Lesson 3 Review
There are three basic categories of coverage upon which the life insurance world revolves: (1) Ordinary, (2) industrial, and (3) group.
There are no cash values in term insurance. A term life policy can be a level term, decreasing term, or increasing term policy.
Most term policies contain the option to renew or the option to convert. The option to renew allows the policyowner to renew the policy without the insured having to provide evidence of insurability. The option to convert allows the policyowner the choice of changing a term policy into a whole life policy at renewal time without evidence of insurability.
Permanent (whole) life insurance comes in six variations: (1) Straight whole life, (2) universal life, (3) variable life, (4) adjustable life, (5) modified life, and (6) family life. Whole life policies build cash value and mature at age 100.
Death benefits payable to the beneficiary are not taxable.
Rights of ownership provide the right to choose and change the policy's beneficiary; the right to determine how death benefits will be disbursed to the beneficiary; the right to policy loans; the right to policy dividends and their disbursement method; the right to assign ownership to someone else; and the right to cancel the policy and select a nonforfeiture option.
An additional lapse notice is required for individual life policies that have been in force for at least one year that covers persons 64 years of age or older.
When a life policy is reinstated, a new suicide exclusion does not go into effect again due to the lapse. The suicide clause typically stipulates a two-year period of time in which the policy's death benefit will not be paid if the insured commits suicide within that timeframe.
Florida law restricts an insurance company from charging a fixed rate higher than 10% annually.
The transfer of ownership is referred to as assignment and the new owner is the assignee. If a policy is transferred as a means of establishing security on a debt, it is considered a collateral assignment.
The Accelerated Death Benefits provision allows the insured policyowner to become his/her own living beneficiary if the insured becomes terminally ill or suffers from a life-threatening medical condition.
Nonforfeiture options include: (1) Cash surrender, (2) reduced paid-up, (3) extended term, (4) automatic loan, and (5) dividend accumulations.
Policy dividends are not taxable income as they are considered a return of premiums paid.
The information contained in Units 5 and 6 of the Florida study manual has been presented in Lesson 3 of the online course.
