This document provides an overview of traditional life insurance, including permanent plans like whole life and endowment policies, term riders like waiver of premium and accidental death benefit, risk selection factors, premium calculations, and key policy provisions. Term riders provide additional benefits like waiving premiums if the insured becomes disabled. Risk selection systematically evaluates applicants based on physical, occupational, financial, moral, avocational, residence, and travel factors. Premium rates are calculated by actuaries based on mortality tables, life expectancy, interest rates, and expenses. The policy is a legal contract between the insured and insurer.
This document provides an overview of traditional life insurance, including permanent plans like whole life and endowment policies, term riders like waiver of premium and accidental death benefit, risk selection factors, premium calculations, and key policy provisions. Term riders provide additional benefits like waiving premiums if the insured becomes disabled. Risk selection systematically evaluates applicants based on physical, occupational, financial, moral, avocational, residence, and travel factors. Premium rates are calculated by actuaries based on mortality tables, life expectancy, interest rates, and expenses. The policy is a legal contract between the insured and insurer.
This document provides an overview of traditional life insurance, including permanent plans like whole life and endowment policies, term riders like waiver of premium and accidental death benefit, risk selection factors, premium calculations, and key policy provisions. Term riders provide additional benefits like waiving premiums if the insured becomes disabled. Risk selection systematically evaluates applicants based on physical, occupational, financial, moral, avocational, residence, and travel factors. Premium rates are calculated by actuaries based on mortality tables, life expectancy, interest rates, and expenses. The policy is a legal contract between the insured and insurer.
REVIEW MATERIAL FOR TRADITIONAL LIFE INSURANCE III.
TERM RIDERS – supplementary contracts
I. FOUNDATION Income- recurrent flow of cash in exchange of goods/services. Generated through the ff.: A. WAIVER OF PREMIUM (WP) i. Man at Work Premiums due are waived upon Total (unable to perform ii. Money at Work previous work) and Permanent (after 6 months) Disability iii. Donations/Charity Cash values will continue to accumulate Human Economic Value- Financial value of the Man at Work to his Dividends are still payable beneficiaries; measured as his current assets + potential earnings Excludes: Self- inflicted injuries and Combat activities LIFE RISKS INSURANCE SOLUTION B. PAYOR’S DEATH BENEFIT (PB) Death Face Amount, Monthly Income Attached to juvenile policy Disability Term Riders (e.g. Waiver of Premium) When payor dies/becomes totally and permanently disabled premiums are waived up to 60 of payer or 21 of child. Live too Long Retirement Fund Whichever comes first Types of RISKS: A.K.A Parent Waiver Clause o PURE RISK- no possibility of gain C. ACCIDENTAL DEATH BENEFIT (ADB) o SPECULATIVE- may result to gain, loss or no change Pays an additional amount if insured dies due to accident Uses of Life Insurance Death must occur 90 days from date of accident Family Income Education Fund A.K.A Double Indemnity Clean-up Fund Estate Planning Exclusions: Life income for widow Emergency Fund Sickness Combat/warlike Retirement Fund Disability Fund Poisoning Activities NOTES! Gas Inhalation Committing a crime Insurance companies protects “Man at Work” by investing money Suicide Aviation Activities (Money at Work). Fruits of these investments are given as D. TERM INSURANCE RIDER (TIR) “Donations” to the Beneficiaries of the “Man at Work” Life insurance ensures the continuance of INCOME despite of LIFE Pays an additional amount for a period of time RISKS by insuring his HUMAN ECONOMIC VALUE Death must occur within the term Use of Risk Sharing: Pools risk to decrease uncertainty; minimizes E. FAMILY INCOME RIDER (FIR) hazards Monthly Income in addition to the Face Amount Insurance protects people from pure risks by investing into Modified Decreasing term insurance speculative risks IV. RISK SELECTION Systematic evaluation of an insurance applicant for the purpose of BASIC INSURANCE TERMS (IMPORTANT!) determining the classification of risk of possible coverage Insured- person whose live is covered by insurance Anti-Selection: tendency of those with impaired health or those Beneficiary- person who receives proceeds(FA) of insurance with hazardous occupations and/or avocations to purchase life Policy- contract between insured and insurance company insurance Policy fee- fixed fee added to premiums Policy owner/payor- pays and owns the policy. May or may not be RISK FACTORS (POFMAR) the insured PHYSICAL Face Amount- amount paid to the beneficiary upon the demise of Age the insured Current Physical