the lifetime of their coverage.
JUVENILE POLICIESIndividual life insurance policies that are written on children are oftentimes referred to as juvenile policies. Typically, such coverage is offered to children who are at least 15 days old through to age 15 years.
ANNUITYis a contract that provides income for a specified period of time, or for the remainder of one's life. An annuity can essentially protect one from outliving his or her money. These financial products are not life insurance, but rather they are vehicles for accumulating money, receiving an income stream, and possibly liquidating an estate.
ANNUITANTis defined as the individual who receives the benefits of an annuity. In many cases, this refers to the income stream that pays out based upon the annuity's principal and payout structure chosen. The annuitant can be the annuity contract holder, however, this does not have to be the case. It is the annuitant's age and life expectancy that the amount of annuity income payments are based upon.
IMMEDIATE ANNUTIESgenerally do not have an accumulation period, but rather withdrawals are begun very soon after the annuity contract is established. The withdrawals consist of guaranteed income payments.
DEFERRED ANNUITYis an annuity that is purchased either with a lump sum of cash (a single premium annuity) or through periodic payments. These types of annuities are unique in that the funds inside of the annuity account are allowed to grow on a tax deferred basis. With a deferred annuity, income payments to the annuitant will begin some time one year or after the annuity purchase. Deferred annuities are often used for accumulating funds for retirement. If a deferred annuity is surrendered prior to the holder turning age 59 1/2, there will be a IRS (Internal Revenue Service) imposed 10% penalty on the amount of the gain that is withdrawn. Income tax will also be due on the gain.
FIXED ANNUITYis a type of insurance contract. Within these contracts, the insurance company will guarantee a certain amount of payment to the annuity owner throughout the life of the annuity. Income payments on a fixed annuity may be set for a certain number of years, or the annuity could state that income payments will continue for the remainder of the owner’s life. With a fixed annuity, it is the insurance company that takes the risk. This is because the owner of the annuity could live for many years while receiving the annuity payments.
VARIABLE ANNUITYis a contract between an investor and an insurance company, under which the insurance company agrees to make periodic payments to the investor, beginning either immediately or at some future date. Variable annuities are also considered to be tax deferred investments, meaning that the contract owner pays no taxes on the income and investment gains from the variable annuity until they withdraw the money. Variable annuities provide the opportunity for market appreciation through a variety of investment options, providing tax deferred accumulation, as well as future income. Variable annuities offer numerous benefits including, tax deferred growth, the opportunity for market appreciation, liquidity, benefits to spouses, and benefits to heirs.
QUALIFIED ANNUITYis any annuity that is being used as an investment vehicle when funding a type of IRS-approved retirement plan.
NON-QUALIFIED ANNUITYis any annuity that is not being used as the funding vehicle for an IRS-approved retirement plan. Therefore, the premiums that are paid into such plans are not tax deductible.
A GROUP ANNUITY...contract is issued by a life insurance company to a retirement plan sponsor or employer for the purpose of funding a tax-qualified retirement plan such as a defined contribution, defined benefit, 401(k), or 403(b) plan.
EQUITY INDEX ANNUTIESare annuity contracts that have an interest rate that is linked to the performance of an equity index. Most regular annuity contracts will pay the amount of interest that is stated in the contract. However, an equity index annuity will pay the annuity holder a guaranteed minimum interest rate, with the possibility of a higher rate - dependent upon the performance of the underlying index. One commonly used index is the S&P 500.
MARKET VALUE ADJUSTED ANNUITYis a type of contract that features a fixed interest rate guarantee that is combined with an interest rate adjustment factor that can cause the annuity's surrender value to fluctuate in response to market conditions. Therefore, this type of annuity will offer its holder a guaranteed interest rate, but it will also offer a market value adjustment if the annuity holder opts to surrender the annuity contract.
TAX SHELTERED ANNUITIES (403B PLANS)provide a type of retirement plan for employees of tax exempt 501(c)(3) organizations to make contributions from their income - and to defer the taxes on such contributions. Therefore, the contributions and the gains in the account will not be taxed until the time of withdrawal. The employer is also allowed to make contributions into the tax sheltered annuity. A common type of tax sheltered annuity is the 403(b) plan that provides employees of certain non-profit entities and public education institutions the ability to have a tax-sheltered way to save for retirement.
INDIVIDUAL RETIREMENT ANNUTIESare tax-deferred or pre-tax personal retirement plans that can provide their holders with future financial security in retirement. These plans are designed as either fixed or variable annuities, with the issuing insurer acting as the plan's custodian. An individual retirement annuity, or IRA, is a type of annuity driven retirement savings vehicle that is structured in a similar manner to an Individual Retirement Account (IRA), except that the annuity contract must be purchased subject to certain conditions.
