once again it's infinitely better to study 20 or 30 minutes every day than two or three hours one day 20 or 30 minutes every day rewrite the notes everything i write down you write it down write it out it's gonna stick much faster than just reading it if you do that every day for a week two weeks three weeks you're gonna pass the test a hundred question tests in 30 minutes to be done with it all right annuities the first lesson was life insurance the purpose of life insurance is to create an estate the purpose of an annuity is to liquidate a mistake so annuity is a liquidate in the state meaning you got a lump sum of money the insurance company will help you stretch that money out last the rest of your life for example jack and jill gave some money they're going to give their money to the insurance company the insurance company going to give jack and jill their money back over a lifetime now why would you do that if jack and jill put their money in the bank and start withdrawing and living off of it eventually it's gonna be worth all gone if jack and julia get them out to an insurance company an insurance company say based upon your life expectancy and this is the amount of interest that you're going to earn we can have this money last year the rest of your life even beyond when you withdraw more than you put into the account so they are guaranteeing you an income based on the money that you start with so the purpose of an annuity is to liquidate a mistake and it protects the annuitant the person whose life expectancy they're using from outliving their money we got two dangers one you can doubt too soon that's why you need life insurance the other one is we can run out of money that's i'm putting more skill to that i don't want to run out of money so we got to have enough money when we can't outlive it so we got to accumulate a lot of it or i could accumulate a business that pays a residual income but we never run out of it all right so now this is an annuity jack and jill getting money to the insurance company insurance company to pay jack and dear amount of money for the rest of their life from right here all the way until jack and jill start taking the money out all of this period is called the accumulation period accumulation period pay in period that's where the money is being put in over here when they start taking the money out it's called the annuity or the annuitization period when they start taking the money out accumulation period grows tax deferred like an all right anything that grows tax deferred meaning that i said it'll make you pay attention anything the girl takes for automatically is gonna have a penalty for early withdrawal so that goes together early withdrawal is before 59 and a half when you put your money in annuity depending on what they do with the money if they pay you a guaranteed interest rate that's a g percent that's a guaranteed interest rate is considered a fixed annuity if they pay you a variable rate or based upon the stock market there's a variable annuity gotta have a securities license to sell it if the premium on a money inside an annuity pays both it has a fixed or guaranteed minimum but it is invested or linked to the uh to an index linked to an index is called a fixed index annuity that's not an e that's a i it has both a guaranteed interest rate and it can grow based upon an index that's a fixed index annuity when you take your money out of an annuity over here you have three different types of annuities based upon you withdrawing the money you could have a straight life annuity that pays you the biggest monthly check with no beneficiary so big check no benny big check no benny big check no benny big check no benny straight life is big check no benny jack gonna get the largest monthly check he died jill get nothing he could all you can have a life with a period certainly he's gonna get a jackpot get a check for the rest of his life his his beneficiary is going to check for a certain period he can get a life for the 20-year certain so jack got a monthly income for life he died in the 15th year his wife can get a check for five more years because he's a 20-year certain jack lived 22 years and dies over while jail don't get nothing life was period certain then you have a life with a refund like with refund just means jack gonna get jailed jeff jack will get a check for life he died he is going to get the money that's left whether everything is account minus withdrawals he can get if he had a hundred grand already he would draw 10 and die jill's gonna get 90. he could get a she could get a cash refund or she could get an installment refund meaning she could get the hold the check that jack was getting until all the money is gone it could save 50 installment refund she means she'll get 50 of what he was making to all the money is gone but it's a refund annuity certain annuities just by themselves always last for a period a short period of time they don't last for life that's everything you want to know about an annuity everything you need to know to pass the test for sure right you might have some other stuff on there that like uh maybe a little different but if you got this concept down liquidating mistake outliving that money accumulation period tax deferred annuity period straight life like fear certain life or refund you can get your license get write that down every day drop in the diagram every day you get to tell you it'll be easy and i don't and i rarely use the word easy but this would be easy all right now the provisions three provisions that you're gonna have to know backwards and forwards the first provision is non-forfeiture options so non-forfeiture options three non-forfeiture options first what is a non-forfeiture option let's break this word now forfeit meaning to lose something non-forfeit mean i don't want to lose something so if i have a whole life policy that has cash value i don't want policy anymore but i don't want to forfeit or lose the cash value inside of it they give me so i am counseling a whole lot of policy but i don't want to forfeit the cash value inside of it they give me three options to see in all these provisions is always cash cash baby cash cash is candy cash is i give my money i'm down with y'all if you do a cash surrender then the policy cannot be reinstated can't be reinstated you can have extended terms then the term means they take the cash value so you cancel the whole like policy but you don't want to lose you do not want to lose your cash value so you can take your cash value and buy an extended term meaning you will take the same face amount of coverage you have before so the same amount of insurance and it will last for a period of time however long a term period your cash value will buy based on your age so it gives you the same amount of same amount of coverage for a temporary period so extended term gives you the most coverage and it is also the automatic option so if a person had a whole life policy about 10 years they changed banks forgot to call the insurance company to set up a draft policy lapses what happened all that money i put in the company automatically did the