traditional insurance concepts accreditation material

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March 2015 version

Insurance ConceptsTRADITIONAL LIFE REVIEW

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I. The Insurance Commission

II. Insurance Commission Exam/Insurance Institute for Asia and the Pacific-Validating Final Exam

III. Concepts of Life Insurance

IV. Premium, Basic Plans and Riders

V. Legal Aspects of Life Insurance

VI. Policy Provisions

VII. Annuities

VIII. Ethics

Course Content

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March 2015 version

The Insurance Commission

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• Regulatory government agency

• Executes all laws pertaining to insurance

• Regulates insurance companies

Insurance Commission

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• Issues licenses to insurance companies• Reviews policy contracts and premium rates• Examines the financial condition of insurance companies to

ensure solvency• Renders assistance to the public on matters pertaining to

insurance

Functions of the Insurance Commission


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1071 United Nations Avenue cor. Romualdez St., Ermita, Manila

Location of the Insurance Commission

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• Rendered the provisions of Presidential Decree No. 612

• Promulgated in 1978

• Also known as Presidential Decree No. 1460

• Special law to govern insurance


Insurance Code of the Philippines

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Built on Trust

• Between the company, the advisor and the client

• Importance of upholding professionalism and proper ethics

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March 2015 version

IC Exam and IIAP Validating Final

Exam

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Successfully complete the Sun Life - Insurance Concepts Review Course

Choose from 2 options

The Insurance Commission Licensing Exam

The IIAP-Validating Final Exam

IC Exam/IIAP VFE Exam Requirements & Procedure

IC Exam and IIAP VFE

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IF YOU OPT TO TAKE THE IC

LICENSING EXAM

Pass the Simulated IC Exam

Secure a Test Permit from STD

Secure NBI/Barangay Clearance

Completely fill out the Application for Life Insurance Agent’s Walk-in Examination Form

Don’t forget to attach your 1x1 photo (2 copies)

Proceed to OIC Licensing Division in U.N. Avenue to take

the exam

Option 1: Insurance Commission Exam


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• Ground Floor, OIC Bldg. #1071 United Nations Avenue, City of Manila

• 50 item multiple choice exam• Covers general life insurance

concepts, terms and practices• 70% Passing mark• P710 exam fee

Option 1: Insurance Commission Exam


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Option 1: Insurance Commission Exam Schedule

• Every Tuesday to Friday

• 8:30 am–9:30 am

• 9:30 am–10:30 am

• 50 persons per session

• Will be released one (1) hour after the exam


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IF YOU OPT TO TAKE THE IIAP-VFE

Proceed to IIAP 26th Floor, Ayala-FGU Center 6811 Ayala Avenue,

Makati to take exam

Pass the Simulated IIAP-VFE

Completely Fill out Form0930 Don’t forget to attach your 1x1

photo (2 copies), and bring Photocopy of Valid ID

Secure Form0930 from STD to take the Regular and Walk-In exams at

the IIAP

Option 2: IIAP Validating Final Exam


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• Insurance Institute for Asia and the Pacific (IIAP) 26th Floor, Ayala-FGU Center 6811 Ayala Avenue, Makati to take exam

• 50-item multiple choice exam, 2 points per item for a total of 100 points• Covers general life insurance concepts, terms and practices• 70% Passing mark or 70 points (35 out of 50 items)• P700.00 exam fee



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• Every Saturday

• 8:00 am–9:00 am

• Will be released one (1) hour after the exam

• Course certificate will be released 3 days after



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March 2015 version

Concepts of Life InsuranceTRADITIONAL LIFE Insurance Concepts

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Concepts of Life Insurance

INCOME EXPENSES

Man at Work

OLD AGE DISABILITY DEATH SICKNESS

In Memory

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INCOME EXPENSES

“Life Insurance is against all O.D.D.S!” LIFE INSURANCE

Man at Work

Life’s Brighter

under the sun


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OLD AGE

DEATH

SICKNESS & DISABILITY

In Memory

RetirementIncome

GuaranteedSavings

CashValues

Maturity Benefit

DeathBenefit

FamilyProtection

THREATS SERVICE BENEFIT


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• Human life has an economic value• The capitalized monetary worth of the earning

capacity of an individual devoted to the support of his family during his working lifetime

Human Economic Value


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A RISK–SHARING

BUSINESS

Life Insurance


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Risk Sharing

• A group of people places a fund together in preparation for an uncertain event.

