Insurance Contracts [Legal Concepts]

1. Basic Principles of Life, Health Insurance and Annuities
2. Nature of Insurance; Risk, Perils and Hazards
3. Legal Concepts of the Insurance Contract
4. Life Insurance Policies, Provisions, Options and Riders
5. Life Insurance Premiums, Proceeds and Beneficiaries
6. Life Insurance Underwriting and Policy Issue
7. Group Life Insurance
8. Annuities
9. Social Security
10. Retirement Plans
11. Uses of Life Insurance
12. Health and Accident Insurance
13. Health Insurance Providers
14. Disability Income Insurance
15. Medical Expense Insurance
16. Private Insurance Plans for Seniors
17. Health Insurance Policy Provisions
18. Health Insurance Underwriting
19. Michigan Laws and Rules Pertinent to Insurance
    

Legal Concepts of the Insurance Contract

Life insurance has been recognized for more than a century as an essential element in an individual's or family's financial planning program. Life insurance involves the transfer of the risk of premature death from one party to another party. When Life insurance contract is payable upon the death of the insured, it instantly creates funds for a named beneficiary. In other words, a life insurance contract creates an immediate estate.

Unlike other lines of insurance (for example, property and casualty) there are no "standard life policies". Today's policies are typically defined by the benefit options available, the intended length of coverage, and how the policy benefits will be funded, or paid for. Broadly speaking however, all life insurance policies fall into three basic kinds of coverage: ordinary insurance, industrial insurance, or group insurance. A life insurance company may choose to specialize in one or two of these coverages or may offer all three. These basic coverage types are distinguished by the types of customers, amounts of insurance written, underwriting standards, and marketing practices.

General Law of Contract, unique features of the unique insurance contract such as aleatory contracts, contracts of adhesion, unilateral, personal, and conditional contracts. Furthermore, the chapter will introduce concepts of indemnity and valued contracts, insurable interest, how to negotiate and issue new contracts, and some of the more critical regulations that states impose on people who solicit and sell insurance. Ending with E&O Policy and the losses covered under it.

5 Aspects:

• General Law of Contracts
• Special Features of Insurance Contracts
• Negotiating and Issuing Insurance Contracts
• The Law of Agency
• Other Legal Concepts Related To Insurance

Legal Concepts

• Understand the concept of errors and omissions.
• List the several types of Negligence.
• Distinguish between agents versus solicitor authority.
• Distinguish between agents versus brokers.
• Understand the 3 types of agent authority.
• Difference between canceling an insurance contract and waiving a legal given right.
• Difference between void and voidable contracts.
• Understand concealment and resigned.
• Distinguish between a warrant, representation, and material representation.
• List the elements of a valid insurance contract.
• Distinguish unique insurance contract characteristics.
• Legal and binding contracts [knowing essential elements].
• Identify the parties of an insurance contract.
• Understand the basic terminology used in insurance contracts.

General Law of Contracts

• Life Insurance: Binds to pay a certain sum upon death of insured
• Health Insurance: Binds to pay a certain sum for accidental injury, sickness or disability.
• Property Insurance : Agreement to pay for loss sustained to the insured's covered property.
• Casualty Insurance : Agreement to pay for losses or damaged caused by the insured.
  Regardless of the insurance type, the policyowner (or insured) always pays premiums in exchange for the insurer's promise to pay covered claims.

These are the four essential elements to be contained in every contract to be legally valid and binding:

- Offer and acceptance
- Consideration
- Legal Purpose
- Competent Parties

LIFE INSURANCE POLICY TYPES

Industrial Life Insurance : Issues very small face amounts, such as 1k - 2k. Premiums are paid weekly and collected by debit agents.

Ordinary Life Insurance : is life insurance of commercial companies not issued on the weekly premium basis. It is made up of several types of individual life insurance, such as temporary (term), permanent (whole).

Group Life Insurance : Insurance written for members of a group, such as a place of employment, association, or union. Coverage is provided to the members of that group under one master contract. The group is underwritten as a whole, not on each individual member. One of the benefits of group life coverage is there is no evidence of insurability required.

