Life Insurance Basics 1

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Definitions of terms and highlights the need.

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Life Insurance Basics 1

  1. 1. The Guardian Life Insurance Company of America 7 Hanover Square, New York, NY 10004 BASICS #1 LIFE INSURANCE
  2. 2. <ul><li>Insure: </li></ul>DEFINITIONS : To make certain , especially by taking necessary measures and precautions.
  3. 3. LIFE INSURANCE BASICS DEFINITIONS: <ul><li>Insurance: </li></ul>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. 4. LIFE INSURANCE BASICS DEFINITIONS: <ul><li>Indemnify: </li></ul>To make compensation for incurred hurt, loss, or damage.
  5. 5. LIFE INSURANCE BASICS DEFINITIONS: <ul><li>Life Insurance </li></ul>Insurance providing for payment of a stipulated sum to a designated beneficiary upon death of the insured .
  6. 6. <ul><li>Beneficiary : </li></ul>LIFE INSURANCE BASICS DEFINITIONS: The person named to receive proceeds or benefits.
  7. 7. <ul><li>Risk Management: </li></ul>LIFE INSURANCE BASICS DEFINITIONS: The use of all the alternative methods of dealing with risk ... - waiving of liability or exercising insurance to indemnify <ul><li>transfer of risk </li></ul>- conscious act of keeping or assuming risk <ul><li>retention of risk </li></ul><ul><li>reduction of risk </li></ul><ul><ul><li>avoidance of risk </li></ul></ul>
  8. 8. <ul><li>Premium : </li></ul>LIFE INSURANCE BASICS DEFINITIONS: Consideration paid for a contract of of insurance.
  9. 9. <ul><li>Consideration : </li></ul>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. 10. <ul><li>Policy Dividends: </li></ul>LIFE INSURANCE BASICS DEFINITIONS: Return of unneeded premium , and are not subject to income taxation.
  11. 11. <ul><li>Proceeds : </li></ul>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. 12. Common Types of <ul><ul><li>Profit-seeking insurers or &quot;stock&quot; companies </li></ul></ul>LIFE INSURANCE COMPANIES <ul><ul><ul><li>Policies sold are fixed-price, non-participating </li></ul></ul></ul><ul><ul><ul><li>(non-par) policies, i.e. no dividends paid to </li></ul></ul></ul><ul><ul><ul><li>policyholders. </li></ul></ul></ul><ul><li>Pay dividends to stockholders after payment </li></ul><ul><li>of claims, expenses, and “possible ” provisions </li></ul><ul><li>for additions to surplus </li></ul><ul><li>Owned by stockholders who provided original </li></ul><ul><li>capital or who acquired stock from other </li></ul><ul><li>stockholders </li></ul>
  13. 13. STOCK COMPANIES (Non-Participating) Stock Company Stockholders receive common stock dividends (profit goes to stockholders) No dividends paid to policyholders Stock Policy
  14. 14. Common Types of <ul><ul><li>Non-Profit insurers or “mutual&quot; companies </li></ul></ul>LIFE INSURANCE COMPANIES <ul><ul><ul><li>Dividends are paid to policyholders </li></ul></ul></ul><ul><ul><ul><li>No capital stock, no stockholders, owned by </li></ul></ul></ul><ul><ul><ul><li>policyholders </li></ul></ul></ul>
  15. 15. MUTUAL COMPANIES (Participating) Mutual Company Policyholders receive policy dividends (return of excess premium) Policyholders are the owners of the company Policy
  16. 16. Common Types of <ul><ul><li>Fraternal Benefit Societies </li></ul></ul>LIFE INSURANCE COMPANIES <ul><ul><ul><li>Receive tax benefits because they </li></ul></ul></ul><ul><ul><ul><li>operate for the benefit of a charitable or </li></ul></ul></ul><ul><ul><ul><li>religious affiliation. </li></ul></ul></ul><ul><ul><ul><li>Operate for the benefit of a narrow, </li></ul></ul></ul><ul><ul><ul><li>defined group </li></ul></ul></ul><ul><li>Similar to mutual companies in design </li></ul>
  17. 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. 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

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