• Everyone is prepared to accept a small loss to compensate the unfortunate from the effect of a larger loss.


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• Chance of loss.• Exists when there is

uncertainty about the future.

What is Risk?

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Types of Risk

1. SPECULATIVE RISK – involves three possible outcomes: loss, gain, or no change.

2. PURE RISK – is a risk that involves no possibility of gain; there is either a loss or no loss. May be insured.

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Law of Probability

• A likelihood that a given event will occur in the future.

• This is used in determining the number of people dying & living at a particular age w/in a given period.


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• The more frequent a particular event is observed, the more likely that the observed results will approximate the true probability of the event happening.

Law of Large Numbers


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Risk Selection/Underwriter


• is a systematic evaluation of an insurance applicant for the purpose of determining the classification of risk for possible coverage

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• is the high pre-disposition for those with impairments to purchase life insurance

• Can be prevented through proper Risk Selection / Underwriting

Anti-Selection


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PHYSICALOCCUPATIONFINANCIALMORAL HAZARDAVOCATIONRESIDENCE/TRAVEL

Factors in Risk Selection


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PHYSICALOCCUPATIONFINANCIALMORAL HAZARDAVOCATIONRESIDENCE/TRAVEL

Factors in Risk Selection


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• Application Form

• Medical Examination Report

• Agent’s Confidential Report

• Medical Impairment Bureau (MIB)

Sources of Information

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RISK CLASSIFICATION

ACCEPT DECLINE

STANDARD SUBSTANDARD

http://www.sybotechnologies.com/

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• Life Insurance Policy• Insured• Insurer• Policyowner/ Applicant• Beneficiary

• Face Amount• Premium• Death Benefit• Maturity Benefit• Cash Values• Dividends

Basic Insurance Terms

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Life Insurance Policy

as defined by the Insurance Code P.D. 1460

A contract whereby a PARTY for a CONSIDERATION agrees to pay ANOTHER a SUM OF MONEY in the event of his DEATH FROM ANY CAUSE NOT EXCEPTED IN THE CONTRACT, or upon surviving a SPECIFIED PERIOD, or otherwise on the CONTINUANCE or cessation of life.

Basic Insurance Terms

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Party – Insured & Insurer

Consideration – premium payment/policy payment

Another – Beneficiary

Sum of Money – proceeds/face amount/face value

Death from any cause not excepted in the contract – excluded risks

Specified period / Continuance – Maturity period

Life Insurance Policyas defined by the Insurance Code P.D. 1460

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Insurer

- The insurance company

Insured

- The person whose life is covered under the insurance policy.

Policyowner/Applicant

- The person who is buying or applying for life insurance.

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Beneficiary

- The person who is designated to receive the insurance proceeds upon death of the insured.

Face Amount

- The amount stated in the policy as payable under a life insurance policy if the insured dies while the policy is in force.

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Premium

- is a sum of money given by the insured as a consideration for the insured’s promise to indemnify or replace the loss.

Death Benefit

- is the amount payable upon death of insured. The sum assured the beneficiary (ies) would receive in case the insured dies during the protection period.

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Maturity Benefit

- is the amount payable if the insured outlives the protection period

Cash Values

- The guaranteed amount received in case the plan is terminated prior to the death of the insured or maturity of the policy

- legal reserves or the savings element of the policy.

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Dividends

- is a return of excess premium paid annually to owner of insurance policy based on insurer’s performance and experience over a given year.

