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Life and Health Exam
Life Exam
| Question | Answer |
|---|---|
| The five purposes and benefits of life insurance | Income replacement, immediate creation of an estate, provides cas to meer final death expenses, protects businesses from economic loss, and indirect social benefits |
| Oridnary starit life is "perminant insurance" which is also known as | whole life insurance |
| An Orinary Life product reaches the endowment point at age | 100 |
| Endowment point | is when the cash value equals the death benefit and the death benefit is paid to the insured |
| All WL policies have 3 things in common | Level premium, fixed and guaranteed amount of death benefit, and Cash Surrender Value (CSV) |
| Limited pay policies | are whole life policies that that are paid for a limited amount of time but the insured is covered for life |
| 10 pay life | is a whole life policy that is paid for 10 years but coverage is to age 100 |
| 20 pay life | is a whole life policy that is paid for 20 years but coverage is to age 100 |
| 30 pay life | is a whole life policy that is paid for 30 years but coverage is until age 100 |
| This is a whole life policy that premium is paid only once | Single Premium Whole Life (SPWL) |
| This polciy allows the owner to change the plan of insurance by increasing or decreasing face amounts and premiums, with in certain limits | Adjustable Life |
| This life insurance policy has no cash value | Term Life Insurance |
| Temporary Life Insurance | Term |
| Term life insurance is | temporary life insurance for protection for a specific period of time. The death benefit is only paid if the insured dies during the term and all premiums were paid |
| The death benefit stays level during the term | Level Term |
| Term Renewable Rider | the insured has the right to renew the term policy for a similar term of life without showing evidence of insurability |
| The death benefit decreases over the term of the coverage | Decreasing Term |
| The insured has the right to convert the term policy to any whole life policy offered | Covertible Rider |
| The death benefit decreases by the same amount each year | uniformly decreasing term |
| an additional but optional coverage for which the policy owner will pay additional premium | rider |
| The death benefit remains proportunately higher in the early policy and then quickly drops | Mortgage decreasing term |
| the current age of the insured | attained age |
| The face amount of the insurance increases with each payment | Increasing Term |
| this policy pays a rate or return on cash value that flutuates rather than a fixed value | Interest-sensative life products |
| Flexible Premium Whole Life | Universal Life |
| combines the best features of low cost term insurance with tax-deferred policy account feature which allows cash value to build | Universal Life |
| behaves exactly like a traditional whole life contract except that the rate of return paid on cash value can flutate | interest sensative whole life |
| the amount of money invested in an annuity and the rate of return earned, the age of the annuitant, and the sex of the annuitant effect the annuitant's | income |
| requires a fixed and level premium however cash values can be invested in a wide range of accounts such as bond funds money markets and mutual funds | variable life |
| Annuity benefit withdrawal alternatives could be to take a lump sum or to | annuitize |
| in a variable life the consumer bears all investment | risk |
| the company will take all the money in an annuity and will pay periodic checks for the duration of the payment period. The check is made up of return of principle and interest | annuitize |
| variable universal life | same as variable life expect the premium payments can be flexible or skipped as long as the cash value can pay the premium |
| take the money in an annuity as a partial lump sum and annuitize the remainder | combination |
| pays the face amount on the first to die | joint life |
| The annuitant gets the highest possible fixed income, guranteed by the insurance company for life. If the annuitant dies the principal and income is kept by the insurance company | life annuity |
| pays the face amount on the last to die | survivorship life |
| leaves all the money not yet distributed to the original annuitant to a named beneficiary upon the annuitant's death | cash refund annuity |
| It is a period payment made to the annuitant over his expected lifetime or for a specific period of time | annuity |
| ties the benefit benefit payment to two or more annuitants. | Joint and Survivor annuity |
| life insurance pays at the time of | death |
| the annuitant receives a fixed monthly amount for the life or a period certain, whichever is longer or just for the specified period. Which ever the annuitant decides | Period Certain Annuity |
| annuities usually stop payments at the time of | death |
| What is the age that an annuity is best to be started | 59 1/2 |
| the insurance company bears all risk. the annuiant gets the same amount of income | fixed |
| once a decision to annuitize has been made can the annuitant undo it? | No |
| the annuiant bears all risk. the income is not always the same | variable |
| The greater the guarantees made by the insurance company to the annuitant the income will be | lower |
| the annuitant cannot experience any loss to principle but returns are based on the performances of the stock indexes | equity index |
| Is Entire Contract Clause manitory | yes |
| SPIA | Single Premium Immediate Annuity |
| is a clause that the policy and the application are the entire agreement between the insurance company and the policy holder | entire contact |
| SPDA | Single Premium Deferred Annuity |
| in the entire contact clause statments made bu the policyholder are not warranties they are | representations |
