Life Insurance and Health Insurance
What is considered a valid reason for small businesses to insure the lives of its major shareholders? To provide an income for the surviving dependents Reduce the company's tax liability To pay for final expenses Fund a buy-sell agreement
Fund a buy-sell agreement
Non Qualified Annutiy
Funded with after tax dollars but the interest earned is tax deferred
The policy will terminate when the cash value is reduced to nothing.
If an insured continually uses the automatic premium loan option to pay the policy premium,
50 day notice
If an insurer is not renewing the health plan for a small employer
Medicare
Insurance for 65 and older; federal government
Which of these pays an income to two or more annuitants until the death of the last annuitant? Joint life annuity Deferred survivor annuity Joint and survivor annuity Survivorship annuity
Joint and survivor annuity
Payor benefit rider
This rider will not cause the death benefit to increase
Eligibility
To be qualified
Grace period
What required provision protects against unintentional lapse of the policy?
Suicide is excluded for a specific period of years and covered thereafter.
What statement about a suicide clause in a life insurance policy is true?
Guaranteed Insurability
When an insured wants to buy additional insurance later on and doesnt want to worry about having to take physical exam; premiums will be adjusted
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage and issues a policy
If it is intentional and material
When would a misrepresentation on the insurance application be considered fraud?
Third-party ownership
Which insurance arrangement will be appropriate for a parent buying a life insurance policy on a child where the parent is the policyowner?
Extended term
Which nonforfeiture option has the highest amount of insurance protection?
Defamation
Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?
Term life
Which of the following would NOT have a policy loans provision?
All of the following would be considered a nonqualified retirement plan
Keogh plan, Roth IRA, 401(k)
Diagnostics
Perform blood tests, image testing etc.
Which benefit can be found in an equity indexed annuity, but not in a fixed annuity? Protection against living too long Equity loans A fixed rate of return Protection against long-term inflation
Protection against long-term inflation
therapeutic
Provide services over time to treat pt
Absolute and Collateral
The two types of assignments are?
Convertible term policy
The type of policy that can be changed from one that does not accumulate cash value to the one that does, is a...
When do you have to provide evidence of insurability?
only when whole converts to term.
Keogh Plan
- self employed and employees - replaced by SEPs
Within __ days of requesting an investigative consumer report an insurer must notify the consumer in writing that the report will be obtained?
3 days
Accelerated Benefit Rider
A living benefit or terminal illness rider - if you have terminal illness, you can use the money before you die and it reduces the overall death benefit
Required a premium increase each renewal.
A man decided to purchase a $100,000 Annually Renewable Term Life Policy to provide additional protection until his children finished college. He discovered that his policy..
maternity benefits
A maternity provision may provide a fixed amount for childbirth or a benefit based upon a specified multiple of the daily hospital room benefit Frequently, the maternity benefit is available only as an added benefit for an additional premium
Fraternal Organization
A non profit or benevolent association and only can provide insurance to its members.
Hazard
A condition that exists that increases the chance of a loss occuring
Benefit is received tax free
A corporation is the owner and beneficiary of the key person life policy. If the corporation collect the policy benefit, then
limited pay life insurance
A form of whole life insurance characterized by premium payments only being made for a specified or limited number of years.
Costs of training a replacement
A key person insurance policy can pay for which of the following?
What do you need on an application
1) Applicant and agent need to sign 2) Agent cant make changes and if the agent changes something, the aplicant has to initial it
Statements made on an insurance application
1) Representation
What is another name for a Keogh plan? Roth IRA HR 10 plan Rollover plan 1040 plan
HR 10 plan
Straight whole life policies
Have a guaranteed face amount and a level premium for the life of the insured.
Rebating
Having a client in inducement to a sale not stated in the policy is an unlawful practice known as?
Grow tax deferred
In life insurance policies, cash value increases
Investigations
In order to enforce the insurance code the commissioner has the power to conduct which of the following?
Reinsurance
Insurance purchased by insurance companies - limits liability of insurance co and prevents catastrophic loss
During the first two years a life insurance policy is in force, the insurer may contest a policy for all of the following reasons EXCEPT Misstatement of age in the application Material misrepresentation in the application Fraud in the purchase of the policy Material concealment in the purchase of a policy
Misstatement of age in the application
Premium
Monthly payment for insurance
Unilateral Contract
One-sided: only one party makes an enforceable promise
Insurable Interest
Only allowed when contract is issued and does not have to be maintained throughout the life of the contract
Reduction of premium
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's' premium, thus reducing it to $900. What option does this describe?
Accidental death and dismemberment (AD&D) principle sum
Paid as the death sum
Accidental death and dismemberment (AD&D) capital sum
Paid for loss of sight or dismemberment
Not subject to income taxation by the Federal Government
Death benefits payable to a beneficiary under a life insurance policy are generally
Obtain a list of all life insurance policies that will be replaced
During replacement of life insurance, or replacing ensure musky which of the following?
Family health history, alcohol/tobacco consumption, and recent surgeries
Part 2 of the application for life insurance provides questions regarding all of the following..
Any form of life insurance
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
An annuity
Periodic payments of accumulated funds best describes...
Senior day care
Pt lives at home but spends time here during day while fam is working or running errands; receive help with ADLs rehab medications and entertainment and socializing
Which tax is normally associated with an individual's death? Excise tax Consumption tax Federal estate tax Ad valorem tax
Federal estate tax
Level, Increasing, & Decreasing
What are the three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term:
The earnings in the plan accumulate tax deferred
What describes the tax advantage of a qualified retirement plan?
The performance of the policy portfolio
What determines the cash value of a variable life policy?
Size of each installment
What determines the length of time that benefits will be received under the fixed-amount settlement option?
Face amount
What does "level" refer to in level term insurance?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company.
What is a material misrepresentation?
Those who have been insured under the plan for at least 5 years
What employee insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?
Unit Coverage
What every the coverage times by the number of units
Keogh
What is an IRS qualified retirement program for the self-employed?
Owner's rights
What explains the policyowner's right to change beneficiaries, choose options, and receive proceeds of a policy?
HR-10 plan
What is another name for a Keogh plan?
Employees receive individual policies
What is correct concerning a non contributory group plan:
Premiums are not tax deductible as a business expense.
What is correct concerning the taxation of premiums in a key-person life insurance policy?
Worker's Compensation
What is not an example of a business use of life insurance?
The original age is used for premium determination
What is the advantage of reinstating a policy instead of applying for a new one?
Common disaster clause
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?
18
What is the minimum required age for an insurance producer in this state?
Viator
What is the name of the insured who enters into a viatical settlement
Old age survivors disability insurance
What is the official name for the Social Security program?
Lump sum
What is the other term for the cash payment settlement option?
Retirement
What is the primary purpose of a 401(k) plan?
To explain features and benefits of a proposed policy to the consumer.
What is the purpose of a disclosure statement in life insurance policies?
The rider is usually level term insurance
What is true about a spouse term rider?
Trusts can be valid beneficiaries, the beneficiary may be a natural person, and the policy does not have to have a beneficiary named in order to be valid
What is true about beneficiary designations?
They are tax-free to terminally ill insured
What is true regarding taxation of accelerated benefits under life insurance policy?
Life income with period certain
What life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?
Buyer's Guide and Policy Summary
What must be presented before an applicant submits a premium?
Option B
What option for Universal Life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
100%
What percentage of a company's employees must take part in a noncontributory group life plan?
Insuring Clause
What policy component contains the company's promise to pay?
Face amount
What policy component decreases in decreasing term insurance?
Universal Life- Option A
What policy would have an IRS required corridor or gap between the cash value and the death benefit?
Policy summary
What usually includes information about premium amounts, cash values, surrender values, and death benefits for specific policy years?
Buy-Sell agreement
What would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount?
Has a tax benefit for both employer and employee
What's true of a qualified plan?
Nonforfeiture values
Required by state law to be included in the policy, and cannot be altered by the policyowner. A table showing the nonforfeiture values for the next 20 years must be included in the policy.
Which life insurance policy would be eligible to include an automatic premium loan provision? Increasing term Level term Decreasing term Whole life
Whole life
The policyowner is entitled to policy loans.
Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.
It has a guaranteed minimum interest rate
Why is an equity Indexed annuity considered to be a fixed annuity?