TEMPORARY LIFE INSURANCE POLICIES

Term life Insurance : Yields the greatest amount of coverage for a limited period of time. Term insurance is only good for limited period of time because it has a Termination date. Term insurance is an inexpensive type of insurance, making it an attractive option for large policies. Term life is the CHEAPEST type of pure life insurance, and due to having a termination date and not having any cash value, it will ALWAYS be cheaper than a whole life policy with the same face value. It provides a pure death protection since it only pays a death benefit if the insured dies during the policy term.

Level Term : Is also called level premium level term, has a level face amount and level premiums. Premiums tend to be higher than annual renewable term because they are level throughout the policy period. However, the premiums will increase at each renewal. Life insurance written to cover a need for a specified period of time at the lowest premium is called Level Term Insurance. Term insurance always expires at the end of the policy period. For example, if D needs life insurance that provide coverage for the reminder of her working years and wants to pay as little as possible, D would need level term. Level term provides a fixed, low premium in exchange for coverage which lasts a specified time period.

Term Policies : do not build up cash value; when term policies are purchased they contain decreasing death benefits and leveled premiums.

Level: Describes the "Face Amount" in "Level Term"

A "10 year level term" insurance policy with a 200k benefit has a constant face amount and premium fee over the "10" year period.

If policyowner dies 15 years after the policy's inception date [a "10 year Non-Renewable level" term policy]. Beneficiary will receive Nothing.

Decreasing term : Is term life insurance that provides an annually decreasing face amount over time with level premium. These policies are usually used for mortgage protection. A decreasing term policy is a type of life policy which has a death benefit that adjusts periodically (according to a schedule) also written for a specific period of time. Decreasing term policies are usually written for a mortgage or other debt that typically decreases over time until it is paid off. For Example, a 15 year decreasing term policy could protect a 15 year mortgage. As the mortgage balance reduces each year, the face value of the insurance policy will adjust accordingly to match. After the mortgage is paid off, the insurance policy will expire. Decreasing term policies contain decreasing death benefits and level premiums.

A "Decreasing Term" life insurance is often used to * provide coverage for a home mortgage.

Mortgage Redemption Insurance : Is a type of decreasing term life insurance policy. Its purpose is to provide policyholders a way to have their mortgages paid off if they die before it is fully paid. This prevents the full burden of paying the mortgage from falling on the surviving family members shoulders. With this design, the face value decreases as the balance remaining on the mortgage decreases.

Increasing Term: is term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the face amount.

Convertible Term : a provision that allows policyowners to convert their term insurance into permanent policies without showing proof of insurability. Convertible Term provides temporary coverage that may be charged to permanent coverage without evidence of insurability. For example, if you take out a term insurance policy when you are young to take advantage of your good health and policy's lower premium, but want the option convert the policy to a permanent one for final expense benefits once your finances improve, you would want to convert the policy to a permanent one for final expense benefit. The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is the premium cost. The number one factor which impacts life insurance premium cost is the insureds current or attained age. For example, a $25,000 policy on a healthy 7 year old boy will cost substantially less than a $25000 policy on a 57 year old man. Whether converting an individual or group term insurance policy, although your insurability is guaranteed, your age is typically reevaluated to your current (attained) age, not left at the age you were when you applied for the original term policy. Convertible Term would allow you to take temporary coverage and change it to permanent coverage without evidence of insurability or good health, but your premiums will increase due to using your attained age.

Renewable term : is term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability. For example, if you have a 10 year renewable and convertible term; After the 10 years are up, the policy terminates or you can renew it. This cycle continues until you are too old to renew or its too expensive. ALL TERM insurance has a final TERMINATION date where you can no longer renew it. A "Renewable Term" Life Insurance policy can be renewed at a predetermined Date or Age, regardless of the insured's health. Without producing proof of insurability.

Annual renewable term : is term coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.

A "Single Premium Cash Value" Policy can be described as a policy that is paid up after only ONE payment.

A Term Rider is a type of life insurance product which covers children under their parent's policy. Family plan policies usually cover the family head with permanent insurance, and the coverage on the spouse and children is term insurance in the form of a rider. a Term rider is always level term. This is cheaper than every family member getting their own policy. For example, the main policy may be on Dad, then mom and the children are riding on (attached to) dad's policy as term riders. Term riders allow for additional family members to be covered under one policy by attaching everyone to a main policy. Term riders can also allow an applicant.