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C

Re

Fa

L

E

E

R

Fund to pay hospital bills, funeral expenses, and taxes

Fund used to cushion immediate life style adjustment that family must make if the insured die

Fund to provide for the family’s needs while the children still dependent

Lifetime fund for the widow

Fund that will ensure the education of children

Fund that is designed to provide financial back up for unexpected

Clean Up Fund

Readjustment Fund

Family Dependency Fund

Life Income for the Widow

Educational Fund

Emergency Fund

Retirement FundFund that gives security and peace of mind who have outlived their earning years

Cash Needs: CReFaLEER


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Life Insurance gives certainty to uncertainty

Death is a certaintyWhen, is an uncertainty

To live is one’s rightHow long isn’t one’s choice

Life insurance cannot prevent your death

It prevents your plans from dying with you

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March 2015 version

Premiums, Basic Plans

and RidersTRADITIONAL LIFE Insurance Concepts

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Premiums, Basic Plans & Riders

Concept of Premium• An ACTUARY is the /a company officer that determines

the premium rates with respect to the principal elements of the life insurance

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Factors that affect the premium:

1. Mortality

2. Interest

3. Expense

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Mortality + Interest = NET PREMIUM

Expense + (Safety Margin Requirement) = LOADING

Net Premium + Loading = GROSS PREMIUM

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Types of Premium

• Natural Premium o premiums that increase each year as the age of the

insured increases.

• Level Premium o premiums that remain the same from year to year

throughout the premium paying period.

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CLASSIFICATION OF BASIC PLANS

According toNATURE

According toPARTICIPATION

According toCOVERAGE

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According toNATURE



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ACCORDING TO NATURE

TEMPORARY / TERM PERMANENT

LEVEL TERM DECREASING TERM

ORDINARY / WHOLE LIFE

ENDOWMENT

Limited Pay Life

Regular Endowment

Pure Endowment

Anticipated Endowment

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Temporary or Term Plan• Life Insurance that remains in force for a

specified period or term• Term pays the face amount only in the event of

death • There are no cash values, no profit sharing, and

is the cheapest in terms of initial premium outlay

• Renewable & Convertible

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Age 30 Age 31

Renewable

Age 32

Example: Yearly Renewable Term

Protection Period Renewable for another year

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Age 30 Age 35

Protection Period

Age 33

May be converted in whole or in part

ConvertibleExample: 5 Year Convertible Term

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Types of Term Plans

1. Level Termo the death benefit remains constant over the term of

coverage

2. Decreasing Termo the death benefit starts at the set face amount and

then decreases over the term of the coverage.

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Types of Term Plans

1. Level Term

Face Amount

Example: 5 Year Level Term

Php 3M

5 Years

Php 3M

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Types of Term Plans

2. Decreasing Term

Example: 5 Year Decreasing Term

Face Amount

Php 2.5M

5 Years

Php 5M

Death Benefit

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Whole Life Plan• Life Insurance that remains in force during the

insured’s lifetime • The face amount is paid whenever death occurs

up to the age of 100 of the insured.• There are cash values as well as profit sharing

and dividends. • The initial premium outlay is higher than term

insurance but is lower than endowment.

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Age 30 Age 100

Protection Period & Premium Paying Period

Age 65 Age 75 (RIP)LB = CV+AD DB = FA+AD MB = FA+AD

Whole Life Plan

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Limited Pay Life Plan• Provides lifetime protection with premiums

payable for limited term of years.• Life Insurance that remains in force during the

insured’s lifetime • The face amount is paid whenever death occurs

up to the age of 100 of the insured.• There are cash values as well as profit sharing

and dividends.

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Age 30 Age 100

Protection Period

Age 65 Age 75 (RIP)LB = CV+AD DB = FA+AD MB = FA+AD

Example: 10 Year Limited Pay Life Plan

Premium Paying Period

Age 40

Limited Pay Life Plan

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Endowment Plan• Pays the face amount whether the life insured

lives to the end of a specified period or dies during that period.

• It has cash values, profit sharing or dividends. • Initial premium outlay is the highest compared to

term and permanent plans.• Allows for faster accumulation of funds, making it

ideal for saving for future needs.

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Age 40 Age 60

Protection & Premium Paying Period

Age 50 (RIP)DB = FA+AD MB = FA+AD

Example: 20 Year Endowment Plan

Endowment Plan

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Types of Endowment Plan

1. Regular Endowment

a. Age-based

b. Term-based

2. Pure Endowment

3. Anticipated Endowment

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1. Regular Endowment

a. Age-based - provides maturity benefit

at a specified age (Ex. Endowment at 65)

b. Term-based - provides maturity benefit at the

end of a specified period (Ex. 20 Year Endowment)

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2. Pure Endowment• Promises to pay the face amount only if the

insured survives up to the end of the endowment period

• Nothing will be paid if death occurs before the end of the endowment period.