Substandard Risk
Will result in having to pay the highest premium due to health, history, habits, etc.
Mutual Insurance Company
________________ are owned and controlled by their policyholders. Any surplus money is returned to the policyholders as dividends.
Best detail of underwriting process for life insurance
Selection, classification, and rating of risks
Rollover
Tax free withdrawal of cash or other assets from one retirement program and its reinvestment in another program. It is not considered income and it is not taxable until a later withdrawal. Has to be completed in 60 days
Purchase a smaller amount of the same type of insurance as the original policy
The paid-up addition option uses the dividend to..
Reduction of premium
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?
A non qualified annuity plan
The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is...
Rate
The price of insurance per 1000 of coverage ie if it costs 3.45 / unit than u multiply by 1000 to get total cost
Consideration
the exchange of of one value for another - there are 2 parts to the consideration 1) the application 2) the premium
Risk
the uncertainty or chance of loss
Misrepresenting pertinent policy provisions relating to coverage after a loss is A concealment in insurance application An unfair claims settlement practice An unfair discrimination between individuals A violation of the principle of adhesion
An unfair claims settlement practice
The insurer
And any controversy between the insured or the insured's beneficiary and the insured that arises from the application for insurance of any policy issued a connection with the application, the producer is considered to be the agent and which of the following?
She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan
And employee has group life insurance through her employer. After 5 years, she decides to leave the company and work independently. How can she obtain an individual policy?
The insured would not need to prove insurability for a conversion policy, the insured make convert coverage to an individual policy within 31 days, the premium for individual coverage will be based upon the insured's attained age
And employee is insured under her employers group life plan. If she terminates her group coverage, what is true?
Before accepting the initial premium
Assuming that a policy does not contain an unconditional refund provision of at least 10 days, when must a Buyer's Guide and policy summary be provided?
When does the insured stop making payments under a thirty-payment whole life policy? At the time of death or 30 years after the policy's inception, whichever comes first It depends on the performance of the underlying investment account When the cash value surpasses the face amount At age 100
At the time of death or 30 years after the policy's inception, whichever comes first
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be..
Authorized
In the event of premium default, which life insurance provision will use the cash value to keep the policy in force? Waiver of premium Automatic premium loan Reinstatement Policy loan
Automatic premium loan
A qualified plan for a small business
If a company has a simplified employee pension plan, what type of plant is it?
A modified endowment contract
If a life insurance policy develops cash no you faster than a seven-pay whole life contract, it is?
Accidental death benefits
If a person dies within 90 days of an accident
The balance of the loan will be taken out of the death benefit
If a policy had an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
The balance of the loan will be taken out of the death benefit
If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
With the policy
If a policy includes a free-look period of at least 10 days, the Buyer's Guide must be delivered to the applicant...
Dividends are not guaranteed
If a producer discusses policy dividends in a sales presentation, what statement must the producer also make?
30 days
If a resident insurance producer moves from Tennessee to another state, he/she must file a change of address and provide certification from the new resident state within how many days of the change of legal resident?
Return the application to the applicant for a signature
If an agent fails to obtain an applicant's signature on the application, the agent must...
Settlement option
If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a?
All of the above may happen
If an individual licensee's violation of the entrance code was known or should have been down by one or more of the partners, officers, or managers of the agency, what could happen to agency?
Fully insured
If an injured worker has earned 40 quarters of coverage, the worker's status under Social Security disability is?
False advertising
If an insurance company has published a brochure that in accurately portrays the advantages of a particular insurance policy. What is this an example of?
Prior insurance, credit history, and habits
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information of the applicant...
The policy will terminate when the cash value is reduced to nothing
If an insured continually uses the automatic premium loan option to pay the policy premium..
Unpaid Premium Provision
If an insured has a claim in the grace period, insurer may subtract overdue premium from the amount of the claim paid
0%
If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insured's death?
It is only taxable if the cash value exceeds the amount paid for premiums
If an insured surrenders his life insurance policy, what is true regarding the cash value of the policy?
It is only taxable if the cash value exceeds the amount paid for premiums
If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?
the amount of earnings lost by the insurance company in interest income
If an insured withdraws a portion of the death benefit by the use of this rider, the benefit payable at death will be reduced by that amount plus..
Be interpreted as if the insurer waived its right to have an answer on the application.
If an insurer issued a policy based on the application that had unanswered questions it would...
Receipts
Insurability Type Conditional Receipt
Foreign Insurance Co
Insurance Co that's allowed to do business in a state other than their home state
Accident and Health Insurance
Insurance against loss through accident or sickness
The Medical Information Bureau consists of members from which group? Doctors Hospitals Insurance companies Underwriters
Insurance companies
Insurance agents represent the
Insurance company of the insurer
long-term care insurance
Insurance coverage that provides a daily monetary benefit to people who are chronically ill and who require living assistance either at home or in a residential facility
Medicaid
Insurance for blind, low income, disabled; state governments
Loss
Insurance is a contract by which one seeks to protect another from...
Co-insurance
Insurance pays a certain percent and pt pays a percent (80/20%)
Replacement Insurance
Insurance that actually replaces an item that has been destroyed.
A retired couple would like to maximize the income derived from their life savings and have it payable until they both die. Which annuity would be their best choice? Fixed annuity Survivorship annuity Joint life annuity Joint and survivor annuity
Joint and survivor annuity
Which of the following can be used to avoid the mandatory withholding tax on qualified plan distributions? Qualified plan waiver Trustee-to-trustee transfer Conduit IRA 1035 exchange
Conduit IRA
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
Which of the following contracts offer deferred taxation, flexible payments, a guaranteed interest rate, and death benefits equal to the cash value? Variable life policy Modified life policy Flexible premium fixed annuity Immediate fixed annuity
Flexible premium fixed annuity
Accidental Death Rider
This pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs within 90 days of such an accident.
change of occupation
This provision also allows the insurer to reduce the maximum benefit payable under the policy if the insured switches to a more hazardous occupation or to reduce the premium rate charged if the insured changes to a less hazardous occupation
cancellation
Though prohibited in a number of states, the provision for cancellation gives the company the right to cancel the policy at any time with 45 days' written notice to the insured This notice must also be given when the insurer refuses to renew a policy or change the premium rates If the cancellation is for nonpayment of premium, the insurer must give 10 days' written notice to the insured, unless the premiums are due monthly or more frequently The cancellation provision also allows the insured to cancel the policy any time after the policy's original term has expired
The annuity period
Time during which accumulated money is converted into an income stream
Buyer's guide purpose
To allow the consume to compare the costs of different policies
15 days
To appoint a producer as it's agent, the appointing insurer must file a notice of appointment with the commissioner within how many days from the date the agency contract is executed?
6 credits
To attain currently insured status under Social Security, a worker must have earned at least how many credits during the last 13 quarters?
Ambulate
To walk
Nursing home
LTCF; pts are in need of constant nursing care and assistance with their ADLs
extended care facility
LTCF; pts need less care that nursing home but require assistance with ADLs and their medical needs, such as taking meds; often require help for rest of life; Alzheimer's, Dementia; brain damage
Which of the following normally pertains to an immediate annuity? Tax-free benefit payments Installment premium payments Lack of an accumulation period Lump-sum benefit
Lack of an accumulation period
Industrial Health Care Centers
Large companies often provide onsite health clinics for emergency tx, accident prevention training l, but also basic examinations for employees
All of these are duties that a producer may be required to perform when delivering an insurance policy EXCEPT Acquire a statement of good health signature Gather the initial premium Review policy with applicant Leave a conditional receipt with client
Leave a conditional receipt with client
How much is normally paid to a policyowner in a life (viatical) settlement? Total premiums paid plus interest Full face amount More than the face amount Less than the death benefit
Less than the death benefit
What type of premiums are associated with individual mortgage protection life insurance policies? Level premiums Flexible premiums Modified premiums Decreasing premiums
Level premiums
Modified Whole Life
Level premiums for designated timeframe (typically 5 years); higher premiums thereafter
Laura added a children's rider to her life insurance policy. What type of coverage was added? Level term Increasing term Decreasing term Juvenile term
Level term
40
Number of credits required for fully insured status for Social Security disability benefits?