Credit Policies : Typically purchased using a decreasing term life insurance policy, with the term matched to the length of the loan period and the decreasing insurance amount matched to the amount due on a loan if the debtor dies before the loan is repaid; credit policies can only be purchased for up to the amount of the debt or loan outstanding. For example, if you wanted an insurance policy with an initial face value of $20,000. You will pay the same level premium every month for the 5-year term of the policy. The face value will start out at %20,000 and change according to a schedule (the decreasing balance of the auto loan). After 5 years, the care will be paid for and the insurance policy will no longer be needed.

PERMANENT LIFE INSURANCE POLICIES

Whole Life Insurance : provides death benefits for the entire life of the insured. It also provides living benefits in the form of cash values. It matures at age 100 and normally has a level premium. All whole life has the same type of benefits. The only difference in

"Types" of whole life is how the policy is paid. Some will be paid straight until death or age 100, some will be paid for after a few years or by a specific age, some may give you a little discount in the early years to help you get started, etc. All whole life lasts until death or age 100, has a fixed premium, and level benefits with cash value accumulation, regardless of how it is paid. Whole life is often compared to BUYING; like BUYING a house.

• The Shorter the Time periods the Higher the Premiums.

With Whole Life - Straight Life Insurance, premiums are payable throughout the insured's lifetime, and coverage continues until the insured's death. Said differently, premiums are payable as long as coverage is in force. Like all other whole life policies, straight whole life provides fixed premiums, a level death benefit, and cash value. Whole life also requires the face amount to be paid out to the insured at age 100 (when the policy matures), provided a death benefit has not really been paid. If G wants a policy with a fixed level premium and benefit that pays out at death or age 100, G would want a whole life policy. Straight whole life allows you to maintain coverage throughout your entire lifetime and spread the cost out over your entire life.

With Whole Life - Limited Pay : the coverage remains on limited-pay life policy until age 100 or death, whichever happens first. Even though the premium payments are limited to a certain period, the insurance protection extends until the insured's death, or to age 100. For example, if you were to purchase a 20 pay policy, premiums would need to be paid for 20 consecutive years. After that, you would not be required to make any additional premium payments, and your coverage would be guaranteed until death or age 100. A 40 year old applicant who would like to retire at age 70 and wants a policy with level premiums, permanent protection, and premiums paid up at retirement would also choose a paid up at 70 limited pay policy. A limited pay life insurance policy covers insured's whole life with level premiums paid over a limited time.

• A limited pay life Insurance policy is a whole life policy that pays out its cash value over a 20 year period. [not a Term, a whole life policy]
  Premiums are on limited payment and are paid for a limited number of years, but the benefits LAST A LIFETIME.
• A "limited Payment" Insurance : is a "Life Insurance" policy that has premiums fully paid up within a Stated Period Of Time.
• When a Whole life policy is surrendered, income taxes are not owed.

Whole Life - Modified : is a policy were the premium stays fixed for the first 5 years, and then increases in year 6 and stays level for the remainder of the policy. Modified whole life has all of the first few years. For example, K wants to buy life insurance because she knows it is cheaper when she is young. However, she is a college student and cannot afford the large premium associated with whole life. The insurance company may offer her a Modified whole life to lock in her age and provide her all of the benefits of whole life, but give her a discount on premium while she is in college. After the first five years of the policy, she will be out of school and be able to afford the normal premium cost. Modified Whole Life describes a whole life policy with a premium that increases once after the first few years and then remains level for the remainder of the policy. The premium is lower than the typical whole life policy during the first few years and then higher than typical for the remainder

Whole Life - Modified Endowment Contract (MEC) : is best described as a policy that exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life to the IRS. For that reason, the policy will lose favorable tax treatment. The test is designed to discourage premium schedules that would result in a paid up policy before the end of a seven year period. For example, if your annual premium for policy was $1,000 and you paid $20,000 in the first five years, you will have ailed the 7 pay test by exceeding $7,000 (7 years time on year of premium). Said differently, you have exceeded the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract.

