Life Insurance Policy Options Flashcards

1
Q

Settlement Options

A

define how the policy proceeds will be paid to the beneficiary upon the death of the insured

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2
Q

Cash Payment (lump sum)

A

not taxable to the beneficiary

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3
Q

Life Income

A

pays guaranteed installments as long the recipient lives

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4
Q

Interest Only

A

a temporary option that pays fixed interest until a specified time when the proceeds are paid interest is taxable

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5
Q

Fixed-Amount Installments

A

pays fixed amount until proceeds are exhausted & interest extends each payment

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6
Q

Fixed-Period Installments

A

benefits are paid over a specified period of time & interest extends the time it will payout

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7
Q

Nonforfeiture Options

A

provide the owner to access the policy’s cash value if the policy lapses or is surrendered

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8
Q

3 nonforfeiture options are:

A

Reduced paid-up: reduced face amount
Extended-term: same face amount/term policy
Cash-cancel the policy interest on cash value taxable (surrender charge may apply)

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9
Q

Extended Term

A

Provided the most protection but has no cash value

* No forfeiture option is chosen this is the default

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10
Q

Stock Insurers

A

Issues nonparticipating (nonpar) policies

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11
Q

Mutual Options

A

Issues participating (par) policies

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12
Q

Dividends

A

return of excess premium: not taxable/not guaranteed

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13
Q

Tyes Dividend Options

A

Stock Insurers
Mutuals Insurers
Dividends

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14
Q

Dividend Options (CARPO)

A
Cash
Reduction of Premium
Accumulation at interest (interest taxable)
Paid-up Additions
Paid-up Insurance
One-year term
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15
Q

Interest Only

A

Settlement Option that pays only the earnings on the death benefit to a beneficiary

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16
Q

Emily has chosen to receive the payout from her husband’s life insurance policy so that she will receive an income for at least 15 years. At the end of that time, the entire proceeds from the policy will have been paid out. Emily has selected the

A

Fixed-Period Option

17
Q

Paid-up Additions

A

the dividends are used to purchase additional insurance protection

18
Q

Policy Dividends

A

The insurer can send a check for the policy owner in the amount of the dividend
The dividend can be applied against the next premium due, reducing its amount
A dividend can be left with the insurer in a savings account to earn interest

19
Q

Cash Surrender
Reduced Paid-Up Insurance
Extended-term insurance

A

Types of nonforfeiture options

20
Q

Types of Settlement Options

A
  1. Interest Only
  2. Fixed Period
  3. Fixed Amount
  4. Life Income
  5. Life income- period certain
  6. Life Income - Refund
  7. Joint Survivor