Home Care
Nurses may visit pts in home to give follow up care after hospital stay or for chronically ill pts who do not require being in LTCF; lower cost, comfort of home, lower risk of nosocomial infection
As a field underwriter, a producer is responsible for all of the following tasks..
Obtain appropriate signatures on the application for insurance, help prevent adverse selection, and solicit business that will fall within the insurer's underwriting guidelines.
Modified Fully Insured Plan
Offer employer payment options to lower group plan costs -premium delay arrangement - employer can delay payment beyond 30 day grace period for 60-90 days - Reserve Reduction arrangement - After 1 year employer can retain amount of premium equal to claim reserve - retrospective rating arrangement - when an insurer charges up to 10% less than of charges
Social Security benefits
Old-age and retirement benefits, disability benefits, death benefits
"Not taxable" since the IRS treats them as a return of a portion of the premium paid.
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are
All of these statements correctly describe an aleatory contract EXCEPT A legal wager is considered an aleatory contract Potential unequal exchange of value for both parties Only one party makes any kind of legally enforceable offer Element of chance is involved
Only one party makes any kind of legally enforceable offer
Chain of command
Organizational chart
skeletal system
Orthopedics
When a deferred annuity is surrendered, who must sign the authorization to do so? Owner Annuitant and beneficiary Annuitant All parties involved
Owner
Major difference between stock company and a mutual company..
Ownership is the difference between these two companies. Mutual-policyholders; Stock-stockholders
Nonprofit examples
PKD foundation, Red Cross, American cancer society
Which statement most accurately describes a single premium whole life policy? Premiums that can only be paid from a single source A single premium that is due annually Paid-up policy that offers lifetime protection Paid-up policy that offers limited protection
Paid-up policy that offers lifetime protection
A prospective insurer receives a conditional receipt, but dies before the policy is issued. The insurer will...
Pay the policy proceeds only if it would have issued the policy
Benefits
Payment and assistance based on agreement
Indemnity type medical expense policy
Pays a specific per day benefit
Business Overhead Expense
Pays the business if the small business owner gets disabled - Its purpose is to pay overhead expenses to keep the business in business - premiums are tax deductible with benefits being taxable
Policyowner
Person entitled to exercise the rights and priveleges in the policy
PPE
Personal protective equipment
Facilities
Place designed or built to serve a special function, such as doctors office or hospital
Policy loans can be repaid at death, an insurer can charge interest on outstanding policy loans, A policy loan may be repaid after the policy is surrendered
Policy loans
Straight whole life insurance can be accurately described in all of these statements EXCEPT Policy protection normally expires at age 65 Nonforfeiture values are available to the policyowner Provides level protection with level premiums Cash value loans are permitted
Policy protection normally expires at age 65
Straight whole life insurance
Policy where premium is paid for the whole lifetime of the insured
Universal life
Policy which allows the partial withdrawal, or surrender, of the policy cash value
The beneficiary of a life insurance policy is normally selected by whom? Policyowner Contingent beneficiary Estate Insurance company
Policyowner
PPO
Preferred Provider Organization - enters into contractual agreements with hospitals and doctors in order to provide services at a reduced cost - the insured will pay a lower deductible - the drs get more volume
Consideration
Premium payment + application
When an agent collects the initial premium from the applicant, the agent should issue the applicant a...
Premium receipt
The applications
Primary source of insurance underwriting
Proprietor
Private owner
When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice? Producer Insurer Underwriter Fiduciary
Producer
A cease and desist order issued against an agent Suspends the agent's certificate or broker's license Prevents the agent from receiving commissions Prohibits a specific practice listed in the order Terminates the agent's appointment with the insurer
Prohibits a specific practice listed in the order
Major Medical
Protects against catastrophic losses with much higher benefits - High coverage limitations - unlimited lifetime benefits - deductibles are front end (must be satisfied before you recieve any coverage) - After the deductible has been satisfied, the patient and the insureance share the costs (80% / 20%). - Blanket coverage - will cover everthing in the hospital
Veterans Affairs Hospital
Provide care for veterans who served in armed forces
Rehab Center
Provide physics therapy PT and occupational therapy OT; fitting of prosthetics; other therapies; often outpatient basis
Refund Life Annuity
Provides annuity payments for the annuitant's lifetime with the guarantee that in no event will total income be less than the purchase price of the contract. If the annuitant dies before receiving this amount, the difference is paid to a named beneficiary either as a cash refund or in installments.
Specialty Hospitals
Provides care for special conditions for age groups.
Binding Receipt
Provides coverage as soon as premium is received (before approval)
Workers Compensation
Provides coverage for injuries and illness occurring on the job Provides 4 benefits - unlimited medical benefits - survivor income and funeral up to 5k - disability benefits - rehab Only available for full time employees
Dread Disease Policy
Provides coverage for specific disease(s), such as cancer or leukemia.
Hospice
Provides end of life care, pt expected to have 6 months or less to live; cancer most common; medical services, psychological support, spiritual support, financial support to pts and fam; goal is to be comfortable and control pain; die with dignity
Business Continuation Plan - Also called "Buy Sell" or Entity?ERKERKERK
Provides for business continuation in the event a partner dies using life insurance - Allows money to be available to purchase deceased partner's beneficiaries interest - pre arranged purchase price
Consideration
Something of value exchanged between the insurer and the insurer is considered....
Which one of these is NOT considered to be an element of an insurable risk? Speculative risk Pure risk Loss cannot be catastrophic Loss must be due to chance
Speculative risk
XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this? Split-dollar Cross puchase Key employee Deferred compensation
Split-dollar
Claims settlement practices of insurers are regulated by: The Internal Revenue Service The National Association of Insurance Commissioners Claims adjusters State insurance departments
State insurance departments
CHIP or SCHIP
State; children's health insurance program; for children of families who earn too much for Medicaid but can not afford private health insurance
Disposition of Proceeds
Straight Life or Pure Life Life with Period Certain
Which of the following statements about the installments for a fixed period settlement option in life insurance policies is NOT true? The periodic payment amount is determined by the beneficiary's age The shorter the period of time, the larger each installment The longer the period of time, the smaller each installment The installment payments are composed of both principal and interest
The periodic payment amount is determined by the beneficiary's age
Beneficiary
The person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have to have an insurable interest in the policyholder.
physical exam and autopsy
The physical exam and autopsy provision entitles a company, at its own expense, to make physical examinations of the insured at reasonable intervals during the period of a claim, unless it's forbidden by state law.
General requirements of a qualified plan
The plan must be communicated to all employees, the plan must be for the exclusive benefits of the employees and their beneficiaries, the plan must be permanent, written and legally binding
Interest only option
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. What settlement option should the policyowner choose?
Tax deductible by the employer
The premiums paid by the employer in a business life insurance policy are
Tax deductible by the employer
The premiums paid by the employer in a business life insurance policy are...
The annuitant is a natural person
The president of a company is starting an annuity and decides that his corporation will be the annuitant. It can happen just as long as..
The annuitant assumes the risks on investment.
The payments that that annuitant invests into the variable annuity are invested in the insurer's separated account. The separate account under many annuities provides the annuitant with a dozen or more investment options ranging from "money market funds" to "growth stock funds" to "precious metal funds".
Straight Life Annuity
The payout option that will guarantee an annuity payment for the remainder of an individual's life. This option typically provides the largest monthly payment.
Reduced paid-up
This nonforfeiture option provides coverage for the longest period of time:
Important notice regarding the Replacement of life insurance
When the sale of life insurance involves a replacement the applicant must be given a copy that he/she has to sign
Cross Purchase Plan
When there are lots of partners, each partner would beed to buy a policy on the other partners. EG: 7 parnters, each buy insurance on the other 6 partners so there are 42 (7x6) contracts
Discrimination
When twin brothers applied for life insurance from company a, the company found that while neither of them smoke and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered?
When the insured reaches age 100
When would a 20-pay whole life policy endow?
When the insured reaches age 100. "A limited-pay whole life policy, just like straight-life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years."
When would a 20-pay whole life policy endow?
If an applicant 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
Life income with period certain
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original dies, the payments will continue to a designated beneficiary?
Reduced paid-up
Which nonforfeiture option provides coverage for the longest period of time?
Issuing the policy
Which of the following activities is not performed by an insurance producer?
Failing to meet sales goals
Which of the following acts would not get an insurance producer terminated "for cause"?
