A. All the incidents of ownership in the policy belong to the donee. - In an outright gift
of life insurance to a charity
A. All the incidents of ownership in the policy belong to the donee.
B. The donor retains the right to name a new beneficiary.
C. The cash values in the policy belong to th...
Elements of a Contract - ✔✔Competent parties, legal purpose, offer and
acceptance, consideration
Waiver - ✔✔Voluntary giving up of a known right or privilege, can be express or implied
Estoppel - ✔✔A person is prohibited by virtue of his own past actions from claiming a right
that would work to the detriment of another who relied on the past conduct
Aleatory Contract - ✔✔a contract where the values exchanged may not be equal but depend
on an uncertain event
Contracts of Adhesion - ✔✔One-sided in regards to preparation (prepared by the insurer)
,Contract of Utmost Good Faith - ✔✔Both parties bargain in good faith when forming and
entering into the contract. The two parties rely upon the statements and promises of the other
and assume no attempt to conceal or deceive has been made.
Executory Contract - ✔✔A contract that has not yet been fully performed.
Mortality Rate - ✔✔Determined by dividing the average number of people who will die
each year at each age by the entire population of people that age (1980 CSO table)
Functions of Life Insurance - ✔✔Create an immediate estate, requires no management
or physical upkeep, paid in installments, can be used as collateral
Final Expenses - ✔✔Medical and funeral expenses, outstanding debts
Total Needs Approach - ✔✔Totaling the amount required to pay for current and
future expenses
Living Benefits of Life Insurance - ✔✔Loan value (can be used as collateral,) retirement benefits
,Human Life Value - ✔✔The monetary value of an individual's life
Tax Advantages of Life Insurance - ✔✔Cash value earnings accumulate tax free, proceeds
at death pass income tax free
4 Types of Life Insurance - ✔✔Permanent, Term, Industrial, Group
Permanent Life Insurance - ✔✔Accumulates cash value, insurance protection decreases as
cash value increases
Term Life Insurance - ✔✔Accumulates no cash value, only provides death benefits
Whole Life Insurance - ✔✔A permanent policy for which you pay a specified premium each
year for the rest of your life, cash value accumulates, endows at age 100
Limited-Pay Life Policies - ✔✔Premiums are paid to a specified age or for a specified number
of years and then stop. Protection remains for the rest of the insured's life.
, Endowment Policies - ✔✔As of 1984, no policy can endow before age 95 because the CV
and DB would be taxed
Single Premium Whole Life - ✔✔Policy is completely paid up after one premium,
policyholder pays less than if premiums stretched out over several years
Modified Endowment Contract (MEC) - ✔✔TAMRA: All single premium policies, any policy
that does not satisfy the 7-pay test // money taken from the policy is taxed as ordinary income
// if policy owner is younger than 59 1/2 and not disabled 10% penalty is assigned
Joint Life Policies - ✔✔First-to-die, contract comes to an end at the first death, no
further insurance protection for the other person or persons covered by the policy
Survivorship Policies - ✔✔Second-to-die, covers 2 lives and guarantees payment only
when second insured dies
Adjustable Life Policies - ✔✔Policyholder can adjust face amount of policy,
amount/frequency of premium payments, period of insurance protection
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