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insurance test
| Question | Answer |
|---|---|
| Insurance evolved to produce | Practical solution for economic uncertainties |
| Healt; uh; insurance evolved from: | Scientific principles to provide funds for medical expenses due to sickness and injury and cover loss of income during a disability |
| Annuities provide: | Income by making a series of payments to annuitent for specific period of time or life |
| Reserves: | Accounting measurement of an insurer's future obligations |
| Reserves are classified as | Liabilities on insurance companies accounting statement since must be settled at a future date |
| Liquidity is | A company's ability to make unpredictable payouts to policyholders |
| Two main types of insurance | Private commercial and government |
| Private insurance companies (commercial) insurer's offer | Many types of insurance. Some sell primary and annuities others sell accident and health or property and casualty |
| Multiplying insurers | Companies that sell more then one line of insurance |
| Non participating insurance | Stock companies |
| Non participating stock companies called this because | Policyholders don't participate in dividends resulting from stock ownership |
| Stock companies stock holders | May or may not be stockholders |
| Stock companies are structured as | Any other corporation |
| Organized and incorporated by state laws to make profit for stockholders | Stock companies |
| When declared in stock companies | Dividends are paid to stockholders |
| In stock companies ___ are responsible to stockholders | Directors and officers |
| Participating companies are called | Mutual companies |
| Mutual companies have no | Stockholders |
| Mutual companies are incorporated and organized by | State law |
| Owners of mutual companies | Policyholders |
| In mutual companies owners are | Anyone purchasing insurance |
| Has same person as customers and owners | Mutual companies |
| Mutual members have right to | Vote for board of directors by issuing participating policies that pay policy dividends,mutual insurer's allow policy holder's to share in company earnings |
| Mutual companies represent a | Refund of portion of premium company set aside after necessary reserves and deductions for expenses taken out |
| Dividends can include | Share in company investment, mortality, and opp operating profits |
| Surpluses in mutual companies typically distributed to | Policyholders annually |
| Participating means policyholders | Shares in dividends |
| Mutualization | Stock company converted into mutual company |
| Demutualization | Mutual companies convert to stock companies |
| Stock and mutual companies aka: | Commercial insurer's |
| Commercial insurer's can write | Life, health, property, and casual insurance |
| Strong assessment mutual insurer's | Classified by how they charge premiums |
| Pure Assessment mutual company operates | On basis of loss sharing by group members. No premiums paid in advance. Each member assessed individual portion of losses that actually occur |
| Advance premium assessment mutual charges premium at | Beginning of policy period. If original premiums exceed operating expenses and losses surplus returned in dividends |
| In advance premium assessment mutual if total premiums aren't enough to meet losses | Additional assessment is levied against members. Amount estimated by state law or insurer's bylaws |
| Reciprocal insurer's are similar to | Mutual companies organized on basis of ownership by policyholders. Each policyholder assumes some share of risks brought to company by other |
| Reciprocal insurer's are managed by | Attorney in fact |
| Lloyd's of London aren't | An insurer |
| Lloyds of London are | Individuals and companies that individually underwrite insurance. |
| Lloyds of London are similar to the | N.Y. stock exchange |
| Lloyds of London gather and disseminate | Underwriting information, help associates settle claims And dispute through member underwriters |
| Reinsurers | Specialized branch of insurance because insure insurer's |
| Reinsurance limits | Loss from any one insurer that may face a very large claim becoming payable. |
| Reinsurance is good in that it | Meets certain objectives such as favorable underwriting or mortality results |
| Ceding company | Company transferring risk in reinsurance |
| Reinsurer | Company assuming risk in reinsurance |
| Treaty reinsurance | Common reinsurance contract between two insurance companies. Automatic sharing of risks |
| Captive Insurer | Insurer established and owned by a parent firm for purpose of insuring parent firms loss exposure |
| Risk Retention Group (RRG) | |
| Insure people in same business, occupation, or profession. (Pharmacists, dentists, engineers) | |
| Fraternal benefit society | Noted primarily for social, charitable, and benevolent activities. |
| Fraternal benefit society memberships are based on | Religious, national, or ethnic lines |
| Fraternal benefit society began for | Poorer people's needs |
| To be characterized as a fraternal benefit society the group must be | Non profit, have a lodge system (includes ritualistic work) |
| Fraternal Benefit societies must | Maintain a rep form of government with elected insurance |
| Industrial Insurers | Special branch known as home or debt insurer's that specializes in particular type of insurance. |
| Known for small dollar amounts $1000, or $2000 insurance? | Industrial insurer's |
| Service providers offer | Benefits in return for payment of premium |
| Service providers premium can be in form of | Services provided by hospitals and physicians participating in plan |
| Service providers sell | Medical and hospital care services not insurance |
| Service providers purchasers are called | Subscribers |
| What is an HMO | Type of service provider for fixed premium paid in advance of any treatment |
| Hmo subscribers are entitled to | Services of certain physicians or hospitals contracted to work with HMO |
| Unlike commercial insurer's service providers provide | Financing for health care plus health care itself |
| HMOs stress | Preventive health care and early treatment |
| A PPO is known as | Preferred provider organizations |
| PPO is a | Group of certain health care services by employers or unions that will obtain discounts or special services from certain elect health care providers in exchange for referring employee's or members to them. It's a contract between employers and healthcare |
| Government insurer's provide | Social insurance programs |
| Government insurer's include | Bank, savings, and loan deposit insurance |
| Social security is what type of insurance | Government |
| Social security stands for | Old age, survivors, and disability |
| Medicare is | Government insurance aka medicare |
| Self insurer's is not a method of | Transferring risk |
| Self insurer's establishes | Own self funded plan to cover potential losses |
| Self insurer's used often by | Large companies for funding pension plans and some health insurance |
| Self insurer's may look to insurance companies for | Anything above a certain max level of loss bearing amount of loss below max |
| Agents represent | One company/insurer |
| Brokers represent | Many companies/buyers |
| A captive or career agent works for | 1 company and sells only that companies insurance |
| Independent agents work for | Self and sells from many |
| Agents contract and appointment with | Insurance company that grants authority to bind insurer's to insurance contract |
| In a dispute the insured or beneficiary and insurer represent | Insurer's and not insured or beneficiary |
| Focuses on building sales staffs | Career agency system |
| Career agency system | Branched of major stock and mutual insurance to represent insurers in a specific area |
| Career insurance agents are | Recruited, trained, and supervised by manager employee or company or general agent who has a vested right in any business written by GAs agent |
| Personal producing general agency system | Similar to career agency system. They don't recruit, train, or supervise career agents |
| Personal producing general agency system primarily | Sell insurance but may have small sales force to assist and maintain own offices and administration staff |
| In personal producing general agency employee is hired and considered employee's of | PPGA not insurance company and supervised by regional director |
| Independent agency system dont | Have a sales staff or agency to any one insurance company |
| Independent agency system represent | Any number of insurance companies through contractual agreements and compensated on a commission or fee basis for business they produce |
| Independent agency system is known as | American agency system |
| Ppgas don't | Recruit, train, or supervise agents they primarily sell insurance |
| Independent agents represent | Any number of insurance agencies through contractual agreements |
| Direct selling deals directly with | Consumers by selling policies through vending machines, ads, or salaried sales reps |
| Mass marketing is | Exposure to large groups of consumers using direct selling |
| Regulating insurance has the primary purpose to | Protect public welfare by maintaining solvency of insurance companies, and aid in consumer protection, ensure fair trade, and fair contracts at fair prices |
| Insurance is regulated by | State and federal government |
| 1868 Paul vs. Virginia case: | About regulating insurance company domiciled in another state. Court against agency ruling state and issuance of insurance isn't interstate commerce and state right to regulate insurance |
| 1944 US vs. Southeastern underwriters association (SEUA) | Supreme court ruled that insurance is subject to series of Federal laws which many were in conflict with state laws and that insurance is a form of interstate commerce to be regulated by federAl gov. Didn't affect power of states to regulate insurance but |
| 1944 US vs southeastern underwriters association shifted balance of regulatory control to | Federal government |
| 1945 The McCarran Ferguson Act: | Continued regulation of insurance by state was in publics best interest. State revised insurance laws to conform to federal laws. de |
| Regulation today is considered: | Regulated by state |
| National conference of insurance legislators(NCOIL): | Help legislators make informed decision insurance issues that affect constituents to declare opposition to federal encroachment of state to oversee business of insurance authority under McCarran Ferguson act of 1945 |
| 1958 Intervention by FTC (Federal trade commission) | Sought to control advertising and sales literature. 1958 supreme court help McCarran Ferguson disallowed such supervision |
| 1959 Intervention by SEC | Securities and Exchange Commission. Federal laws applied to insurer's that issued variable annuities and requires to conform both SEC and state regulation |
| SEC regulates | Variable life insurance |
| 1970 Fair Credit Reporting Act: | Requires fair and accurate reporting of info about consumers, including applications for insurance. Insurer's must furnish applicant with nAme of reporting agency furnr |
| 1999 Financial Services Modernization Act | Repealed glass Steagall act of 1938 of 1933 and new commercial banks, investment banks, retAil brokerages and insurance companies can enter each other's lines of businesses |
| What are the insurance agent's marketing and sales practices? | 1. Selling to needs 2. Suitability of recommended products 3. Full accent and disclosure 4. Documentation 5. Client Service |
| Selling to needs is when | Agent determined client needs and what is best suited for them |
| What are the two principles of need-based selling? | Find the facts and educate the clients |
| Suitability of recommended products means to? | Assess correlation between recommended products and clients needs and capabilities by asking what is clients needs what can help me their needs, does client understand products and provisions, does client have capability financially to manage products, an |
| What is full and accurate disclosure? | Presents clearly completely and accurately. Never hide products limitations |
| What is documentation? | Document each clients meeting and transaction , use fact-finding forms, obtain clients written agreement for needs, some documents are required by state law. |
| What is clients service? | Follow-up calls, beginning a relationship not ending the relationship and point-of-sale, complaints are handled promptly and fully |
| A buyers guide must be given to applicants when? | Before initial premium is accepted |
| Who requires a buyers guide and summary ? | Most states require a delivered buyers guide to select the most appropriate plan and understand product features. |
| What does a buyers guide explain? | It explains so that an average citizen can understand the policy summary the net payments and the surrender cost comparison Index |
| What is the policy summary? | The policy summary has info about specific policy that must be given that identifies the agent insurer policy, info about premiums, dividends , each rider , benefits, cash surrender values, policy loan interest rules and life insurance cost |
| Policy summary includes what indexes ? | Cost indexes, net payment cost comparison Index , surrender cost comparison Index. |
