2-15 Lic.

a simple spreading of risk or the possibility of loss across a sizeable number of people, instead of bearing the cost on one person. basically everyone chips in a small amount to cover a large amount if somehting is to occur

the large the number of individual risk that are combined into a group, the more certain there is of knowing the amount of loss sustained in a given period of time

involves the chance of both loss and gain, like gambling

involves only the chance of loss, like an injury from an accident

life insurance and health insurance

individual characteristics that promote the chance of peril, like someone that is blind

behaviorism or habits an individual may have

tendencies that stem from attitude or an emotional state, such as sorrow that can lead to distarction of hazard

non participating companies that sole purpose is to make a profit for its stockholders

a participating company that the owners are the policyowners. if you purchase insurance from a mutual insurer you would be both customer and owner

this type of insurer charge premiums

specializes in insurance that is not usually covered for example a singer insuring her voice.

insure insurance companies

non profic organizations that are known for their social and charitable events

offer benefits in the form of medical services, which are prepaid by customers on a monthly basis know as premiums. basically the sell medical and hospital services, not insurance

hmo and ppo

known for stressing preventive care, provides subscribers services of participating physicians and hospitals

receive discount from certain health care providers in exchange to referring their members to them.

oasdi, social security hospital insurance and supplemenatl medical insurance also known as medicare, and workers compensation

consist of an insurance company appointing an agent to solicit their product, and the master agent or general agent can train and also get commision for each agent tied to them

is not employed by the insurance agency but by the PPGA company they work for, to solicit other companies insurance

this system allows an agent to become appointed with as many carriers as they choose, they are paid commision directly from the insurance company they solicet

an insurance company was attemted to be regulated by the state it did not hold domicile within. the court ruled with the state because insurance should not be considered intersate commerce, and each state has the right to regulate insurance sold

puts insurance in the hand of the federal governemnt by stating insurance is a form of interstae commerce and any state laws that conflict will be void

this act overturned the decision of SEUA by once again ruling that insurance is not interstate commerce

goal is to provide uniform laws to states to follow in order to standerized multilple state insurance laws, but they do not regulate insurance laws

Advertising code and unfair trade practices act

their purpose is to help meet and maintain the health and financial needs of individuals through education, advocacy, and ethical codes

gurantees that if their are unpaid claims by insurance compaines that the insurer will get paid

• stock insurers
• mutual insurers
• lloyds of london
• assessment mutual insurers
• reinsurers
• fraternal benefit societies
• service providers

the possibility there will be an element of chance for both parties and the dollar value exchange may not be equal

means only one party prepares the contract and is non-negotiable

only one party is required to follow through on any enforceable promise. if you keep paying premium insurance must maintain agreement

if policy holder stops paying they insurer, insurance stops

amount paid will be equal to amount lost

occurs when investors invite individuals to purchase life insurance and make the beneficiary the investor

legal enforcement of a waiver, if a waiver is legally enforced its considered an estoppel

once an agreement is in written form it cant be changed

when agen persuades client to drop current insurance from one company to go to another companty to get commission again

change their current plan to another with the same company

consist of plans such as term, endowment, and perminant. ordinary life insurance is the most common type of insurance

know as buriel insurance, this type of insurance provides minimal coverage in case someone dies to cover basic service

• level term
• decreasing term
• increasing term

provides coverage for a certain time period.

benefits will decrease over time, good to use for morgages. if the insurance is for 1million dollars for ten years. if the insurer dies in the first year he would receive 1million and if the ten years is up he will receive 0 dollars

benefits will increase over time, good for consumer price index CPI, good example is ever growing gas prices

allows the policyowner to renew is insurance for examples for 7 years more. since they have insurance they do not have to prove insurability and if they have a heart attack they cant be denied renewability

provides coverage for a year at a time, their is usually a limit on how many times you can renew and is most popular with group insurance

allows policy owners to convert to a whole life or permanent plan at the end of their term insurance. this does not require proof on insurance. when exchange for whole life occurs a new premium will be met depending on age

• attained age method-new premium rates are determined with policy holders current age at time of exchange
• original age method-premium of whole life insurance is calculated with the age of inception

know as savings or accumilation element. cash values grows until equalling the face amount at the maturity of 100 years of age. the money accumilated can be used as a loan, or if the insurer decides to cancel he could take what accumilated minus interest accrued.

distingished by cash values like whole life insurance but at a much faster rate. instead of maturing at age 100 they mature for example at age 65. endowments give living benefits and death benefits

because individual where using life insurance for fast funding methods and tax benefits, congress passed a law to dissuage people for buying life insurance as a investment as a result the technical miscellanous and revenue act was place TAMRA. As a result a new type of insurance was created MEC

design to cover all members with different amounts. usually the policy owner is the main source of income in the household so he has the largest face amount

covers two people under one policy, premiums are calculated usually with the average of both ages. and if one is to die they can change to a single policy without proving insurability

for children from 1 day to 14-15 years old. often comes with a payor provision which if the guardein or parent dies, permiums will not have to paid until child because a particule age

