Questions and Answers
What does a guarantee insurability rider ensure for the policyholder?
Which rider allows life insurance coverage to adjust with inflation?
What occurs under a non-contributory group life insurance policy?
What does the reduced paid non-forfeiture option allow policyholders to do?
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In which scenario does a waiver of premium rider apply?
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What does the extended term non-forfeiture option allow a policyholder to do?
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What is the term for leaving life insurance money to all children equally?
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What type of annuity involves a single premium payment that is deferred?
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Which component is NOT part of Social Security?
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How does a Spendthrift Clause benefit a beneficiary?
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What is the tax-free account mentioned in the content?
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What type of life insurance matures at age 100?
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What is the main characteristic of a Variable Annuity?
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Which of the following is NOT a classification of insurance?
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Study Notes
Life Insurance Riders
- Guarantee Insurability Rider: After policy expiration, life insurance coverage cannot be denied due to health issues, as long as the new coverage is the same or less.
- Cost of Living Rider: Adjusts coverage annually to reflect cost of living increases.
- Waiver of Premium: Disability allows policyholders to skip premium payments for life insurance.
Group Life Insurance
- Certificate instead of Policy: Individuals receive certificates rather than individual policies.
- Contributory Group Life: Employees contribute to the insurance premiums; requires 75% participation.
- Non-Contributory Group Life: Employer pays all premiums; 100% of eligible employees must be covered.
Insurance Terminology
- Domestic: Insurer licensed in California.
- Foreign: Insurer licensed in another U.S. state.
- Alien: Insurer licensed in another country.
Non-Forfeiture Options
- Extended Term Non-Forfeiture Option: Converts cash value of whole life into a term policy for 10-15 years with no monthly premiums.
- Reduced Paid Non-Forfeiture Option: Reduces coverage or face amount of whole life, lowering monthly payments.
Annuities
- Single Premium Deferred Annuity: One-time payment with access to funds after 12 months.
- Flexible Premium Immediate Annuity: Ongoing payments can be withdrawn within 12 months.
Social Security Benefits
- Four components:
- Disability
- Retirement
- Medical
- Survivors
Annuity Types
- Fixed Annuity: Funds go into a general account.
- Variable Annuity: Funds go into a separate account.
Inheritance Terms
- Per Capita: Equal distribution of life insurance proceeds among all children.
Spendthrift Clause
- Protects beneficiaries from creditors; prevents creditors from claiming proceeds that the beneficiary receives.
Life Insurance and Taxes
- Roth IRA: Account with tax-free withdrawals.
- Withdrawal tax implications: Half of the amount withdrawn is taxable (in the given example, $5,000 of a $10,000 withdrawal).
Dividends in Insurance
- Dividends come from participating policies and represent excess profits; they are not guaranteed and are tax-free.
Whole Life Insurance
- Matures at age 100, allowing policyholders to receive their death benefit in cash.
Flexible Premium Life Insurance
- Also referred to as universal life insurance, offering flexible premium payment options.
Warranty Types
- Implied Warranty: Verbal assurances regarding insurance representations.
- Express Warranty: Written contracts outlining terms.
1035 Exchange
- Allows the exchange of life insurance policies, annuities, and transforms life insurance into annuities. Cannot exchange annuities back to life insurance.
- Classifications: Preferred is an example; "Declined" is not a classification.
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Description
This quiz covers essential life insurance riders including the guarantee insurability rider, cost of living rider, waiver of premium, and group life policies. Test your knowledge to better understand how these options enhance life insurance coverage.