| The net payment cost comparison Index gives the buyer and idea of? | The cost of policy at future point in time compared to the death benefit |
| The surrender cost comparison Index compares? | Cost of surrendering policy and withdrawing cash values and a future time |
| What is the national Association of insurance commissioners? | NAIC is an all insurance commissioners for directors or members that have committees that work regularly to explain various aspects of insurance industry and recommend appropriate insurance laws and regulations |
| What are the four objectives of the NAIC? | 1 encourage uniform insurance state laws and regulations 2. Assist and administration of those laws by promoting efficiency 3. Protect policy owners and consumers 4. PreServe state regulation of insurance business |
| There used to be a past problem of misleading | insurance advertisements and direct mail solicitations |
| The advertising code was developed by | NAIC |
| The advertising code specifies what? | Certain words and phrases not to be used in any advertising and full disc of policy renewal, cancellation, and termination provisions |
| What is the unfair trade practices act? | It gives chief financial officers power to invest insurance companies and providers, to issue cease and desist under and impose penalties |
| The unfair trade practices act gives officers the right to seek what? | Court injunction to restrain insurers from using any unfair methods |
| The unfair trade practices act's includes | misrepresentation and false advertising, coercion and intimidation, unfair discrimination, and equitable ministration of claims settlements. |
| What are state guaranty associations? | If insurer becomes insolvent and unable to pay claims, state K Guaranty association will step in and cover consumers unpaid claims |
| The state guaranty Association is funded by? | Insurance companies through assessments |
| rating services determine? | Financial strength of companies being regulated |
| A+ superior means? | Financial strength of company is superior ability to meet ongoing obligations a.m. best |
| AA- rating means ? | The company has a very strong capacity to meet our obligations . Fitch ratings |
| Standard and pours AA- rating shows? | Very strong financial security characteristics |
| Moodys A1 rating shows? | Good financial security |
| What is a characteristic of a participating life insurance policy? | Policyowners can receive dividends |
| what type of reinsurance contract between two insurers involves automatic sharing of risks involved? | Treaty reinsurance |
| Dividends from a mutual insurance company a paid to whom? | Policyholders |
| what is considered the accounting measurement of an insurance company's future obligations to his policyowners? | Reserves |
| a group own insurance company that is formed to assume and spread the liability risks of its members is known as? | A risk retention group |
| which of the following is a syndicate established by a group of insurers to share underwriting duties? | Lloyd's of London |
| and agents authority to bind an insurer to an insurance contract may be granted in the? | Agent contract and insurance companies appointment grants authority to bind insurance contract |
| What is risk pooling? | lost Sharing spreads risk by sharing possibility of loss over a large number of people |
| What transfers risk from individual to group ? | Risk pooling |
| What is the law of large numbers? | Larger groups provide increased degree of accuracy and loss predictions based on past experience. The higher exposure the more likely it can be predicted |
| what is the definition of risk? | A potential for loss |
| what is peril ? | Something that can cause a financial loss such as an earthquake or accident itself |
| what is loss? | Unintentional decrease in value of an asset due to peril |
| What are homogeneous exposure units? | Similar objects of insurance exposed to the same group perils |
| what types of risks are there? | Speculative risk, pure risks |
| What is a speculative risk? | A risk that presents chance for both loss and gain not insurable i.e. gambling |
| What are Pure risks? | Only incurable risks and are a potential for loss with no possibility of gain such as injury, illness, and death |
| What are treatment of risks? | Avoidance, reduction, retention, transfer, and sharing. |
| What is avoidance? | Don't do anything. Elimination of a hazard is a risk |
| What is reduction? | Minimizing, severity of potential loss. I.e.smoke alarms, stop smoking |
| What is retention? | Self insure. Used when losses are highly predictable and worst possible loss is not serious |
| What is transfer? | Buying insurance best way to transfer risk sharing |
| what is sharing in retention? | Each party assumes risk receiving benefits under system |
| What are the elements of insurable risk? | Loss must be due to accidents outside and insureds control, loss must be definite and measurable with the time, place, amounts and when payable, Loss must be predictable estimated average frequency and severity loss can't be catastrophic it must be reaso |
| what is risk management? | It is a process of analyzing exposures that create risk and designing programs to handle them |
| what our principles of indemnity? | Making insured whoLe by restoring to same condition as befOre loss |
| What is adverse seLection? | Insurer's must minimize adverse selection which is tendency fOr poorer then average risks to seek out insurance. |
| Someone with 12 Prescriptions is considered? | A poor risk |
| You can compensate poor risks with | better than average risks or the ability to pay claims may be compromised |
| what is reinsurance | spreading rest from one intro to one or more other insurers. Minimizing exposure to loss by reinsurring risks |
| What is a hazard? | A condition or situation that creates or increases the chance of loss i.e. icy roads, a DUI, and improperly stored toxic waste |
| What are the types of hazards? | Physical i.e. poor help being overweight or blinds . Moral i.e. dishonesty, drugs, alcohol abuse Morale i.e. reckless driving, jumping off a cliff, stealing, racing motorcycles, carefree, or careless lifestyle. |
| ABC company is attempting to minimize the severity of potential losses within his company the company is engaged in | Risk |
| risk reduction can | reduce the chance in particular loss will occur or reduce the amount of potential loss if it does occur |
| according to law of large numbers how would losses be affected if the number of similar insured units decreases ? | Predictability of losses will be improved. As a number of similar insured units increases predictability of losses improves |
| for insurance purposes similar objects which are exposed to the same group of perils are referred to as | Homeogeneous exposure units |
| Which of the following can be described as a potential for loss? | Risk is the potential for loss |
| and I'm sure has a contractual agreement which transfers a portion of risk exposure to another insurer. What type of contractual arrangement is this ? | Reinsurance contracts . They accept portion of risk underwritten by another insurer contracted for entire coverage amount. |
| What type of risk is not an element of insurable risk? | Speculative risk |
| which statement regarding insurance is false one-way insurance deal with catastrophic loss is reinsurance? as the number of insured units increase the number of lost decreases? speculative risk cannot be insured? or pure risk can be insured ? | As the number of insured units increase the number of loss decreases |
| Which term describes a elimination of a hazard? | Risk avoidance |
| what can be defined as the cause of the loss ? | Peril |
| Purchasing insurance is an example of what type of risk | transference |
| A contract is enforced by? | Law |
| what certain elements for contract are needed to be binding ? | 1 offer and acceptance 2. Consideration 3. legal purpose 4. Competent parties |
| What are the elements of offer and acceptance ? | The contract must be made with a definite unqualified proposal i.e. offer by one party and acceptance of its exact terms by another |
| in many cases a contract offer made by applicant when application is submitted with what? | Initial premium insurance company accept when it issues a policy |
| When an offer is answered with a counter offer which offer is valid? | First offer is void |
| what is consideration? | The value given for the promises sought |
| Consideration is given by whom? | Applicant in exchange for renters promised to pay benefits. Also consist of application and initial premium |
| offer and acceptance are not complete until the insurer receives? | Application and the initial premium |
| offer and acceptance are not complete until insurer receives | application and first premium |
| consideration clause also contains info such as? | Schedule and amount of premium payments |
| what is the legal purpose | to be legal must have legal purpose the reason the parties are entering into the agreement must be legal |
| Insurance contracts always possess what? | A legal purpose |
| the competent parties of the contract are? | Applicant and insurer |
| The insurer is considered competent if? | Licensed by state in which he conducts business |
| and application is considered competent unless they are? | A minor , mentally infirm, or under the influence of alcohol or drugs. |
| Based on principle some parties are not capable of ? | Understanding the contract that they agree to |
| What is Aleatory? | There is an element of chance and potential for an equal exchange of value or consideration for both parties it is conditioned upon occurrence of an event |
| Both the insurance and gambling contracts are typically considered? | Aleatory contracts |
| An example of lavatory contracts concerns disability in which way? | If paying disability insurance but never become disabled you still pay but get no benefits |
| What is adhesion? | Insurance contract prepared by one party the insurance company. With no negotiation between applicant and insurer |
| In adhesion the applicant adheres to terms of? | The contract on a take or leave it basis what excepted |
| Any confusing language in an insurance contract of adhesion would be in favor of? | The insured |
| Adhesion makes the contracts correct any ? | Advantage that mayresult for party who prepared the contract |
| Policy of adhesion is one in which? | The insurance company can modify |
| A unilateral contract is when ? | Only one party the insurer makes any kind of enforceable promise to pay benefits upon occurrence of a specific event such as death or disability . The applicant makes no promise not even to pay premiums . |
| What is a personal contract? | It is a personal agreement between insurer and insured |
| a personal contract the owner is | the person who has no risk insurer assumed |
| People who buy life insurance are | policyowners not policyholders because they own their policy |
| what is assignment ? | It is a chance for a policy to another person by insured notifying in writing |
| the new owner because the assignment is granted the rights of ? | Alright so policy ownership |
| What is a conditional agreement? | The insurers promise to pay depends on occurrence of an event covered by contract |
| With a conditional agreement if the event don't materialize then? | No benefits will be paid |
| with a conditional agreement Insurors obligations are conditioned on? | Performance of certain acts by insured a beneficiary i.e. timely payments of premiums |
| What is a valued contract? | A contractor PaYs stated sum regardless of the actual loss incurred |
| Life insurance contracts are contracts of | Indemnity. |
| An example of an indemnity contracts would be if someone died with a $500,000 policy the beneficiary gets how much? | $500,000 |
| Indemnity contracts are which type | Fire and health policies |
| and insured who has a fire and has a $50,000 policy but only has $5000 in damage can only collect ? | $5000 not $50,000 |
| What is utmost good faith? | Both the policy owner and insurer must know all material and facts relevant can be no attempt to conceal, disguise or deceive |
| insurance applicants are required to make | full , fair and honest disclosure of the risk to agent orange sure |
| Warrantees, representations and concealment represent grounds in which an insurer may | seek to avoid payment under contract |
| a warranty is | A statement made by applicant guaranteed to be true in every respect. It becomes part of the contract and If found untrue can revoke contract |
| A representation is material because? | It affects insurance decision to accept or reject an applicant |
| What is representation? | It is a statement made by the applications that they consider to be true and accurate to the best of their belief |
| representation is used to determine? | Whether or not to issue policy |
| representation is not part of what? | It is not part of the contract and needs to be true only to the extent that their material and related to risk |
| representation statements made are considered to be? | Representations and warranties |
| what is concealment? | Failure by applicant to disclose known material fact when applying for insurance |
| With concealment if the purpose was to disclose a known material fact it is grounds for? | voiding policy |