Used the life of debtor is insured for the amount of the loan. premiums are paid by the creditor and usually use decreasing term

differs from odrinary whole life when premiums remain level. premiums usually change annually do to interest rates trends caused by higher or lower mortality or investent returns.

consist of both term and permanant insurance, the insurer can adjust plan based on their needs, but proof of insurability may be required

is flexible simular to adjustable insurance but the policy owner decideds how much and how many payments are to be made. its classified as a whole life but in reality its a term life plan that is renewable annualy.

Life insurance largely based on market return. offers policy owners to transfer funds from fixed account to index account. cash values can only increase if market is favorable not decrease if market is down. calculations usually made from NASDAQ

in order to sell these kinds of plans you need to have a life insurance license along with a financial industry regulatory authority FINRA. with variable insurance seperat accounts are used in order for the investor to direct funds that are more aggressive for a possibility of a higher return

a combination of universal life and variable life policies which contain a degree of death benefits, cash values, and premium payments.

• straigh whole life
• limited pay whole life
• single-premium whole life

• modified
• graded
• minimum deposit
• economatic

usually more affordable then straight whole life for the first couple of years, usually 5 years then becomes slightly higher then straight whole life insurance. good for college students starting out in the work force who cant intially afford whole life insurance

simular to modified standard whole life with premiums being less expensive then whole life but over the years gradually increases until finally leveling off slightly higher then standard whole life

intial payment which allows for immediate build in account. subsequent premium payments are then paid by borrowing from the cash value for the portion of the entire premium

offered by some mutual companies that allow a policyowner a higher insurance death benefit at a lower premium through the combination of whole life and term life policy.

includes a face amount that will adjust depending on consumer price index CPI.

policy holder has 14 days to review the contract

7 days

10 days

31 days

additional 21 days than standard

allows the policy owners to transfer the policy to whoever they see fit

assignee gains full control

assigns policy to a creditor as collertal for a debt

if policy owner gets a a grave medical condition, they are allowed to utilize a certain percentage of their faced amount. the remaining is paid to the beneficiary in the case of death

additional benefit that can be placed in an insurance policy

provides a policy holder with whole life to purchase specified amounts of additional insruance in intervals without providing proof of insurability

if an insurer is unable to earn income because of illness or disability, and are unable to pay their premiums the policy will not lapse due to none payment

if payment is not received afte grace period , cash value is applied towards the cost of the monthly premium in order to prevent policy from lapsing.

in the event of death during a specified time period beneficiary will receive the face amount of policy along with all premiums paid.

this rider is tied to consumer price index CPI. the face amount will increase in an inflation index. but if CPI rises higher then insurance allows for maximing face time usually 5%, insurer must the remaining if the want to continue to match CPI

basically a term life insurer for the family member who is tied to the whole life insurance plan, usually known as the child rider

contingent

based on charging more premium than the insurance is worth early in the policy so that when the insurer gets older the mortality rate increases, the additional cost offsets the additional risk

• preferred risk
• standard risk
• substandard risk

1 to 11 months

• master contract
• low cost
• insured turnover

75

most common type of insurance; annually renewablle term ART insurance. If employee is not with the company they will not pay, and if they stay it will renew without proof of insurability

• group ordinary
• group paid up
• universal life

in some instances cash values of group ordinary insurance are owned by the employees, at other times it's used to fund the plans of the remaining employees through the results of cash forfeiture

involves a combination of both term and whole life. the employer pays the term portion while the employee pays the whole life. in the event of termination or retirement, the employee is granted the paid-up portion, known as the cash value

mostly paid by the employee but they can choose how much coverage they want or how much they want to pay

not if under or equal to 50,000, and in order to qualify for favorable tax treatment employer must benefit 70 percent of the employees along with 85 percent of participating employees must not be key employees

• earnings-benefits based on the amount you earn, for example life insurance equals 3 times an employee annual salary
• employment position-the higher the position the greater amount of insurance
• flat benefit-a flat benefit is provided to all emplyees

31 days also individual converting must opt for whole life regardless if their group life was permanent or term

employer is considered a sponsor instead of the policyholder because each individual receives their own policy. employers main task is to collect premiums for insurance companies

considered term group life insurance, it is used to pay creditors the amount loaned to a debtor in the event death occurs and loan not paid back.

covers everyone during an event of a given time, for example a cruise ship. no certifcates are given and policyholders are not listed

used for small employers looking to provide coverage for their staff and employer must become member of the trust by subcription