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3. Anticipated Endowment• Policy owner does not have to wait for the

maturity date of before a portion of the face amount is given

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According toNATURE



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According toNATURE



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ACCORDING TO PARTICIPATION

PARTICIPATINGNON

PARTICIPATING

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Participating vs. Non-participating• Non-Participating

o is one in which the policy owner does not share in the insurer’s dividends.

• Participatingo is one under which the policy owner shares in the

insurance company’s dividends.

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According toNATURE



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According toNATURE



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ACCORDING TO COVERAGE

INDIVIDUAL LIFE JOINT LIFE GROUP LIFE

Contributory

Non-Contributory

Joint Life

Joint and Last Survivor

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Individual Life• Provide protection to one person only. There is

only one Insured in this type of plan• May be payable annually, semi-annually or

quarterly basis. • Individual policies may also be paid on a

monthly basis in the form of Salary Savings insurance.

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Joint Life• Joint Life plans provide protection to two or

more persons, allowing a single plan to have 2 or more Insured's.

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Types of Joint Life

• Joint Lifeo Death benefit payable at first death, after which the

policy terminates.

• Joint and Last Survivoro insurance coverage is extended until the last person

being covered in the policy dies.

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Group Life• Provides protection to a group of people• A single master policy under which individuals

in a natural group (such as employees of a business firm) are insured

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Types of Group Life• Non-contributory

o employer pays for the premium; 100% of the employees are included in the policy

• Contributoryo employer and the employees share in the premium

payment; at least 75% should be enrolled

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Riders• Are supplementary contracts that when

attached to the basic policy, will provide additional benefits at minimal cost

• It is referred to as a rider because it needs a basic policy to “ride on” to be effective

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Types of Riders• Accidental Death Benefit• Waiver of Premium Due to Disability• Payor’s Benefit• Guaranteed Insurability Option• Term Insurance Rider• Family Income Rider

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Accidental Death Benefit (ADB)• Provides an additional amount equal to the

coverage in the event of accidental death of the insured.

• Limited within the period of 90 days from the date of the accident.

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Waiver of Premium due to Disability (WPD)• Provides for a waiver of premium if the insured

suffers from a total and permanent disability

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Payor’s Benefit• Provides waiver of premium during the rider term

when the payor dies or becomes totally and permanently disabled

• Waives premiums until the time the insured child reaches the age where he can earn and pay for the premiums of the policy

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Guaranteed Insurability Option (GIO)• Provides an opportunity for people to buy

specific amounts of additional life insurance coverage at stated future intervals without the need to show evidence of insurability.

• This means that the insured will automatically pay the standard rate since there would be minimal underwriting requirements.

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Term Insurance Rider• Provides an additional amount of coverage for a

minimal cost. • The rider has its own face amount separate from

the coverage of the basic policy, but cost of coverage is lesser since it is a term coverage.

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Family Income Rider• A form of decreasing term rider that provides

the family of the insured monthly income from the insured’s date of death until the duration of the rider.

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March 2015 version

Legal Aspects ofLife Insurance

Insurance Concepts

89

Legal Aspects of Life Insurance

Types of Contracts• Valued Contracts and Contracts of Indemnity• Informal and Formal Contracts• Unilateral and Bilateral Contracts• Aleatory and Commutative Contracts• Contracts of Adhesion and Bargaining Contracts

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Valued Contract vs. Contract of Indemnity

LIFE INSURANCE NOT LIFE INSURANCE

VALUED CONTRACTspecifies the amount of benefit that will be payable when a covered loss occurs, regardless of the actual amount that was incurred

CONTRACT OF INDEMNITYThe amount of policy benefit payable for a covered loss is based on the actual amount of financial loss, as determined at the time of loss

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Informal Contract vs. Formal Contract


INFORMAL CONTRACT-Parties met requirement concerning the substance of the agreement. -It may be expressed in a verbal or written fashion. Life insurance contracts are typically written.

