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Table Of Contents / McGill's Life Insurance

Preface i
About the Author ii
About the Editors iii

Chapter 1: Economic Bases of Life Insurance 1
Dan M. McGill
Revised by Edward E. Graves
Family Purposes 2
Business Purposes 16
Chapter 2: Basic Principles21
Dan M. McGill
Revised by Edward E. Graves
Concept of Risk Pooling 22
Yearly Renewable Term Insurance 25
Level Premium Plan 27
Chapter 3: Term Insurance35
Dan M. McGill
Revised by Edward E. Graves
Nature of Term Insurance 36
Critique of Term Insurance 43
Chapter 4: Whole Life Insurance 49
Dan M. McGill
Revised by Edward E. Graves
Principal Types of Whole Life Insurance 49
Joint-Life Insurance 59
"Special" Whole Life Policies 60
Functions of Whole Life Insurance 62
Chapter 5: Variations of Whole Life Insurance 63
Edward E. Graves
Endowment Policies 64
Adjustable Life Insurance 66
Variable Life Insurance 68
Variable Adjustable Life Insurance 77
Universal Life Insurance 77
Current Assumption Whole Life 90
Variable Universal Life 94
Methods of Comparing Life Insurance Policy Costs 100
Tables 1-17 107
Chapter 6: Annuities 125
Dan M. McGill
Revised by Edward E. Graves and Joseph W. Huver
Nature of Annuities 126
Single-Life Annuities 130 Joint Annuities 138
Variable Annuities 140
Equity-Indexed Annuities 144
Actuarial Considerations 148
Uses of the Annuity 151
Structured Settlements 152
Chapter 7: Individual Disability Income Insurance 163
Edward E. Graves
Likelihood of Becoming Disabled 165
Sources of Funds for Disabled Persons 169
Disability Income Insurance Policies 171
Insurance Company Limitations on the Amount of Coverage 192
Business Uses of Disability Insurance 195
Chapter 8: Long-Term Care Insurance 201
Burton T. Beam, Jr.
Need for Long-Term Care 202
Sources of Long-Term Care 203
Development of Insurance Coverage 205
NAIC Model Legislation 208
Effect of Health Insurance Portability and Accountability Act 210
Characteristics of Individual Policies 213
Group Coverage 220
Checklist for Comparing Long-Term Care Policies 220
Chapter 9: Family Uses of Life Insurance 225
Edward E. Graves
Sources of Immediate Funds 226
Income to Family Survivors 230
Funds to Repay Debt 233
Funds to Pay Death Taxes 233
Funds to Dependents' Education 234
Funding Trusts at Death 235
Charitable Donations 236
Funding for Gifts to Individuals 237
Supplementing Retirement Income 237
Finding Home Health Care or Nursing Home Care 237
Transferring Assets to Younger Generation 238
Discreetly Providing for Confidential Needs 238
Chapter 10: Needs Analysis, Surrender Options, and Policy Illustrations 241
Dan M. McGill
Revised by Edward E. Graves
Needs Analysis 241
Surrender Options 246
Automatic Premium Loans 254
Policy Illustrations 256
Policy Illustration Regulations 275
Outlook 278
Chapter 11: Tax Treatment of Life Insurance and Annuities 281
Ted Kurlowicz and James F. Ivers III
Income Taxation of Death Proceeds of Life Insurance 282
Income Taxation of Living Proceeds of Life Insurance 285
Deductibility of Premium Payments 288
Income Taxation of Annuity Contracts 288
Life Insurance in Estate Planning 290
The Federal Transfer Tax System 291
Transfer Tax Implications of Life Insurance 296
Federal Gift Taxation of Life Insurance Transfers 296
Federal Estate Taxation of Life Insurance 298
Federal Generation-Skipping Transfer Taxation of Life Insurance Products 304
Practical Uses for Life Insurance in the Estate Planning Context 305
Conclusion 311
Chapter 12: Business Uses of Life Insurance 313
Ted Kurlowicz and John J. McFadden
Life Insurance in Employee Benefit Planning 314
Group Term Life Insurance (Sec. 79) Plans 315
Executive Bonus (Sec. 162) Life Insurance Plans 318
Split-Dollar Life Insurance Plans 322
Life Insurance in Deferred-Compensation Plans 331
Life Insurance in Qualified Plans, IRAs, and 403(B) Plans 332
Life Insurance in Nonqualified Deferred-Compensation Plans 338
Key Person Protection 341
Funding Buy-Sell Agreements with Life Insurance 344
Chapter 13: Basis of Risk Measurement 357
Dan M. McGill
Revised by Norma Nielson and Donald Jones
Theory of Probability 357
Application to Life Insurance 359
Common Characteristics of Public Tables 369
Chapter 14: Time Value of Money 377
Dan M. McGill
Revised by Norma Nielson and Donald Jones
Definition of Terms 378
Compound Interest Functions 379
Current Interest Assumptions 395
Chapter 15: Net Premiums 397
Dan M. McGill
Revised by Norma Nielson and Donald Jones
Net Single Premium 398
Net Level Premium 413
The Effect of Gender-Distinct Mortality on Premiums 418
Chapter 16: The Reserve 421
Dan M. McGill
Revised by Edward E. Graves
Types of Reserves 422
Methods of Determining the Reserve 424
Statutory Regulation of Reserves 435
Safety Margins in the Legal Reserve 436
Supplemental Reserves 436
Voluntary Reserves 438