These policies are characterized by guaranteed minimum interest rate, tax deferral of interest accumulations, and policy loan access. The equity index returns are designed to keep pace with or beat inflation which protects the policyholder against downside market risk. Equity indexed life insurance contracts combine term life insurance with an investment feature, similar to a universal life plan. Death benefits are based upon the coverage amount selected by the contract owner plus the account value.

A MEC is typically described as a Life Insurance Contract which accumulates cash values higher than the IRS will allow.
"Death Benefit" is NOT subject to income taxation under a Modified Endowment Contract (MEC).

The Endowment Policy is a contract providing for payment of the face amount at the end of a fixed period, at a specified age of the insured, or at the insured's death before the end of the stated period.

• A face amount plus cash value policy is a contract that promises to pay at the insured's death the face amount of the policy plus a sum equal to the policy's cash value.
• "Pre-Death Distributions" are typically taxable when a "Modified Endowment" contract failed to meet the Seven-Pay test.

Characterized by cash values that grow at a rapid pace so that the policy matures or endows at a specific date (that is, before age 100). Endowment of life insurance contracts pay a death benefit to a named beneficiary upon the death of an insured during a specific "endowment" period; OR it pays the policyowner/insured a cash value equal to the face amount of the policy at the end of the endowment period (when the contract matures or "endows") if the insured is still living. Endowments do not pay the cash value upon death. Therefore, an endowment pays at the earlier of the death of at the end of a specific period ("endowment period").

They can be compared to whole life policies with accelerated maturity dates. While a whole life policy "matures" or "endows" at age 100, an endowment matures or endows at the end of a specified period of time.

At the maturity date, the cash value has grown to match the face amount, just like what occurs at age 100 with a whole life policy. Example. $50k "whole life" policy endows at age 100; A $50k, 20years endowment endows at the end of a 20 years period.

Having rapid cash value build ups in order to provide early policy maturity, endowment policies have comparatively high premium.

Remember, the shorter the policy term, the higher the premiums.

Endowment policies are typically purchased to provide a living benefit for a specified future time for retirement, for example, or to fund a child's college education. Semi-endowments are plans that pay upon survival only one half the sum payable in the event of death during the specified endowment period. Pure endowments pay nothing if the insured dies during the endowment period. They only pay if the insured survives. Juvenile endowments are those covering children which mature at specified age. These plans help the policyowner meet the educational goals.

Endowment policies no longer meet the income tax definition for "Life Insurance", no longer qualifying for the favorable "tax treatment". The Tax Reform Act of 1984 states, "any policy issued after 1/1/1985 that endows before the age 95 no longer qualifies as life insurance."

In 1988, Congress enacted the Technical and Miscellaneous Revenue Act, commonly referred to as TAMRA.

A "Modified Endowment Contract" is considered to be a policy that is overfunded, according to the IRS tables and as such, is not truly a life insurance policy.

Once a contract is declared a MEC, it can never revert back to ordinary insurance. However, if there is a material change in the contract, the seven pay test applies again (The seven pay test is a limitation on the total amount you can pay into your policy in the first seven years of it existing).

The following bullet points are tax treatment with regard to the distributions from a MEC:

• Taxation only occurs when any cash is distributed to the contract owner or money is withdrawn whether by surrender, loan or dividends.
• The gain (i.e., interest or appreciation) is taxable first when a distribution is made (i.e., LIFO).
• The first dollars received by the contract owner are considered "earning first" or excess amounts of cash value beyond premiums and are taxable.
• If a policy is a MEC and cash is withdrawn, even if it will be used for legitimate reason such as financial hardship or to pay medical expenses, applicable amounts are still taxable and if effected prior to age 59-&half, a 10% penalty tax will be assessed.

Non Medical Life Insurance typically does not require a medical exam and tends to be more expensive than medically underwritten policies. The insurer will average out everyone's risk and charge accordingly. Although Insurers typically will not require a medical exam, they will still inquire about the applicant's medical history and lifestyle.

Target premium is a suggested premium used in Universal Life policies. It does not guarantee there will be adequate funds to maintain the policy to any time, specially to life. It may give an indication of what will be needed (under conservative estimates), to maintain the policy.