| To avoid a contract the insurer must prove | concealment and materiality |
| life insurance has only a limited time to? | Uncover false warrantees, misrepresentations or concealments after that time normally two years the contract cannot be voided |
| What is insurable interest? | The person acquiring the contract who is the applicant must be subject to loss upon death illness or disability of person being insured |
| to have an insurable interest in life of another person an individual must have a reasonable | expectation benefiting from other persons continued life |
| insurable interest must only exist at the time of? | Application it doesn't have to continue or exist at time of claim |
| stranger originated life insurance STOLI | Investors persuade individuals who are typically seniors to take out new life insurance . Naming them as a beneficiary a.k.a. I OL I investor originated life insurance |
| Stranger originated life insurance is used to circumvents | state insurable interest statutes |
| with STOL I investors loan money to? | Insured to pay premiums for a defined period which is usually two years based on life insurance contestability period. Eventually the insured assigns ownership to investors to receive a death benefit when the insured dies |
| Stoli normally includes what to insured? | Financial incentives to insured which are usually upfront payments, loans, small continuing interest in policies death benefits. |
| After two years investors make premium payments on behalf of of | insured using STOLI |
| What is an agent? | An individual authorized by the insurer to sell goods and services on its behalf |
| what are the roles of the agents | describe companies insurance policies to prospective buyers and explaining conditions under which policies are obtained SOLICITING applications Collecting premiums for policyowners Rendering service to those who purchased policies |
| what is contract of agency ? | The authorization of agent to undertake functions between agent and company |
| the agent is considered to be | the insurance company governed by agency law |
| legal definition of an agent is a? | Person who aCTS for another person or entity which would be the principle with regard to contractual arrangement and third parties |
| And authorize agent can Bind | Principle to contracts |
| the acts of the agent are considered to be aCTS of | Principle |
| a contract completed by agent is a contract completed by | principal otherwise known as contract of principle |
| payments made to agent on behalf of principal our payments to | Principle |
| knowledge of agent regarding business of principle aRE presumed knowledge of | PRINCIPLE |
| What is agent authority | authority that is given by an insurer to a licensee to transact insurance on their behalf |
| What is express authority? | Express authority is when a principal deliberately gives it to an agent i.e. the agent has express authority to solicit applications for insurance on behalf of the company |
| What is implied authority? | On written authority that is not expressly granted but which the agent is ASSUMED to have to transact business of principle |
| Not everything is spelled out such as printing business cards with the company's name. This would be an example of what kind of authority ? | Implied |
| What is a parent authority? | Appearance or assumption of authority based on actions words or deeds of principle or circumstances principle created |
| By printing out a rate book, application forms, and sales literature the company creates an impression that a | relationship exists between self and the individual. Not later allowed to deny it |
| what is significance of authority | this title company to ask them deeds of the agents |
| the law will view the agent and company aS? | One in the same when the agent acts within their scope of authority |
| and insurance may be liable to insured for | Unauthorized acts of agent when agenT is unclear about authority granted |
| What is a fiduciary | a person who holds position of financial trust and confidence |
| in age and ask as a fiduciary when they? | Except premiums on behalf of ensure or offer advice that affects a person's financial security |
| what is a broker | someone who legally represents the insureD may represent a number of companies under separate contractual agreements |
| What do brokers do | they solicit and accept applications for insurance and places coverage with A insurer |
| Insurance agents need what type of insurance | errors and omissions professional liability insurance |
| the insurer agrees to pay ____ the agent legally is obligated to pay for injuries resulting from professional services failed to render | SUMS |
| What is an estoppel ? | It is a legal impediment to one-party denying consequences of own actions and deeds . It results in another party acting in a specific manner or certain conclusions drawn . I.e. loss of defense |
| what is parole evidence rule ? | Oral or verbal evidence given in court and parties put agreement in writing all previous verbal statements come together and wording and written contract cannot be changed by oral evidence |
| what is a void contract? | It is in agreement with that legal effects . It is not a contract because it lacks one of the elements specified by law for valid contracts |
| Void contracts cannot be | enforced by either party |
| An example of a void contract would be | a contract that has an illegal purpose |
| And ensure may void a policy if they | misrepresents a proven material on application |
| what is a voidable contract? | A contract for a reason satisfactory to the court that maybe set aside by one of the parties to contracts |
| Voidable contracts are binding unless? | The party with the right to reject wishes to do so |
| if a policyholder don't pay premiums the company can cancel contract REVOKE coverage. This would be an example of what type of contract ? | A voidable contract |
| this can be the reason to Void a contract | Fraud |
| life insurance has only a limited time usually two years to prove | fraud and after that. They cannot contest the policy or deny benefits a material misrepresentation concealment or fraud |
| An arrangement where individuals authorized to act on the half of another person or company is established through ? | The law of agency |
| The following are all elements of a void contract except . Consideration Offer and acceptance Competent parties Written evidence ? | Written evidence |
| XYZ company gives direct authority with producers to sell insurance to agency contract but nothing is stated regarding collection of premiums which authority grants producer right to collect premiums | Implied authority |
| in what way our insurance policy said to be AlEATORY? | Involves a potential for an UNequal exchange of value |
| An insurance company can be liable for a producers on authorize acts when ? | Agency contract is unclear concerning authority given. An insurance company can be liable for a producers on authorized act when the agency contract is VAGUE concerning authority granted |
| And insurance contracts maybe voided if misrepresentation found on application is determined to be? | Material |
| Which element of a contract constitutes a definite and on qualified proposal by one party to another | offer |
| an insurance application requires applicants a full , accurate EXPOSURE of risk factor involved using this cataria an insurance policy is considered what type of contracts | contracts of utmost good faith |
| Bookworks will normally interpret a policy in favor of the insured when meaning of policy is not clear this is because insurance policy is a | Contract of adhesion |
| Statements made by the insured on accident and health insurance application are considered to be | |
| What are the three basic types of life insurance ? | Ordinary industrial and group insurance. Many companies offer all or specialize in one |
| Life insurance is distinguished by? | Types of customers, amounts of insurance, Britain, underwriting standards and marketing practices |
| What is ordinary life insurance? | It is individual life insurance and includes many types of permanent and temporary protection |
| In ordinary life insurance how are premiums paid | Monthly, quarterly, semiannually or annually |
| What is the principal type of life insurance in United States? | Ordinary life insurance |
| What does ordinary life insurance include | Paul, term, universal invariable and endowment policies |
| What is industrial insurance? | Characterize the comparatively small amounts of $ 1000 with premiums collected weekly or monthly basis by agent |
| Industrial insurance is marketed and purchased as? | Burial insurance |
| group insurance is written for? | Emergency , groups, associations, unions and creditors to provide coverage for a number of individuals under one contract |
| Group insurance underwriting is based on? | The group and not individuals who are insured |
| What is ordinary life insurance? | It includes many types of insurance temporary which is term and permanent which is whole and variable are universal plans |
| What is basic forms of term life insurance | number of forms term life offers distinguished by the amount of benefit payable, known as level term and increasing term |
| level term provides? | A-level amount of protection for a specific time. After which the policy expires |
| Level term insurance are able to offer premiums that are? | Level averaged over the term of the policy |
| $ 100,000.10 year level term produces | Straight 100k in 10 yrs. If insured dies at any time during 10 yrs beneficiary gets benefits. If insured lives beyond 10 yrs no benefits given |
| What is decreasing term insurance? | It's a benefit amounts to decrease gradually over time of protection with level premiums |
| A decreasing term insurance at that benefit for 20 years will pay $50,000 at the beginning and gradually over 20 years? | Decline to zero at end |
| What is credit life insurance? | It is sold to cover outstanding balance on the loan is based on decreasing term insurance |
| Decreasing term insurance is commonly used to protect? | Insureds mortgage |
| What is increasing term? | It provides a death benefit that increases at periodic intervals overturns policy usually started as a specific amount 4% of the original amounts |
| increasing term usually stated as | specific amounts of percent of original amount |
| Increasing term is tied to? | The cost of living index such as consumer price index |
| Increasing term maybe sold as? | Separate policy |
| Increasing term life insurance is usually purchased as? | A cost-of-living rider to a policy |
| What are features of term life insurance? | Issued for a specific time defined in terms of years her age . Most contain two options we can extend coverage. Option to renew and convert |
| What is the option to renew in term life insurance | It is a guaranteed renewable policy that allows policyowner to renew the term policy before the expiration date without having to provide evidence of insurability |
| The option to renew premiums will be | Higher than initial. Reflecting insurers increased risk . But there are typically several renewal periods available |
| Option to renew allows the insured to continue insurance protection even if | they become insurable |
| Renewable term ART means | Renewable term. Annually renewable. Yearly renewable |
| Renewable term insurance represents the | most basic form of life insurance |
| Renewable term provides coverage for | one year and allows policyowner to renew yearly without evidence of insurability |
| The option to convert is common to | most life insurance and it gives the insured the right to convert exchange term policy for whole without evidence of insurability |
| Option to convert attained method | issuance of whole life at premium rate reflecting insurance agent time of conversion |
| option to conVer original age method | When original taken out |
| The option to convert generally specifies a | time limit |
| What is the cost of issuance | the most important factor when trying to decide whether to convert at the insured's original hedge or a teenage |
| Whole life insurance provides | permanent protection for whole life from date of issuance to death. Benefit payable is facemail which means constant throughout life |
| Whole life insurance premium set at | time of issue and the main level for life |
| What distinguishes whole life insurance from term | cash values immaturity and hundred . The living benefits to the owner |
| What are cash values | unlike in term insurance which provides only death benefits whole life combines insurance with a savings element |
| In whole life insurance policies cash value will | Build over life of policy. It is credited with a certain guaranteed rate of interest |
| In whole life insurance interest is credited to policy on | regular basis and grows over time |
| And whole life insurance income taxes may? | Be due at the time of surrender |
| Cash value is regarded as? | Savings element because it represents the amount of money policyowner will receive if ever surrendered |
| Cash value of the results of WAy the | Premiums are calculated and interested paid and policy reserves |
| The amount of a policies cash value depends on | the face amount of policy the duration and amount of premium and how long policy was in force |