Making derogatory oral statements about another insurer's financial condition
Which of the following best describes the unfair trade practices of defamation?
Notice regarding replacement
Which of the following documents must be provided to the policyowner or applicant during policy replacement?
Have attained fully insured status
Which of the following is an eligibility requirement for all Social Security disability income benefits?
Telling a client that his first premium will be waived if you purchased insurance policy today
Which of the following is an example of a producer being involved in an unfair trade practices of rebating?
Prelicensing course is must be approved by the commissioner, applicants must complete 20 hours of training for each line of authority, online and the classroom courses are allowed
Which of the following is true regarding pre-licensing education requirements for insurance producers in the state?
Business entity
Which of the following may obtain a producer's license, but may not sell, solicit, or negotiate a contract of insurance in Tennessee?
A person who negotiates insurance contracts
Which of the following persons is required to hold a producer license?
Policy loan
Which of the following provisions would NOT be found in Term Life Insurance?
It requires the policyowner to pay all overdue premiums with interest before the policy of reinstated.
Which of the following statements about the reinstatement provision is true?
Implying that the agent is the insurer
Which of the following would be considered false advertising?
A salaried employee who advertises and solicits insurance
Which of the following would be required to be licensed as an insurance producer?
A nonresident life insurance producer who is planning to transact property insurance
Which of the following would be required to complete pre-licensing education?
Face Amount
Which policy component decreases in decreasing term insurance?
Insuring clause
Which provision of a life insurance policy states that the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
Replacement rule
Which road apply for the agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
An individual who has a contract or agreement we could ensure to solicit or negotiate insurance policies on behalf of that insurer
Which statement best defines an insurance producer?
Level or flexible
Which two terms are associated directly with the premium?
Universal Life
Which type of life insurance policy allows the policyowner to pay more or less than the planned premium?
Single premium
Which type of life insurance policy generates immediate cash value?
Equity Indexed Annuity and Fixed Annuities
While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate
An individual not covered by an employer-sponsored plan who has earner income
Who can make a fully deductible contribution to a traditional IRA?
Policyowner
Who can request changes in premium payments, face value, loans, and policy plans?
A policyowner who is not the insured
Who is a third-party owner?
The individual making the contract on behalf of the on authorized insurer is liable
Who is personally liable for all contracts of insurance unlawfully made with in Tennessee on behalf of an unauthorized insurer?
Determines if the insurance policy is an MEC.
Who is the main purpose of the seven-pay test?
The employer is the owner and beneficiary
Who is the owner and who is the beneficiary on a key person life insurance policy?
The employer is the owner and the beneficiary
Who is the owner and who is the beneficiary on a key person life insurance policy?
Exclusion from Workers Comp
exclusion of coverage if - injured while playing sports then you only get paid for meals lodging and transportation - injured while participating in a voluntary off duty activity or social event - if your drunk, commiting a crime or starting a fight in the workplace
With life insurance, the needs approach is used primarily in determining which insurance company to purchase the coverage from how much life insurance a client should apply for the type of life insurance that should be purchased a budget for the surviving dependents to follow in the event of the client's death
how much life insurance a client should apply for
7 Pay Test
if premiums paid during the first 7 years exceed the net level premium that should have been paid, it is a MEC (Modified Endowment Contract)
Cobra
if terminated, the employee can still receieve insurance but has to pay it themselves. Premium charges cant exceed 102% of the group premium; you can get it for 18 months or 36 months if one of you dies, gets divorced or child leaves home
Waiver of Premium
if you are disabled, after 90 days, the premium is waved - life insurance its 6 months
A life insurance policy that includes a return of premium rider will pay the beneficiary how much upon the insured's death? Total premiums paid plus the policy face amount Face amount plus interest accrued Interest accrued plus total premiums paid Face amount minus any outstanding loan balances
Total premiums paid plus the policy face amount
Straight life policy
Traditional level premium contract..
Viatical Settlement Provider
When a company purchases life insurance from a policy owner. They buy a % of the death benefit. They must pay the premium on the policy. It is usally sold to terminally ill patients (death of 24 months or less)
Community Rateing
When a group is small, the insurance company would use the experience from their community
Equal to the original policy for as long a period of time that the cash values will purchase
When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount
Equal to the original policy for as long as a period of time that the cash values will purchase
When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount..
Duplicate cover can result in over insurance
When a person is converting a terminated plan and they try to enroll in a new employers plan
Contract of Adhesion
When a persons only options for a contract are on a take it or leave it basis; prepared only by the insurer.
Tort of Error and Omission (E&O)
When a producer engages in an honest or unintentional mistake - producer can buy E&O insurance
Defamation
When a producer was reviewing a potential customer's coverage written by another company, the producer made several remarks that were maliciously critical of that other insurer. The producer could be found guilty of?
Retrocession
When a reinsurance company reinsures with another reinsurer
Purchase a single premium policy for a reduced face amount
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be use to..
Transfer
When amounts of a qualified plan are transferred to another qualified plan
Payor Rider
When an adult insures a child, premiums will be waived until the child reaches 21, if the adult dies or is disabled
31 days
When an employee terminates coverage under group insurance policy, coverage continues in force for how long?
waivers for impairments
When an insurance company does not cover a loss due to a specific condition the insured has. This is usually called an impairment rider. If the insured's condition improves, the company may be willing to remove the waiver.
Insurability Type Conditional Receipt
When applicant hands in application and premium, then if the policy is approved, the the contract begins on the day he handed it all in; sometimes a medical exam is needed to have it approved
Conditional
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is..
Spendthrift Provision
When insurance company retains the proceeds. It Protects beneficiary from creditors as long as the death benefits are left with the insurer. Proceeds left for beneficiary cant be touched if left at the insurance company
Common Disaster Clause
When insured and primary die at the same time, it is assumed that the primary died first
When the application is signed and a check is given to the agent.
When is the earliest a policy may go into effect?
When death occurs within a specified period of time after the policy was issued
When may an insurance company use suicide as a defense against paying a death claim?
Life with Period Certain
When policy owner wants to get income for life but also wants to guarentee that a survivor gets a benefit if he dies for a certain period of time; made in 5,10,15 and 20 years option
Experience Rating
When the actual experience of the group determines premiums
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?
When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable statement of Good Health
The earliest a policy may go into effect?
When the application is signed and a check is given to the agent
Under which circumstance is the interest rate guaranteed within a market value adjusted annuity? When the contract has been held for a stated time period For the entire length of the contract Never When the cash value has reached a stated minimum amount
When the contract has been held for a stated time period
When does interest income for a flexible premium deferred annuity get reported for federal income taxes? Never After the principal has been exhausted When the distributions are received from the contract During the accumulation phase
When the distributions are received from the contract
Split Dollar Plan
When the employer funds the cash portion of a whole life plan and the employee funds the term part of the plan -at death, employee receives death benefit and employer receives cash calue of plan
Fixed amount
When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option?
Fixed amount
When the policyowner specifies dollar amount in which installments are to be paid, he/she has chosen which settlement option?
Elimination (Waiting) Period
period of time preceding each disability during which benefits are not paid -similar to a time deductible - the longer the elimination period, the lower the premium
Unilateral Contract
promise in exchange for an act
Certificate of Insurance (COI)
proof that the insured has insurance
State Guaranty Association
protect policy owners in the event of any insurance company going out of business, becoming insolvent, or the in ability to pay claims
Any employee insured under a group life insurance plan is normally given a master certificate covered on a noncontributory basis required to show proof of insurability protected by term life insurance
protected by term life insurance
Deferred Compensation Plans
- a non qualified plan - employer deffers payment of salary until a later date
Qualified Plan
-approved by IRS for favorable tax treatment - tax deffered growth
Joint and survivor
The type of settlement option which pays throughout the lifetimes of two or more beneficiaries is called?
Transfer of all ownership rights in a policy
An absolute assignment is a..
Hearing
Audiology
Convertible Term Insurance
Convertible without proof of insurability up to the full term death benefit.
School heath services
Employee nurse at school
Corporations
Hospitals may be run as _____; for-profit/proprietary
Premiums paid by an employer on a $30,000 group term life insurance plan for employees
In which instance would the premium be tax deductible?
Domestic insurer
Licensed in the state where the individual resides.