| Flexiable Premium Deferred annuity aka | FDPA |
| is considered, by its maker, to be an absolutely true statement | warranty |
| is a statement made which is considered true in the opinion and to the knowledge of the individual making it | representation |
| if a company can prove a representation was material, the representation was flase, the insured knew the statement was flase but made it anyway, the insured wanted the company to act on the flasehood, and the company did act on it then the contact is | void |
| the promises between the parties are found in this clause | insuring clause |
| The promise is that in return for regular stated premiums paid by the owner in a timely fashion then a face amount will be paid upon the death. This is in the | insuring clause |
| The owners rights are assignment, beneficiary changes, borrowing against cash value, surrendering cash value, dividends, and selection of | mode |
| the parties named in the insuring clause are the company, the policyholder, and the | insured |
| In the owners rights the assignment right states that | the owner can sell or gift his ownership to another party without the permission of the insurance company |
| Not included in the insuring clause are the policy type and the mode of | premium |
| If the insured and the policy applicant are different, who has the owners rights? | the owner (applicant) not the insured |
| This clause says that once a policy has been delivered to an owner, the owner has a specific amount of time to decide if they want to keep the insurance | free look examination |
| how many premium modes are there? | four |
| At any time during the free look period a policyholder may return the insurance for how much of a refund | full refund |
| what are the premium modes? | monthly, quarterly, annual, and semiannual |
| This clause states that the only duty of the policy owner is to pay the premium on time | consideration clause |
| what is the cheapest mode of premium for the policy owner? | annual |
| the first premium which is submitted with the application is called what type of premium | initial |
| what is the most expensive premium mode for the policy owner? | monthly |
| The statments made in the application and the money collected at the time of application make up the initial | consideration |
| can the mode of payment be changed at any time? | yes |
| This clause sets forth the contractual rights belonging to the policyowner | owners rights |
| This person will recieve the proceeds in the event of the insured's death | beneficiary |
| The first choice to recieve the proceeds of the insured's death is the beneficiary | primary |
| Nonforfeiture Options are | options that are important when the policy owner does not pay the required premium |
| The second choice to recieve the proceeds of the insured's death in the event of the death of the primary beneficiary is the | contingent beneficiary |
| Cash Value (Surrender), Extended Term Insurance, and (Reduced) Paid-up Insurance are all considered what | Nonforfeiture Options |
| If a beneficiary can not be changed by the applicant then the beneficiary is | irrevocable |
| Name the 3 Nonforfeiture Options | Cash Value (Surrender), Extended Term Insurance, (Reduced) Paid-up Insurance |
| If the beneficiary can be changed by the applicant then the beneficiary is | revocable |
| This is paid to the owner who surrenders the policy and all rights held by the policy owner | Cash Value (Surrender) |
| If the beneficiary is a minor the proceeds of the insured's death go to the | probate court |
| This is the "automatic" selection of the 3 Nonforfeiture Options | Extended Term Insurance |
| If the insured and the primary beneficiary die at the same time and there is no contingent beneficiary the proceeds would go to the | insured's estate |
| This is in the event the policy owner stops paying premium but neither cash value nor requests a paid up policy the insurance company automatically places the policy on | Extended Term Insurance |
| This is a 31 day time allotment tge owner has from the premium due date in which to make the premium payment without losing some essential rights of the contact | grace period |
| Extended Term Coverage continues for as long as | cash value remains in the policy to make required payments |
| if the 31 day grace period expries without payment, then the policy is | lapsed |
| Before a contract can be eligible for reinstatement, it must not have been surrendered or had the paid-up option exercised and must be on | extended term insurance |
| This clause states that if at the end of the grace period the premium is not paid then the company can take cash value from the policy to pay premium so it does not lapse | Automatic Premium Loan |
| if a policy owner dies on extended term insurance then the | full face amount is paid |
| Is Automatic Premium Loan (APL) mandatory? | No |
| this allows the owner to use the entire cash value to purchase a fully paid-up face amount of insurance of the same type originally purchased | (Reduced) Paid-up insurance |
| This clause allows the owner a period of time (between 3-5 years) after the policy lapsed to pay back all unpaid premium to reinstate the policy from the original issue date | Reinstatement |
| Paid-Up Insurance is "reduced" because it is less than the | original amount |
| There is no obligation to repay this loan but if the loan and interest charged on the loan equals the cash value, the policy is no longer in force | policy loan |
| This is the only nonforfetiure option that still accumulates cash value | (Reduced) Paid-up Insurance |
| In a universal or variable life contact the owner can take account values for a one time service charge. There is no interest paid, this is called a | withdrawal |
| This is offered by mutual companies but not stock companies | dividends |