| Whole life insurance provides a death benefit if the death is | Before 100 |
| With whole life insurance if a person is not Diabate hundred they will receive | the full maturity value of policy paid out to policyowner or beneficiary as a living benefit and policy will terminate |
| The larger the face amount of policy the larger | the cash values will be |
| The shorter the premium payment. | Quicker cash value will grow |
| Whole life insurance is designed to mature at age | 100 |
| Whole life insurance is based on the assumption that people will | Paying premiums for their whole life |
| At 100 cash value policy has accumulated to the point that it equals | Face amount of policy and at that point it matured or endowed |
| Whole life insurance give living benefits through | cash value accumulation buildup in the policy |
| Policyowner has a ready source of funds that may be? In whole life insurance | Borrowed it reasonable interest-rate |
| Borrowing money from whole life insurance there's not a requirement that the loan | be repaid however if outstanding is that the amount of the loan plus any interest if attracted from the death benefit before it is paid |
| Cash values of a whole life insurance policy belong to | be policyowner . The insurance company cannot claim the funds |
| Whole life insurance is designed as if the insured will live to | AGe hundred |
| Whole life premiums is calculated on the basis of | the number of years between the insured's age at issue and 100 |
| A shorter payment. Equals a higher | premium |
| And whole life premiums the amount of the premium is spread | equally over hundred known as level premium approach. It allows whole life insurance premiums to remain level rather than increase each year with the insureds age |
| Whole life insurance does not have to be calculated to | 100 |
| What is street whole life | provides a permanent level protection with level premiums from time issue to death |
| What is limited pay whole life | level premiums limited to a specified number of years. Can be any duration. Can do one for 20 years paid for 20 years after which number premiums are owed |
| Limited pay whole life is best suited for a | prospective insured who desires permanent insurance but does not want premiums indefinitely. Premium is limited to a certain period |
| The insurance protection extends until in whole life | Church death or hundred |
| What is single premium whole life | the most extreme form of limited pay policies. It involves a large one-time only premium at the beginning of the policy. From that point coverage is completely paid for full life policy |
| What are some common traits a single premium whole life? | immediate nonforfeiture value created Immediate cash value created A large part of premium set up to policies reserve Advantage policyowner will pay less for policy letter premium stretch out over several years |
| is shorter premium pain. Would equal | a higher premium initially but a quicker cash value will grow |
| Cash values buildup and limited pay policies faster during | premium paying years thEn during nonpremium pain years |
| What is modified whole life insurance | premiums that are lower than typical whole life premiums during first few years usually the first five and higher than typical there after |
| With modified whole life during the initial. Premium rate is | only slightly higher than that of term . Afterwards the premium is higher than typical whole life rate at age of issue |
| Modified whole life makes initial purchase of permanent insurance? | Easier and more attractive especially for individuals with limited financial resources, the promise of improved financial position in the future |
| What is equity index whole life? | Type of whole life where 80 to 90% of premium is invested in traditional fixed income securities and remainder premium invested in contract stipulated stock index |
| What is graded premium whole life? | Similar to modified whole life. Redistribute premiums. Premiums are lower than whole life rates during the preliminary. After the policy is issued premiums initially increase during preliminary. Then remain level afterwards |
| What are endowments? | Characterized by cash value that grows at a rapid pace so that policy Matures or endows at a specified date (before hundred) |
| What are two benefits of endowments | death benefit to beneficiary if insured died within specified period The endowment period. |
| There is a living benefit of endowment which is | policyowner if insured lives at end of endowment. Has fully matured will get full ownership of money |
| Endowment pay the death benefit if the insured dies during | certain. It can be compared to level term insurance |
| What is pure endowment? | Contract that guarantees a specified sum payable only if the insured is living at the end of stated period |
| In pure endowments nothing is payable in | The case of a prior death |
| Level term insurance and endowment together provide ? | Guarantees endowment contracts offer |
| Endowment policies compared to | whole life with an accelerated maturity date |
| What is a common maturity age | 65 |
| Endowments are designed to build ? | Cash values quickly they provide living benefits for specified future time for retirement for example or to fUnd a child's college education |
| What are endowment periods? | Rapid cash value buildup to provide early policy maturity , comparably high premiums, shorter policy term equals higher premiums. |
| Endowments are declining because they | no longer meet the income tax definition of life insurance and no longer qualify for favorable tax treatment life-insurance given |
| What is a modified endowment | in 1988 They, Pafford technical and miscellaneous revenue act a.k.a TAMRA |
| The technical and miscellaneous revenue acts law said | they refused the definition of life insurance contracts . It is Primarily to discourage sale and purchase of life insurance for investment purposes or as a tax shelter |
| What is A MEC? | Considered to be a policy overfunded according to IRS tables |
| It's considered a MEC see the IRS wILl ? | TAX |
| Life insurance is normally granted | very favorably tax |
| Cash value accumulation are not taxed to policyowner as they ? | Build inside a policy |
| Our policy withdrawals tAXED? | No not until they are withdrawn and it exceeds the total amount policyowner paid into the contract |
| Policy loans are not considered? | Distributions and not tax the policy owner unless or until full surrender and then only to what extent that distribution exceeds what was paid into the policy |
| If it doesn't meet specific test and it's considered a MEC tax treatment is | Different and policyowners will pay tax |
| There are penalty taxes which are | 10% premature distribution prior to age 59 1/2 from a modified endowment contract it normally applies to policy loans |
| Any gains received from a modified endowment contract is included in ? | Insured gross income per year and a 10% tax penalty is assessed on the gaIN if insured is under age 59 1/2 |
| To avoid meeting a modified endowment contract you must meet the ? | Seven pay test |
| What is the seven-pay test? | ITSthe limitation on the total amount you can PaY INTO YOUR policy in the first seven years |
| The seven pay test is designed to discourage | premium schedules that would result in a paid up policy before the end of the seven-year. |
| The seven pay test applies also if there is a | material change in contracts |
| What are family-planning policies? | A plan that ensures all family under one plan. The coverage is sold in units. Coverage on spouse and children is level term insurance in form of a rider. Usually for spouses and children coverage is convertible without evidence of insurability |
| What do family income policies consist of? | They consist of whole life and decreasing term insurance. Monthly income to beneficiary if death occurs after the specified period after date of purchase |
| The family income portion of family income policies are FROM? | Decreasing term policy |
| Family income policies income payments are to | the beneficiary and occur when the insured dies and continue for a period specified in the policy usually 10,15 or 20 years from the date of issue and not death. |
| In family income policies if the insured dies after the specified time only ____ is paid to the beneficiary | Face value of whole life is paid to the beneficiary decreasing term insurance expired |
| What is a family maintenance policy? | BoTH Wthole life and level term. It provides income for a specific period beginning on the date of death of insured |
| Family maintenance policy proviDES that if the insured dies before predetermined time the policy? | Provides income to the beneficiary for a stated number of years from the date of the death |
| With the family maintenance policy the beneficiary will receive | the entire face amounts of whole life at the end of the income PAYING PERIOD |
| In the family maintenance policy if the insured dies after the period ended the beneficiary receives | Only face amounts of whole life |
| What are joint life policies? | Two or more people are covered. Some type of permanent interns opposed to term. It pays death benefit at first INSURED death . |
| In joint life policies survivors can then buy? | Individual policy without evidence of insurability |
| The premiums in joint life policies are? | Lesson separate multiple policies. Ages OF insurer's are averaged and the premium for each life is given |
| What is the second to die policy? | It is a variation of joint life. It covers the cost of two lives. The benefits are paid on death of the last surviving insured |
| Survivorship life insurance policy normally covers? | Two lives |
| Survivorship joint life insurance premium is | lower than two separate policies |
| Survivorship life insurance policy is useful in? | Estate planning they can pay taxes on assets. |
| What is juvenile insurance? | Dentures the life of a minor. Application and ownership rests with an adult. They do not need a minor consent |
| Juvenile insurance applicants are usually | paid by adult until the child is of age and can pay their own premiums |
| What is the juvenile insurance payor provision? | In the event of death or disability of adult premiums are waved into a child of age specified usually 25 or the maturity date of the contract whatever happens first |
| What is credit life insurance? | It is designed to cover life of a debtor and pay amount doing alone if the debtor dies before the loan is repaid. The beneficiary is usually the lender. |
| With credit life insurance they use? | Decreasing term insurance with the term match the length of the loan. Limited to 10 years or less and decreasing insurance matched outstanding loan balance. |
| Credit life insurance policies are most often sold to? | The bank or lending institution that covers all borrowers . The cost of it is usually paid entirely by the borrower |
| What is a interest-sensitive whole life policy? | Characterize a premium that vary reflecting insurers changing assumptions with regard to death, investments and expense. Nontraditional life policy |
| And interest-sensitive whole life the cash values maybe ? | Greater than guaranteed levels |
| In interest-sensitive whole life underlying in death investment and expense assumptions are more favorable policyowners can get | Lower premiums or higher cash values |
| It's underlying assumption is less favorable you get? | Higher premium than at policy issue. Policyholder may either pay higher premiums or reduce policy face amount and continuous premium |
| What is Face amount plus cash value? | Contract promises to pay insureds face amount of policy plus a sum equal to the policies cash value |
| What is good about adjustable life insurance? | – Flexibility combining term and permanent insurance into a single plan. |
| In adjustable life insurance policy owner determines what? | How much face protection and how much premium policy owner wants to pay. Dancer or then select the appropriate plan to meet needs of customer |
| And adjustable life insurance policy owner may specify? | The plan and face amount desired |
| Calculate the premium and adjustable life insurance? | The insurer |
| With adjustable life insurance you can either increase or decrease | The amount face amount period Of protection or both. Increasing face usually providing proof of insurability |
| Adjustable life insurance can be converted from what | Whole to term or vice versa. High premium to Lower or limited pay contract. |
| is adjustable life insurance more expensive? | Yes oto its design and flexibility. usually more expensive then conventional or whole |
| What is universal policy | It is a term policy with cash value characterized by flexible premiums and adjustable death benefit |
| In universal life insurance part of the premium goes into? | Investment account that grows and earns interest. Can borrow or withdraw cash value. |
| In a universal life insurance policy policyowners can determine ? | The amounts and frequency of premiums and adjustment death benefit up or down to reflect needs |
| How are changes made in a universal life insurance policy? | With relative ease by policyowners and no new policies need to be issued when changes are desired |