SPECIAL LIFE INSURANCE POLICIES

A joint Life Policy covers the lives of 2 individuals and save on premium cost by averaging the ages of the two insureds. Joint life policies pay the face amount after the first person covered on the policy dies. This is similar to a Joint Checking account. The policy is shared between two people, and when one person dies, the other receives the entire account. If B and M were insured under a joint life policy and B were to die, M would receive the entire benefit and would also no longer be insured. A policy that promises to pay the face amount on the death of the first of 2 lives covered by the policy is called Joint Life Policy.

A joint Survivor or Last Survivor Life Policies : cover the lives of two individuals and saves on premium costs by averaging the ages of the two insureds.

 Joint Life Survivor or Last Survivor policies only pay the death benefit upon the death of the last insured person. For example, say B and M purchase a Joint Life Survivor Policy. If B were to die first and M died 10 years later, no benefits would be paid from the policy until M died. A joint Life and Survivor policy covers two lives but only pays benefits after the death of the last insured. 
"Survivorship Life" is a type of policy which pays on the death of the last person. Survivorship life insurance policies are helpful when providing funds to pay taxes

A Family Maintenance Policy : Pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face amount of the policy is payable at the end of such preselected period. If P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum $20,000 at the end of the 20 year period, he should purchase a Family Maintenance Policy. Family maintenance policies provide an income for a specific period starting at the death of the insured.

A Family Income Policy pays an income beginning at the insured's death and continues for a period specified from the date of policy issue. For example, G purchased a Family Income policy at age 40, with a 20 year rider period. If G were to die at age 50, G's family would receive an income for 10 years.

"Family Term" Insurance "Rider" will pay a death benefit if the insured's spouse dies.

ALTERNATIVE LIFE INSURANCE POLICIES

[CAWL] Current Assumption Whole Life / Interest-sensitive whole life
This policy is characterized by premiums that vary to reflect the insurer's changing assumption with regard to its death, investment, and expense factors. However, interest sensitive products also provide that the cash values may be greater than the guaranteed levels. If the company's underlying death, investment, and expense assumptions are more favorable than expected, policyowner may then either pay higher premium or choose to reduce the policy's face amount and continue to pay the same premium. An interest sensitive life insurance policyowner may be able to withdraw the policy's cash value interest-free. The provision that allows this is called "The Partial

Surrender Provision".

Interest-sensitive life insurance : policyowners may be able to withdraw the policy's cash value interest free. This is called "Partial Surrender".

An Adjustable Life Insurance Policy : owner is usually looking for a policy offering flexible premiums. As financial needs and objectives change, the policyowner can make adjustments to the premium and/or face amount of an Adjustable Life Insurance Policy. Adjustable life policies are able to provide these features by combining a whole life and term life into a single plan. If a policyowner was looking for a policy in which they could control the amount and frequency of payments with a death benefit that can be adjusted as their life needs change, they would want an adjustable life policy. There typically are no dividends involved with adjustable life policies. Increasing the face amount may require a policyowner to provide proof of insurability. Usually, a customer with an Adjustable Life Policy has a special need for flexible premiums.

Universal Life Insurance Policy : Incorporates flexible premiums and an adjustable death benefit. The investment gains from a Universal Life Policy usually go towards the cash value. The policyowner can use the cash value to manipulate the flexible aspects of a universal life insurance policy. A customer who wants a policy that gives them the most options and the most control would be looking for a Universal Life Policy. Universal policies use gains to fund the cash value and give the policyowner options for flexible premiums and adjustable death benefits. Universal life policies use cash value that accumulates and face amount becomes the sum after a number of years. It contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate.

When purchasing a "Universal Life" insurance policy with a face amount of $500,000. After 15 years, the value accumulates to $100,000 and the policy's face amount becomes $600,000.
Universal Life Insurance Policies DO NOT have Fixed surrender value.