Table 16-1 440
Table 16-2 444
Chapter 17: Gross Premiums 447
Revised by Norma Nielson and Donald Jones
General Considerations 448
Loading of Participating Premiums 450
Gross Nonparticipating Premiums 456
Chapter 18: Modified Reserve Systems 467
Revised by Norma Nielson and Donald Jones
Modified Reserves 468
Statutory Regulation of Reserves 474
Chapter 19: Surrender Values 477
Revised by Norma Nielson and Donald Jones
Guiding Principles 478
Nonforfeiture Legislation 481
Relationship Between Surrender Values and Other Values 485
Nontraditional Insurance Products 486
Table 19-1 488
Chapter 20: Surplus-An Insurance Company's Capital 491
Norma Nielson and Donald Jones
Managing Surplus 492
Distribution of Surplus 497
Illustrative Dividend Computation 501
General Equity of the Dividend Scale 503
Chapter 21: Selection and Classification of Risks-Part 1 509
Dan M. McGill
Revised by Jeremy S. Holmes and James F. Winberg
Representing the Home Office Life
Underwriters Association
Risk Classification 510
Guiding Principles 511
Factors Affecting Risk 513
Chapter 22: Selection and Classification of Risks-Part 2 529
Dan M. McGill
Revised by Jeremy S. Holmes and James F. Winberg
Representing the Home Office Life
Underwriters Association
Sources of Information 530
Classification of Risks 534
Nonmedical Insurance 538
Insurability Option 543
Insurance at Extremes of Age 544
Ethical Issues of Classifying Risk 558
Chapter 23: Insurance of Substandard Risks 563
Dan M. McGill
Revised by Jeremy S. Holmes and James F. Winberg
Representing the Home Office Life
Underwriters Association
Incidence of Extra Risk 564
Treatment of Substandard Risks 565
Removal of Substandard Rating 570
Value of Substandard Insurance 571
Chapter 24: Reinsurance 573
Dan M. McGill
Revised by Jeremy S. Holmes and James F. Winberg
Representing the Home Office Life
Underwriters Association
Purposes of Reinsurance 574
Proportional Reinsurance 577
Nonproportional Reinsurance 581
Reinsurance Agreement 583
Chapter 25: Settlement Agreements 591
Dan M. McGill
Revised by Edward E. Graves
General Concepts and Rules 592
Structure and Functional Characteristics of Settlement Options 597
Use of Settlement Options 612
Sample Settlement Agreement 617
Chapter 26: The Regulation of Life Insurance-Part 1 623
Jon S. Hanson
Development of Insurance Regulation at the State Level 624
Goal of Insurance Regulation 628
Licensing: Foundation of Regulatory Control 630
Substantive Content of State Insurance Regulation 633
Chapter 27: The Regulation of Life Insurance-Part 2 663
Jon S. Hanson
Allocating Regulatory Authority between Federal and State Government 664
Early Federal-State Interaction
Increasing Applicability of Federal Antitrust 666
Law to the Business of Insurance 667
Dual Federal-State Regulation and State Responses 675
Chapter 28: Types of Life Insurance Carriers 701
Jon S. Hanson
Commercial Life Insurance Companies 702
Government-Provided Life Insurance 712
Internal Organization of Life Insurance Companies 713
Afffiliations 72
Chapter 29: Life Insurance Marketing 733
Michael B. Petersen, Walter H. Zultowski,
Archer L. Edgar, and Ram S. Gopalan
Structure of Marketing Departments 734
Variety of Producers 737
Structure of Field Organizations 738
Relationship Between Agent and Company 741
Marketing Costs and Profitability 742
Recruiting, Selecting, and Developing Producers 744
Other Distrubution Channels 746
Future of Life Insurance Marketing 747
Chapter 30: Financial Statements and Ratings-Part 1 751
Harry D. Garber
Considerations in Life Insurance Company Accounting 752
Life Insurance Company Financial Statements 760
Chapter 31: Financial Statements and Ratings-Part 2 775
Harry D. Garber
Ratings 776
Rating Process 778
Regulatory Measures 781
Comparative Performance Measures 787
Chapter 32: Life Insurance Company Investments 791
Francis H Schott
Historical Perspective 792
Life Insurance Portfolio Management 794 Regulation of Life Insurance Investments 804
Life Insurance Investments and Commercial Rating Agencies 810
Chapter 33: Group Life Insurance 815
Burton T. Beam, Jr.
Group Insurance Characteristics 816
The Govenmental Environment for Group Life Insurance 822
Group Term Life Insurance 830
Postretirement Group Life Insurance 858
Chapter 34: The Incontestable Clause 869
Dan M. McGill
Revised by Burke A. Christensen
Nature and Purpose of the Clause 869
Types of Incontestable Clauses 874
Matters Excluded from Incontestable Clause 876
Relationship to Other Policy Provisions 877
Chapter 35: Policy Provisions 883
Burke A. Christensen
Policy Face Page 885
Standard Policy Provisions 886
Required Provisions 887
Prohibited Provisions 893
Optional Provisions 894
Waiver and Estoppel 897
Additional Common Provisions 899
Appendix: How Much Life Insurance Is Enough? 905
Thomas J. Wolff

Index 933