Ordinary life
Is made up of several types of individual life insurance, such as temporary (term)), permanent (whole)
Term life
insurance provides pure death protection since it only pays a death benefit if the insured dies during the policy term. This insurance does not accrue cash value.
Whole life
insurance provides death benefits for the entire life of the insured. It also provides living benefits in the form of cash values. It matures at age 100.
Industrial life
insurance issues very small face amounts, such as $1,000 or $2,000. Premiums are paid weekly and collected by debit agents. They were designed for burial coverage.
Group life
insurance written for members of a group, such as a place of employment, association, or a union. Coverage is provided to the members of that group under one master contract. The group is underwritten as a whole, not on each individual member. One of the
Level term
has a level face amount and level premiums. Premiums tend to be higher than annual renewable term because they are level throughout the policy period.However, the premiums will increase at each renewal.
Decreasing term
Term life insurance that provides a decreasing face amount over time with fixed premiums. These policies are usually used for mortgage protection.
Increasing term
Term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.
Convertible term
A term life policy that allows policyowners to convert their term insurance into permanent policies without showing proof of insurability.
A term life policy that allows policyowners to convert their term insurance into
permanent policies without showing proof of insurability.
A term life policy that allows policyowners to convert their term insurance into
permanent policies without showing
A feature of term insurance that allows the policyowner to renew the coverage after the designated term expires without having to prove insurability.
Annual renewable term
Term coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.
Whole Life Insurance
Provides both living and death benefits. Provides permanent life insurance protection for the insured's entire life. It also provides living benefits such as cash value and policy loans.
Advantages of whole life insurance
Covers the entire life of the insured, Living benefits - cash value and policy loans, Fixed premiums
Drawbacks of whole life insurance
Protection is more expensive because of living benefits, Premium paying period may extend beyond the income-earning years
There are several types of whole life insurance such as
1. straight whole life, limited pay whole life, single-premium whole life, modified whole life, graded whole life
Straight life
This is basic whole life insurance with a level face amount and fixed premiums payable over the insured's entire life. Premium payments made until death of insured or age 100.
Limited Pay life
This is whole life insurance where the insured is covered for his entire life, but premiums are paid for a limited time. As the premium payment period shortens, cash values increase faster. Premiums are only paid until the insured is 65 years old. With a
Single Premium life
Allows the insured to pay the entire premium in one lump-sum and have coverage for the insured's entire life.
Modified whole life
Low premiums in the early years and jumps to a higher premium in the later years and remains fixed thereafter. Premiums increase just once.
Graded whole life:
Starts out with a low premium then has slight increases yearly for a set period of time.Premiums then level off for the remainder of the policy. For example, a policy can start out low in a graded whole life and increase a small amount every year up until
Family Plan Policies
These are designed to insure all family members under one policy. Usually the family head is covered by permanent (whole life) insurance and the spouse /children are included on the same policy as term life riders. The term coverage on the spouse and chil
Family Plan Policy Example
1. Husband - Whole Life Policy
2. Wife (spouse) - Term Policy - convertible without proof of insurability
3. Children - Term Policies - convertible usually at age 18 or 21 without proof of insurability
Family Income Policies
Whole life and decreasing term insurance (begins date of purchase)
Family Maintenance Policy
Whole life and level term (begins date of death)
Multiple protection policies
Pays a benefit of double or triple the face amount if death occurs during a specified period. If death occurs after the period has expired, only the policy face amount is paid. The period may be for a specified number of years - 10, 15, or 20 years or to
Joint Life Policy
A policy that covers two or more people. The age of the insureds are "averaged" and a single premium is charged. It uses permanent insurance (as opposed to term) and pays a death benefit when one of the insureds dies. The survivors then have the option of
Juvenile Insurance
Life insurance which is written on the lives of children is called juvenile insurance. The adult applicant is usually the premium payor as well, until the child comes of age and is able to take over the payments. A payor provision is typically attached to
Credit life insurance
is designed to cover the life of a debtor and pay the amount due on a loan if the debtor dies before the loan is repaid. A decreasing term policy is most often used.