Condition Premium- regular payment to the insurance company to keep the Build (BMI) policy in force Family Medical History Personal Medical History Date of illness PREMIUM RATE FACTORS- calculated by ACTUARY Doctor’s name Mortality table- based on age and sex Diagnosis Life Expectancy- average number of years people will live Duration Law of Large Numbers- the more figures in the study the higher Drugs administered the probability that the event is true OCUUPATION Principle of Probability- tool used to estimate life expectancy of a Accident Hazards person Unhealthy Working Conditions MORTALITY- ↑mortality=↑premiums (vice versa) Social Hazards INTEREST- ↑interest=↓premiums (vice versa) FINANCIAL- capacity to pay; look into other sources of income such as: o Interest earnings mainly come from- PREMIUMS FROM Rental Income CLIENTS AND INVESTMENT REVENUE Harvest from land EXPENSE- ↑expense=↑premiums (vice versa) Investments MORAL GROSS PREMIUMS= Net premiums + Loading Lifestyle and habits, Personal relationships, etc. o NET PREMIUMS- value of contractual liabilities based on: AVOCATION mortality, safety margins and interest assumptions High Risk hobbies o LOADING- covers expenses for securing and maintaining Aviation Activities- involvement in flying activities other than as a business fare-paying passenger, pilot or crewmember of a commercial Types of premiums airline o Natural- increasing through time (term insurance) RESIDENCE AND TRAVEL o Level- remains the same Extreme changing climate o Fractional- based on TIME VALUE OF MONEY; Modal factors: Peace and order situation Annual- 1 Unhealthy living condition Semi-annual- .53 Quarterly- .28 Monthly- .096 RISK CLASSIFICATION Standard Risk Sub-Standard Risk II. BASIC PLAN o Lien o Flat Extra/Extra Rating Uninsurable/Unacceptable Risk A. PERMANENT PLANS Sources of Information Protection Application Form Medical Records Savings (Cash Values- loanable up to 80%) Agent’s Confidential Report Attending Physical Statements Dividends if Participating-↓Mortality, ↑Interest, ↓Expense Inspection Report Medical Impairment Bureau i. WHOLE LIFE- Covers up to age 100 Financial Statements a. Ordinary- premium payment until 100 or death b. Limited Pay- premium pay for a period of time V. POLICY PROVISIONS ii. ENDOWMENT- Matures after a certain time; lump sum Legal Contract- agreement b/n two or more people which can be a. Regular- premium payment until maturity upheld in a court of law b. Limited Pay- premium payment for a period of time Life Insurance Contract- one party undertakes to indemnify NOTE: (benefits) another against loss, damage or liability (life risks) arising Age-based: uses “at age” or “@”; matures at stated age from an unknown or contingent event for a given consideration Term-based: uses “yr.” or “year”; matures at after stated years (premiums) o Unilateral Contract- only one party makes promises B. TERM PLANS Protection ELEMENTS OF A CONTRACT Renewable Legal Capacity- Competence to enter into a life insurance contract Convertible INSURANCE COMPANY INSURED i. LEVEL- Face Amount remains constant Registered with the: Sound mind ii. DECREASING- Face Amount decreases, premiums stay the SEC Legal Age same Insurance o 18-20: insure own life Used for mortgage redemptions and loans Commission o 21&↑: may insure others Yearly Renewable Term Insurance Not a public enemy Insurable interest at the inception of C. VARIABLE LIFE – hybrid insurance and investment the contract Mutual Consent- both parties agree without force or coercion VI. SPECIAL INSURANCE Adequate Consideration GROUP INSURANCE (May be TERM of PERMANENT) o First Premium- PUTS the policy in-force Protection for a group that was not formed for the purpose of o Subsequent Premiums- KEEPS the policy in-force obtaining insurance Legality of Purpose Minimum of 30 hours in a week LEGAL CONSIDERATION EMPLOYER: Master Policy; EMPLOYEES: Group Insurance Binding Receipt Enrollment Card o Company pays whether or not policy would have been Underwriting- non-medical, presumed to be generally healthy approved Premium Payment Conditional Receipt o Contributory- employee and employer o Company pays only if policy would have been approved o Non-contributory- employer only Statements Conversion Privilege- within 30 days from resignation/retirement Warranties- Literally true o No need for proof of insurability Representation- Substantially true o Premiums based on age at the time of conversion HEALTH INSURANCE A. WHILE INSURED LIVES Provides protection in case of accidents, illness or disability Entire Contract Clause- (PAPA) Proposal, Application form, Policy, Health Insurance Benefits Amendments o Expense Reimbursement Ownership Provision- Owner has the rights to: o Disability Income o Assign o Accidental Death and Dismemberment o Amend Types of Health Insurance o Change beneficiaries (irrevocable must agree) o Limited health policy- limited hazards o Collect cash values and dividends o Blanket health policy- all hazards o Exercise