| How often are dividends declared | annually |
| Dividends are not considered to be either profit or income and therefore are not | taxable |
| This is a two year period of time the insurance company has to investigate the statements made by the insured | Incontestibility clause |
| The 4 most common dividend options offered by a company are | Cash, Accumulation of interest, Paid-up additions, and One-year term option |
| This is the transfer of some or all rights held under the insurance contract by the contract owner to another party | Assignment |
| This means the dividend is invested with the insurance company to earn interest at a rate of interest specified in the policy | Accumulation of Interest |
| this means "all incidents of ownership" are transfered to an assignee who now stands the in the same position as did the assignor who transferred the rights (this is a type of assignment) | absolute |
| As the dividends and interest accumulate they are available to the policy owner at | any time |
| this is where a life contract is used to secure a transaction (this is a type of assignment) | collateral |
| If dividends and interest are not cashed in before the insured dies then they are paid in addition to the | face amount of the policy |
| The two types of assignment are | absolute and collateral |
| Paid-up Additions | apply the dividends to purchase addition amounts of paid-up death benefit. It is a "mini" single premium death benefit. |
| this is a two year period from the policy issue date permitting a company not to pay the death benefit if the cause of death is suicide | suicide clause |
| If a policy owner has paid-up additions and wants to take the cash value of the dividends, can they? | yes, but the paid-up additions will be eliminated |
| Will a misstatement about age and gender void a policy | no |
| This uses the annual dividend to purchase one year of term insurance coverage at the attained age of the insured which would be paid up in addition to the face amount of the contract | One-year term option |
| If the gender and age were incorrect then once the correct gender and agre are discovered then it is corrected by | calculating the premium payment that should have been collected |
| If one-year term option is selected after the policy is purchased the compant might require | proof of insurability |
| settlement options | are different options of how the face amount will be paid to a beneficiary |
| The 3 dividend options that are most often USED are | Premium application, Endow the policy, Paid-Up option |
| This settlement option states that the compant keeps the death benefit and pays interest to the beneficiary | interest only |
| This applies the dividend to the next premium payment, lowering the premium cost | premium application |
| this settlement option is a fixed periodic payment paid until both the principal and interest run out | fixed amount option |
| this uses the dividend to pay the insurance faster and creates a closer endowment date | endow the policy |
| Can the policy owner pick the settlement option? | yes |
| this is when the dividends are added to the cash value to pay the policy sooner and "vanish" future premium payments however the endowment date stays the same | paid-up option |
| If the owner did not pick the settlement option before their time of death then who picks the settlement option? | the beneficiary |
| The two Test concepts to understand about dividends are | the main benefit of dividends is insurance cost is reduced, policy loans taken will not reduce future dividend payments as long as premiums are paid on time |
| This settlement option is very similar to an annuity where equal installments are paid for a specific time and then stop | fixed period option |
| This settlement option, the proceeds are held by the company and regular periodic payments are made to the beneficiary as long as they live | life income |
| This settlement option, proceeds are paid in installments during the lifetime of two beneficiaries | Joint and survivor |
| in the Joint and Survivor settlement option, if one of the beneficiaries dies then | a reduced payment is paid to the survivor (50%, 66%, or 75%) |
| This policy rider allows young people the right to make additional future purchases without reguard to future evidence of insurability | Guaranteed Insurability Option (GIO) |
| is a rider whereby premium payments are "waived" for as long as the insured has a disability which is "total and perminant" | waiver of premium |
| This term rider allows coverage on more than one person on a single policy | other insureds |
| according to the waiver of premium there must be how many months of disability? | six |
| This term rider says the insured may exhange one permanent policy for another without prrof of insurability, if there is no additional risk to the company | conversion options |
| During the six month disability period in the waiver of premium rider does the insured have to continue premium payments? | yes but the money is refunded at the end of the six months |
| This term rider states the death benefit amount will increase annually based on the index US government published inflation rate | cost of living |
| is a rider whereby the carrier waives the cost of premium and expenses for the life insurance coverage while also paying a monthly income due to disability to the insured | waiver of premium with disability income |
| this limits the scope of a benefit which is otherwise payable | exclusion |
| With the waiver of premium with disability income rider the disbility income is typically paid for low long? | two or five years and each would have an elimination period |
| Name the two basic life contract exclusions | war and aviation |
| With the waiver or premium with disability income, how long (typically) is the elimination period for a two year DI policy and a five year DI policy? | 3 months for a two year DI policy and 6 months for a five year DI policy |