Variable Life Insurance Policies : Require a producer to have proper FINRA and National Association of Securities Dealers (NASD) securities registration prior to selling any variable policy contract, whether it be life insurance or an annuity, as they include regulated securities. These policies are also known as interest sensitive policies. The policies usually have a fixed level premium, but the cash value and death benefits of a Variable Life policy can fluctuate according to the performance of its underlying investment portfolio. A typical Variable Life Policy investment account grows through mutual funds, stocks and bonds. This includes Variable Life, Universal Variable Life, Variable Whole Life, and Variable Annuity. If a policyowner or applicant was looking for a policy to offset inflation, they would want to look into a variable policy. Since the policyowner is assuming all of the investment risk and the rate of return is not guaranteed, a person must have proper FINRA securities registration in addition to an insurance license to sell any variable contracts.

When selling "Variable Life" Insurance a "Securities License" is required for a life insurance producer to sell. Variable Universal Policies offer flexible premiums, a flexible death benefit, and the choice of how the cash value will be invested.

"Variable universal life policies" combine the Flexibility of a "Universal life" policy with "Investment Choices". Policyowner has the RIGHT TO SELECT the investment which will provide the greatest return.

A "Corridor" in relation to a "Universal Life" insurance policy is the GAP between the total death benefit and the policy cash value".

Equity Index Universal Life Insurance : Equity Index Universal Life Insurance or Equity Induced Life combines most of the features, benefits and security of traditional life insurance with the potential of earned interest based on the upward movement of an equity index. Unlike, a traditional whole life plan, this plan allows policyholders to link accumulation values to an outside equity index like S&P 500. 80% to 90% of the premium invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index.

EQUITY index Whole Life, is where 80 to 90% of the premium is invested in traditional income securities and the remainder of the premium is invested in contracts tied to stipulated stock index.
The securities component of index whole life insurance is considered an EFFECTIVE HEDGE against inflation.

JUVENILE LIFE INSURANCE POLICIES

A juvenile life insurance policy is any type of ordinary life insurance policy that insures the life of a minor. Applications for insurance and ownership of the policy rests with an adult, such as parent or guardian, and do not require the minor's consent. This is known as third party ownership. Additionally, the adult applicant is usually the premium payer until the child comes of age and is able to take over the payments. Associated with PAYER BENEFIT RIDER.

Jumping Juvenile Insurance (Estate Builder)
In addition to purchasing insurance on a child for burial expenses, insurance may also be purchased to protect the child's insurability. Some parents purchase these plans to begin a savings plan for their child. The face amount of this policy can be as low as $1,000 to start The coverage amount "jumps up" (typically 5 times the initial amount) when the child reaches the age of maturity or a specified age (i.e., age 21). This benefit increase comes without any evidence of insurability and no premium increase. In addition to being called a jumping juvenile policy, some insurers also refer to the plan as a junior estate builder.

Stranger / Investor-Owned Life Insurance (STOLI) / (IOLI)

[Stranger OLI] is when a person purchases life insurance only to sell to a third party with no insurable interest, who would therefore be unable to legally purchase the original policy. STOLI is a way to circumvent the insurable interest requirement when purchasing a life insurance policy. To legally purchase life insurance on someone else, the purchaser must have insurable interest in that person's life. STOLI is prohibited in most states.

[Investor OLI] the investor pays a person to take care out a considerable life insurance policy for that person. The investor pays the person's premiums in exchange for the person's life insurance benefits. An IOLI transaction is somewhat similar to a STOLI transaction, the only difference is that an IOLI is always initiated by an investor.

Life Insurance Policies, Provisions, Options and Riders

The "Provision" that the policy and copy of an application is endorsed upon or attached to the policy when issued is the "ENTIRE CONTRACT" provision.

The "Free-Look Provision" Gives the policyowner the right to RETURN the policy for a FULL REFUND.

An "Automatic Premium Loan Provision" authorizes an insurer to withdraw from a policy's cash value the amount of PAST DUE PREMIUMS that have NOT BEEN PAID by the end of the grace period.

A "Collateral Assignment Provision" allows a person to temporarily give up a portion of their ownership rights to secure a loan.

A life insurance policy's DOUBLE INDEMNITY provision would apply when the policyowner's death occurs due to an accident.

The "Results Clause" states the insurer is excused from paying the amount only if the death if the result of war.