| Universal life insurance has flexibility by? | unbundling or separating basic components of life insurance policy. Including insurance element, savings elements and expense elements |
| In universal life insurance what type of charg is deducted each month? | A mortality charge from the policies cash value accumulated. For cost of insurance protection it may include company expense or loading charge |
| Universal life insurance mortality charge increases with | Age level premium increases age. |
| A universal life insurance policy specifies a the percent of? | Each premium that goes toward insurance protection and goes to cash value |
| With a universal life insurance As premiums are paid the cash value? | Accumulates, interested credited to the policies cash value. Interested either current interest rate deducted by the company and depending on the current market conditions or guaranteed minimum rate in contract |
| With a universal life insurance as long as the cash value is sufficient to pay monthly mentality and expense costs it will | Continue whether insured pays premium or not |
| In universal life insurance premium payments must be | Large enough to generate sufficient cash values. If cash value is not large enough to support the monthly deductions the policy will terminate |
| In universal life insurance a specific percentage must be used for | Death benefit or not favorable tax treatment |
| During certain intervals providing insurability evidence that can increase or decrease the face amount | |
| Corresponding premium payments of universal life aren't required as long as | Cash values can cover mortality and expense costs |
| With corresponding life insurance if you pay more you | Add more cash value |
| With in universal life insurance partial withdrawals are | Able to be made from cash value. Not true with whole life. |
| Whole life insurance can only tap cash value through :) | Policy loan or complete cash surrender which terminates policy |
| What are universal life death benefit charges | Policy owner may designate specified amount of insurance. Death benefit equals cash value plus remaining pure insurance. Decreasing term plus increasing cash values |
| Universal life has a death benefit that is | Level composed of increasing cash values and remaining pure insurance. (Decreasing term) |
| If forecast value in universal life cash value exceeds certain percentage fixed by federal law | Additional amount of pure insurance called corridor is added to maintain minimum death benefit requirement |
| In universal life insurance cash value can't be | Disproportionately larger then term insurance portion (tax codes of life insurance) |
| In universal life insurance death benefit can equal | Face amount (pure ins) plus cash values (level term plus increasing cash) |
| What is index universal life | Permanent life insurance. Policyholder link accumulation values to equity index life like S & P 500 |
| What is equity index universal life? | Permanent life insurance. Policyholders to link accumulation values to outside equity index like the S&P 500 |
| Equity indexed Universal life typically contains? | A minimum guaranteed fixed interest rate along with an indexed account option |
| With equity index universal life if the return on index exceeds the policies guaranteed rate of return the cash value will? | Reflecting on index |
| Equity indexed Universal life security of the fixed universal with? | Growth potential a variable policy linked with index return |
| Variable insurance products are | insurance and have premiums fixed. Part of the premium is placed in a separate account and invested in stock, bond and money market funds |
| Variable insurance products have a death benefit that is ? | Guaranteeing that the cash value of the benefit can vary considerably and downs of the stock market |
| Enable insurance products don't guarantee | contract cash and policyowner things investment risk . However the investment games are possible which will exceed traditional life policies. Policyowners can direct investment of funds that back variable contracts to separate accounts |
| With variable insurance products by placing in separate accounts they can participate doing investment performance which will | earn a variable as opposed to a fixed return |
| Variable insurance products are similar to? | Mutual funds principle directly related to the performance of assets underlying separate accounts . Separate accounts are not insured . Returns on investments are not guaranteed |
| Variable insurance products are considered security contracts and insurance contracts because? | , because of the risk from insurer to policyowner |
| In order to sell variable insurance products the individual selling must hold? | A life insurance license and financial industry regulatTory authority FInra registered license and license test |
| To sell the variable insurance products may require | Especially variable insurance license or addendum to the regular life insurance license |
| Variable insurance products are primarily | life insurance and not investment contracts. The primary purpose is to protect against death |
| What is non-medical life insurance | life insurance it does not typically require a medical exam ask about lifestyle. And medical history. It is more expensive than medically underwritten policies.insurer averages everyone's risk and charges accordingly |
| What is a policy owner | generally a person who pays for premium |
| What are the rights of the policyowner? | The right to change and designate the beneficiary The right to select type that proceeds will be paid to beneficiary The right to cancel the policy and select the nonforfeiture option The right to assign ownership to another |
| to promote state-by-state uniformity of insurance regulation states adopted | Wording of NAIC model regulations |
| Insurance regulations in each state protects? | The consumers by establishing strict guidelines of what must I must not be included in the insurance policy |
| What is the entire contract provision? | It is found at the beginning of the policy states the policy document, application attached to policy and any attached riders constitute the entire contract |
| The entire contract provision prohibits | the insurance from making any changes to policy revisions or changes in bylaws after it is issued |
| The entire contract provision does not prevent a change that is? | Mutually agreeable from being made to policy a policy specifically provides a means for modifying the contract after it has been issued such as changing the face amount of an adjustable life policy |
| What is the ensuring clause? | Except for the company's basic promise to pay benefits upon the insured's death . It appears on the cover . |
| The ensuring clause may state that? | The promise to pay a subject of policies provisions, exclusions and conditions |
| The ensuring clause is typically undersigned by? | The president and secretary of the insurance company |
| What are the owners rights provisions? | To find the person who may name and change the beneficiaries, select options available on the policy and receive financial benefit from policy |
| What is the owners rights provision ? | It's a kind person who may name and change beneficiaries, select options available under policy and receive any financial benefit from policy |
| What is the free look provision? | It gives policyowner the right to return the policy for full premium refund within a limited time after policy delivery. It is required by most states |
| What is the consideration clause? | Value given in exchange for a contractual promise. Life insurance and states consideration consists of completing the application and paying the initial premium. |
| The consideration clause specifies? | The amount and frequency of premiums that must be made to keep insurance |
| What is the grace period provision? | To protect the insured. If there is a slight lapse in pain prevents forcing to prove insurability again |
| If premiums are paid monthly the grace period is? | One month but no less than 30 days |
| What happens if the insured dies during a grace period? | If the premium is not paid the policy is payable but the premium will be deducted from the death benefit |
| What is the reinstatement provision? | With a labs either intentional or not reinstates lapse policy with some limitations. |
| The reinstatement provision policy will | restore the policy to the original status and values of product today but most insurers require that all back premiums be paid, interest on past due premiums paid, outstanding loans paid , typically proves insurability |
| The green statement provision is available for | a limited time to reinstate. There is normally three years but maybe as long as seven |
| The reinstatement provision gives a new | contestable period. But no new suicide exclusion period. |
| What is the policy loan provision? | State insurance laws require cash value life included in the loan provision within the prescribed limits the policy owner may borrow money from the cash values of their policies |
| The policy loan provision is more of a? | Advance on proceeds then a true loan. It may not be called by the company and can be repAyed anytime. If not repaid the loan balance and any interest in the policy will be deducted at time of claim |
| If policy is surrendered for cash cash value available is? | Reduced by any loan outstanding and interest |
| When a policyowner obtains the loan collateral is? | Cash value of policy |
| Cash rates vary but stipulated a | Max rate by most states |
| Some newer pOlicies have variable interest rate tied in to | Moody's corporate bond index |
| If policyowner doesn't make a scheduled interest payments amount of interest will be due with | Loan balance |
| If a loan plus interest exceeds policy cash value policy will | no longer be in fOrce |
| What is the incontestable clause? | It specifies after certain period of time has elapsed usually two years from issuance insurer no longer has a right to contest validity of policy so long as contract is in force |
| The incontestable clause says he can't contest a death claim payment event on the basis of? | Material misstatement, concealment or fraud. Even if learned the light was deliberately made must pay the death benefit. If past contestable period. |
| The incontestable clause applies to? | Death benefits not accidental death benefits and disability provisions because relating to accidents very and often uncertain they have the right to investigate them |
| The incontestable clause applies to? | Policy face plus any additional riders are payable at death |
| The incontestable clause allows the insured to? | Contest a claim during the contestable period. The time limit is limited to no more than five years |
| What's three circumstances does incontestable clause not apply to? | Impersonation, no insurable interest, intent to murder |
| An application for insurance made by anyone person but another signs or takes the medical exam constitute | Impersonation |
| No insurable interest existed between the applicant and insured at the inception of the policy the contract is not valid to begin with this is an example of? | No insurable interest |
| If it is an applicant applied with the intent of murdering insured for the proceeds policy has no legal purpose from start an insurance company can deny coverage this is an example of | intent to murder |
| What is the assignment provision? | Policyowners not holders because they own the policy as if property. The policyowner can gIve policy away which is assignment. |
| Assignment sets forth the procedure for? | Ownership transfer. |
| The policy procedure usually assignment isn't writing company then | accents without question |
| Does policyowner need permission for assignment | No |
| What is the assignee? | The person who in the life insurance is transferred to |
| No insurable interest is needed between? | The insured and the assignee |
| The assignee is granted? | Alright ownership. Even Kanina the beneficiary has rights in the original beneficiary is revocable |
| What is absolute assignment? | Transfer complete and irrevocable, assignee receives full control of policy and full rights to benefits |
| What is collateral assignment? | The policy is assigned to the creditors security or collateral For a debt |
| If the injured creditor is reimbursed for the benefit and proceeds of the amount owed | Beneficiary entitled to excess |
| What is he accelerated benefits provision | If the insured has a life-threatening illness there used to be no immediate financial relief. Accelerated benefits provide for early payment of some portion of face amount should insured be injured suffer from a terminal illness or injury |
| With the accelerated benefit provision the death benefits | LeSs accelerated payment are still payable |
| The accelerated benefits provision can be made | as a lump sum or monthly installments over special period. Such as a year. It is given without an increase in premium |
| What is the suicide provision? | And most life insurance protection sure against the purchase of the policy in contemplation of suicide . There's a specified time usually 1 to 2 years before a claim is paid if the insured commits suicide . |
| What will happen if the insured commits suicide before 1 to 2 year period.? | Premiums paid will be refunded the claim is not paid |