| There are two basic types of war exclusions, they are | status and results |
| This rider is another form of premium waiver. It is added to a juvenile policy and the cost is based on the age and health of the parent. The rider states that premiums will be waived until the child reaches 21-25 in the event that the payor dies | Payor Benefit |
| The status exclusion states that: | no benefit will be paid if the insured was in the military at the time of death |
| This rider on juvenile policies states that upon reaching adult age the face amount of the policy jumps to a higher amount (usually 5 times the original amount) | Jumping Juvenile |
| The results exclusion states that: | death benefit will not be paid if the death is war related |
| this rider also known as the double indemnity will pay a face amount that matches the basic life policy upon which it is added if the cause of death is accidental | accidental death benefit (ADB) |
| Typically there was eclusion of all aviation related deaths except those to | fare-paying passengers on regularly scheduled airline flights |
| According to the accidental death benefit, death has to occur how long after an injury to be considered a result of the accident? | 90 days |
| After the underwriting process can the insurer add any specific exclusions? | yes |
| ADB is usually a rider but can be purchased as a contract with | accidental dismemberment benefits |
| Fair disclosure of all facts relating to the purcahse of life insurance must be made. this is designed to let the prospect make an | informed decision |
| When advertising, what words should a producer be careful when using | investment, expansion, profit, or savings plan |
| The owner of the policy is not the insured | third party ownership |
| covered worker's childer can get Social Security benefits at any age of they were disabled before age | 22 |
| a parent applying for life insurance on theri child is an example of | third party ownership |
| Widows or widowers at any age if caring for a deceased worker's child can get Social Secuity Benefits. This is called the _________ benefit | survivorship |
| For third party ownership to be valid, what must be between the applicant and the insured at the time a policy is issued? | insurable interest |
| Social Security Survivorship benefit is paid up to the minor's age of | 18 and to age 19 if they are still in high school |
| The coverage on this type of insurance is usually one year term | Group Life Insurance |
| Dependent parents can get social secuity at age | 62 |
| The life insurance an employee gets though work is called | group life insurance |
| If you have been divorced, your former wife or husband can get social security benefits if your marriage lasted at least 10 years at age | 60 or older (50-60 if disabled) |
| all employee contract rights in a group life plan exist under one what? | master contract |
| a worker must have 40 quarters or 10 years of coverage under SS to be _________ insured | fully |
| The group life master contract is held together by employers and employees who are __________ into the plan | enrolled |
| If a worker does not have 10 years (or 40 quarters) in SS then they are __________ insured | currently |
| Is the cost for group life higher or lower than individual life? | lower |
| The one time death benefit paid out by SS is | $255 |
| In a group life are the benefits level to all employees? | yes |
| This period is when the SS survivorship benefit has ended but the widow is not yet 62 to get SS | widow blackout period |
| is insurability considered in a group life plan? | no |
| Premium dollars are paid by individuals with their _____ tex dollars (with the exception of group life) | after |
| can group life be issued to debtors and common creditors? | yes |
| the proceeds of life insurance are _____ of income tax | free |
| what is it called when group life is issued to debtors and common creditors? | group credit life |
| The _______ tax is the transfer of property from one person to another at death | estate |
| What is it called when an employee leaves a group and has 31 days to convert the coverage from group term to an individual permanent contract at guaranteed insurable rates | group conversion option |
| Life premiums paid by the individual are not generally tax qualified and so ____ tax dollars must be used | after |
| in a group conversion option when an employee leaves the group how long do they have to convert to an individual contract? | 31 days |
| life preiums paid by an employer usually are no ________ unless they are paid under a group plan by a corporation as an expensed item. | deductible |
| If an employee dies in under 31 days of leaving a group life contract are they covered? | yes |
| dividends paid by a mutual company are not ______ taxable | income |
| This means the employee and employer share the cost of the insurance | contributory |
| A modified endowment contract is any contract that is fully paid in under | 7 years |
| This means 100% of those eligible are covered because the employer is picking up the entire cost and so the employee has no choice but to be covered | non-contributory |
| MEC have different tax laws than normal life insurance. money from dividends, loans, withdrawals, or surrenders are treated the same as amounts received under annuity contracts _______ (LIFO) | last in first out |
| Typically in a contributory group life what percent must be enrolled? | 75% |
| First money out is income taxable plus a 10% tax penalty is due if the contract owner is less than 59 1/2 years of age at the time of cash receipt | last in first out |
| income which is earned and would otherwise be income taxable immediately except that they are dollar contributed to a qualified plan will not be taxed until the future are called | pre-tax dollars |
