Life Exam

Question	Answer
Term Life Insurance Term Lengths	10 and 20 years
Explain Renewability	At the end of the term the insured may renew yearly without proof of insurability until age 95. But their can be an increase in the premium after the term.
Explain Convertibility	The insured can convert their term policy anytime during the policy period WITHOUT proof of insurability - They will maintain the same classification but rate will be set at the age of conversion. -If they do it within the first 5 years they will receive a 20% credit on the first years premium (Option 1)
Name the 5 risk classifications for Life Insurance	Preferred Plus Preferred Non-Tobacco Preferred Tobacco Standard NON-Smoker (Table) Standard Tobacco (Table)
All the rights in the policy belong to who?	The owner of the policy
Explain the three types of beneficiaries	Primary - Person named to receive the death benefit Contingent - Next person up if the primary beneficiary dies. Irrevocable - Cannot be removed without written consideration (usually court ordered)
The entire contract is made up of three parts - name them	-The policy -The application, delivery receipt and questionnaires -Any rider and endorsements
Explain Contestability and how it suicide relates to it?	We cannot contest the policy after 2 years. However, we can investigate within the first 2 years to make sure there was no misrepresentation during the application. - If there is a case of suicide then the premiums up until that point will be reimbursed and no death benefit will be paid.
Explain Waiver of premium in regards to Life Insurance	We will waive premiums if the insured becomes -Totally Disabled -For at least 6 months -Before age 60 -Own Occupation 2 years - After that it will be become any occupation
Explain the Children's Insurance Rider in regards to life insurance (3 bullets)	- For Current and Future Children - Between the ages 14 days and 25 years - 5k to 15k of coverage per child.
Universal Life Flexible Premium Payments	As long as there is enough money in the policy to cover the next month's cost of insurance and expense charges then the policy will not lapse.
Describe Differences between option 1 and 2	Option 1 is a level death benefit, cash values build up in the policy, less expensive. Option 2 increasing death benefit, cash value outside of the policy, more expensive.
Interest Rates Current Rate? Guaranteed Rate? Loan Rate? Credited/Net Loan rate?	Current: 5% Guaranteed: 3% Loan Rate: 7% Credit/Net Loan Rate: 4%
What is the smallest policy we can write? What is the smallest increase we can make?	$50,000 for both
Minimum face amount to get preferred rates?	$100,000
Surrender charges last for how long? Why do we have surrender charges?	10 years Keep the insured motivate to keep the policy in place
Length of time for contestability?	2 years
Loans and Partial Surrenders - When does it make more sense for someone to do one over the other?	Loan - Short term plan on paying it back Partial Surrender - Long term don't plan on paying it back
What is the surrender fee? How do both options pay it out?	$50 Option 1 reduces face amount Option 2 taken out of the top cash value
Universal Life Insurance Children's Rider (3 Points)	- Current and Future kids - 14 days to age 25 years - 5k to 25k
Universal Life Insurance Waiver of Cost of Insurance - Explain (3 additional Points)	Waives the monthly deduction (cost of insurance and expense charges) NOT the entire premium -Disabled at least 6 months - before age 60 - Own Oc for 2 years and any for after
Option to Increase Rider - Explain -(4 additional Points)	The ability to increase their permanent insurance without proving insurability - Every 3 years - Between ages 25-43 - Increase options 50k/250k or 100k/500k -Can advance at marriage, birth, or adoption
Disability Income What percentage of disabilities come from sickness/illness?	80/85%
Disability Income 1 in how many people have a disability for at least 90 days between ages of 30-65	1 in 4 people
At what point do we have to verify income for disability income?	$100,000 Except in Cali Bro
What are the two parts of the disability payment? Which part is guaranteed? Which part of the benefit corresponds with social insurance? And what is the Max?	Basis (guaranteed) and the SIS - correlates with the social benefit SIS Max: $1400
Be able to explain an example of how the SIS benefit is reduced by social insurance kicking in.	The SIS is originally $1400 Social Insurance: $1000 The SIS is reduced to $400
Income Includes what 3 parts?	Regular Earnings Business Profit Rents from Personally owned Buildings
What is the range of income Federated covers?	$12k to $300k
Explain a Non-Cancellable Does Fed have this policy or the competitors?	The policy may not be canceled and the premium is locked in as long as the insured pays the premium. FED has Non-Cancellable
Guaranteed Renewable (Most Competitors)	The Policy may not be canceled as long as premium is paid BUT the premium can be raised at any time on a class basis.