| What if suicides committed after period. Specified? | The insurance company will Pay full amount as if it were natural cause death |
| What happens with the misstatement of each for sex? | Age and sex are important critical factors in establishing the premium rate. The company reserves the right to make the adjustment of age has misstated or sex. |
| As male female premiums normally less? | Female |
| If misstatement of age is younger than stated proceeds would be? | Increased and premium paid brought to the correct age |
| If Holder proceeded amount would be? | Decreased to whatever premium paid would've purchased the correct age |
| If misstatements of age or sex is discovered while the insured is Living the premium is? | Adjusted downward if younger than shows and refund premium for overpayment or if older will adjust premium and require the difference in premium or reduce the amount of the face to what it should be for the premium paid |
| What is the automatic premium loan provision? | It is common to most cash value policies. It authorized the insured to withdraw from cash value amount of overdue premium if the premiums not paid by the end of the grace period. |
| Automatic premium loan provision amount withdrawn becomes? | Alone against cash value bearing rate of interest specified in contract. If loan is not repaid interest is also deducted from the cash value |
| If the insured dies the loan plus interest deducted from the benefits | payable |
| The automatic premium loan provision maybe? | Standard policy or added as a rider with no additional charge. |
| The automatic premium loan provision is beneficial if? | A person forgets to pay premium or they can't pay because of financial difficulties . The policy will lapse in coverage continues . Let's keep doing this eventually it will lapse in cash value will be reduced to nothing. Policyowner would have to reinstat |
| What is the beneficiary designation? | Indicates who receives proceeds |
| What is settlement options | ways in which proceeds are paid out or settled |
| What is the discretionary provision? | Gives discretionary authority when determining eligibility of benefits. Limits Weycourt can review claim denial and it's difficult for the court to conduct a fair review of the claim. Some states prohibited because designed to protect the insurance compan |
| Exclusions can be attached as? | Riders |
| Insurance companies exclude | certain types of risks or premiums would be higher |
| What are the exclusions? | War, aviation order policy is due today excluded from commercial aviation , hazardous occupations or hobbies not covered but maybe with increased premium , commission of a felony, suicide |
| Suicide is excluded by? | Almost all insurance agencies it happens during a specified time period. After period Passes death is covered |
| What is a nonforfeiture clause? | Allowed to stop paying premiums and not forfeit equity . |
| What are the three nonforfeiture options? | Cash surrender option, delayed payment provision, cost recovery rule |
| What is the cash surrender option? | Request immediate cash payment of cash values. Reduced by any outstanding loans or debts. Insurer's required to make cash surrender available after first three years |
| What is the delay payment provision? | Most states require cash payment postponed for up to six months after the policyowner request payment . Some policies require a penalty to be paid as surrendered in the early years called the rearend load deducted from the cash value when discontinued |
| What is the cost recovery rule? | When life-insurance is surrendered for cash value, cost basis exempt from taxation . Partial surrender can withdraw cash value interest-free |
| What is the reduced paid up option? | Taking a paid up policy for the reduced face amount. Policy owner pays no premiums but retains the same life insurance. Cash value used as a premium for a single premium whole life policy and a lesser face amount in the original policy |
| The reduced paid up option is same as? | Original but for lesser coverage . Riders and accidental death excluded. New face stays The same for life of policy but can build up cash value |
| What is extended term option? | Purchases level term insurance and amount equal to the original policy for as long as cash value will purchase . When level term expires there is no more protection. Supplemental benefits are dropped. |
| For most companies extended term option is the | Automatic nonforfeiture option for standard insured risk |
| Participating vs nonparticipating companies difference lies in | Participating pays dividends nonparticipating does not |
| Participating insurance policies have premiums | slightly higher than nonpar |
| Participating insurance companies have an extra cost to cover | unexpected contingencies built into par policies. |
| Policy dividends are really in return? | Part of premiums paid and so generally not taxable unless exceeds cost of policy |
| A whole life policy that provides a choice of dividend options must include | A statement that dividends are not guaranteed |
| When a dividend is declared it is used in effect thE? | Premium for a single payment life policy of same type of base policy in which declared |
| PUA is | Paid up additions . If your dividend option you use 100% of dividends being paid each year. Used to buy additional blocks of whole life insurance paid up for life. Size of surplus affects the amount of dividends |
| What is a mixed plan? | Offering both par and nonpar policies |
| Mutual companies can only issue | par |
| There is only interest charged? | Accumulations text on policyowner Dividends |
| What are the five options for utilization of dividends | cash dividend option Accumulated interest option Paid-up additions option Reduce premium dividend option One year dividend option |
| What is the cash dividend option | usually paid and policy anniversary dates. Automatically receive dividend check after company approves it. |
| What is accumulation of interest option | leave with company to accumulate interest available for withdrawal at any time. Policy dividends not taxable interest paid is New Year's credited to the policy whether or not it's received by the owner |
| What is the paid up additions option? | Paid up additions of life insurance. Same kind is originals policy. Amounts of paid-up additionn purchased each year as determined by the attendees age, amount dividend paid and type of coverage purchased |
| What is the reduced premium dividend option? | Use dividend to pay all or part of the next premium due on policy |
| What is the one year dividend option? | Not as common. Purchases as much 1 year term life as possible |
| What are policy riders? | The option to customize policy to specific needs |
| riders add? | Value policy |
| Most riders need to be selected when | The policy is applied for. If It's an option not a standard feature |
| What is an automatic premium loan rider | the only optional rider available at no cost. Sometimes can add after policy in force |
| What is the guaranteed insurability option rider? | It allows policyowner to purchase additional life insurance and specified dates without providing evidence of insurability |
| The guaranteed insurability option rider is good because? | older someone gets usually they have less days to purchase more life insurance. Some ages may not be purchased or added . Option amount is maxed life insurance policy owner can buy on a specified date. Can buy option amount or less an option date or not a |
| the guaranteed insurability option rider can't be added from | one option date to another of the other date was not exercise . |
| With the guaranteed insurability rider cost for new coverages purchased are calculated on | Insureds attained age . However can purchase additional coverage at marriage or birth of a child |
| What is the waiver of premium rider? | It is added security for policyowners. It may prevent a relapse and not paying premiums if disabled or unable to work. It's available and permanent and term life insurance |
| Waiver of premium rider is good if totally disabled the person will be | completely waived from paying premiums as long as the disability continues . Does not cover short-term illness or injuries. Insured usually must be seriously disabled for certain link of time |
| What is the guaranteed insurability option waiting period. | Insured must be seriously disabled for certain length of time usually 90 days to six months . Must pay premiums in waiting period. |
| What if the insured is still disabled at the end of the waiting period? | Company will refund all premiums from started disability. |
| The waiver of premium rider has the insurance company pay? | All premiums Frenchurch while a disability list. Go back to work they were using their own premiums. No premiums made by company needs to be paid back . |
| For the waiver of premium rider to become operative? | Insured must meet policies definition of totally disabled . |
| Totally disabled maybe defined as? | The insureds inability to work for which they are fitted to do by education, training, or experience . Maybe worded inability to work and injured own occupation for extended. Example 24 months in any occupation thereafter |
| Waiver of premium rider remains in effect till ? | The insured reaches a certain age such as 60 or 65 . One provision expires premium is reduced. |
| With the waiver of premium if the insured becomes disabled prior to the specified age premiums are? | Waived by the disability continues even falling do after stipulated age. Death benefit remains the same. Cash values increase at a normal rate and dividends are paid. Cash values are available at any time on the disability continues |
| What is the automatic premium loan rider? | A standard feature in some life insurance and in others it can be added at no additional charge. It allows the insurer to pay premiums from cash value if premiums are not paid by the end of the grace period. |
| Automatic premium loan rider deductions are treated as? | Loans and charged interest . If loan is not repaid interest is also deducted for cash value |
| The automatic premium loan rider will continue as long as | Premiums are not paid and into the cash value is exhausted and then policy lapse |
| What is the accidental death benefit rider? | Otherwise known as double indemnity provision . It is an additional amount of insurance usually equal to the face amount of the base policy of death was an accident . Total benefit paid would be double policies Face Value |
| What is the triple indemnity provision? | It would provide a total death benefit of three times the face value . It is subtracted from the policy face amount not the death rider for any policy loans |
| The accidental death benefit rider is strictly defined not including? | Accidents directly or indirectly from elements of physical disability. Additional proceeds only paid that as a result of bodily injury from some external, violent and purely accidental reason |
| For the accidental death benefit rider Death must occur within | A specified time usually 90 days in the accident |
| The accidental death benefit rider exclude stuff that might be considered | accidental self inflicted war or aviation activity |
| What is the payor provision of a rider | Juvenile insurance providing for waiver of premiums of adult premium pair should die or totally gets disabled. Usually extends until the child reaches a specified age such as 21 or 25 |
| The accidental death rider is usually not offered to people older than | 55 or 60. An additional death benefit for a limited period lowest possible cost . |
| Accidental death benefit rider additional insurance builds no | Additional insurance cash value . Extra protection usually expires adventured reaches 60 or 65. |
| The accidental death premium benefits are not payable beyond | what additional benefit expires notice benefited by any paid-up additions that may be purchased with dividends. Drops of surrender policy and flex one of the nonforfeiture options |
| What is the return of premium rider? | An event of death of insured within a specified time policy will pay in addition to the face amount and amount equal to all premiums paid to date. |
| Return of premium rider don't return? | Premiums but pays an additional benefit equal to the premiums upon date of death |
| ROP is | Return of premiums toileting policyowner after a specified time . Life insurance policies return hundred percent of premiums paid it and determine if no death benefits paid. |
| What is COL? | Cost of living rider : Cola cost-of-living adjustments provide increases amount of insurance protection without requiring evidence of insurability . Amount of increase to inflation-indexed increase consumer price |
| Which of these must be disclosed in a universal life policy Max coverage they can be purchased Surrender charges Commissions earned from the sale of policy Producers expiration license date | Surrender charges |
| How does a continuous premium whole life policy different from a limited pay life policy? | The time. Which premiums will be paid |
| Taxable income maybe the results from all these modified endowment contracts except for A cash value loan taken Automatic premium provision utilized Policy is surrendered for life than what it was paid into it or dividend issued | policy is surrendered for lesson was paid into it. Others may result in taxable income except when the owner surrender policy for less than was paid |