| The accelerated Death Benefit or ________ benefit lets the policy owner access up to 75% of the death benefit in an event of terminal illness | living |
| This plan must be tax-deferred income but also have the ability to invest with pre-tax dollars | tax-qualified plans |
| _____________ contracts provide death benefit but heavy emphasis is placed in the savings feature (cash value) | endowment |
| IRA, SEP, 401(K), ESOP, and PROFIT SHARING are examples of | tax-qualified plans |
| At the selected endowment point the _______ amount of the policy is paid to the insured | face |
| the flip side to qualified tax plans are | nonqualified plans |
| Endowment at age 65 means that if they insured has not died by 65 the _____ amount of the policy is paid to the insured | face |
| Most purchases of life insurance are nonqualified or tex-qualified plans? | nonqualified plans |
| In advertising can it say that limited numbers of people are eligible (unless refering to underwriting terms) | no |
| This retirement plan utilizes tax-deferred growth of income with after tax dollars | nonqualified plans |
| in advertising can it say dividends are guaranteed | no |
| This is used to protect companies and business partners from the possible economic loss suffered due to the unexpected death of a kep employee | Business Insurance |
| deceptive | |
| OASHDI stands for | Old Age, Survivorship, and Hospitalization and Disability Income Benefits |
| prohobited | |
| Social Security Benefits are referred to as | OASHDI |
| any ads for direct life marketing cannot imply that because there is no producer contracts that there is a cost savings unless such claim is | factual |
| Widows or Widowers as young as age 62 (reduced benefits) or recieve full benefits from social security at age 65 if born before when | 1940 or later |
| genuine | |
| Widows or widowers who are disabled will recieve social security as early as age | 50 |
| ads cannot state that enrollment periods are "special" or "limited" if they are successive enrollment periods. The enrollment periods must be at least ____ months apart | six |
| preneed funeral contracts ads must disclose is a ____ insurance contract is involved | life |
| representatives of the deceased must be told there is a right to ______ the choice of the preneed provider (funeral home) | change |
| no ad shall imply that any federal or state agency approves or ______ any producer or company | endorses |
| copies of all advertising must be kept on record for ____ years or until next date of an insurers examination report, whichever is longer | four |
| replacement is defined as any transaction where it is known that as part of the transaction, any existing life insurance will be | lapsed, forfeited, surrendered, or terminated, converted to a nonforfeiture or reduced in value, be converted so that a loss of benefit or time in force occurs, pledged or borrowed more than 25% of cash vlaue, re-issued with a reduction in cash value |
| The following policy types are ______ to replacement regulations: credit life, group life & group annuities, life policies in connection with pension profit sharing or other tax deductible premiums, variable life, nonconvertable term expiring in 5yr | Exemptions |
| when replacement is involved each producer shall submit to the replacing insurer with or as part of each application for life or annuity: | a signed statement by the applicant as to weather or not replacement is involved, a signed statement by the producer as to weather or not the producer knows replacement is involved |
| duties of the insurance company are the carrier must require that the producer with each application for life or annuity shall signed a statement as to weather or not replacement is involved, the replacing insurer shall be required to fill out _____ form | notice regarding life insurance or annuity |
| The insurance comopany must make sure agents are complying properly in the replacement law and providing _______ to applicants | buyers guide |
| company must forward, within ___ working days, the notice form to the other company | three |
| replacing insureers must keep replacement notices on file for _____ years | three |
| The purpose of life solicitation rule is to | protect consumers by making life insurers deliver information which will enable the prospective buyer to be more educated as to the best plan under consideration |
| _____ is one of two required documents given to life applicatns. It explains the difference between various policy types and explains how to understand cost indices | buyers guide |
| ______ is the current illistrated dividend which can be applied toward gross premium payments | cash dividend |
| ______ are projections of dividend payments which can be illistrated to ten or twenty year and allow consumers to make valid comparisons of dividend projections from one company to another | equivalent level annual dividend |
| ______ this index is useful if you consider the level of the cash value to be primary importance to you. it helps compare costs if at some future point in time, such as 10 or 20 years, if you were to surrender the policy and take its cash value | life insurance surrender cost index |
| _______ this index is useful if you main concern is benefits that are to be paid at your death and if the level of cash values is of secondary importance to you. It helps compare costs at some future point in time such as 10 or 20 years | life insurance net payment cost index |
| the solicitation regulations does not apply to these policies: credit life, annuities, franchise life, group life, variable life, and ________ | ERISA type pension plan and welfare plans |
| a buyers guide must be submitted to the applicant prior to | collecting the initial premium |
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