Life Insurance
When an annuity is replaced, the replacing insurance company must notify the previous insurance company within:
3 business days --- The replacing insurer has 3 business days from the receipt of application to send the notice regarding replacement and a policy summary to the client's existing insurer.
When replacing a life policy, the agent must give the applicant:
A disclosure form --- The agent must give to the client a disclosure statement or notice regarding replacement on the day of application. The notice regarding replacement gives the insured pertinent information about replacement.
Insurers must retain all copies of illustrations for:
3 years from the date of policy termination --- Insurers must retain a copy of all illustrations received by the policy owner for 3 years after policy termination.
Dan is attempting to save a policy that he sold 2 years ago from being replaced by his ex-wife who works for another company. Another term for what Dan's ex-wife is doing is:
Conservation --- After a policy has been replaced, the agent of the existing policy has the opportunity to try to save the policy. This is called conservation. The existing insurer has 20 days to conserve the old policy. This is accomplished by sending the client a copy of a current policy summary for their existing policy.
Which of the following is not subject to the replacement regulation requirements?
Group life --- Whole life, endowment, term, universal life, variable life policies and annuities are subject to replacement laws. Group insurance and credit life are not subject to replacement laws.
A notice regarding replacement must include all of the following, EXCEPT:
Method of payment --- A notice regarding replacement must include the name of agent, the insurance company that the agent is representing, the date of the application, information about the policy being replaced, and the premiums of both policies. The method or mode of payment (i.e. monthly or annually) is not required. The date of issue of the replacing policy has not occurred at the time of disclosure.
An insurance company must retain replacement records for a minimum of:
3 years --- The replacing insurer must keep replacement records for 3 years. The existing insurer must keep conservation records for 3 years.
Who is governed by the Washington Solicitation of Life Insurance Regulation?
All insurance companies the hold a certificate of authority in the State of Washington --- Any insurance company that wishes to sell life insurance in the State of Washington is governed by the Washington Solicitation of Life Insurance Regulation.
The policy illustration regulation pertains to which of the following policies?
Indeterminant premium whole life --- The purpose of the regulation is to provide standards for policy illustrations that will protect consumers and foster consumer education. Exemptions include variable life insurance, annuities, credit life, and life insurance with a face value less than $10,000. Insurers must declare as to whether a policy will or will not be marketed with an illustration. Typically, interest-sensitive policies are issued with an illustration.
All of the following statements are true about the replacement of a life insurance contract
Term life insurance is subject to replacement regardless of when it will lapse. Universal life, endowment policies and variable life are subject to replacement. Variable life products must be sold with a prospectus. The existing insurer must be notified by the replacing insurer the replacement is in progress. This is accomplished by sending a copy of the notice regarding replacement and a policy summary. The existing insurance company is given 20 days to conserve the policy that is being replaced. The existing insurer must send the client a copy of the policy summary of their existing policy.
Which of the following is true?
The policy summary must be delivered prior or at the time of policy delivery --- The Buyers Guide must be delivered prior to or at the time of application. The policy summary must be delivered prior to or on the date of policy delivery. The Buyers Guide or policy summary must be delivered to the client if requested by the client.
Sam and Janice have requested a policy loan from their insurer. Their policy has been in force for 4 years. Which of the following is true regarding the loan?
The insurer must send the loan within 6 months of applicaition. --- Policy loans must be made after 3 full years of premium payment. Policy loans must be made within 6 months of the date of loan application. The interest rate can be fixed not to exceed 8% or a variable rate. Variable rates adjust at regular intervals from 3 month. to 1 year. Increases and decreases cannot exceed .5%. Indebtedness can be subtracted from the total loan amount. If total indebtedness (loan + interest) exceeds the cash surrender value, the policy will terminate. The life insurer will notify the policy owner, at the time a cash loan is made, the initial rate of interest on the loan and send advance notice of any increase in the interest rate.
A buyers guide and policy summary must be given to the client to educate the client and prevent against unfair competition. This is part of what regulation?
Washington Solicitation of Life Insurance Regulation --- The insurer is required to deliver to the client information that will assist the client in determining the best insurance for their needs. This is referred to as the Washington Solicitation of Life Insurance Regulation and is accomplished by providing the client with a Buyers Guide and a policy summary. The Buyers Guide must be delivered prior to application. The policy summary must be delivered prior to or on the date of policy delivery. Either document must be provided to the client upon request.
Laurie decided she did not want to keep the policy her agent delivered to her 5 days ago. The insurance company sent her a premium refund 45 days later. Which of the following is true?
The insurer must refund 110% of premiums. --- The "return of policy and refund of premium" indicates that if an insured returns a policy within the 10 day free look period, the insurer must refund premiums paid within 30 days or pay an additional 10% penalty over premium.