Adjustable life policies
are distinguished by their flexibility that comes from combining term and whole life insurance into a single plan. The policyowner determines how much face amount protection is needed and how much premium the policyowner wants to pay. Adjustable life insu
Universal life
is a variation of whole life insurance, characterized by considerable flexibility. Allows its policy owners to determine the amount and frequency of premium payments which will adjust the policy face amount.
Equity Index Universal Life lnsurance (EIUL)
A permanent life insurance policy that allows policyholdersto tie accumulation values to a stock market index. Indexed universal life insurance policies typically contain a minimum guaranteed fixed interest rate component along with the indexed account op
Modified Endowment Contracts (MEC)
For those policies that do not meet the 7-pay test, they are considered and will lose favorable tax treatment. The 7-pay test is a limitation on the total amount you can pay into your policy in the first seven years of its existence. The test is designed
Variable life insurance
was created to help offset the effects of inflation on death benefits. It's permanent life insurance with many of the same characteristics of traditional whole life insurance. The main difference is the manner in which the policy's values are invested. Wi
Insuring Clause
The insurer's basic promise to pay benefits in the event of a covered loss.
Consideration Clause
A policy owner must pay a premium in exchange for the insurer's promise to pay benefits. The amount and frequency of premium payments are contained in the
Entire Contract
The insurance policy itself, any riders and endorsements/amendments, and the application comprise the entire contract between all parties. Insurance producers cannot make changes to a policy. found at the beginning of every life insurance policy issued.
O
Grace Period
The period of time policyowners are allowed to pay an overdue premium during which the policy remains in force, usually 30 days
Reinstatement:
Permits the policy owner to reinstate a policy that has lapsed- as long as the policy owner can provide proof of insurability and pays all back premiums, outstanding loans, and interest. Most states allow reinstatement up to 3 years. However, some states
Incontestable Clause
Prevents the insurer from denying a claim or voiding a life insurance policy, except for nonpayment of premiums, after the policy has been in force for 2 years
Misstatement of Age or Sex
Allows the insurer to adjust the policy benefits if the insured's age or sex is misstated on the policy application.
Policy Loan Provisions
Policies that have cash value also have policy loan and withdrawal provisions. These policies must begin to build cash value after a certain number of years. In most states, this is 3 years. The policy owner has the right to the policy's cash value. Polic
Automatic Premium Loans
Allows the insurer to automatically use the policy cash value to pay an overdue premium. There is no cost for this provision.
Assignment Clause
The right to transfer policy rights to another person or entity.
Free Look:
The policy owner is permitted 14 days in Florida once the policy is delivered to look over the policy and return it for a refund of all premiums paid.
Suicide Clause:
The policy will be voided and no death benefit will be paid if the insured commits suicide within 2 years from policy issuance. Some states mandate 1 year, but most are at 2 years. However, the company will return premiums paid.
Aviation:
The insurer will not pay the claim if the insured dies due to involvement with aviation, such as a military pilot flying a jet aircraft.
War or Military Service:
The insurer will not pay the claim if the insured dies while in active military service or due to an act of war.
Hazardous Occupation or Hobby:
If the insured dies as a result of a hazardous occupation or hobby, the insurer will not pay the claim.
Nonforfeiture Options
When a policy owner decides he does not want his life insurance policy anymore, he has the option to
surrender his policy. If there is cash value remaining he must use one of the options
Cash Surrender
allows the policy owner to receive the policy's cash value. Policy owner no longer has coverage at this point.
Extended Term Option
permits the policy owner to use the policy's cash value to buy extended term insurance. No premium payments are made.
Reduced Paid-Up Option
the policy owner pays no more premiums but the face amount is
decreased.
