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Life Insurance Basics 1

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Definitions of terms and highlights the need.

Definitions of terms and highlights the need.


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  • 1. The Guardian Life Insurance Company of America 7 Hanover Square, New York, NY 10004 BASICS #1 LIFE INSURANCE
  • 2.
    • Insure:
    DEFINITIONS : To make certain , especially by taking necessary measures and precautions.
  • 3. LIFE INSURANCE BASICS DEFINITIONS:
    • Insurance:
    Coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril, or, the means of eliminating or reducing the financial burden of risk by dividing the losses they produce among many individuals.
  • 4. LIFE INSURANCE BASICS DEFINITIONS:
    • Indemnify:
    To make compensation for incurred hurt, loss, or damage.
  • 5. LIFE INSURANCE BASICS DEFINITIONS:
    • Life Insurance
    Insurance providing for payment of a stipulated sum to a designated beneficiary upon death of the insured .
  • 6.
    • Beneficiary :
    LIFE INSURANCE BASICS DEFINITIONS: The person named to receive proceeds or benefits.
  • 7.
    • Risk Management:
    LIFE INSURANCE BASICS DEFINITIONS: The use of all the alternative methods of dealing with risk ... - waiving of liability or exercising insurance to indemnify
    • transfer of risk
    - conscious act of keeping or assuming risk
    • retention of risk
    • reduction of risk
      • avoidance of risk
  • 8.
    • Premium :
    LIFE INSURANCE BASICS DEFINITIONS: Consideration paid for a contract of of insurance.
  • 9.
    • Consideration :
    LIFE INSURANCE BASICS DEFINITIONS: An act, or the promise thereof done or given by one party in return for the act or promise of another.
  • 10.
    • Policy Dividends:
    LIFE INSURANCE BASICS DEFINITIONS: Return of unneeded premium , and are not subject to income taxation.
  • 11.
    • Proceeds :
    LIFE INSURANCE BASICS DEFINITIONS: - at death of the insured (under any payout arrangement) To Beneficiary - or at election of income settlement option - at surrender of policy To Insured Amount of benefits paid out
  • 12. Common Types of
      • Profit-seeking insurers or "stock" companies
    LIFE INSURANCE COMPANIES
        • Policies sold are fixed-price, non-participating
        • (non-par) policies, i.e. no dividends paid to
        • policyholders.
    • Pay dividends to stockholders after payment
    • of claims, expenses, and “possible ” provisions
    • for additions to surplus
    • Owned by stockholders who provided original
    • capital or who acquired stock from other
    • stockholders
  • 13. STOCK COMPANIES (Non-Participating) Stock Company Stockholders receive common stock dividends (profit goes to stockholders) No dividends paid to policyholders Stock Policy
  • 14. Common Types of
      • Non-Profit insurers or “mutual" companies
    LIFE INSURANCE COMPANIES
        • Dividends are paid to policyholders
        • No capital stock, no stockholders, owned by
        • policyholders
  • 15. MUTUAL COMPANIES (Participating) Mutual Company Policyholders receive policy dividends (return of excess premium) Policyholders are the owners of the company Policy
  • 16. Common Types of
      • Fraternal Benefit Societies
    LIFE INSURANCE COMPANIES
        • Receive tax benefits because they
        • operate for the benefit of a charitable or
        • religious affiliation.
        • Operate for the benefit of a narrow,
        • defined group
    • Similar to mutual companies in design
  • 17. FRATERNAL COMPANIES (Participating) Fraternal Company Policyholders receive policy dividends (return of excess premium) Company receives tax benefits: operates for the benefit of a charitable or religious affiliation Grand Poo-Bah International Brotherhood of Water Buffalo IBWB Policy
  • 18. The Guardian Life Insurance Company of America 7 Hanover Square, New York, NY 10004 See Different Types of Life Insurance Covered In BASICS #2 LIFE INSURANCE