A "Payor Benefit" will waive the premium on a Juvenile life Insurance policy IF the parent paying the premium Dies.

The "Accumulated Cash value" of a whole life insurance policy BECOMES THE POLICY LOAN value upon which the INSURED MAY BORROW.

"LOANS" may generally be obtained against the cash value of a personal life insurance policy and are NOT TREATED AS TAXABLE INCOME.

When borrowing against Cash Value the "Death Benefit" will be reduced if the loan is not repaid. The "Net Death Benefit" will be Reduced by the "Outstanding Loan Balance".

An Alternative to a "Life Settlement" is an "Accelerated death Benefit Rider".

"Accelerated Death Benefit options are offered with NO INCREASE IN PREMIUM."

All of the following riders can "Increase Death Benefit Amount":

• Cost Of Living
• Accidental Death Rider
• Guaranteed Insurability

• Cash Outlay to the Policyowner
• Policy Premium Reduction
• Buy Additional Insurance Coverage

The "accumulation of interest" is a taxable dividend option.

These are some "Common Exclusions" to a life insurance policy:

• Military Service
• Aviation
• Hazardous Occupations
  

• Reduced paid up insurance
• Extended term insurance
• Cash surrender

* 1868 Paul v. Virginia : This case, which the U.S. Supreme Court decided, involved one state's attempt to regulate an insurance company domiciled in another state.

* 1944 U. States v. SEUA : In the Southeastern Underwriters Association case, the Supreme Court ruled that the insurance industry is subject to a series of Federal Laws, many of which conflicted with existing state laws. As such, insurance is a form of interstate commerce to be regulated by the federal government.

* 1945 McCarran-Ferguson Act : This law made it clear that the states continued regulation of insurance was in the publics best interest. However, it also made possible the application of federal antitrust laws to the extent that [The insurance business] is not regulated by state law.

* 1958 Intervention by the FTC : In 1958 the Supreme Court held that the McCarran Ferguson Act disallowed such supervision by the FTC, a federal agency. Additional attempts have been made by the FTC to force further Federal Control, but none have been successful.

* 1959 Intervention by the SEC : The Supreme Court ruled that Federal securities laws applied to insurers that issued variable annuities and, thus, required these insurers to conform to both SEC and state regulations. The SEC regulated variable life insurance.

* 1970 Fair Credit Reporting Act : Requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about Any Investigations that are being made upon completion of the application.

* 1994 U. States Code (USC) Section 1033 & 1034.
According to 18 U.S.C. 1033 & 1034 : It is a criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust to willfully engage or participate (in any capacity) in the business of insurance without first obtaining a "Letter of Written Consent to Engage in the Business of Insurance" from the regulating insurance department of the individual's state of resistance.

* 1999 Financial Services Modernization Act. :  In 1999 Congress passed the Financial Services Modernization Act, which repealed the Glass Steagall Act. Under this new legislation, commercial banks, investment banks, retail brokerages and insurance companies can now enter each other's lines of business.

* 2001 Uniting & Strengthening America by Providing Appropriate Tools Required to Intercept & Obstruct Terrorism Act. : The Patriot Act, which amends the Bank Secrecy Act (BSA), was adopted in response to the September 11, 2001, terrorist attacks. The Patriot Act is intended to strengthen U.S. measures to prevent, detect, and deter terrorists and their funding. The act also aims to prosecute international money laundering and the financing of terrorism. These efforts include anti-money laundering (AML) tools that impact the banking, financial, and investment communities.

* 2003 Do Not Call Implementation Act. : The Do Not Call Registry allows consumers to include their phone numbers on the list to which telemarketers cannot make solicitation calls.

* 2010 Patient Protection & Affordable Care Act (PPACA) : Often shortened to the Affordable Care Act (ACA), it represents one of the most significant regulatory overhauls and expansions of health insurance coverage in U.S. history.

All notes come from an In-depth study into: The Michigan Pre-licensing Education - Life, Accident and Health Insurance course has been approved by the Michigan Department of Financial Services as meeting the mandatory 20-hour requirement for Life and 20-hour Requirement for Health | XCEL Solutions LLC. Provider ID#: 0950 Course ID#: 60731/60732