| Which statement concerning adjustable life insurance accurate Cash value loans are not permitted Face amount in premiums can be changed simultaneously by policyowner Settlement options are limited Only a face amount can be changed by the policy owner | face amount and premiums can be changed simultaneously policyowner |
| What is juvenile life insurance policy | life insurance policy that covers the life of a minor |
| Which statement concerning adjustable life insurance policy is incorrect ? Cash surrender as possible Evidence of insurability required when changing premium Combines term and permanent into a single plan An extra premium paid is allowable | evidence of insurability is required when there is a change in premium |
| Straight whole life can be accurately described in all these statements except Policy protection normally expires at 65 Nonforfeiture values available to policyowner Provides level protection with level premiums Cash value loans permitted | policy protection normally expires in 65 |
| What would be considered the advantage of purchasing term life insurance | Initial payment is lower compared to the same amount of whole life coverage |
| Which statement regarding universal life insurance is correct Cash value accumulations have a guaranteed minimum interest rate Policyowners can change face but not premium Policyowner can change premium but not face Partial literals can be made from | cash value have a guaranteed minimum interest rate. Cash value accumulation subject to a minimum interest guarantee and universal life insurance |
| Which statement regarding whole life is accurate Cash value loans not permitted Insurance value can continue for life Policy normally matures in retirement No cash value accumulation | insurance coverage to continue for life |
| Which of these is considered a whole life policy Credit life Single premium life Renewable life Convertible life | single premium life |
| An insurance policy that can also be classified as a securities product is called | Variable life because of the transfer of investment risks from insurer to policyowner a.k.a. insurance contracts |
| A life policy that has premiums that are lower than normal during early years is called | Modified life |
| Which statement about universal life is not true Death benefit can be increased Premiums are flexible Universal life has a minimum guaranteed cash value duration of policy Cash value must equal or exceed a guaranteed minimum value | universal life has a minimum guaranteed cash value for duration of policy |
| Which of the following is a form of group credit life decreasing, increasing, level term, whole life | decreasing term insurance |
| How is a collateral assignment used to life insurance contracts | Transfer specific ownership rights to the creditor entitling the creditor to be reimbursed the policy proceeds for an amount owed |
| One last policies premium has been made current and as a potential of being? | Reinstated |
| Which situation is an accelerated living benefit rider suited for? | Insured expected to be contained nursing home for life. May qualify if he has or physical disability that can reasonably be expected to result in death within 24 months |
| What if payables policyowner if whole life is surrendered prior to maturity dates | Cash value |
| Which benefit supplement added to life insurance whole family | family term rider |
| Which statement regarding life insurance premium for children's term rider is true | Premium remains the same the matter how many children |
| If policyowner has a life insurance policy where she had listed her age on the application is five years younger than actual age. If she dies and insured discovers her misstatement of age, how much will insurance company pay | Less than face amount |
| What happens if the death benefit of the life insurance policy insured elected partial payment from aCcelerated living benefit provision? | Reduced. If insured excepts the payment from this death benefit is reduced |
| How is the insured protected if they payor benefit rider is attached to life insurance policy? | Premium payments waves and events the premium payer dies or is disabled |
| A insured that has a guaranteed insurability rider attached to his life insurance has the right without proving insurability to | Periodically purchase additional insurance |
| The absolute assignment of the life insurance policy results in | Assignee receives all incidents of ownership |
| Which life insurance policy would be eligible to include an automatic premium loan provision? | Whole life |
| Any event of premium default, which life-insurance provision will use cash value to keep policy in force | Automatic premium loan |
| Which of the following is not subject to the promise to pay in Surance clause | How premiums paid an insuring clause might state that the promise to pay is subject to any conditions, provisions, exclusions, not how premium is calculated |
| A life insurance policy owner would have a dividend option that results in a limited current outlay of funds what dividend would be chosen? | Reduction of premium payment |
| What is the way to provide life insurance, health insurance or both for a number of people under one contract | Group life insurance |
| Group life insurance is typically provided by? | Employer for employee |
| Group life is written on | more than one life |
| Group life is most often written as? | And annually renewable policy |
| What is contributory plan? | An employee group insurance plan in which employees share the cost at least 75% of employees participate |
| What is noncontributory plan? | The employer pays the entire cost of the plan. Hundred percent of all eligible employees participate . This helps ensure avoided adverse selection |
| In group plans the individual doesn't have to | provide evidence of insurability and sense not issued to individuals the individual does not own plan |
| Issue certificate of insurance for certificate of coverage and benefits is used as? | As evidence of employees coverage the employer gets the master policy |
| What are employees and employers called of group life insurance? | Employees are called certificate holders. Employers are called contract holder |
| Group life insurance can be formed by other organizations just as long as | it is formed for some other reason than just to obtain insurance |
| Who is eligible for group life insurance | employees were full-time and actively working. If contributory employee must approve auto payroll deductions. New employee has a probationary period of 1 to 6 months . Employee has 31 days during enrollment to sign-up or may need evidence of insurability |
| For group life insurance insurers require a minimum number? | Group members or employees to participate in group insurance to minimize adverse selection |
| What is the preferred rating | low risk equals lower premiums |
| What is the standard average risk | no extra ratings for restrictions |
| What is the substandard risk | rated up higher premiums |
| What is the declined noninsurable risk | the potential loss to the company is too high |
| How is group insurance eligibility determines | must benefit 70% of all employees. At least 85% of all participating employees must not be key employees |
| How are premiums for group life figured out | they are not tax-deductible if paid by the employee. If the employer can deduct premiums as a business expense |
| When is life-insurance taxable to the employee | if it is about $50,000 . It is tax-free if taken in a lump sum. if taken in portions will be subject to taxes on the interest portion of installments. |
| Benefit schedules are according to | earnings, employment position, flat benefit |
| When Canon employee convert to an individual policy from the group policy? | IF terminated member and dependents may convert to whole life insurance without proof of insurability |
| What is the group policy conversion. | Must apply within 31 days of date of group coverage termination. Individual covered under group during the conversion. |
| What is group policy termination | if master is terminated each individual insured at least 5 Years, can convert to an individual policy providing coverage to Face Value of group |
| What is franchise life insurance | participants are employees of a common employer or association. Each individual is issued an individual policy in force as long as premiums are paid and relationship Mantains with sponsor |
| Franchise group life insurance is used by | small groups who don't meet the states minimum number bylaw |
| What is group credit life insurance | usually decreasing term. Set up by banks, financial companies to provide if insured dies before loan is repaid policy benefits to pay the loan balance |
| What is blanket life insurance | individuals are only covered for a common hazard |
| What is the reason that insurance companies require a minimum number of employees participating in group insurance plan | Adverse selection minimize . The larger the group the more predictable the expected losses |
| What statement regarding certificate of insurance is accurate? It is insurance contract between the employer and insurer It indicates evidence of the employees insurance coverage Each certificate is underwritten on an individual basis It is issued b | indicates evidence of employees insurance coverage |
| Which statement is incorrect about group life Cost can be shared between the employer and the employee Each participant requires evidence of insurability Minimum number of employees participating maybe required Employer is issued master policy | each participant requires evidence of insurability |
| What minimum percent of all eligible employees must participate in group life insurance if premiums are completely paid by the employer? | 100% |
| What is the term used for an insurance contract that identifies individuals by relationship to a specific organization | Group insurance |
| What type of policy can group term life normally be converted to | an individual permanent life insurance policy |
| The policy provision that permits employees to change from group plan to individual plan is? | Conversion provision |
| An employer has group life insurance in place for his employees. How wouldn't employee in poor health be treated in situation | Eligible for sAme type of coverage as other employees |
| If an employer pays for accidental death and dismemberment insurance for its employees the amount paid by the employer is generally | Tax-deductible to business |
| The conversion option for group term insurance maybe exercised by an employee within | 31 days of terminated employment |
| Life insurance satisfies the need for? | Financial security |
| A beneficiary is a | party designated to receive proceeds upon insureds death |
| What are the three things that life insurance premiums are calculated on | mortality factor, interest factor and expense factor |
| What is the mortality factor | a measure of the number of deaths in a given population. Based on a large risk pool of people and time. Mortality tables help protect life expectancy and probability of death for a given group |
| What is the interest factor | insurance companies invest premiums in an effort to earn interest. One of the ways they can lower premium |
| What is the expense factor | also known as a loading charge insurance companies have operating expenses. |
| Besides the three main factors for calculating premiums what other things can impact the premium | Age, sex, health, occupation, hobbies, habits, |
| What is the premium mode | a policy feature that permits the policy owner to select timing of the premium payments |
| What is the mode of premium provision? | Premiums are normally taken out once a year beginning of policy and company will have a premium to invest which is interest factor for a full year |
| If the policy owner chooses to pay more than annually the company will normally add | Additional charge because company has more billing and collecting premiums |
| What is the premium payment option | payments can be made annually semiannually quarterly or monthly . Higher frequency of payments equals higher premiums |
| What is level premium funding | the average premiums over policy periods.pays more in early years for protection to help cover costs in later years which allow premIums to remain level throughout life of policy |
| What is single premium funding? | Is a single premium that provides protection for life as a paid up policy normally whole life |
| What are ReServes? | Money set aSide to pay future claims |
| What is cash value? | The savings element of whole life payable before death. The cash value during early policy will normally be less than premiums paid |
| Premiums paid an individual life insurance are | not tax-deductible |
| Premiums for life insurance for business are | not tax-deductible |
| The exceptions to tax deductible would be | premiums used for charity, life insurance paid by ex-spouse alimony, employer paid premiums to fund Group life for benefit of employees |
| What is taxable part of cash value | If cash value surrender portion exceeds premiums |