FORMALCONTRACT-Parties met certain formalities concerning the form of the

agreement.-Contract should be written and should have a seal to be enforceable

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Unilateral Contract vs. Bilateral Contract


UNILATERAL CONTRACTOnly one of the parties (insurer) to the contract has legally enforceable promises

BILATERAL CONTRACTBoth parties to the contract have legally enforceable promises

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Aleatory Contract vs. Commutative Contract


ALEATORY CONTRACT

-One party provides something of value to another party in exchange for a conditional promise

-One party may receive something of greater value than that party gave

COMMUTATIVE CONTRACT-is an agreement which the parties specify in advance the values that they willexchange-parties exchange items or services of relatively equal value

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Contract of Adhesion vs. Bargaining Contract


CONTRACT OF ADHESION

One party prepares the contract and the other may accept or reject as a whole, without any bargaining between the parties to the agreement

BARGAINING CONTRACT

Both parties, as equals, set the terms and conditions of the contract

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Offer and Acceptance• For a contract to be valid there must be:

An OFFER and ACCEPTANCE

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Conditional Receipt• In most cases when an advisor receives the

premium payment from the client, he/she issues a conditional receipt to acknowledge payment.

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Legal Capacity• Policyowner

o Must be of legal ageo Must have sound mind and body

• Insurance Companyo Registration and Regulationo Capitalization

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• Insurable Interesto Insurable Interest exists when a policyowner has

reasonable chance of suffering financial loss if the person who is insured dies.

o It should also exist between the insured and the named beneficiaries.

o Its existence during inception of the policy is required.

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Every person has an insurable interest in the life and health:

1. Of himself, of his spouse and of his children;

2. Of any person on whom he depends wholly or in part for education or support, or in whom he has a pecuniary interest;

3. Of any person under a legal obligation to him for the payment of money, or respecting property or services, of which death or illness might delay or prevent the performance; and

4. Of any person upon whose life any estate or interest vested in him depends.

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March 2015 version

Policy ProvisionsTRADITIONAL LIFE Insurance Concepts

101

Policy Provisions

o Entire Contract Clause

o Ownership

o Premium Payment

o Grace Period

o Policy Loan

o Assignment

o Dividend Options

While the insured lives and the policy is active..

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Policy Provisions

o Made up of the policy and the attached application form

o Includes other reports, amendments material to the policy

o Cannot be affected by later changes

Entire Contract Clause

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Policy Provisions

o Right to assign, transfer or have policies amended

o Change beneficiaries and exercise privileges in the contract

o Right to cash values and dividends

Ownership

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Policy Provisions

o Can be done annually, semi-annually, and quarterly

o Payment of the first premium makes the contract binding

o Subsequent payments are entirely dependent on the policyowner

Premium Payment

105

Policy Provisions

Grace Period

o Protects the policy from lapsing

o Generally, 30 days from due date

o Right to cash values and dividends

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Policy Provisions

o Right to loan against the cash value

o Loan within prescribed limits; not exceed the cash value

o Treated as a loan, has interest

Policy Loan

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Policy Provisions

Assignment

o 2 years after the policy has been in force, the company cannot contest its validity

o If the company has no objection during the period, there can be no question about the payment of proceeds

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Policy Provisions

o For participating policyholders

o Dependent on mortality experience, investment earnings and expenses

o NOT GUARANTEED

Dividends

109

Policy Provisions

1. Cash

2. Reduced Premium

3. Interest

4. Paid-Up Addition

5. Yearly Renewable Term

Dividend Options

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Policy Provisions

When the insured dies…

o Misstatement of age

o Incontestability

o Suicide

o Beneficiary

o Settlement

111

Policy Provisions

Misstatement of Age

o Misrepresentation on the matter of age

o Age is increased or decreased

o Amount of proceeds will be adjusted upon death

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Policy Provisions

o Right of the policyowner to transfer or assign the policy

o Two types: Absolute and Collateral

o Must notify the company of any assignment

o Company will accept without question

Incontestability

113

Policy Provisions

Suicide

o To discourage financially desperate people from purchasing policies with suicide in mind.

o If committed within 2 years of the policy, the company will refund the premiums.

