Life and Health Insurance

Separate accounts

A domestic insurer issuing variable contracts must establish one or more

Level term

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?

Increasing

A return of premium life policy is written as what type of term coverage

Pure Risk

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

Premiums are determined by the age, sex and occupation of each individual certificate holder

All of the following are characteristics of group life insurance EXCEPT

Premiums

All of the following are examples of risk retention EXCEPT

The Guaranty association

All of the following entities regulate variable life policies EXCEPT

Lower premiums than a person who receives a standard risk

An applicant who receives a preferred risk classification qualifies for

$100,000

An individual purchased a $100,000 Joint life policy on himself and his wife. 8 years later he died in an automobile accident. How much will his wife receive from the policy?

Authorized insurer

An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an

Inspection report

An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a

Term

Children's riders attached to whole life policies are usually issued as what type of insurance?

Juvenile life is classified as any life insurance purchased by a minor

Concerning Juvenile Life insurance, which of the following statements is INCORRECT

Speculative Risk

Events in which a person has both the chance of winning or losing are classified as

Something that increases the risk of loss

Hazard is best defined as:

upon the last death

In a survivorship life policy, when does the insurer pay the death benefit

The type of investment

In an adjustable life policy all of the following can be changed by the policy owner EXCEPT

It will likely be higher because the applicant is a substandard risk

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium

Loss

Insurance is a contract by which one seeks to protect another from

Risk

Insurance is the transfer of

Viator

It is the viatical settlement brokers job to represent the

War or military service

Name of clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military

As of the application date

The full premium was submitted with the application for life insurance and the policy was issued two weeks later as requested. When does the policy coverage become effective?

100

The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?

Lower

The premium of a survivorship life policy compared with that of a joint life policy would be

Pure risk and speculative

The risk of loss may be classified as

Adverse Selection

The tendency of risks with higher probability of loss to purchase and maintain insurance more often than the risks who present lower probability.

Absolute and collateral

The two types of assignments are

Increasing term

The type of term insurance that provides increasing death benefits as the insured ages is called

Material Misrepresentation

Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called

Signed waiver of premium

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT

Cash values can be borrowed at any time

What does "liquidity refer to in an insurance policy?

Principal

What is the term for the entity that an agent represents regarding contractual agreements with third parties?

Transfer

When an individual purchases insurance, what risk management technique is he or she practicing?

Coverage until death of age 100

Which characteristics makes whole life permanent protection?

Indemnity

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost

Someone who gives money as consideration for a life insurance policy

Which of the following best describes a "viatical settlement purchase"

Net premium plus expenses

Which of the following best describes gross annual premium?

Riders

Which of the following describes attachments made to the policies that either add or modify coverage?

The loss must be catastrophic

Which of the following is NOT a characteristic of an insurable risk?

Workers compensatin

Which of the following is NOT an example of a business use of Life Insurance?

It transfers rights of ownership from the owner to another person

Which of the following is TRUE about a policy assignment?

The trust that a client places in the producer in regard to handling premiums

Which of the following is an example of a producer's fiduciary duty

To create an estate

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

Universal Life-Option A

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Stock

Which of the following types of insurers is owned by stockholders?

The expense of a vacation for surviving family members

Which of the following would NOT fall into the category of costs associated with death?

Medical information

Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives?

Contigent beneficiary

a beneficiary who has second claim to the policy proceeds after the death of the insured (usually after death of the primary beneficiary)

primary beneficiary

a beneficiary who has the first claim to the policy proceeds after the death of the insured

To qualify for small group life insurance

a group must be formed for a purpose other than attaining life insurance

Minor

a person under legal age

Estate

a person's net worth

Cash Value

a policy's savings element or living benefit

Solvency

ability to meet financial obligations (an insurance company maintains enough assets to pay claims)

Viatical settlements

allow someone living with a life-threatening condition to sell their existing life insurance policy and use the proceeds when they are most needed, before their death

Trust

an arragement in which funds or property are held by a person or corp for the benefits of another person

Policy loans

are ONLY available in policies that have cash value (whole life)

Dividends

are a return of excess premiums; therefore, not taxable when paid to the policyowner

Premium rates on a joint life policy

are determined by averaging the ages of both insured

Settlement options

are triggered by the insured's death or age 100

Nonforfeiture values

benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses

Variable life insurance products

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

Life insurance

coverage on human lives

Cash Value

equity amount accumulated in permanent life insurance

Joint life=

first to die

Term insurance

has no cash value

The policy will NOT lapse

if an insured skips a premium payment on a universal life policy, the missing premium may be deducted from the policy's cash value

"level"

in level term insurance referes to the death benefit, which does NOT change

Collateral assignment

involves a transfer of partial rights to another person

Absolute arrangement

involves transferring all rights of ownership to another person or entity

Gross annual premium

is net premium plus expenses

Extended term

is the automatic nonforfeiture option: same face amount, shorter term of coverage

Group insurance

is written as annually renewable term insurance

NAIC

national association of insurance commissioners an org composed of insurance commissioners from all 50 states, formed to resolve insurance regulatory issues

Childrens term rider:

one premium for ALL children

Lump-sum

payment of the entire benefit in one sum

If NO beneficiary is named

policy proceeds to go to the insured's estate

Entire contract=

policy+copy of application + any rider or ammendments

Illustrations

presentation or depiction of nonguaranteed elements of a life insurance policy

The common disaster clause

protects the contingent beneficiary

Whole life insurance

provides lifetime protection and accumulates cash value

Term insurance

provides the greatest amount of coverage for the lowest premium

Survivorship life=

second to die

Liquidation

selling assets in order to raise capital

Purchase of Life insurance: Policy owner pays premium to insurance company, Insurance company issues policy to policyowner, Beneficiary receives benefit upon insured's death

steps of life insurance

Death benefit

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

Joint lifew policies

the death benefit is paid upon the first death only

Principal amount

the face value of the policy; the original amount invested before the earnings

Attained age

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

In group insurance,

the master contract is for the employer, and certificates of insurance are for individual insureds

Lapse

the policy termination due to nonpayment of premium

In variable contracts

the policyowner bears the investment risk

Level premium

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

Under life-income settlement option

the recepient cannot outlive the benefit payments

Endow

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

Assignment

transfer of rights of policy ownership

The waiver of premium rider

waives the premium for a total disability after a waiting period

Misstatement of age on the application

will result in adjustment of premiums or benefits

Deferred

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