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L&H Exam Study

Life & Health Insurance

QuestionAnswer
Risk is best defined as the chance of loss
Insurance deals with pure risk
When purchasing an insurance policy, the risk is transferred
The National Association of Insurance Commissioners (NAIC) It seeks to preserve state rather than federal regulation of the insurance industry. It promotes uniformity in state insurance laws and regulations. It seeks to promote efficient administration of insurance laws and regulations.
This type of insurance company is run for the benefit of its policyowners Mutual
An insurance company chartered in Illinois is licensed to do business in Indiana. Is? Foreign
With regard to insurance, the term "consideration" means the price of the contract (the premium)
A life insurance contract contains the enforceable promises of only one party? Unilateral
In purchasing an ins contract, the applicant must accept the contract as written. contract of adhesion
Which of the following principles states that in forming an ins. contract, both parties have a responsibility to the other? Doctrine of Utmost Good Faith
Which of the following meets the definition of insurable interest? The policyowner must expect to suffer a loss from the insured's death.
R signs an app. for $100,000 pol., pays the 1st prem. & recd'a conditional receipt. If R dies in accid. 4days later what would happen? If R would have been approv. the pol. as applied for, R's bene will receive $100,000.
Consideration with the underwriting decision to accept, reject or rate a risk? Health of the proposed insrd. Age & gender of the proposed insd. Occup. of the proposed insd.
Agent responsibilities toward an applicant Explain the coverage, Deliver the policy, and Collect the initial premium
Classification of risks Applicants who are preferred risks have a lower premium than standard rate risks. An applicant can be considered a substandard risk because of a dangerous occupations. A standard applicant is issued a pol. with a "normal" prem. w/o special restrictions
Facts regarding insurance premiums Insurers invest prem.to earn interest. The operating expenses factor is sometimes called the "loading" factor. The cost of doing business is part of the premium calculation.
Assuming the following are all standard risks & all other factors being equal, which proposed ins. would have the lowest prem.? Youngest Female even if same age of youngest male
An application for insurance is submitted to the underwriting department for review when A conditional receipt was iss., the pol.becomes eff. if approved by undw dept & with the results of any req. med. exam.
Each application for life insurance requires the signature of The proposed insured, the policyowner, if different from the insured and the agent.
Policy that has the fastest growth of cash value 20-Pay Life
Policy that would have an increased premium after a given period of time Convertible Term
A Renewable Term policy guarantees The right to renew up to a state age or date regardless of health status.
Cash values on a life insurance policy belong to the Policyowner
B borrows money from a bank for home improvements. The bank strongly suggests that he purchase life insurance that will pay the loan in the event of premature death. What will best help him achieve this objective? Decreasing term
Whole Life insurance Face amount stays the same as long as pol. in force, The shorter a prem. period, the faster the cash value will grow, & any outstanding loans at death will reduce pol. proceeds to the bene.
J, age 35, has purchased a 20-pay life policy. When she is 55 she will Stop paying premiums
M & N, insureds, purchased a life pol.that will pay a death benefit when the first dies. Kind of policy purchased? Joint life policy
What happens with an outstanding policy loan upon death of the insured? The loan, plus any interest due, is deducted from the death benefit.
P surrenders a life ins. pol. & receives a lump sum of $30,000. Prem. totaled $25,000 on the pol. How is the surrender tax purposes? $25,000 is received tax-free and $5,000 is taxed at ordinary income rates.
Which policies would papy a tax-free death benefit to the beneficiary? Group life, Whole life, and Term life.
The payor benefit rider states that premiums will be waived upon the death of the prem. payor until the insured child reaches the age of majority
The guaranteed insurability rider cannot usually be added to existing policies, is normally avail. only to new insureds under a certain age, & guarantees the right to purchase additl ins. w/o proof of insurability
M has a $50,000 life ins. pol. with a double indemnity provision. M has a heart attack and dies. The bene. will receive $50,000
T has a life ins. pol. with a rider that will pay him $800 per month if he is totally and permanently disabled. What rider is this? Disability income rider
A policyowner who wants to retain the rights of ownership should name a bene. as a (an) Revocable beneficiary
If the insured lies about his age on a life application this means: The death benefit will be adjusted to reflect the correct age of the insured.
Common Disaster provision When the ins. and prim. bene. die in a common disaster that the death benefit paid to the cont. bene.
If death occurs during the grace period, the insured will pay the full benefit less the overdue premium
To reinstate a lapsed policy, all of the following must be met pay all past due premium, pay interest on past due premium and prove insurability.
Provision which states that the application is part of the contract? Entire Contract clause
Part of the Consideration provision Amount and frequency of premium payments
Policyowners rights Name the beneficiary, borrow the cash value and decide how policy proceeds will be paid.
Automatic premium loan provision It applies to term pol. only, it is automatically incl.in all life policies and money used to pay premiums is treated as a partial withdrawal and not subject to interedt charges or a reduction in the death benefit.
V purchases a pol. on 10/01/10 and it is del. 14 days later. 10-day freelook expire on October 25, 2010 (10 days after delivery date)
A Basic Hospital Expense policy covers DRB (Daily Room and Board)and ancillary expenses occured during confinement
A medical expense policy's coninsurance provision specifies the perentage of coasts that will be paid each by the insurer and the insured.
When added to a health insurance contract, an impairment rider excludes from coverage any loss associated with the defined impairment & specified insured.
A major medical expense policy typically expresses a deductible as a defined amount
Currently, which of the following is used by health insurers issuing individual pol. to reduce adverse selection? Preexisting conditions limitation
Which feature of a major med. expense pol. requires 100% pymt of covered expenses after the insured's claim reaches a certain level? Stop-Loss provision
A major medical expense policy covers x-ray, blood transfusion and ambulance
The term assignment with health policies normally refers to Benefits assigned to health care providers
V has a major med. expense pol. covering her disabled child, W. When W reaches the limiting age, the insurer could terminate W's coverage for which reason? Self-sustaining employment
A comprehensive major med. expense pol. covers the Jones family. Mrs. Jones gave birth to Q. 3 wks after Q born, Q hospitalized. Coverage on Q? Q is covered
Unilateral An ins. contract provision that states only one party to the contract, the ins. co, makes an enforceable promise.
Mutual company An insurance company owned by policyholders. Policy dividend is not taxable
Stock company An insurance company owned by stockholders, stock dividend is taxable.
Domestic company Doing business in state where it is.
Foreign company Doing business out of state.
Alien company Doing business out of country
Insured policyholder (policyowner)
Insurer insurance company
premium cost of insurance
beneficiary person designated to receive the proceeds of life ins. pol.
Risk uncertainty of loss or chance of loss
Contract of Adhesion Insurer must "stick" (adhere) to the contract
Contract of Utmost Good Faith mutual reliance on both parties to do what they say they will do.
Term "consideration" means the price of the contract (premium)