extended term option and your policy just ran out they kept all your money that's what happened to your money that's what happened to grandmother's money that's what happened to your uncle's money anybody about this if they have bought turn if they have brought term and invested the difference the money in their mutual funds still be growing even their chain banks not putting any more money in and they could have kept the money in the investment and bought paid and pay the premium for the turn insurance but if they do this they're gonna end up with nothing all right the next one is reduced paid up reduced paid up if you're taking your cash value and you're buying a permanent policy for less coverage so reduce means you're gonna have less coverage less face amount but it's gonna be permanent so cash get your money cannot be reinstated extended term gives you the most because it gives you the same amount you have for a temporary period reduce paid up gives you coverage for the longest period because it's permanent got it the next one is the dividend options dividend options insurance company just makes up stuff because for those of us who got a securities license a dividend is when a perfectly traded company takes the profits and especially between the shareholders the insurance companies make up their own definition of a dividend and say they're gonna overcharge you and they're gonna return your unused premium so the shirt is going to owe you some money back crapo see in all the provisions always all of these are the provisions is c and all of them is always cash so i'm going to check next is reduction of premium next is accumulate at interest next is paid up addition and this is next is one year term [Music] paid up addition and one year term reduction premium on a test they just want to make sure you know it reduces next year's premium your premium due in january you ought to come here a thousand dollars well let's say no your premium is due in february it's thousand dollars insurance company oh you're a dividend they're gonna get you three they owe you 300. you can't say well just take the 300 and take it off the thousand i send you 700 in february no no they're gonna say sending us a thousand in february and next february you can pay a 700. so it always next year's premium accumulate at interest insurance company owes you money you say accumulated entry i mean don't send it to me now to send it to me later i call you when i need it so what you need to know is on the test that dividends are not taxable but the interest is taxable so the insurance company owe you 400 dollars you say i'm going to accumulate an interest dividend a year later now your dividends have accumulated plus interest of 450. at the end of that year you're gonna pay taxes on the fifty dollars so the interest is taxable whether you take it or not you still gotta pay taxes on it paid up addition is you use your dividend to purchase or add additional permanent insurance to your policy you increase your coverage with permanent insurance so if you had a hundred thousand dollars now you got 105 for life is permanent one year term is when you take your dividend and you add temporary insurance a policy is only going to last one year it is always the amount is equal to the cash value yeah last provision move over some is a settlement option sell them an option insurance car jack died they got to pay g or her claim pay her the death benefit the claim with a death benefit all that is the same as saying the settlement they owe her the money so a settlement option is when an insurance company is paying the death benefit they're going to settle with you so they got five options the beneficiary has five options on how they can take the money the city is cash send me a check cash baby cash don't get no better than that the next is life income remember back over here at annuities when we said you got a straight line big check no benny life appearance in life with a refund that is the exact same thing as life income over here you can annuitize the death benefit meaning you don't have to get it all at one time you can get a straight life you can get a life for the pure certainty or you get a life with a refund a life income is not a lump sum it's a mafic next is interest only when i read the test when i'm helping people study they make this sound so tricky it's amazing and it's the most simple concept of all this information we cover interest only is just saying that i don't need the money now just send me the interest off the money jack died jill get a hundred grand jill don't want jill don't need a hundred grand she don't want it right now just too many inches off of it but on a test you just gotta look for keywords some version of if they want an immediate income and they want to protect the principal for protect the principal because you're not going to spend 100 you just want the answers off of it entries only you want some money now but not the personal and then the last two is fixed amount and fixed period fixed amount the beneficiary chooses the amount the beneficiary chooses the amount and the insurance company going to give you the period so jack died jill said i need five thousand dollars a month to live off of you'll see me checking five ran out until it's all gone i had to figure it out after that the next is fixed period fixed period is you the beneficiary chooses the period and the insurance company gonna tell them the amount so jack down glc these kids are young to check for 15 more years at least so split this up money just spread the money of the evening over 15 years until it's all gone so that's how they differ and there's one thing they both pay until all the money is exhausted which reminded me back over here on his annuities is another two different types of annuity you have which is called an immediate annuity and a deferred annuity an immediate annuity if you make if you start making any withdrawals less than 12 months withdrawals versus withdrawals over 12 months [Music] jack got a hundred thousand dollars he and he put the money in january he starts taking out in february that's immediate annuity jack got our annuity started putting money in january he didn't take it out until the next february or mark anything over 12 months they'll be considered a deferred annuity on the test they have a question word where they mentioned something about jack starting an annuity and starting an income they don't use the word immediate but that answer is an immediate annuity because they just basically you just they just want to make sure you know if you take that money immediately that's an immediate annuity our teammates kept the types of insurance we've discussed annuities and the provisions we've discussed you have to read the regulations you have to have the discipline to redirect there's a price to pay to be successful you're going to read that regulation every day and you're going to you're going to remember if you don't pass this test with no problem 20 or 30 minutes every day is infinitely better in two or three hours one day good luck teammates we're going to take over from here i hope it helps