LUTCF Course 1 flashcards
LUTCF Course 1 · Build recall with a focused review session.
31 cards. Read the term and the definition here. The deck at the top of this page is optional.
- Insurable Interest
- A financial or love-and-affection relationship such that the policyholder suffers loss if the insured dies. In life insurance it must exist at policy application, not at death.
- Human Life Value
- A method valuing a person's economic worth as future earnings minus self-maintenance costs and taxes, discounted to present value over remaining working years.
- Needs Approach
- A method that totals survivor income needs, debts, education costs, and final expenses, then subtracts existing resources to determine the required death benefit.
- Incontestability Clause
- A provision stating the insurer cannot contest the policy for misrepresentation after a stated period, usually two years from issue, except for nonpayment of premium.
- Grace Period
- A period, commonly 31 days, after a premium due date during which coverage remains in force. Any unpaid premium is deducted from a death benefit paid during that period.
- Nonforfeiture Options
- Choices available when a cash value policy lapses: cash surrender, reduced paid-up insurance, or extended term insurance. They protect the policyholder's accumulated equity.
- Aleatory Contract
- A contract in which the values exchanged are unequal and depend on an uncertain event. The insured may pay small premiums and receive a large benefit, or nothing.
- Waiver of Premium Rider
- A rider that waives premiums after the insured becomes totally disabled for a stated period, usually six months, keeping the policy and its values in force.
- Own Occupation Definition
- A disability definition that pays benefits when the insured cannot perform the material duties of their own specific occupation, even if able to work elsewhere.
- Elimination Period
- The waiting period after disability begins before benefits become payable. Longer elimination periods reduce premium because the insurer avoids short-term claims.
- Residual Disability Benefit
- A partial benefit paying a percentage of the monthly benefit proportional to income lost after a disability, often requiring a stated income loss threshold such as 20 percent.
- Presumptive Disability
- A provision paying full benefits for specified severe losses such as loss of sight, speech, hearing, or two limbs, without requiring an elimination period.
- Coordination of Benefits
- Rules determining which health plan pays first when a person has dual coverage. For dependent children, the birthday rule usually applies to the parents' plans.
- Birthday Rule
- A coordination of benefits rule stating the plan of the parent whose birthday falls earlier in the calendar year, comparing month and day only, pays first for a dependent child.
- Guaranteed Renewable
- A renewability provision requiring the insurer to renew the policy at the insured's option while retaining the right to increase premiums by class, not individually.
- Noncancelable Policy
- The most favorable renewability provision: the insured may renew to a stated age and the insurer cannot cancel or raise premiums individually.
- Activities of Daily Living
- Six basic self-care tasks: bathing, dressing, eating, toileting, transferring, and continence. Inability to perform two typically triggers long-term care benefits.
- Medicare Part B
- The optional Medicare component covering physician services, outpatient care, durable medical equipment, and preventive services, funded by premiums and general revenue.
- Accumulation Period
- The phase of a deferred annuity during which premiums are paid and interest or investment returns build the contract value before any income payments begin.
- Exclusion Ratio
- The formula determining the tax-free portion of each nonqualified annuity payment: investment in the contract divided by expected return, applied to each payment.
- Life Only Settlement Option
- An annuity payout providing the highest periodic income because payments cease at the annuitant's death, with no refund or survivor benefit.
- Joint and Survivor Annuity
- A settlement option paying income for as long as either of two annuitants lives, commonly continuing at 50, 66, or 100 percent to the survivor.
- Fixed Annuity
- A contract guaranteeing a minimum interest rate and a stated payout, with the insurer bearing investment risk and the contract value declared in dollars.
- Variable Annuity
- A contract whose value fluctuates with subaccount investments, shifting investment risk to the owner; it is a securities product requiring a prospectus and proper licensing.
- Required Minimum Distribution
- The minimum amount that must be withdrawn annually from tax-deferred retirement accounts beginning at age 73 or 75 depending on birth year.
- Defined Benefit Plan
- A pension promising a formula-based benefit, often final average pay times years of service times a percentage, with the employer bearing investment and longevity risk.
- Fiduciary Duty
- The obligation to act in the client's best interest through competence, loyalty, disclosure of conflicts, and good faith, exceeding a mere suitability standard.
- Six-Step Planning Process
- Establish the relationship, gather data and goals, analyze the situation, develop recommendations, present and implement, then monitor and review periodically.
- Scope of Engagement
- A written statement defining the services to be provided, timeframe, fees, and exclusions, which limits liability and aligns client expectations.
- Errors and Omissions Insurance
- Professional liability coverage protecting against claims of negligent acts, errors, or omissions in advisory services; it excludes fraud and intentional misconduct.
- Suitability Information
- Client data required before recommending a product: financial and tax status, objectives, time horizon, risk tolerance, liquidity needs, and existing holdings.