HSA's Do not include
Medical supplement premiums
Childbirth
Obstetrics
Geriatric care
Specialty focus on treatment if elderly
Dividend
Term used to name the no taxes return of unused premiums?
The state
The regulation of the insurance industry primarily rest with
urinary system
Urology
indemnity
a payment for damage or loss
Immediate Annuity
contract owner gets money immediately only if it is funded with a lump sum
Short Term Disability payouts
has a potential benefit bw 13 - 52 weeks or
Fraud
intentional deception; grounds for recission
Fiduciary
position of trust
Legal Purpose
sale cannot be contradictory to the good of the public
........ insurable interest must exist in a life insurance policy
"At the time of the application" is when interest must exist.
Indemnity
- Stated amount of death benefit in the contract
Separate Accounts
A domestic insurer issuing variable contracts must establish one or more..
Physician and dental lab
Allow for Dx and Tx in smaller setting
Deferred Annuity
An annuity that starts sometime in the future.
World Health Organization (WHO)
Founded in 1948; part of UN
support
Include food services housekeeping biomedical tech
Emergency care
Life threatening
The Federal Fair Credit Reporting Act
Regulates consumer reports
Government run hospitals
VA; SAMMC, Willford Hall; Universal Health Care System
Premiums are not tax-deductible as a business expense
Concerning the taxation of premiums in a key- person life insurance policy is:
Family Rider
insurance to cover spounce and children
level term life insurance
premiums remain the same thoughout the life of the policy
Individual Life Insurance
purchased by individuals; usually greater face value Has 10 day return policy upon delivery
Morbidity Tables
shows statistical average or possibilty of becomeing disabled and the extent of it
Conditional
the insurers promise to pay if the condition occurs (ie death)
Presumptive Disability
type of total and permanent disability based upon loss of sight, hearing, speech and loss of limb. Need to lose 2 limbs
Which settlement option makes minimum guaranteed dollar payments over a stated number of years? Interest-Only Fixed-Period Fixed-Amount Life Income
Fixed-Period
Insurance Definiation
- Transfer of risk from 1 party to another utilizing a legal contract through the pooling or accumulation of funds - transfering financial consequences of death to the insurance company to help pay
What do you need to get Social Secutiry
- You have to work for 40 qtrs or 10 years
Penalty for Withdrawl of Qualified Plan
- a 10% penalry plus applicable state and federal taxes
Life expectancy
Result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?
Self insurance is and example of what kind of risk treatment?
Retention
Scheduled Dental Insurance
- a basic plan - generally have no deductible or co payments and include first dollare coverage. - contains categoris of treatments with maximum benefits
Pension Plan
Retirement Plan that calculates benefit based upon years of service and income averages
Keogh Plan
Retirement plan for self-employed individual and their qualified employees
When using the needs approach for life insurance planning, lump sums may be created for all of the following reasons EXCEPT Final expenses Charitable donation Education Employee benefits
Employee benefits
20
A candidate for an accident and health producer's license must complete how many hours of prelicensing education?
20
A candidate for life insurance producer's license must complete how many hours of prelicensing education?
Interest only
When a beneficiary receives payments consisting of both principal and interest portions, which part are taxable as income?
Reinstatement provision
An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?
Alien Insurance Co
An insurer authorized to conduct business in any of the 50 states but who has its hoje office in another country
Illegal
An insurer devises in a determination strategy in order to quarter a large portion of the insurance market. What best describes this practice?
10 days
An insurer must present a buyers guide and policy summary prior to accepting the applicant's initial premium, unless the policy contains an unconditional refund provision lasting at least how many days?
Mutual Insurer
An insurer that is owned by its policyholders and formed as a corporation for the purpose of providing insurance to them.
STOLI policy.
An investor buys a life insurance policy on an elderly person in order to sell it for a life settlement.. what is this an example of?
Premiums are not tax-deductible as a business expense
What is correct concerning the taxation of premiums in a key-person life insurance policy?
When the application is given to a prospective insured.
What is not a consideration in a policy?
What qualifies as acceptance of an insurance contract offer? A declined policy An issued policy The application and initial premium The initial premium only
An issued policy
Inspection report
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)
To create an estate
What is the best reason to purchase life insurance rather than annuities?
To provide a guaranteed income for a certain amount of time
What is the purpose of a fixed-period settlement option?
It allows the insured to reject the policy with a full refund
What is the purpose of a free-look period in insurance policies?
To keep the policy in force
What is the purpose of establishing the target premium for a universal life policy?
Contributory Disability Policy
Employee pays all or part of premium -premium is deductible to employer - benefit it taxable to employee but only the portion based on the employer contribution
75%
What is the required percentage of participants in a contributory group plan?
The law of contracts - 4 elements of a contract
4 essential elements of a contract 1) agreement 2) consdieration 3) Legal Capacity 4) Legal Purpose
Mode
What is the term for how frequently a policyowner is required to pay the policy premium?
What must be given to a life insurance applicant when the agent receives an application and the initial premium? Agent's report Conditional receipt Commission disclosure Good health statement
Conditional receipt
Buy-Sell agreements are normally funded with a life insurance policy
What is true concerning a buy-sell agreement?
100% participation of members is required in noncontributory plans
Group life insurance is a single policy written to provide coverage to members of a group. What statement is correct?
Estoppel
- a broken promise and may prevent denial of a claim by insurance company 3 Parts 1) When insurance agent makes a false statement upon which the insured believes 2) The insured relies on the truthfulness of the statement 3) Harm results - the insurance company denies the claim If it can be proved that the statements were made, then the insurance co is "estopped" from claim denial
Funds exceeding the premium paid are taxable as ordinary income.
What is true of the cash surrender nonforfeiture option?
Non Scheduled Debtal Insurance
- a comprehensive plan - incude deductible and co pay - certain prodcedurs are reimbursed at 80% (like fillings and oral surgery) and some are at 50% (like crowns, orthodontics, facial reconstruction
Material Misrepresentation
- a false statement that changes the outcome of issueing a policy - generally with the health statement
Group Health Insurance
- a more liberal underwriting process - probationary period is only applied to those that enroll in the group after the policy effective date
IRA IIndividual Retirement Account)
- all individuals who have earned income - possible tax deductions - tax deferral of gains - Can contribute up to 5,000 - can add 1,000 "catch up" if over 50
Parol Evidence Rule
when oral statements made prior to the contract issue cannot be used to contradict the written terms of the contract
401k Plan
- allows employees to save for retirement tax free - money is taken out pre-tax, and can be matched (and deductible to employwer) - Withdrawl penalty of 10% prior to age 59.5 - Miniumum distributions by age 70.5 - 2011 max was 16,500
PPGA (Personal Producing General Agent )
- an individual producer that does not appoint other producers
MGA (Managing General Agent)
- appoints hires and supervises producers while also providing underwriting and claims administration
457 Deffered Compensation
- available for employess of state and local govt -the plan is owned by employer
403(b)/tax-sheltered Annuity
- availbale for employees of nonprofits, schools universities, churches & hospitals - just like 401k plans
What is taxable in an IRA
- both the contributions and the growth or earnings
Owner's rights provisions
- can change the beneficiary - can borrow cash value - can receive dividends - select premium mode - assignment rights - The beneficiary has no rights in the contract
The customer's associates, friends, and neighbors provide the report's data
In comparison to consumer reports, what best describes a unique characteristic of investigate consumer reports?
Group health insurance Classifications
In group health insurance employees cannot be classified by age
Suicide is excluded for a specific period of years and covered thereafter
In most states, if death results from suicide within a certain period, the insurer is not obligated to pay the death benefit therefore..
Certificate of Authority
In order for an insurer to legally transact insurance, it must obtain what?
Colateral Assignment
when some of the rights are passed on to a 3rd party ie whole life cash value to secure a loan
Interest is credited to a fixed annuity no lower than the variable contract rate contract guaranteed rate current rate of inflation prime rate
contract guaranteed rate
HMO
health maintenance organization; private health insurance, network list, preventive medicine; lower cost; PCP first that refers to specialist
Group Plan Insurance Conversion
- can convert within 31 days without proof of insurability, if they leave - You normally convert to a universal life polity - pricing is based on age - the employer still ows the policy but he cant name the beneficiaries
Legal Capcity
when the insurance co is legally allowed to sell and when the inseree is competent and not a minor, insane, drugged or coerced
What is the excise tax rate the IRS imposes on individuals aged 70 1/2 or older who do not take the required minimum distributions from their qualified retirement plan? 30% 40% 50% 60%
50%
5 years
In order to qualify for conversion from a group life policy to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?
