Mortgage redemption insurance, structured as decreasing term life insurance, is designed to pay off a debt as it amortizes. The decreasing death benefit pays just enough to cover the balance should pre-mature death occur.
Joint life (first-to-die)
Mortgage redemption (decreasing term/mortgage protection)
Policy dividends, considered a return of excess premium by a mutual insurer, are not taxable since the original premium was paid with after-tax dollars. Thus, these refunds are not taxable. Future dividends cannot be predicted nor guaranteed.
They are not taxable and are not guaranteed.
They are guaranteed to be paid and they are taxable as income.
Stock insurers pay dividends to policyowners, mutual insurers pay dividends to shareholders.
They are likely to be larger in nonparticipating policies.
When a client dies during the free-look period they are covered, if consideration had been given (initial premium paid with application), and the policy has not been returned for a refund.
If the premium has been paid and the policy has not been returned.
Only if the policy is returned.
If the policy has not been returned, whether or not a premium was paid.
Under no circumstance; there is no coverage until the 10-day period has passed.
A payor benefit is a feature of a juvenile policy. If the parent/guardian (owner) dies or becomes disabled, the premium is waived until the child reaches adulthood. The child’s policy will continue in force during the waiver period.
The insured is only covered to age 18, then the policy expires.
At age 21 or 25, the death benefit is reduced by up to 50%.
The owner of the policy is disabled or has died.
The insurer pays monthly disability income to the premium payor.
Under Social Security the unmarried children of a “fully insured” deceased worker will receive benefits until 18, or 19 if still in elementary or secondary school.
22 or 23, if unmarried and a college student
18 or 19, if unmarried and a student in elementary or secondary school
Under the fixed amount settlement option the beneficiary receives a stated amount for each benefit payment until the original lump-sum death benefit amount, plus some interest, are paid out. It this case, $3000 a month is the stated amount of the benefit payment.
Interest-only to age 40
Because premiums are a non-deductible expense, death benefits are tax-free to the beneficiary. In a sense, the money has already been taxed when first earned and before the premium was paid.
Non-deductibility of premiums, non-taxable death benefits
Non-deductibility of premiums, taxable death benefits
Deductibility of premiums, taxable death benefits
Deductibility of premiums, non-taxable death benefits
With universal life the cash value can always be surrendered. There might be surrender charges in the early years, or a loan to pay off, but any available cash value can always be obtained at any time by surrendering the policy.
Within 30 days of an interest payment
At any time
Only when the cash value equals the death benefit
Only if there are no outstanding loans
This rule is designed to protect seniors. It is written as “at least 24 hours” in advance of the first meeting in the client’s home.
At least 24 hours
One business day
Prior to entering the home
Three calendar days
Total invested amount is $50,000; total account value is $100,000. $50,000 divided by $100,000 = 1⁄2. 1⁄2 of $8,000 is $4000. That means $4000 is excluded from taxation, and $4000 is taxable.
LTC and disability income policies don’t begin to pay-out benefits until a certain number of days of illness have elapsed.
Insurance companies prefer insureds that are part of a large group with similar risks so they can understand the scope of the risk, and charge the appropriate premium.
The item to be insured has a market value difficult to determine.
The item to be insured holds no hardship to the owner should it be lost or damaged.
The item to be insured faces high catastrophic loss exposure.
The item to be insured is part of a large group of homogeneous exposure units.
Insurance policy dividends are not guaranteed and are not taxable.
Policy dividends issued by mutual companies are guaranteed and not taxable
Dividends allow policyholders to share in a mutual company’s divisible surplus
Mutual companies issue policies referred to as participating
If a mutual company goes public, it demutualizes
If employment terminates, the employee owns 100% of the employer’s contributions after 7 years. They earn 20% each year for years 3 through 7. Employee contributions are immediately vested.
The commissioner is no longer appointed by the governor. He or she has various duties and authorities.
Selected by the Governor as an appointee
Elected by the people of California every four years
Capable of becoming the conservator of a financially impaired, or insolvent, insurer
Is a representative to the National Association of Insurance Commissioners (NAIC)
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