Life Insurance and Risks Overview

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Questions and Answers

What does the Waiver of Premium rider allow a policyholder to do?

  • Skip premium payments if they become disabled. (correct)
  • Receive a higher benefit in case of accidental death.
  • Automatically increase their death benefit value.
  • Purchase additional life insurance without a medical exam.

Which benefit does the Accidental Death Benefit provide?

  • Guaranteed insurability for all family members.
  • An additional payout if death results from an accident. (correct)
  • Coverage for multiple insured individuals.
  • A fixed rate for premiums regardless of age.

What distinguishes group life insurance from individual life insurance?

  • Group life insurance is generally less customizable. (correct)
  • Individual life insurance is linked to employment.
  • Group life insurance has higher premiums.
  • Individual life insurance covers multiple people under one policy.

In a noncontributory plan, how is the plan funded?

<p>By employer contributions only. (C)</p> Signup and view all the answers

Total Compensation concept includes which of the following?

<p>Group insurance and other noncash benefits. (B)</p> Signup and view all the answers

What is a characteristic of contributory plans?

<p>Employees must contribute to the plan. (B)</p> Signup and view all the answers

How does group insurance typically differ from individual insurance in terms of coverage portability?

<p>Individual insurance typically allows for more tailored benefits. (C)</p> Signup and view all the answers

What kind of events would trigger the Guaranteed Insurability Option?

<p>Life events such as marriage or childbirth. (A)</p> Signup and view all the answers

What does the capitalization approach assess in terms of human life value?

<p>The income a deceased person would have earned (D)</p> Signup and view all the answers

How is the cost of death protection calculated?

<p>(#dying / #alive) * $1,000 (D)</p> Signup and view all the answers

Which type of life insurance offers pure death protection without any savings component?

<p>Term Life Insurance (D)</p> Signup and view all the answers

What distinguishes a living benefit from a death benefit in life insurance?

<p>Living benefits are paid while the insured is alive for specific needs (B)</p> Signup and view all the answers

Which of the following accurately describes whole life insurance?

<p>Offers lifetime protection with a level premium (D)</p> Signup and view all the answers

What is the primary characteristic of variable life insurance?

<p>References the performance of investment options like stocks (C)</p> Signup and view all the answers

What is the main implication of a reserve in life insurance?

<p>It helps ensure promised death benefits are met (A)</p> Signup and view all the answers

Which type of employment-based compensation is considered taxable income?

<p>Bonuses given for achieving company targets (C)</p> Signup and view all the answers

Flashcards

Waiver of Premium

A life insurance rider allowing policyholders to skip premium payments if disabled.

Accidental Death Benefit

Additional life insurance payout if death is accidental.

Guaranteed Insurability Option

Allows life insurance purchasing without medical exams at given times.

Group Life Insurance

Life insurance for a group of people (e.g., employees).

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Individual Life Insurance

Life insurance bought by one person, not group.

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Total Compensation

All non-cash compensation from an employer, incl. insurance, etc.

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Noncontributory Plan

Employee benefit plan funded only by employer contributions.

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Contributory Plan

Employee benefit plan where employee pays part of the contributions.

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Life Cycle Risks

Potential financial exposures throughout a person's life, including mortality, longevity, morbidity, disability, and financial needs of dependents.

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Capitalization Approach

A method to estimate the economic value of human life/needs, by calculating present value considering future income or expenses.

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Term Life Insurance

Provides death benefit coverage for a specific period. Premiums may increase over time.

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Whole Life Insurance

Provides lifelong death benefit coverage with a fixed premium and cash value accumulation.

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Universal Life Insurance

Permanent coverage with flexible premiums and a death benefit that can vary. Has two types(A/B) of policies

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Variable Life Insurance

Permanent coverage with a death benefit that depends on the invested funds' market value. Involves mutual funds and bonds.

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Level Premium

Constant premium payments for the life of the insurance policy.

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Cash Value (Life Insurance Reserve)

Accumulated funds in a life insurance policy that can be used for savings or loans.

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Study Notes

Life Cycle Risks/Exposures

  • Be familiar with statistical tables related to mortality, longevity, morbidity, disability, and annuity.
  • Be able to evaluate the economic value of a human life, including needs and capitalization approaches.
  • Understand how to estimate the financial needs of dependents.
  • Distinguish between cash and non-cash employment-based benefits (taxable vs. non-taxable).

Life Insurance Calculation

  • Understand how life insurance works through pooling.
  • Be able to calculate the cost of death protection.
  • Know the differences between term, whole, universal, and variable life insurance.
    • Term life insurance provides coverage for a set period.
    • Whole life insurance provides lifelong coverage with a level premium.
    • Universal life insurance features flexibility and may adjust based on market conditions.
    • Variable life insurance is tied to the value of investment.

Life Insurance Riders

  • Understand waiver of premium riders, which allow for premium payments to be skipped if disabled.
  • Be aware of accidental death benefit riders, which provide additional death benefits in case of an accident.
  • Familiarize yourself with guaranteed insurability riders, which provide the option to purchase additional coverage without medical exams.

Group vs. Individual Life Insurance

  • Distinguish between group life insurance (offered by employers) and individual life insurance (purchased by individuals).
  • Recognize the differences in coverage, cost, and benefits associated with each type.

Total Compensation

  • Understand the concept of total compensation, encompassing all non-cash benefits provided by employers.
  • Identify different aspects of total compensation, including group insurance, educational assistance, legal assistance, childcare, and discounts.

Pension Plans

  • Differentiate between contributory and non-contributory pension plans.
    • Non-contributory plans are funded solely by employers.
    • Contributory plans involve employee contributions alongside employer contributions.

Non-discrimination in Pension Plans

  • Understand the concept of pension plan non-discrimination and how it's enforced.

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Related Documents

Life Insurance & Employee Benefits (C17-20) PDF

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