Be licensed as an insurance producer
In order to receive a commission, a person is required to...
Characteristics of group life insurance
Amount of coverage is determined according to nondiscriminatory rules, individuals covered, under the policy receive a certificate of insurance, certificate holders may convert coverage to an individual policy without evidence of insurability
Death Benefit
Amount paid upon the death of the insured in a life insurance policy
Modified Endowment Contract
An IRS classification of an actual insurance contract; If the premiums paid for it are higher than the proportion of the death benefit (overfunded policy) it will lose many of the tax advantages
Speculative Risk
A chance of loss, no loss, or gain.
Coordination of Benefits (COB)
A clause in an insurance policy that explains how the policy will pay if more than one insurance policy applies to the claim.
The Application
An Insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?
Rebating
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of?
FINRA
An agent selling variable annuities must be registered with..
conditionally renewable policies
A conditionally renewable policy allows an insurer to terminate the coverage but only in the event of one or more conditions stated in the contract They typically are related to the insured reaching a certain age or losing gainful employment
Annuity
A contract that provides income to an annuitant for a lifetime or a specific period of time. It is the liquidation of an estate or pool of money. Protects against outliving ones income; pays a higher interest; only sold by life insurance
The benefit is received tax free
A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then...
Blue Cross and Blue Shield
A corporation that is a health care service contractor
noncancellable policies
A noncancellable or "noncan" policy cannot be cancelled nor can its premium rates be increased under any circumstances Noncancellable provisions are most commonly found in disability income policies. They are rarely used in medical expense policies
Deferred Compensation Plan
A nonqualified retirement plan whereby the employee defers receiving current compensation in favor of a larger payout at retirement (or in the case of disability or death).
Group Insurance
- consist of term life insurance or whole insurance - the employer is the owner and receives the master contract - the employees are cirtificate holders which outlines the details of it - underwriting is much more liberal because its a large group and probably wont have adverse selection - offered only 1x per year - if you want to get in at another time, employee has to show insurability
What does the insurance company need to pay the death benefit
- death cirtificate - completed claim form
Closed Panel HMO
- dr are considered employees of the HMO - you have a primary care physician or Gatekeeper
Risk Retention Group
- each policy owner is also a stockholder and can only sell liability insurance (medical malpractice, general liability, product liability) - the group assumes the risk themselves
Social Security
- employee and employer pay 7.65% of their payroll - Self employed pay 15.3%
ESOP
- employee stock ownership plan - defined contribution plan that provides employer stock to employees based on income and profits of company
Advantages of Qualified plans
- employer and employee contributions are tax deductivble and accumulate tax deferred - Withdrawls before 59.5 is a 10% penalty - must begin miniumum distributions by age 70.5
Group Life insurance Premiums
- employer pays all of it (non-contributory plan) - Contributory - employee pays all of it - but 75% of employees have to participate
Probationary Period
A one time event at policy issue, usually 30 days where illness is not covered
Dividends
A participating insurance policy will pay _________ to the owner based upon actual mortality cost, interest earned and costs.
Limited Partnership (LP)
A partnership consisting of one or more general partners and one or more limited partners.
SEP IRA (simplified Employee Pension Plan)
- employer sponsored IRA for small employers - contrinutions deductible to employer - Employee must have worked for 3 of last 5 years - contributions by employer cant exceed 49k or 25% of income, whichever is lesser - contributions for employees cant exceed 16,500
An insurance producer
A person required to be licensed under the laws of the state to sell, solicit, or negotiate insurance is known as
HMOs
- established as alternative to fee for service - attempt to control costs with preventative medicine - pre paid premium - Members are called enrollees or members - closed panel HMO
Impairment Exclusion Rider
- excludes coverage for partifular illness - may be temporary or permanent - eliminates pre existing condition
What does E&O insurance not cover
- fraud or ciminal acts - misappropriation of client funds - actions covered by other insurance
Defined Contribution Plan
- indicates amount of contribution from employer without knowing the benefit
Defined Benefit Plan
- indicates amount of future benefit, based upon years of service and avg income
What benefits do you get from SS
- it depends on how much you've contributed or your Primary Insurance Amount (PIA)
What kind of Risks are insurable
- loss must be accidental - loss must be definable (or calculable) - must not be financially catastrophic - premiums must be reasonable
Education IRA
- method to provide funding - Can be transferred to another IRA at 30
Coverage for dependent Children
- must notify insurance company w in 31 days of birth and pay additional premium - coverage usually ends at 19 unless kid is a full time student - if child has multiple coverage through both parents, then parent whos birthday comes first in the calendar year is the primary - if divorced, coverage under the parent with custody
Representation
- oral or written statements made by an applicant when completeing an application - true to the best of his knowledge and belief - can be changed prior to policy issue NOT afterwards
Profit Plan
- part of defined contribitution plan - annual profits shared among employees - no guarantee of payment
Taxation of Medical Plans
- premiums are not deductible - benefits are not taxable - if expenses exceed 7.5% of adjusted gross income the excess is deductible - employer paid group premiums are deduction to the employer
Employer Liability Insurance
- provides coverate for common law claims - an employee can sue their employer if workers comp is not provided
What are the benefits of Social Security
- provides for retirement check - provides for disability - benefit to survivors - death benefit of $255
Section 529 Plans
- state provided - can be funded by after tax dollars - can pay prepaid tuition - All earnings exempt from federal taxes - If withdrawn for unqualified withdrawl, 10% penalty
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?
Level term
A policy will pay the death benefit if the insured dies during the 30-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?
Automatic premium loan
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?
Revocable Beneficiary
A policyowner who is also yeh insured wants to name her husband as the beneficiary of her life policy. She also wished to retain all of the rights of ownership. The policyowner should have her husband named as the..
"Illustration" in a life insurance policy refers to
A presentation of non-guaranteed elements of a policy
They must differentiate between guaranteed and projected amounts, they may only be used as approved, and the must identify non guaranteed values
Requirements for life insurance illustrations:
Qualified Plan distributions
- taxable upon withdrawl - 10% penalty upon withdrawl before 59.6 - can take out w/o penalty if death, divorce, qualified financial hardship, plan loan or qualified rollover, 1st time home buyer, disability of owner - if you take out the money early, its a 20% penalty - must rollover w/in 60 days or its considered a premature distribution
Needs Approach
- the amount of money to pay off debts, funeral, shcool, etc
Insurable Interest
- the amount that the insurance co is at risk for; One can have an insurable interest in another
Human Value approach
- the approach to determine how much insurance one should get - it looks at the lost earnings potential if someone should die - often limited to 10x annual income
Payment of Premium Mode
- the frequency of premium payments - Monthly payment is the most expensive bc of the administrative costs associated with it
Grace Period
- the period of time (31 days) that the policy owner has to pay the premium
Concept of Agency
- the relationship that exists between 2 parties; the principal (or insurance company) and the agent or Authorized Rep
Disability policy Exclusions
- war / military - intentionally self inflected - aviation (not commercial flights) - Foreign Country - loss of professional license due to misconduct - can get paid if there's a mental disorder
$250,000
A producer in tensional he violated insurance statues. Ultimately, the commissioner determined that there were a total of 25 separate violations. What is the total, monetary penalty this producer can expect to receive?
Survivor protection
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
Survivor protection
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as..
What kind of arrangement gives the policyowner the right to change the beneficiary? Contestable designation Incontestable designation Irrevocable designation Revocable designation
Revocable designation
Which of the following is NOT a valid contract exchange? An annuity exchanged for a life insurance policy An annuity exchanged for another annuity A life insurance policy exchanged for another life insurance policy A life insurance policy exchanged for an annuity
An annuity exchanged for a life insurance policy
Installment refund annuity
An annuity income option that provides for the funds remaining at the annuitant's death to be paid to the beneficiary in the form of continued annuity payments.
Accelerated Benefits
Riders attached to life insurance policies which allow death benefits to be used to cover nursing or convalescent home expenses.