Disability must lead to (Loss of what) for the benefit to be paid out?	Loss of Income
Disability Income - Own occupation last for how long?	3 years
Benefit period for Disability Income Period	2 years 5 years Age 67 benefit
-Explain what the waiting period is for DI? -What are the waiting periods available for Disability Income? -When will the death benefit be paid out	- Amount of time the insured has to be disabled before you receive your benefit - 30, 60, 90, 180, 365 - First benefit payment will be received 30 days after end of waiting period
Explain Regular Occupation in regards to Disability	Federated will look at what you were doing just prior to your disability
Occupation class B - Give an example	Owner of a higher hazard occupation
Occupation class 1A - What is the percentage of hands on threshold?	- Owner of a contracting business that goes out on the job frequently - More than 25%
Occupation Class 2A - Example and the hands on threshold?	Business owner (Check specific example) Less than 25% on the job
Occupation 3A - Example	-Professionals with some travel involved, -owners with 20 plus employees that -No hands on work
Occupation Class 4A - Example	CPA or attorneys Highly educated, skilled people
Waiver of Premium - Explain Is it (automatically/non automatically) included on DI policy	We will waive the premiums (If disabled for more than 90 days) for the remainder of the disability and will refund any premiums paid up until that time. -AUTOMATIC
Explain Rehabilitation benefits in regards to DI Is it (automatically/non automatically) included on DI policy?	If there is a program of occupational rehab that will help the insured return to work to their regular occupation that would pay at least 75% of their earning then we will pay for the cost of the program -AUTOMATIC
Disability Income Riders GMI Rider - What does it stand for 4 Points	Guaranteed Medical Insurability -Increase the benefit by 100/200/300 -Increase every 2 years -Until age 52 -WITHOUT PROVING INSURABILITY
Disability Income Rider EROR stands for? What does it do?	Extended Regular Occupation Rider -Removes the three year rule and gives the insured own occupation for the remainder of their policy (must be 2A, 3A, 4A)
Disability Income Rider COLA what does it stand for?	Cost of Living Adjustment Rider Will adjust total benefit every 12 months - After a total disability - Adjusted from the CPI - 3% - 8%
Disability Income Rider Business Owner Benefit Rider (3 to 4 points)	-$1000 - $5000 of extra DI benefit - first 12 months Max limitation is 24 months - Must own at least 25% of the business and work 30 hours per week. - Can spend the money on anything they want
Explain Key Person Life Insurance? - Name examples of expenses - How is this taxed?	A policy used to protect the business due to the hardships the business will undergo when that key employee dies. - Such as Loss of profit, hiring, training etc... - Is not a tax write-off since it is an asset to the business.
Explain Executive Bonus -How is taxed	- Business wants to provide a life insurance policy to a key employee in order to provide something extra to incentivize them to stay. An arrangement in which the business pays for a life or DI policy that is owned by the employee. Employee controls the policy. - Business gets to write off the premium as a payroll tax deduction and the employee will be taxed at the end of the year
Explain the Split Dollar Endorsement	- Can either attach this to a key person or on a private bonus arrangement. Special beneficiary designation done by splitting the death benefit for both the business and employee.
Explain the Private Bonus Plan	Serves two purposes. If the employee were to die the business gets to replace the employee. Cash value is used to pay the employee bonuses.
Key Person Owner? Payor? Beneficiary Tax implication?	Owner: Business Payor: Business Beneficiary: Business Tax: Not tax deductible to the business
Executive Bonus Owner? Payor? Beneficiary? Tax Implication?	Owner: Employee Payor: Business Beneficiary: Employee Choice Tax Implication: Tax deductible to the business as a salary expense. EE pays taxes at the end of the year based as a bonus for the premiums.
Endorsement Split Dollar Owner? Payor? Beneficiary? Tax Implication?	Owner: Business Payor: Business Beneficiary: Business and Employee Choice Tax Implication: Not tax deductible to the business. The EE will be taxed on the term cost of the benefit
Private Bonus Owner? Payor? Beneficiary? Tax Implication?	Owner: Business Payor: Business Beneficiary: Business Tax Implication: Deferred tax benefit in that the business can write off the cash value bonus as a salary expense. EE will be taxed on the bonus.
Explain the purpose of the Value estimator? What do we need from the business?	Informal estimate of the value of their business using three different methods. - Three years of financials and some basic information
What is the purpose of the agreement evaluator? What do we need to know? What do we need to get a copy of?	- Tool used to look over a business's buy-sell agreement. - Must first find out if they have one already in place and what exactly they want to have happen with their business in the future. - Need a copy of the current agreement
What is an Estate? How is it valued? Is Life insurance included?	Everything you own at fair market value on the date of your death** - Life insurance face amount included in the estate for estate tax purposes
What is the annual gift tax exclusion? Lifetime exclusion? What is the maximum per couple? Why is getting rid of some of your estate used?	$14k Individual: $5.49 Million Couple: $10.98 Million To lower their taxable estate while they are living.
If the estate exceeds the limits what is the max percentage it can be taxed?	40%
What is the Marital and Charitable deduction?	- There is none A person can pass as much of their assets they want to a spouse or charity.
Explain Intestacy	Dying without having a will or a plan. State Determines how your assets will be passed.
3 reasons why Probate Sucks? What is a way to avoid Probate?	Time Consuming Expensive Privacy Concerns - Creating a Trust
Explain the LS5 - what it is and how the rating works?	Last survivor policy (both have to die) the two people can be different risk classifications (one can be completely insurable) as long as one is rated D or better and the other is expected to live for 12 more months.