ROTH IRAsdo not allow tax deductible contributions, although the withdrawals are tax free to persons who are age 59 1/2 and who have owned the Roth IRA account for at least five years. Roth IRA s allow for contributions even after the account owner reaches age 70 1/2, unlike that of traditional IRA accounts. In addition, a Roth IRA does not mandate that withdrawals be taken once the account owner reaches age 70 1/2.
REPLACEMENTis defined as being any transaction that involves the sale of a new insurance or annuity policy where the consumer's existing insurance or annuity is being lapsed, forfeited, surrendered, terminated, or converted to a different amount. The plan may also be being amended in order to effect a reduction of benefits or term or coverage, or reissued with a reduction in the policy's cash value.
CONSERVATIONis defined as either an agent's or an insurer's attempt to keep the insured's existing life insurance or annuity policy from being replaced by the new policy being proposed.
CANCELLATIONis defined as the act of termination an insurance policy before the end of the policy period. This is sometimes referred to as a "mid-term termination." In life and non-cancellable health and / or disability income policies, the insurer generally may not cancel a policy other than for nonpayment of premiums.
CANCELLATION (AKA "FREE LOOK")The term cancellation is oftentimes also referred to as a policy "free look" period, as well as the examination period, or right of examination. During this time, a policy owner may return a policy for cancellation. He or she may do so by either delivering the policy in person to the insurer or by mailing it in to either the selling agent or the insurer. The insurer then has 30 days from the date it was notified in which to refund the policy holder's premium .
DIVIDENDSare paid on life insurance policies when the actual cost to provide insurance turns out to be less than the insurance company originally estimated in their projections. When this happens, the insurance company returns a percentage of the premium back to the insured in the form of a dividend. Dividends are not guaranteed. They can be taken by o o o o o insureds in several different forms, including: Cash payments Accumulation at interest Paid-up additions Reduced premium payments One-year term insurance
A MODIFIED ENDOWMENT CONTRACTis defined as being a life insurance contract that is entered into or materially changed in which the cumulative premiums that have been paid into the contract during the first seven years of the policy are more than the amount that is needed to provide a paid-up policy based on seven statutorily defined level annual premiums.
GROUP LIFE INSURANCEWith ________,only one policy is issued to the employer or plan sponsor. This policy is called the master contract (as versus a policy in individual insurance). Each employee or plan member in a group plan is issued a certificate of insurance (as versus an individual policy with individual insurance coverage).
..MORE INFO ON GROUP LIFE INS.As with individual life insurance, group life insurance can also offer numerous tax advantages. First, the death benefit on a group life insurance policy is also received income tax free to its beneficiary. In addition, the funds that are used by the employer to fund up to the first $50,000 of group life insurance coverage will not be considered as income to the employee. Likewise, the employer can deduct this amount.
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT or HIPAA, legislation was enacted for the purpose of protecting individuals who were covered by health insurance, as well as to set certain standards for the storage and the privacy of personal medical information. HIPAA limits exclusions for pre-existing medical conditions. It also prohibits discrimination in enrollment and in the premiums that are charged to employees and their dependents, based on health status related factors.
SURPLUSis the amount by which an insurance company's assets exceed its liabilities. Earned surplus is unassigned funds, as required to be reported on an insurer's annual statement. Earned surplus can only be returned to the policy holders once it has been realized (earned) and is not needed by the insurer for reserves, expenses, or liabilities.
FULL RETIREMENT AGEPrior to 1983, early retirement was age 62, and normal retirement was age 65. Today, full retirement age is 67, although individual may still receive reduced retirement benefits at age 62. In order to obtain full retirement benefits, an individual must be considered fully insured. This means attaining 40 quarter credits.
TOTAL AND PERMANENT DISABILITYmeans that the person is unable to engage in any type of gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months or result in early death. This is the most restrictive definition of disability that can be used. The waiting period of Social Security disability is 5 months. This period is not retroactive. If approved, the first disability check will be received in the sixth calendar month.
SOCIAL INSURANCEis defined as being a group of governmental programs that have been created and designed to help certain segments of the population in maintaining an acceptable standard of living. Social insurance can differ from private insurance in a number of ways. First, most social insurance programs are mandatory for certain segments of the population, or they are so beneficial that nearly everyone who is eligible will not turn them down. One example of this is Social Security retirement benefits.