Type of MET (multiple employer trust) for small employers that are self funded and tax exempt status

its a fanancial tool that will provide a succession of payments to a policy owner or annuitant in exchange for a lump sum payment or a series of payments to the insurer. so basically the annuitant pays the insurer a certain amount which is then credited with certain rate of interest and thats how money grows in an annuity

• paid over an amount of time
• paid for a certain monetary per payment
• act as a death benefit

because of the ability to guarantee annuity payment for an annuitants life regardless of age attained

to guarantee annuity payment for an annuitants life regardless of age attained

to protect an individual from outliving their resources, through the liquidation of an estate

annuity payout option begins immediately, exactly one month after the premium has been paid. also known as single premium immediate annuity SPIA

doesnt start paying annuitant until a future specified date

guarantees annutiant payment for life, if he dies the rest gos to the insurer. this option often gives the biggest payout

if annuitant dies before principle sum is depleted, the rest gos to the beneficiary in a lump sum

if a annuitant dies payment will be the same to the beneficiary as the annuitant received

pays annuitant for life and guarentees a minimum amount of payments.

payout of two annuitants, and is the lowest paying option

provides payments for a certain period of time regardless if annuitant is alive or not.

provides a guarantee rate by insurance company. known as the minimal garantee rate, which it could never go below

is an investment approach. their is no minimal gurantee rate.

10 percent, plus income tax

stream income for annuitants retirement, and some annuties pays out the beneficiary incase of death

tax qualified retirement plans that are tax lower

annuitant being paid for a lawsuit or winning the lottery

exclusion ratio (investment in contrace divided by the expected return

1979

• average monthly wage AMW (before 1979)
• average index monthly earnings AIME
• primary insurance amount PIA

• retirement
• death
• disability

protects emplyee retirement plans by establishing rules that qualified plans must follow to ensure that plan fidiciaries do not misuse plan funds and was enacted in 1974

• participating standards-must follow to certain participation standards, for example being employed for 1 or more years and must be over 21. also if the qualified employer plans provides vesting a minimal of 2 years employed is usually required
• coverage requirements-must provide equal oppurtunity to everyone and not favor those of higher rank
• vesting schedules-employees have a 100% vested interest in their benefit that accrue from their contributions. qualified plans must adhere to principles that propose such vesting schedules and nonforfeightable rights
• funding standard-contributions must be made by the employer on behalf of the employee, by an employee, or both and must be held by a 3rd party and invested
• contributions-define contribution plan and define benefit plan that must restrict specific amounts that could be made or acrued to any single, individual plan

several plans that funds are invested in that accumilate interest and possibly dividens like profit sharing plans, stock bonus plans, and money purchase plans

allows emplyees to participate in the company profits with a specific formula at time of retirement

benefits are dispersed in form of company stock

outlines with a fixed contribution, such as 5 percent of emplyees annual income with several requirements

provides a specific amount come retirement, it can be in dollar value or by calculating salary and years of service.

a defined contribution plan, this plan allows an employee to take a reduction in their salary by defering a certain amount into a retirement plan

tax favored retirement plan is an annuity thats available for public schools and certain tax exempt orginizatoins

congress enacted this code to allow participants the ability to defer compensation without current taxation

tax defered pension plan available for self employed and unicorporated business

created to overcome the usual cost associated with establishing qualified plans. contributions could be larger then IRA's

reserved for small business with 25 or fewer employees

for small business fewer then 100 employees

at the end of a plans years, individuals who are 50 years or older are allowed to contribute additional amounts

individuals are giving the oppurtunity to save money while receiving a tax break

includes any individual under the age of 70 1/2 who has earned income that contributions levels of 100 percent of their annual income but cant exceed 5000 dollars and if so will be taxed 6 percent

use post tax dollars instead of pre tax dollars for contributions like a traditional IRA

5 months

used to obsorb the cost when basic medical insurance is unable to provide complete coverage

known for extensive coverage

this deductible is only required when basic medical care exceeds or is exausted

is offset by basic medical expense plan

15 to 30 days

starts immediately after the beginning of disability and can be from 1 week to a year to prevent small claims

6 months to 2 years

until insurer reaches 65

considering that total disability doesnt always follow an accident, this provision allows 30, 60, or 90 days delay between occurance

provides benefits for reacurring disablity

this is a death benefit that incase policy owner dies, the beneficiary will receive the principal sum stated in the contract. however if the insurer dies under specified circumstances the beneficiary could receive double, triple, or even quadroopl benefits payed out

this is a dismemberment benefit. that flucuates depending on the accident

if individual is doing risky behavior like rock climbing benefits will not be paid

if policy holder is doing risky behavior like rock climbing benefits still get paid. most plans follow this

provides coverage for specific times like commercial travel

covers unusual hazards, like a pianist insuring the hands, or a gymnist their legs

6 months

60

buy sell plan

30 days

entity type plan

policy loan provision

no

90 days

inspection report