| What is cost basis | the total of the premiums paid into the policy minus total dividends in cash are used to offset premiums |
| Policies that are not surrendered to grow | tax-free |
| As long as money stays in policy taxes never | imposed on any portion even if it exceeds the cost basis |
| Death benefits are also known as | settlement options |
| When can death benefits be changed | anytime by the policy owner. Once selected cannot be changed by beneficiary |
| What are the death benefit settlement options | lump sum, interest only, fixed Period., Fixed amounts, life income |
| Explain the lump sum benefit | benefit paid in a single Payment minus any outstanding loans or premiums |
| What is interest only.benefit | insurance company holds a death benefit for period of time and pay only interest earned to the named beneficiary . A minimum rate of interest is guaranteed and must be paid at least annually. |
| What is fixed period Settlements | a.k.a. Period Certain. Death benefit is paid in equal installments over a set time part of installments are paid to the beneficiary consist of interest calculated on proceeds dollar amount depending on total number of installments |
| What is fixed amount settlements | pays a fixed death benefit and specified installments until principle is exhausted. larger installment equals shorter payout period. |
| What is life income settlement | the income beneficiary gets from death benefit will not be outlived. Installment payments are guaranteed for as long as the recipient lives. Amount is based on life expectancy and amounts of principle. Gives potential for greater return or loss by how lon |
| What is a joint and survivor option | guarantees benefits paid lifelong two or more people |
| In life income you may name | . Certain amount payable based on ages of beneficiaries |
| What are living benefits | use some of that benefit Proceeds when most needed, before death when insured has terminal illness |
| What is accelerated benefit | physician certifies terminally ill access to death benefit tax-free |
| What is a viatical settlement | someone with a terminal illness Sulzer existing insurance policy to a third-party for percent of the face value. The new owner keeps making premiums and eventually collects the whole benefit, the original owner is Viator. Third-party is viatee |
| Are premiums tax-deductible | no |
| How does tax treatment of proceeds of the death benefit work | tax-free in a lump sum normally. Subject to federal estate tax under certain circumstances and normally included in policyowners gross estate |
| What are the death benefit installments | principle tax-free interest taxable |
| What is the taxation of proceeds paid at death | Generally exempt from taxes if taken as a lump sum |
| What is transfer for value rule | when life insurance is sold to another party before death it is taxable |
| How does tax work for policy surrender | its cash value is more than premiums paid it is taxable |
| How is the accelerated death benefit taxable | terminally ill benefits paid out tax-free |
| Is in viatical arrangements taxable | proceeds could be |
| What is a 1035 exchange | is qualified nontaxable existing life policy assigned to another insurer for new contract. it enables postponement of tax consequences |
| Who is the beneficiary of a life insurance policy | a person or entity designated to receive death proceeds |
| When can the policyowner change the beneficiary | anytime unless designated irrevocable |
| When changing the beneficiary the underwriter may consider | insurable interest even though the policyowner has the ultimate decision |
| Can you put yourself as beneficiary | if you have proof of insurable interest |
| Who can be beneficiaries | individuals, businesses, Trusts, estates, charities, miners |
| How can beneficiaries be described | they can be specific by name, relationship Or class designation groups such as my children |
| If no one is named the beneficiary before insured dies the benefit GOs too | Insureds Estates |
| What is the order of succession of beneficiary | primary is the first in line. Secondary is a contingent second in line . Tertiary is 3 in line if no one named it goes to the Estate of insured |
| What is a revocable beneficiary | the policy owner can change at any time without notifying beneficiary or getting permission |
| What is your irrevocable beneficiary | The beneficiary may not be changed without written consent from the beneficiary. The beneficiary has a vested interest |
| What is simultaneous death? | Is insured and primary beneficiary die at the same time from a common accident with no clear evidence of who died first, the uniform simultaneous death act assumes primary died first the death benefit paid to contingent benefit |
| What is the spendthrift clause | It prevents reckless spending by the beneficiary. It is paid in fixed amounts over certain period. No effect if paid in one lump sum . |
| What is the spendthrift clause | Statement that indicates preventing reckless spending by beneficiary |
| How long to most states allow an insurance company to delay payment of cash under the delay payment provision? | Six months in Kiffin economic crisis it is rare |
| A life insurance company just paid $100,000 death benefit to the beneficiary. When insured died the cash value was $15,000 in total premiums equal $10,000. How much the proceeds will be added to beneficiaries gross income for federal tax purposes | Nothing because lump some death benefit is exempt from federal income tax |
| Which life insurance settlement option pays in monthly payments until the principal and interest are exhausted | Fixed amount installment option |
| Which would be described as a beneficiary designation by class | children of the insured |
| Life insurance premiums are based on | mortality, interests, expenses |
| What describes a single premium whole life policy? | Paid up policy that offers lIfetime protection |
| The highest mortality rate belOngs to which group | Age 70 males |
| What would be the disadvantage of naming a trust as beneficiary of life insurance policy? | Trust administration fees would reduce policy proceeds |
| All surrenders his life insurance policy for cash value. The total premiums paid into the policy minus the total dividends received in cash or used to offset premiums is referred as | Cost basis |
| Kevin has an existing life insurance policy and I sent it to another insurer for a new contract. How would this be treated for tax purposes | |
| 1035 exchange | |
| Exercise caution in deciding who is | qualified to purchase insurance |
| The insurance company standards are | set by each insurer with its own standards as to what constitutes insurable risk vs uninsurable risk |
| Each insurer determines | premium rates and insurable risk . They cannot sell to everyone |
| Every applicant needs a | underwriter to determine if application standards to qualify for life insurance |
| What is underwriting | another term for risk selection. It is a process of reviewing the many characteristics that make up risk profile of an applicant to determine if insurable . If so it's standard or substandard rates |
| What are the two basic questions to underwriting | Is applicant insurable ? If application and insured are two different people does insurable interest exists between the two of them. 2. Does Insurable interest exist |
| Insurable interest is extremely important because | it exists when death of the insured insurable interest in Chelinche to have a cleared financial impact on policyowner |
| Insurable interest in oneself | unlimited, when applicant and proposed insured are the same person there's no question insurable interest exist . There is a question with third-party contracts |
| Who would automatically be presumed to qualify as insurable interest | Spouses, parents, children and certain business relationships. In other cases the burden is upon the applicant to show insurable interest |
| Insurable interest exists with | own life, Wife to spouse, parents and children, parent or grandparent, business officers directors and key employees , business partners in each other, creditor and debtor only extent of debt |
| Insurable interest must exist at | Policy inception not when policy proceeds paid |
| Is the applicant insurable? | This lies in the underwriting process. Reviewing and evaluating information about applicants applying what is known as individual against internal standards and guidelines for insurability and premium rates |
| In regards to underwriting the larger the policy the more | diligent underwriting research is |
| If the insurance application raises questions It can trigger | more thorough review of sources |
| What are the most common sources of underwriting application | medical report, attending physician statement, info medical bureau, special questionnaires, inspection reports, credit reports |
| Explain the insurance application | it is the basic source of insurability. First source to be reviewed regardless of other sources . It is evaluated thoroughly. |
| In regards to the application it is the agents responsibility to see the application is | Fully and accurately recorded |
| What are the three basic parts of the application | part one is general two is medical part three is agents report |
| What is on part one general of the application | general questions about proposed insured. Name, age, address, DOB, sex, income, marital status, occupation. Details of insurance coverage . Type of policy amounts of income , name and relationship to beneficiary , other insurance and, additional applicati |
| Part 2 of application is medical which focuses on | Health and health history of self and family. Must be completed in entirety. Depending on face amount may or may not be required in medical info. Maybe required to take an exam and provide blood or urine sample |
| Part three of the application is the agent report which is | where the agent reports personal observations . Complete fully and truthfully is expectation |
| The agent report has additional info about | financial condition and character background and purpose of sale and how long known applicant. Ask if it is a replacement insurance and if yes certain procedures to protect coNsumers |
| What is a medical report? | Often insurance issued an applicant. This is usually enough if it's below 50,000 or hundred thousand no more info needed |
| The medical section raises questions you may need | a physician statement from the physician who treated applicants . With a copy of signed authorization. |
| Who can do a statement medical | Has to be done by a qualified person not necessarily a physician. It can be a paramedic or RN |
| A physician statement is reviewed and completed by | A medical director or designated associate |
| What is the medical info bureau | it is a nonprofit Central info agency formed by more than 700 member insurance companies. |
| The medical info bureau is reliable source of | Medical information that helps disclose where the applicant may have forgot or concealed underwriting information or erroneous errors by misleading medical info for fraud intenT |
| The medical info bureau also identifies life insurance with | other carriers |
| The medical info bureau household costs down for all policyowners by | preventing misrepresentation and fraud |
| If a company finds out that one of the applicants of the physical elements are impairment listed in the medical info bureau a u the company is | Pledge to release the info to the medical info bureau in code number |
| The medical info bureau allows underwriters to know | Past problem existed available info to member companies used for underwriting |
| The medical info Pirow can release information to | only other member companies And proposed insureds physician |
| What is the USA Patriot Act | requires insurance companies to establish formal anti-money laundering program . Detect and deter terrorism |
| What are special questionnaires? | More detailed information related to aviation, foreign residents, finances, military or occupation hazard . To see if insurance risk is acceptable, |
| The most common special questionnaire is | aviation questionnaire required of any applicant spends a lot of time Flying |
| What are inspection report | for applicants who apply for large amounts of life insurance. Normally obtain inspection reports from national investigation agency X |
| Inspection reports provide a picture of | general character and reputation, mode of living, finances and exposure to abnormal hazards |
| An investigative report you may interview | employees, neighbors, associates, and applicants |
| When an investigative consumer report if using connection with an insurance application applicant has right to | Received a report copy |
| In regards to investigative reports insurer's have the obligation to | Give notice, explain and allow opting out |
| Investigative reports are not normally required for | smaller policies |
| If insurance company obtains inspection report and most informed that it is permitted to do so under | Fair credit reporting act |
| What are credit reports | Questionable credit ratings can be a risk to insurers . Insurers can lose money they can't be recuperated in a short time . Can refuse insurance to people who haven't paid bills or playing for more insurance and I can afford |
Created by:
aperl1984