LS5 - what is the guaranteed rate? Current Rate? Explain the loyalty Bonus? Surrender charges last how long?	Guaranteed: 3% Current: 5% - Loyalty Bonus: Crediting .5% extra once the policy has been kept for more than 15 years - Surrender Charges: Last 15 years
LS5 Explain the 4 Year Term Rider?	- This rider allows the person to increase the amount of death benefit their beneficiaries will receive within the first 4 years to account for the additional estate taxes.
Life Link - Know how to do a - Term and Universal Life illustration - Combination of Term and Perm - Term vs. Perm Comparison - Disability Income Illustration	- Combo of term/perm based on what the insured wants to pay - Term vs. Perm - Know Break Even Point, Net cost - DI illustration - how to tack on supplement coverage's if someone already has a DI policy
Group Health 4 tiers of plan levels and name their participation percentage?	Bronze (60%) Silver (70%) Gold (80%) Platinum (90%)
Group Health How many hours must a person work to be eligible for group health?	Minimum of 30 hours
Group Health Explain the following HMO's PPO's	- Health Maintenance Organization - most restrictive coverage, must use a gate keeper to manage your health care, no out of network coverages. - Preferred Provider Organization - Insured gets both in and out network coverage - not many rules/restrictions
Group Health Explain the following POS EPO	- Point of Service - Similar to the PPO in that both in/out of network has coverage but there is a much more limited selection of service providers that are in-network - Exclusive Provider Organization - Large network like a PPO but has NO out of network coverage
Group Health Prescription Drug Program is available on what two types of plans? What are the 4 levels of drugs?	- Copay and Copay Plus - Generic, Preferred, Non-Preferred, Specialty ($$$)
Life Insurance How long do Expense Charges last?	5 to 15 years
Life Insurance Explain the premium load year 1-3	First year: 10% Second Year: 7.5% Third year and after: 5%
Explain the Closed Formulary concept for group health	Some drugs will not be covered even if prescribed but there will be an equivalent available.
Explain the coverage for: Preventative care Diagnostic Care	Preventative: Covered 100% Diagnostic: Deductible/Coinsurance
Group Health What two dates can the employer change their plan?	Normal Renewal Date or Jan 1.
Group Health When is open enrollment? When is the effective date typically?	- October 1 - December 15th - Effective date of Jan 1
Group Health Large Group requirements Small Group requirements	Large: 51+ Small: 50 and below
Group Health What goes towards the Max OOP in an ACA plan (name the components) What goes towards the Max OOP for Non-ACA plans?	ACA: Everything (Deductible, Copays-Prescriptions, Coinsurance) Non-ACA: Copays do not count towards your OOP. You can hit your max and still have to pay Copays.
Group Health Explain Coinsurance in regards to Group Health	The amount after the deductible the insured must share in cost with the insurance company.
Dawns explanation of LS5 - 4 Year term rider.	If they both die within the first four years they get an extra benefit to take care of the Estate Taxes that would become due.
Estate Planning 5 options to pass your estate at death - Name them	- Do nothing (Intestacy) - Holding Title - Beneficiary Designation - Will (Probate) - Trust (Revocable/irrevocable)
Estate Planning Be able to explain the Holding Title Option	- When they hold their home the Joint Tenancy over rides all other estate planning. - If the home is Joint Tenancy this overrides any will other estate planning.
Estate Planning 3 Year Rule	If they bought the property within the last three years it is included in their estate amount.
Estate Planning What does the following mean? - Financial Power of Attorney - Health Care Power of Attorney - Advanced Directive or Living Will	Financial: gives someone the ability to act on your behalf financially Health Care: Gives someone the ability to act on behalf for medical matters Advanced: Outlines your wishes for end of life care if you are in a permanent vegetative state
Why is putting this in a Trust a good idea?	The owner, the beneficiary is the trust. The Trust can have beneficiaries as well. The owner's of the Trust can specifically cite what they want to have happen. Also avoid Probate
Cross purchase - Who owns the policy, how does the pay out work? Stock Redemption - Who owns the policy, how does the pay out work?	Cross Purchase: Owners own the policy on each other. One dies and FED pays the surviving owner to buy out the dead owners estate. Stock: Business owns the life insurance and if an owner dies FED pays the business and the business buys out the dead owner estate. Shares dissolve.
Business Succession Disadvantage of Stock Redemption plan	No Step up in Basis. Taxed on the entire amount of the business even though they have only invested half.
Step up in Basis - explain	Step up in basis happens when someone inherits assets from someone at the time of their death and gets the asset at the fair market value at that time. By having the step up in basis the person that inherits the asset will have a better tax break when they go to sell the property (Capital Gain).
Increase in basis - Explain	Increase in basis occurs when you buy into the asset more - Example a business owner owns 50% of a 1mil company. The business owner buys out his partner and now owns 100% (1mil). His basis is now 1 million.

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	Created by Dylan Overstreet about 7 years ago