Life and health

beneficiary

A person who receives the benefits of an insurance policy

cash value

A policy a savings element or living benefit

What are the living benefits of whole life insurance?

Loan values

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?

Material misrepresentation

What is included in part 2 of a life insurance application?

Medical information about the prospective insured

Term Life

Pure protection, lasts for specific term, no cash value

A situation in which a person can only lose or have no change represents

Pure risk

In what way can agent demonstrate a high standard of ethics?

Putting the clients best interest before their own

Premium Receipt

Receipt given to the applicant by the producer or insurer, as proof of a premium payment.

What is the main responsibility of a companies underwriting unit?

Risk selection

Loss

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

Morale Hazard

They arise from a state of mind that causes indifference to loss, such as carelessness

endow

To have cash value of a whole life policy reach the contractual face amount

Variable life insurance products

contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance

Fixed life insurance products

contracts that offer guaranteed minimum or fixed benefits

life insurance

coverage on human lives

cash value

equity amount accumulated in permanent life insurance

Securities

financial instruments that may trade for value (for example, stocks, bonds, options)

Policy maturity

in life policies, the time when the face value is paid out

Physical Hazards

individual characteristics that increase the chances of the cause of loss

Who is responsible for the contents of insurance advertisements ?

insurance company

What are the three factors that determine the premium for a particular life insurance policy?

mortality, interest, and expense

lump sum

payment of the entire benefit in one sum

Policyowner

pays premium to insurance company

lapse

policy termination due to nonpayment of premium

All of the following are examples of risk retention except

premiums

Regarding taxation, how does the cash value of a universal life policy accumulate?

tax deferred

What type of life insurance policy offers pure death protection

term

Face Amount

the amount of benefit stated in the life insurance policy

Deferred

withheld or postponed until a specified time or event in the future

once a viatical contract has been established, how long does the viator have to rescind the contract?

15 calendar days

Medical Information Bureau (MIB)

A nonprofit association that maintains medical data on applicants for life insurance

Viatical Settlement

An arrangement that allows someone living with a life threatening condition to sell their existing life insurance policy and use the proceeds when and where they are most needed, before death.

Which of the following types of agent authority is also called perceived authority?

Apparent

An insurer wants to begin underwriting procedures for an applicant. What source will a consult for the majority of its underwriting information?

Application

When must insurable interest exist in a life insurance policy?

At the time of application

What does liquidity mean in a life insurance policy?

Availability of cash value

Attending Physician's Statement (APS)

Designed to obtain more specific information about a particular medical problem revealed in the application or during the medical examination

Which of the following best describes an insurance company that has been formed under the laws of the state?

Domestic

What are the three main instances when insurable interest exists in life insurance?

Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policyowner

Speculative Risk

Involves The opportunity for either loss or gain. And example of this risk is gambling. These types of risks are not insurable

Mode of Premium Payment

Is defined as the frequency and the amount of the premium payment.

Which of the following best describes gross annual premium?

Net premium plus expenses

Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?

No, advertising of the existence of the guaranty association for the purposes of solicitation and sale of insurance policies by insurers is an illegal business practice.

On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are

Not taxable since the IRS treats them as a return of a portion of the premium paid

Which part of insurance application would contain information regarding the applicants medical history?

Part 2

Which of the following is usually true of a participating life insurance policy?

Pays dividends to the policy owners.

Whole Life

Permanent protection, guaranteed elements until death or age 100, level premium, cash value and other living benefits

Which document describes the specific information about a policy?

Policy summary

Who must have insurable interest in the insured?

Policyowner

Classification of risk

Preferred, standard, substandard

What is the term that describes the frequency of the amount of the premium payment?

Premium Mode

Pertaining to insurance, what is the definition of a fiduciary responsibility?

Promptly forwarding premiums to the insurance company

Pure Risk

Situation so I can only result in a loss or no change. There is no opportunity for financial gain. ________ is the only type of risk that insurance companies are willing to except

Which of the following best describes a "viatical settlement purchaser?"

Someone who gives money as consideration for a life insurance policy

Conditional Receipt

States that coverage will be effective either on the date of the application or the date of the medical exam, which ever occurs last, as long as the policy is issued as applied for

What are the personal uses of life insurance?

Survivor protection, estate creation and conservation, cash accumulation and liquidity

Moral Hazard

Tendencies towards increased risk, lying on application for insurance

Death Benefit

That amount paid upon the death of the insured in a life insurance policy

Which of the following statements is true concerning the creditors of the deceased insured?

The creditors have rights to the proceeds if they can show evidence of valid assignment

When planning for survivor protection in life insurance, what needs to be considered?

The insured's current assets, liabilities and survivor's needs

Premium

The money paid to the insurance company for the insurance policy

Viator

The owner of a life insurance policy who enters into or seeks to enter into viatical settlement contract

Insured

The person covered by the insurance policy. This person may or may not be the policy owner

Risk

The uncertainty or chance of a loss occurring.

What is the purpose of key person insurance?

To minimize the risk of financial loss caused by the death of a key employee

What is the purpose of insurance guaranty associations?

To protect policyowners, insurers and beneficiaries from financial losses caused by insolvent insurers

The insurer must be able to rely on the statements in the application, and the insured must be able to rely on the insurer to pay valid claims. In the forming of an insurance contract, this is referred to as

Utmost good faith

Broker

an insurance producer not appointed by an insurer and is deemed to represent the client

Which of the following is the basic source of information used by the company in the risk selection process?

application

illustrations

presentation or deception of nonguaranteed elements of a life insurance policy

Buyer's Guide

provides general information about the types of life insurance policies available, in language that can be understood by the average person.

Policy Summary

provides specific information about the policy purchased, such as the premium and benefits.

Liquidation

selling assets in order to raise capital

Insurable Interest

something of value that, if lost, would cause you financial harm (policyowner's own life, the life of a family member, the life of a key employee)

Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?

stock

Insurer (principal)

the company who issues an insurance policy

Attained Age

the insured's age at the time the policy is issued or renewed

Policyowner

the person entitled to exercise the rights and privileges in the policy

Level Premium

the premium that does not change throughout the life of a policy

For the purpose of insurance, risk is defined as

the uncertainty or chance of loss

Which of the following is the best reason to purchase life insurance rather than annuities?

to create an estate

What type of insurance creates immediate estate?

Life insurance

Mortality tables are used by insurance companies to predict what?

Life expectancy and the death rates for specific groups of individuals

Nonforteiture Values

Benefits in a life insurance policy that the policy owner can not lose even if the policy is surrendered or lapses

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

Either on the date of the application or the date of the medical exam (whichever occurs last)

Underwriting

Is the risk selection and classification process

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

It will decrease

If an application for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

Whether an insurable interest exists between the individuals

insurance policy

a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events

Agent/Producer

a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer

Reciprocity/Reciprocal

a mutual interchange of rights and privileges

Applicant or proposed insured

a person applying for insurance

estate

a person's net worth

Flexible Premium

a policy feature that allows the policy holder to vary premium payments in the amount and or timing

Solvency

ability to meet all financial obligations

Hazards

are conditions or situations that increase the probability of an insured loss occurring.

Which of the following would describe a legal document which would dictate who can buy a deceased partners share of a business and for what amount

buy-sell agreement

peril

causes of loss insured against in an insurance policy

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

consideration