Dividend Options
Participating policies pay dividends to policy owners if the company's operations result in a divisible surplus. Recall that dividends are a return of overcharged premiums, and are therefore not taxable. Insurers typically pay dividends on an annual basis
Cash Option:
Take the cash
Reduced Premiums Option:
Reduces premium payments
Accumulate Interest Option:
Allows dividends to accumulate interest
Paid-Up Additions Option:
Purchase single payment whole life coverage
One-Year Term Option:
Purchase one-year term protection
Waiver of Premium Rider:
Allows the policyowner to waive premium payments during a disability and keeps the policy in force. The disability must be total and permanent and have sustained through the waiting period (90 days or 6 months). After a certain age (usually 60 or 65),
Payor Rider:
if the individual paying the premiums on a juvenile life policy becomes disabled or dies before that child reaches a certain age, such as 18,21, or 25. The policy premiums will be waived until the child reaches a specified age in the contract
Accelerated Benefit Rider
Allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness and expected to die within 1-2 years .
Accidental Death Benefit Rider (multiple indemnity)
Pays an additional sum to the beneficiary if the insured dies due to an accident. The amount paid is a multiple of the policy face amount such as double or triple the original benefit.
Accidental Death and Dismemberment
May be added to a life insurance policy. Pays a principal sum for loss of both hands, both arms, both legs, or loss of vision in both eyes.
Guaranteed Insurability Rider
(future increase option): Permits the policy owner to buy additional permanent life insurance coverage at specific points of time in the future, normally starting at age 25 and ending at age 40. It also includes specific events like marriage and births, w
Cost of Living Rider
Allows the policy face amount to be adjusted to account for inflation based on the consumer price index
Return of Premium Rider
pays the total amount of premiums paid into the policy in addition to the face value, as long as the insured dies within a certain time period specified in the policy. It also returns premiums to the living insured at the end of a specified period of time
Automatic Premium Loan Rider
Allows the insurance company to deduct overdue premium from an insured's cash value if a payment is missed on a life policy.
Absolute assignment
When the assignee receives full control of the policy and rights to the policy benefits from the current policy owner.
Collateral assignment
The partial and temporary transfer of rights to another person or entity. Collateral assignments are usually intended for securing a loan.
The Financial Services Commission may hold hearings for any purpose within the scope of theinsurance code deemed necessary, such as
Person engaging in unfair competition, or any unfair or deceptive act, Person engaging in business of insurance without a license, The best interest of the public would be served
Unauthorized Entities
The potential for criminal activity within the insurance business, Adverse economic impact on authorized insurers and insurance licensees, The potential for unpaid claims due to dishonesty and actuarial unsoundness, No state or federal guaranty fund to co
Senior Citizen Grace Periods
In Florida, anyone over the age of 64 will receive an additional 21 days beyond the normal policy
grace period.
Suicide Clause
In Florida, if an insured commits suicide within 2 years of policy issue, the beneficiary will only receive a refund of premiums paid. After two years, the face amount will be paid in the event of suicide.
Excess Business
is permitted when an agent's own company is not able to write the amount of insurance requested by the applicant. Its that portion of a risk above the limits of that which the agent's own insurer will accept. A licensed life agent may place excess or reje
The Solicitation Law
spells out the information and procedures required of agents and insurers when proposing life insurance to a prospective buyer;
Replacement Rule
sets forth the requirements and procedures to be followed by insurance companies and agents when a proposal is being made in which a prospective life insurance buyer will be replacing existing insurance contracts with the proposed new insurance
Code of Ethics
establishes a broad outline defining appropriate and inappropriate business behavior for life insurance agents.
Every insurance policy issued in the state of Florida must specify the following
The names of the parties to the contract, The subject of the insurance, The risks insured against,The effective date and period of coverage,The premium,The conditions pertaining to the insurance, The form numbers and edition dates of all endorsements atta
CERTIFICATE (Group life)
Instead of a policy, the participants under a group plan are issued certificates of insurance as evidence
that they have coverage.
The certificate must contain the following information
Group policy number, Description of insurance protection to which the certificate-holder is entitled, The name of the insured, beneficiaries and dependents (if any), The rights and conditions
Conversion
In Florida, group life policies must contain a conversion privilege that allows for conversion to an individual policy for a specified period of time.
