Insurance Policies and Terms

Endowment of a 20-Pay Whole Life Policy

A 20-pay whole life policy endows when the insured reaches 100 years old.

Long-Term Care Rider

A long-term care rider added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home.

Level Term Policy

A policy that pays the death benefit if the insured dies during the premium-paying period and nothing if death occurs after the period is a level term policy.

Continuing Education

A producer licensed 4 years ago who holds only 1 line of authority will be required to complete continuing education hours to renew their license.

Commingling

A producer who fails to separate premium monies from their own personal funds is guilty of commingling.

Producer's Fiduciary Duty

A producer's fiduciary duty is the trust that a client places in the producer in regard to handling premiums.

Return of Premium Rider

A return of premium rider is used with a type of insurance called increasing term.

Telemarketing Hours

A telemarketer can make an unsolicited sales call to a potential customer starting from 8 AM.

Credit Life Insurance

All statements regarding credit life insurance are correct except that benefits are paid to the borrower's beneficiary.

Tax-Qualified Annuities

All statements regarding tax-qualified annuities are true except that employer contributions are not tax deductible.

Annuity Certain

An annuity certain is a short-term annuity that limits the amounts paid to a specific fixed period or until a specific fixed amount is liquidated.

Illustration in Life Insurance

An illustration in a life insurance policy refers to the presentation of nonguaranteed elements of the policy.

Inspection Report

An inspection report includes the insured's financial status, hobbies, and habits.

Insurance Company Advertisement

An insurance company's advertisement may not include that its policies are covered by a state guaranty association.

Offer in Insurance

An offer is usually made when an applicant submits an application to the insurer.

Tax-Sheltered Annuity Contributions

Contributions to a tax-sheltered annuity are not included as income for the employee but are taxable upon distribution.

Participating Policies

Dividends in participating policies are not taxable.

Surrender of Deferred Annuity

If a deferred annuity is surrendered before the annuitization period, the owner will receive the surrender value of the annuity.

Cancellation of Producer's Appointment

If an insurance company cancels a producer's appointment, the commissioner must be notified within 30 days.

Consumer Report in Underwriting

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, the report may contain all information except the applicant's ancestry.

Extended Term Option

If an insured cancels their whole life policy and exercises the extended term option, the face amount of the new term policy will be the same as the original policy.

Legitimate Claim

If an insurer neglects to pay a legitimate claim covered under the policy terms, they have violated the consideration principle.

Payor Benefit Rider

If the father becomes disabled, the insured's premiums will be waived until she is 21.

Executive Bonus Plan

In the executive bonus plan, the executive is the owner of the policy and pays the premium.

Adhesion

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions.

Application for Insurance

It is the producer's responsibility to make certain that an application for insurance is filled out completely and correctly.

Life Insurance Illustrations

Life insurance illustrations must be part of the contract.

Life Insurance Proceeds

Life insurance proceeds can be used to put the surviving spouse's child through daycare after the insured's death.

Loss in Insurance

Loss refers to the reduction, decrease, or disappearance of value of the person or property insured in a policy by a peril insured against.

Misrepresentation in Insurance

Making comparisons between different policies is not considered a misrepresentation as it pertains to unfair trade practices.

Temporary Protection

Term insurance policies provide the greatest amount of protection for a temporary period during which an insured will have limited financial resources.

10-Day Free-Look Privilege

The 10-day free-look privilege permits the insured to return the policy for a full refund of premiums paid.

Qualified and Nonqualified Retirement Plans

The difference between qualified and nonqualified retirement plans is the taxation on accumulation.

Guaranteed Insurability Rider

The guaranteed insurability rider is available to all insureds with no additional premium.

Initial Amount of Credit Life Insurance

The initial amount of credit life insurance may not exceed the amount to be repaid under the contract.

Unused Premiums

The non-taxed return of unused premiums is called a dividend.

Reduced Paid-Up

The nonforfeiture option that provides coverage for the longest period of time is reduced paid-up.

Nonforfeiture Options

The nonforfeiture options include cash surrender, reduced paid-up, and extended term, but not interest only.

Reduction of Premium

The option to use nontaxable dividends to help pay for the next premium is called reduction of premium.

Payor Benefit

The payor benefit allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled.

Assignments

The two types of assignments are absolute and collateral.

Spendthrift Provision

When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, the spendthrift provision prevents the beneficiary from changing or borrowing from the planned installments.

Conditional Contract

When the insured makes the premium payment on a new insurance policy, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of a conditional contract.

Cash Refund Option

With the cash refund option, the beneficiary receives the refund of the original amount minus payments already made when the annuitant dies.