If an agent fails to give a notice of replacement when replacing a life insurance policy, the agent is guilty of:
Twisting --- Twisting: Lying about a client's current policy to induce the client to drop his/her current in force policy. Also giving an inaccurate disclosure statement or not giving a disclosure statement to the client. The Notice Regarding Replacement is a disclosure statement.
If a policy is marketed with an illustration, when must the client receive an accurate illustration?
Policy delivery date --- Insurer/agent must provide an accurate illustration by the date of delivery. An agent will most likely give illustrations prior to this date in an attempt to help the client understand the product. Since the policy issued will probably differ from the policy as first illustrated, the agent must provide an accurate illustration for the policy as issued. The insurer must retain copies until 3 years after client terminates policy.
Agents can do which of the following?
Suggest that a policy might pay more than the rate guaranteed by the policy --- Agents can show nonguaranteed benefits, but they must be displayed after the guaranteed benefits. If a policy is interest-sensitive, an agent can illustrate a rate higher than the guarantee, but not higher than current rates. Agents and insurers shall not represent the policy as other than life insurance, imply that a nonguaranteed element is guaranteed, llustrate more favorably than represented by the insurer or provide an incomplete illustration, represent that premium payment will not be required to maintain the illustration death benefit, unless true.
The CC Corp. has a group life policy issued by Excess Insurance Company. Excess has decided to terminate all of it's group life contracts. Which of the following applies to The CC Corp. and it's employees?
The insurer must offer all employees who have been covered for 5 years or more coversion of $2,000 or the full F.V. whichever is less. --- Conversion privileges: If the insurer cancels a group contract with the an employer, employees covered for more than 5 years are offered conversion of the lessor of the F.V. or $2,000.
The purpose of the replacement laws in Washington is to:
Establish penalties for agents using unfair practices in policy replacement --- Purpose These laws: 1. Regulate insurers and agents in replacement of policies 2. Protects the purchaser by establishing minimum standards of conduct by: * Assuring that the purchaser receives proper information. * Reducing the opportunity for misrepresentation. * Establishing penalties. * Providing a 20 day free look period.
Which of the following is true regarding interest rates?
Policy illustrations cannot illustrate higher than the current rate of return being offered by the insurer. --- Interest rates illustrated cannot be higher than the current rate of return being offered by the insurer. Agents and insurers shall not: represent the policy as other than life insurance, imply that a nonguaranteed element is guaranteed, illustrate more favorably than represented by the insurer or provide an incomplete illustration, represent that a premium payment will not be required to maintain the illustration death benefit, unless true.
Connie must provide each of her clients who purchase a policy from her with which of the following?
The Washington Solicitation of Life Insurance Regulation requires that the agent provide the client with a Buyers Guide and a policy summary. The agent is also responsible for delivering the policy to the client. A conditional receipt is not always issued. In particular, a conditional receipt would not be issued if the client did not pay any premium. # Buyers guide # Policy summary # A policy
An agent replaced an insured's endowment policy with a whole life policy and failed to leave a disclosure statement. In this situation which of the following would be true?
The agent is guilty of twisting. --- An agent who fails to leave a disclosure statement with the client when replacing an insurance policy is guilty of twisting. Twisting is a violation and therefore penalties may be imposed on the agent and the replacing insurer.
What is the minimum rate of return that the insurer must pay on policy proceeds?
8% or additional 3% after 90 days --- Policy settlement: interest rates on policy proceeds left with the company after death shall be not less than 8%. After 90 days an additional 3% is added (minimum of 11%).
Arnold is having problems remembering all the terms used in his office. He needs a written statement that describes the elements of a client's life insurance policy to give to his client. What is the name of the brochure he is looking for?
A policy summary --- A Policy Summary is a written statement describing the elements of the policy. It must include: * Title "STATEMENT OF POLICY COST AND BENEFIT INFORMATION" * Name and address of agent and insurance company * Generic name of policy (term, whole life etc.) * The first 5 years annual premiums for base policy and riders, guaranteed F.V., surrender values and guaranteed endowment amounts * Annual percentage rate charged on policy loans and whether applied in advance or in arrears. * Cost comparison indexes, for ten and twenty years, for the base policy and term riders. * A statement: "An explanation of the intended use of these indexes is provided in the Buyer's Guide." * Date the policy summary was prepared.
The term replacement is used in all of the following
Subject to replacement laws: Types of policies: Whole life Endowment Term Universal life Variable life Annuities Situations: * If the insured forfeits, surrenders, terminates or lapses an in-force policy. * If the policy is changed to reduced paid-up or extended term nonforfeiture option. * If the insured borrows 25% from the cash to buy a new policy. * If the policy is reissued with any reduction in cash value, benefits or length of coverage. Not subject to replacement laws: Types of policies: Group insurance Credit life Situations:(policies other than group or credit life) * Proposed life insurance that is to replace life insurance under a binding or conditional receipt issued by the same company. * When a conversion privilege is being exercised. * When an insured adds policies replacement is not required.