Industrial Policies
When an insured has industrial life insurance policies with a single insurance company that total $3,000 or more in face value, the insured has the option to convert all of these policies into one ordinary life insurance policy at standard premium without
The Consolidated Omnibus Budget Reconciliation Act (COBRA)
is a federal law that requires employers with 20 or more employees to include a continuation of benefits provision for former employees and their dependents. COBRA guarantees that the participant can continue the group coverage (at their own expense) at g
Qualifying events
include the death of the employee, termination of employment (except for termination because of gross misconduct) or a reduction in work hours, which results in the participant no longer qualifying for group coverage.
GROUP LIFE INSURANCE ELIGIBILITY
Participants are given a period of time, known as the eligibility period, to join the group plan. Other plans use an open enrollment period, in which case all new employees must wait until the next enrollment period before joining the group plan. In Flori
MAINTAINING A LICENSE
A licensee may not transact insurance business in Florida until the licensee is appointed by an insurer.
An agent needs to abide by the following guidelines to maintain their license:
1. 24 hours of continuing education every two years for agents licensed
PERSONS REQUIRED TO BE LICENSED
Must be at least 18 years old
1. Must be a US citizen or legal alien
2.Must be a Florida resident
3. May not be an employee of the United States
4. Department of Veterans Affairs
5. May not be a funeral director or direct disposer
6. Complete a 40-Hour pr
SUSPENSION, TERMINATON, REVOKING OF A LICENSE, AND OTHER
PENALTIES
The Chief Financial Officer has the power to suspend or revoke the license of an insurance agent who
violates the Insurance Code. In lieu of suspension or revocation, the CFO has the authority to issue
fines or order probation.
Agencies
1. An insurance agency is any business location where insurance transactions take place that
can only be performed by licensed insurance agents
2. There must be an agent in charge at each licensed agency location where insurance
transactions take place
3.
Home agencies
The Department of Financial Services considers all of these factors when determining whether an
agent's home is an insurance agency:
1. The agent advertises home location in newspapers, phone books, or other ways
2. There is a sign on the house indicating
Twisting
occurs when an insurance agent convinces a policy owner to cancel their current policy so that they can purchase new life insurance policy with another company. This would involve the agent using misrepresentations or incomplete comparisons of the advanta
Churning
occurs when an agent has a policyholder replace one policy for another with the same company for the sole purpose of making more commission. This can involve using the cash value and/or dividends of an existing policy to purchase another policy with the s
Sliding
occurs when an agent tells an applicant that in order to get the product they want, they are required by law to get an additional product as well. It can also mean falsely representing to an applicant that specific coverage is included in the policy appli
Coercion
is when an agent uses physical or mental force, with the intent of convincing an applicant to buy insurance.
Misrepresentation
is when an agent uses publications, sales materials, or makes statements that that are false, misleading, or deceptive to unfairly influence the purchase of a policy.
Defamation
occurs when an oral or written statement is made that is intended to injure a person in the
insurance business or be critical and misleading about the financial condition of a person or company.
Fraud
occurs when someone intentionally deceives another with the intent to gain financially
Controlled Business
is coverage written by an agent on his/her own life, health,
property, immediate family, or business associates. Most states will not issue a license to a person if it is determined that their primary purpose is to write
Rebating
happens when an agent refunds part of their commission, or exchanges anything of value to induce someone to purchase an insurance policy. Rebating is
allowed in Florida if the agent rebates insureds in the same actuarial class.
Unfair Claims Settlement
1. Failing to adopt and implement standards for the proper investigation of claims
2. Misrepresenting pertinent facts or insurance policy provisions relating to coverage at issue
3. Failing to acknowledge and act promptly upon communications with respect
Domestic insurance company
A company that resides and is incorporated under the laws of the state in which its home office is located.
Foreign insurance company
A company whose home office is located in another state. It is considered to be a foreign company in all states except for its home state.
Alien insurance company
is one that is chartered and organized in any country other than the United States. It is considered an alien insurance company in all states.