Roth IRA
- Allows owner to make non tax deductible contributions - to get withdrawls tax free, the account must be in existence for 5 years - can add money tax free up to 5k - distributions are tax free - account is only allowed for people who's income does not exceed a certain amount
Insuring Clause
- Appears on first page of contract - has a summary of all the main points of the contract like the "promise to pay" death benefit
Whole life policies, limited-pay policies, annuities
Rules of replacement apply to all of the following:
Family Leave Act of 1993 stipulations
- Applies to employers who employ 50 or more employees within 75 mils of the workplace - must have been employed for at leas 12 months and accumulated 1250 hrs of employment during last 12 months - applies to private and state and federal employees
Medical Expense Policies
- Basic - Major Medical - Comprehensive major medical
Policy Clauses
- Incontestable Clause - Payment of Premium Clause - Grace Period - Reinstatement Period
First-time homebuyers are able to withdraw up to how much from their qualified IRAs without incurring the 10% early withdrawal penalty? $2,500 $5,000 $7,500 $10,000
$10,000
Policy Loan Provision (APL)
- Owner has right to borrow against the cash value of the contract - not available for first 2-3 years of policy - interest is due on the policy aniversary date, not the loan date - An insurance co can delay a load of upward of 6 months
Group Life Insurance Premiums Tax issues
- The beneficiary still recieves the death benefit tax free and its still an employer expense (tax deductible) but if the insurance is over 50k, the employee counts the premium paid by the employer as income
Immediate
(Example) A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?
Issue the policy anyway and pay the face value to the beneficiary.
(Example) When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will...
Limited pay while life
(Example) your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
An agent has 3 types of authority
- Actual or expressed authority as defined in his contract - Implied Authority - business practices that man not be listed in a contract - apparent authority - what the public thinks the agent has
Conditions for fully employer funded healthcare
-accurate claim predictability, large employee base - employer has ability manage claims - employer can hire 3rd party admin services - employer ability to pay higher than expected claims
Incontestable Clause
-addresses material misrepreresenations by applicant. - Insurance Co has 2 years to discover it - If found, the insurance co has to repay all premiums - If there's fraud, than the insurance co can return premiums any time
Premium Payment
-application and premium must be submitted or else coverage doesnt begin - Trial application goes into effect if 1 of the 2 things is not handed in
11 optional provisions
-change of occupation -misstatement of age -other insurance in this insurer -insurance with other insurer -insurance with other insurers -relation of earnings to insurance -unpaid premiums -cancellation -conformity with state statuses -illegal occupation -intoxicants and narcotics
Key employee Life Insurance
-compensates business due to death - cant be business owner - 3rd party contract so key employee needs to sign - the death benefit goes to the company
Salary Continuation
-employer funded - employer agrees to continue salary after retirement in exchange for consultative services
12 mandatory policy provisions
-entire contract -time limit on certain diseases -grace period -reinstatement -notice of claim -claim forms -proof of loss -time of payment of claims -payment of claims -physical exam and autopsy -legal actions -change of beneficiary
Local Health Department Responsibly
-reporting of communicable disease -public health nursing -health education -environmental sanitation -maternal and child health services -public health clinics
Qualified Plan Requirements
1) Be in writing 2)provided for benefit of employee 3) must satisfy age and serive standards 4) cannot be discriminatory 5) contributions cannot exceed yearly maximus 6) must provide survivorship benefits 7) must meet miniumum vesting standards 8) cannot be top heavy
Accident and Health policies
1) Disability Income policy 2) Medical Expense Insurance 3) Long Term Care
Types of Marketing and Distribution systems
1) Independent - places insurance with multiple insurers; owns the business and the policy sold 2) Direct or Captive agents - can only place business with own company 3) Exclusive - Independent agents that place business of one insurer 4) Direct Response - when insurance companies sell their insurance in the mass market
How are life insurance premiums determined
1) Mortality (the probability of death) 2) Interest (how much the insurance co earns on the premiums) 3) Expenses (cost of issuing the policy)
What are the 3 types of Hazards
1) Physical 2) Moral 3) Morale (ie apathy, carelessness, smoking)
Types of Producers
1) agents 2) brokers (they represent themselves and the people they are trying to buy insurance for 3) solicitors 4) Customer service representatives
Places to buy Workers Comp
1) individual insurer 2) state compensation insurance fund 3) self insuring
Workers Comp statutes
1) mandatory for any employer with 1 or more employees 2) 7 day waiting period for disability payments 3) premiums must be approved by state insurance dept which is determined by the "experience" of the employer ie how many claims exist from that employer
Once an applicant is approved, what are the 4 types of categories he fits into
1) preferred 2) standard 3) sub standard (requires higher premium) 4) uninsurable
Healthcare cost containment methods
1) preventative care 2) Hospital outpatient services (pre-admission testing ) 3) alternatives to hospital confinement (hostpice or nursing facility) 4) case managment
The application has 2 parts
1) section 1 = general info about the applicant 2) Detailed health info of appliant 3) (sometimes) agent report
What are the 6 things that need to be in a life insurance contract
1) the parties 2) the party who is the insured 3) the insurable interest of the owner of the policy 4) the risk being insured agains (ie death) 5) the coverage period 6) the premium and the mode
Departments of an insurance co
1) underwrite 2) marketing and sales 3) Actuarial Department 4) Claims Department
Rollover time frame
60 days
Premature IRA distributions are subject to a penalty tax of 0% 10% 15% 20%
10%
John received a one-time distribution of $50,000 from his modified endowment contract (MEC). Prior to that, the contract's cash value was $150,000, the contract investment amount was $100,000, and the death benefit was $500,000. What percentage of the $50,000 distribution was taxable as ordinary income? 0% 25% 50% 100%
100%
What minimum percentage of all eligible employees must participate in a group life insurance plan if the premiums are completely paid for by the employer? 0% 50% 75% 100%
100%
How much can you contribute to an IRA
100% of earnings or not to exceed 5,000
Small Employer Medical Expese Plan
2 - 50 employees - must offer medical expense coverage to all eligible employee -preexisting conditions cannot be excluded for more than 1 year - employer must offer at least 2 medical plan options
Ownership of Insurance Company
2 types 1) mutual co or participating company (policy owners own the company). The dividend is considered a return of premium 2) Stock company or Non participating company
EXCEPT for fraud, the time after issuance of a policy during which an insurance company may contest a health insurance claim due to the statements on an application is 10 days 90 days 2 years 5 years
2 years
An individual participant personally received eligible rollover funds from a profit-sharing plan. What is the income tax withholding requirements for this transaction? 10% is withheld for income taxes 20% is withheld for income taxes 30% is withheld for income taxes Nothing is withheld
20% is withheld for income taxes
Recovery time on health insurance policy (legal)
60 days and 3 years
Until What age can you contribute to an IRA
70.5
ERISA requires that a Summary Plan Description must be provided to a new plan member within how many days following the new member's eligibility date? 30 45 90 120
90
The insured's estate.
A 40 year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarried and dies at age 61, leaving 2 grown-up children. Assuming he never changed his beneficiary, the policy proceeds will go to...
The amount of the distribution is reduced by the amount of a 20% withholding tax
A 60 year old participate in a 401(k) plan takes a distribution in rolled it over to it I already within 60 days. What is true?
Testamentary Trust
A Trust that is created in the will of the deceased
Coercion
A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of...
Proof of insurability is not required
A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. What will she need to provide for proof of insurability?
The insured's premiums will be waived until she is 21.
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?
If the father is disabled for more than 6 months
A father purchases a life insurance policy on his teenage daughter and adds the Payor benefit rider. What must be acceptable in order for the ride to be able to waive the payment of premium?
Keogh Plan
A federally-approved, tax-deferred savings program for self-employed people, allowing them to set money aside for their retirement.
Annuities do not provide a (death benefit)
A fixed annuity is fixed in the sense that it provides a guaranteed minimum rate of interest and income payments that do not vary from one to the next. The company also guarantees the specified dollar amount for each payment and the length of the payout period.
Which of the following combinations best describe a universal life insurance policy? A mutual fund and an endowment policy A term insurance policy and a whole life policy A modified endowment policy and an annual term insurance policy A flexible premium deposit fund and a monthly renewable term insurance policy
A flexible premium deposit fund and a monthly renewable term insurance policy
Variable Universal Life Insurance
A form of universal life insurance that allows the policyholder to make fund choices for the investment component but that has no guaranteed cash value and no guaranteed interest rate.