all allowed options ANNUITY Premium Payment Specified sum payable regularly for a stipulated period of time o Uses modal factors Provides continuous income o frequent modes are more expensive than the annual premium NO LIFE INSURANCE PROTECTION Grace Period Annuitant- person to whom the annuity income is paid (similar to o 30 days from due date to pay his premium the insured) o Remains insured within the period Vesting date- date income is payable NET PROCEEDS= FA – Unpaid Premium Successor Payee- receives the remaining income upon demise of Automatic Premium loan annuitant before exhaustion of fund (similar to beneficiaries) o Cash Values are loaned to pay for premiums automatically Types of Annuity Products o Subject to interest o Fixed (similar to traditional) Loan o Variable (similar to VL) o Max 80% of CV only Types of Annuity Contracts o CV + Interest= Loan Value o Based on vesting date Assignment- Transfer some (COLLATERAL) or all (ABSOLUTE) of the Immediate- 1 month ownership rights from one person to another Deferred- greater than 1 month Dividend o Based on how premiums are paid o Cash Single pay o Reduce Premium installment o Accumulate at Interest o Based on annuity payments/settlement agreement o Purchase paid-up insurance bonus addition Straight Life- periodic payment to annuitant o Yearly Renewable Term Insurance for as long as he lives; no further payment after Change of Plan Period Certain- annuitant receives payment for o Lower Premium to Higher- no evidence required a specified period of time o Higher Premium to Lower- evidence of insurability required Refund Annuity- periodic payment to annuitant for as long as he lives; balance paid in lump sum or through installments to the B. WHEN THE INSURED DIES successor/payee Beneficiary Joint and Survivor- annuity income paid to 2 or Receives the proceeds of policy upon death of the insured more individuals until both or all individuals die Insurable Interest- exists if insured dies beneficiary suffers Ties of love and affection VII. QUALITY BUSINESS AND ETHICS Pecuniary Relationship (creditor-debtor) Insurance Commission- Governing body of Insurance Companies Business Relationship Insurance Code (CRISP) BENEFICIARY LIMITATION Capitalization- 1 billion; 50% paid-up capital and remaining as Those guilty of adultery surplus not less than 200 million Guilty of criminal offense Reserves- Legal, Policy and Contingency Public officers his wife, descendants or ascendants Investments- not exceed 70% of MV of real estate; monitored by IC TYPES OF BENEFICIARIES Solvency- not less than 500,000 Primary- Main Power to adjudicate- claims up to 100,000 Secondary- Back-up Quality of Business-Client has good morality and continuously pays for Estate- Next back-up premiums BENEFICIARY DESIGNATION Licensing Requirement Revocable- may be changed Reasonable Educational Background Irrevocable- needs consent to be changed Good moral character SURVIVORSHIP CLAUSE Not Convicted of crime involving moral turpitude 2 persons (insured and primary beneficiary) Satisfactorily trained Older presumed to survive, unless the older is 60↑ Unethical Practices Male presumed to survive Rebating (NOT TO BE CONFUSED WITH REDATING)- offer part of Misstatement of Age commission to the client/ discounting premiums If wrong age adjustments will be made in the FA Note: SHARING OF COMMISSION IS ALLOWED B/N AGENTS Incontestable Clause Twisting/Replacement- persuading the person to lapse a policy to Company cannot deny claim after 2 years unless gross fraud purchase a new one Suicide Clause Knocking- Making derogatory remarks about a competing policy, After 2 years full proceeds agent, company Within first 2 years; refund all premiums Misrepresentation- false/misleading statements EXCEPTION: Insanity Overloading- selling more than what the client needs/affords Settlement Options Grounds for Termination Lump Sum Material misstatement Interest Fraud Fixed Period Option Material misrepresentation Fixed Amount Unremitted premiums Life Annuity Option Modifying statements part for fixed period Misstatement of clients’ health condition for fixed period and for life NOTE: C. WHEN INSURED QUITS DON’T JUST MEMORIZE THE WORDS, UNDERSTAND THE CONCEPT NON-FORFEITURE OPTIONS GOOD LUCK PO! Cash Surrender Value- cash value at date of withdrawal Reduced Paid-up Insurance- Cash values are used to purchase paid-up insurance but with reduced face amount Extended Term Insurance- limit period of policy; same FA o Pure Endowment- CV enough for extended term coverage REINSTATEMENT PROVISIONS- within 3 years from date of lapse Pure/Straight- pay back all unpaid premiums plus interest due Redating-pays only one modal premium; effective date later than that of the original policy
Reynold Leone, as Administrator of the Estate of Andrea Leone, Also Known as Andrea Held, Deceased, Frances S. Costigan (Now Known as Costigan-Leeds), as of the Estate of George B. Costigan, Jr., Deceased v. United States, 910 F.2d 46, 2d Cir. (1990)