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Policy Provisions

Beneficiary

o Designated to receive the proceeds of the policy

o Must be identified clearly

o Types of Beneficiary: Primary or Secondary (Contingent)

Revocable or Irrevocable

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Policy Provisions

Primary vs. Secondary (Contingent)

PRIMARY- first person in line to receive the death proceeds

SECONDARY (CONTINGENT) - person next in line to receive the proceeds in case of death of the primary beneficiary

Beneficiary

116

Policy Provisions

Revocable vs. Irrevocable

REVOCABLE – changes/amendments to the contract may take effect without consent. Subject to Estate Tax.

IRREVOCABLE - changes/amendments to the contract require written consent. Not subject to Estate Tax.

Beneficiary

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Policy Provisions

Minors are not recommended to be named as irrevocable beneficiaries

Revocable vs. Irrevocable

Beneficiary

118

Policy Provisions

o Lump Sum

o Interest Option

o Fixed Period Option

o Fixed Income Option

o Life Income Option

Settlement

119

Policy Provisions

• Lump Sum o Single sum payment of the

proceeds

• Interest Optiono The company will hold the

proceeds to earn interesto Interest earnings will be paid out

regularly

Settlement

120

Policy Provisions

Settlement

• Fixed Period Optiono Pays the beneficiary equal

amounts at regular intervals over a specified period of years

• Fixed Income Option

o Pays the beneficiary a specified amount until proceeds are depleted

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Policy Provisions

Settlement

• Life Income Optiono Pays the beneficiary regular

income for his lifetime, no matter how long he lives

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Policy Provisions

When the insured quits paying his premiums..

o Non-Forfeiture Options

o Reinstatement

123

Policy Provisions

Non-Forfeiture Options

o Cash Surrender Value (CSV)

o Reduced Paid-Up (RPU)

o Extended Term Insurance (ETI)

o Automatic Premium Loan (APL)

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Policy Provisions

• Cash Surrender Value

o Policyowner claims an immediate cash pay-out for his policy

o Once elected, policy is terminated


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Policy Provisions

30 100

Protection Period

40

No more protection

Quits paying:

Receive Cash Surrender Value and Accumulated Dividends

Policy terminates

Maturity Benefit = 0.00

Cash Surrender Value

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Policy Provisions

• Reduced Paid-Up

o Protection continues for life but for a lower face amount


127

Policy Provisions

100

Protection Period

40

Protection Period

FA = 1,000,000 FA = REDUCED

Reduced Paid-Up

30Quits paying:

Same Protection Period

Reduced Face Amount Maturity Benefit = REDUCED

128

Policy Provisions

• Extended Term Insurance

o Protection continues for the same face amount but only until a certain period of years and days

o Automatic non-forfeiture option


129

Policy Provisions

30

Protection Period

40

Protection Period

FA = 1,000,000 FA = 1,000,000

Reduced Protection Period

Until a certain period of Years and Days

Extended Term Insurance

Quits paying:

Same Face Amount

New Protection Period Maturity Benefit = 0.00

130

Policy Provisions

• Automatic Premium Loan

o The company lends to the insured an amount from the cash value to pay for the overdue premiums

o Policy has to have a sufficient amount of cash value


131

Policy Provisions

30 100

Cash Vaue

40

Maturity Benefit = less any unpaid dues with

interest

41

missed the 30-day grace period:• SAME protection period• COVERAGE : Face Amount less loan (unpaid due)

• if cash value is sufficient, automatic payment will be applied on the premium due• it will be considered as policy loan

Automatic Premium Loan

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Policy Provisions

Reinstatement

o Pure Reinstatement

o Redating

133

Policy Provisions

• Pure Reinstatement

o Pays back all past due premiums plus interest

o proof of insurability is necessary

Reinstatement

134

Policy Provisions

• Redating

o New premium would be charged

o Based on new attained age

o New policy effectivity date

Reinstatement

135

March 2015 version

AnnuitiesInsurance Concepts

136

Annuities

Annuities

o Not a life insurance policy

o Purchase of income

o Liquidation of both capital and interest

137

Annuities

So how are annuities different from life insurance contracts?

138

Annuities

LIFE INSURANCE ANNUITY

Estate Creation

Premiumsmostly in

installments

Beneficiary orInsured

Death of the Insured or at the Maturity of

the Policy

Estate Distribution

Purchase pricemostly paid in

lump sum

Annuitant orSuccessor

While the annuitantis still alive or until a

specified period

NATURE

PAYMENT

RECIPIENT

PAYMENT OF

PROCEEDS

139

Annuities

Types of Annuities• Fixed

o Single Premium Immediateo Single Premium Deferredo Installment Deferred

• Variable

o Conventional Variable

o Deferred Variable

140

Annuities

• Single Premium Immediate

o Entire premium is deposited in the annuity fund at one time

o Income begins immediately

Fixed Annuities

141

Annuities

• Single Premium Deferred

o Annuity fund is purchased through a single payment

o Income begins years after the payment is made

Fixed Annuities

142

Annuities

• Installment Deferred

o Provides pension for life; no life insurance coverage

o Fund is built up through a series of regular payments

Fixed Annuities

143

Annuities

• Conventional

o Based on fixed-dollar investments

o Specified interest and maturity values

Variable Annuities

144

Annuities

• Deferred

o Period of time lets the funds accumulate

o Value may rise and fall depending on the investment results

Variable Annuities

145

Annuities

o Life Annuity

o Cash Refund Annuity

o Installment Refund Annuity

o Period Certain Annuity

o Joint and Full Survivor Annuity

Annuity Settlement

146

Annuities

• Life Annuity

o Provides a series of periodic payments to the annuitant

o Payment for the rest of his life

Annuity Settlement

147

Annuities

• Cash Refund Annuity

o If annuitant dies, the beneficiary will receive cash payment equal to annuity fund

o Cash payment will be less the amount already paid out

Annuity Settlement

148

Annuities

• Installment Refund Annuity

o If annuitant dies, the beneficiary will receive the same monthly income

o Installments will be paid until annuity fund is exhausted

Annuity Settlement

149

Annuities

• Joint and Full Survivor Annuity

o Income that is paid out to the annuitant and the beneficiary

o If either dies, the same income continues to the survivor for life

o When the survivor dies, no further payments are made to anyone

Annuity Settlement

150

Annuities

• Period Certain Annuity

o if annuitant dies within a specified period, such as 10 or 20 years, payments will continue until the end

of the period.

Annuity Settlement

151

March 2015 version

EthicsInsurance Concepts

152

Ethics

Unethical Practices

o Twisting

o Knocking

o Overloading

o Rebating

o Misrepresentation

153

Ethics

• Twisting

o Is persuading the person to lapse or surrender a policy in order to purchase a new one

o Also called Replacement

Unethical Practices

154

Ethics

• Knocking

o Making derogatory remarks about competing policies, advisors or companies

Unethical Practices

155

Ethics

• Overloading

o Selling a person insurance more than what is warranted by his resources

Unethical Practices

156

Ethics

• Rebating

o Offering part of your commission to your client

o Accepting a smaller premium than the one stipulated in the policy

o Premium discrimination against policyholders

Unethical Practices

157

Ethics

• Misrepresentation

o Misstatement of material facts for insurance

Unethical Practices

158

Simulated ExaminationTRADITIONAL LIFE Insurance

ConceptsMarch 2015 version

159

Test Taking TipsInsurance Concepts: TRADITIONAL

& V.U.LMarch 2015 version

160

1. Be prepared, Read and Review.

2. Before the test list everything you will need for it that is allowed. Like pencils/pens, a watch, etc.

3. Review your Traditional Life Simulated Exam and Reviewer.

Before the Exam

Test Taking Strategies

161

1. Read the directions carefully.

2. Get the big picture.

3. Answer easy questions first.

4. Eliminate answers to difficult questions

5. Review your test to make sure that you have answered all questions.

During the Exam

Test Taking Strategies

162

THANK YOU!

&GOOD LUCK!