Insuring Clause
A general statement that identifies the basic agreement between the insurance company and the insured, usually located on the first page of the policy.
Buyer's Guide
A generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process.
Risk Retention Group
A group captive formed under the requirements of the Liability Risk Retention Act of 1986 to insure the parent organizations. EX. Mutual insurance company that is formed to handle the needs of lawyers
PPO
A health care system whose goals are to provide cost effective quality care.; preventive medicine is supposed to prevent expensive serious illnesses; each treatment and diagnostic tool has to have a purpose
Adverse Selection
A high-risk person benefits more from insurance, so is more likely to purchase it.
Costs of training a replacement.
A key person insurance policy can pay for what?
Intermediate Care
A level of care that is one step down from skilled nursing care; provided under the supervision of physicians or registered nurses. Daily care but not 24 hour care
qualified retirement plan
A retirement savings plan approved by the Internal Revenue Service that provides individuals with a tax benefit
Increasing
A return of Premium term life policy is written as what type of term coverage?
Other-insured rider
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the...
Co-payment
A set fee a pt has to pay for each dr. visit or prescription
Credit Life Insurance
A special type of coverage written to pay off the balance of a loan in the event of the death of the debtor.
fully insured
A status of complete eligibility for the full range of Social Security benefits: death benefits, retirement benefits, disability benefits, and Medicare benefits.
A level annual premium for the life of the insured
A straight life policy has what type of premium?
Koegh plan
A tax-deferred retirement plan for self-employed people and qualified employees
Certain groups of employees only
A tax-sheltered annuity is a special tax-favored retirement plan available to
To a producer replacing a licensed agent who is retiring, to the surviving spouse of a deceased producer, to a designee of a producer who enters active duty with the US armed service.
A temporary insurance license maybe issued without examination and all of the following:
Mutual Insurance Company
A type of insurance company owned by its policyholders.
An outline of coverage must be provided to a prospective buyer when he or she is attempting to purchase which of the following? a. a medicare supplement or a long term care policy b. life insurance or a limited policy c. medicaid or a disability income policy d. dental insurance or a long term care plan
A. A medicare supplement or a long term care policy A producer or insurer must provide an outline of coverage to prospective purchasers of Medicare Supplement Insurance or Long Term Care plan prior to application or no later than the time of policy delivery. Most states do not require that an outline of coverage be provided for every type of insurance purchased. Some insurers, however will provide one voluntarily.
Which statement regarding universal life insurance is correct? A. Cash value accumulations have a guaranteed minimum interest rate B. Policyowner can change the face amount but not the premium C. Policyowner can change the premium but not the face amount D. Partial withdrawals cannot be made from the policy's cash value
A. Cash value accumulations have a guaranteed minimum interest rate
Which of the following would qualify someone for medical care benefits under Medicaid? a. insufficient income b. lost wages c. total disability d. blindness
A. Insufficient income Medicaid provides health care for low-income persons those with limited assets or insufficient income, those receiving welfare benefits and others in need who are blind, aged, disabled, or under age twenty-one.
Jennifer pays a $75 premium each month for life insurance coverage. Her insurer promises to pay a much greater benefit to a beneficiary if she dies prematurely. This is an indication that the life insurance contract possesses which of the following features? a. it is an aleatory contract b. it is a contract of adhesion c. it is a conditional contract d. it is a bilateral contract
A. It is an aleatory contract An aleatory feature of an insurance contract means that the contract contains unequal values with regard to premiums paid and benefits received. For example, the premium paid for coverage is less than the (potential) benefit(s) payable.
In which of the following circumstances is cosmetic surgery covered by a health insurance policy? a. it results from an accident b. it is elective c. it is necessary d. it is usual, customary and reasonable
A. It results from an accident Cosmetic surgery that is elective is excluded from health insurance plans. However, if such surgery is the result of an accident, coverage is provided since health insurance plans cover both illness and accidents.
What type of premiums are associated with individual mortgage protection life insurance policies? A. Level premiums B. Flexible premiums C. Modified premiums D. Decreasing premiums
A. Level premiums
A producer licensed in life or health insurance who fails to complete state required Continuing Education requirements is subject to which of the following? a. license suspension b. license renewal c. a monetary penalty of up to $25,000 d. a monetary penalty of not more than $5,000
A. License suspension Any licensee who neglects or fails to satisfy continuing education requirements will be subject to license suspension until compliance.
Which of the following is a vehicle that provides health insurance benefits for small benefits with common employments? a. multiple employer welfare arrangement b. employer administered plan c. residual market pools d. joinder groups
A. Multiple employer welfare arrangement Multiple employer welfare arrangement, also known as multiple employer trusts, allow small employers in common or similar industries to band together in order to receive more cost-effective health insurance coverage. This allows the MEWA or MET to be part of a larger group and thus receive a more advantageous premium rate.
Permanent insurance plans include various options available to the policy owner. What whole life insurance policy options protect a policy-owner against an unintentional coverage lapse? a. non-forfeiture option b. settlement option c. dividend option d. endowment option
A. Non-forfeiture option A policy that includes cash value can not lapse. Other provisions that protect the policy-owner against an unintentional lapse include the automatic premium loan and grace period provisions.
According to a permanent insurance policy's non-forfeiture options, a policy may not lapse when cash value is present. All of the following are types of these non-forfeiture options, EXCEPT: a. one-year term insurance b. cash surrender c. extended level term coverage d. reduced paid up insurance
A. One-year term insurance One-year term insurance is a dividend option. Non-forfeiture options are available to a policy owner who wishes to surrender his or her whole life policy. Once surrendered, a policy cannot be reinstated.
Which of the following provides the core benefits to consumers when they purchase a Medicare Supplement plan? a. Plan A b. Plan B c. Plan C d. Plan J
A. Plan A Plan A includes what are known as "core" benefits in a Medicare Supplement policy. Insurance producers must offer these core benefits to a consumer when he or she is considering whether or not to purchase such a plan. The coverage provided by core benefits is standardized.
Which of the following provides benefits for artificial devices such as bridgework? a. prosthodontics b. endodontics c. periodontics d. orthodontics
A. Prosthodontics This benefit provides for the replacement of missing teeth or artificial devices such as bridgework or dentures.
How does the cost for a survivorship life policy compare to the cost of combining two separate life insurance policies? A. Survivorship life policy is lower B. Survivorship life policy is higher C. Depends on the investment performance of the underlying accounts D. Both have the same actuarial costs
A. Survivorship life policy is lower
Each of the following is a form of risk classification utilized by life or health insurance underwriters, EXCEPT: a. tabular risk b. preferred risk c. standard risk d. substandard risk
A. Tabular risk There are three common types of risk classes including preferred, standard and substandard. The preferred risk carries with it the lowest premium. Substandard risk may be declined or written with an extra premium.
When a ten year renewable term life insurance policy issued at age 45 is renewed, the premium rate will be the current rate for A. Ten year term insurance for a person aged 55 B. Ten year term insurance for a person aged 45 C. Yearly renewable term insurance for a person aged 55 D. Yearly renewable term insurance for a person aged 45
A. Ten year term insurance for a person aged 55
A variable life policy provides a combination of death protection with a variety of investment options. Which of the following are guaranteed in a Variable Life insurance policy? a. the death benefit and premium b. the cash value and death benefit c. the premium and the cash value d. the death benefit and investment performance
A. The death benefit and premium Variable whole life insurance policies are characterized by a guaranteed minimum death benefit and a predetermined premium. The cash value of this form of life insurance is invested in the stock market where there are no guarantees.
A social device used for the transfer of risk through the pooling or accumulation of premiums best describes which of the following? a. the definition of insurance b. the concept of risk c. a hazard d. risk
A. The definition of insurance Insurance transfers risk from one to many.
How does a continuous premium whole life policy differ from a limited pay whole life policy? A. The time period in which premiums will be paid B. The availability of cash value loans C. The availability of nonforfeiture options D. The settlement options
A. The time period in which premiums will be paid
Insurance companies use age 100 to calculate life insurance death benefits because: a. they assume everyone will have died by that age b. it allows them to charge higher premiums c. it makes sure they never have to pay a death benefit d. they assume that mortality rates will decrease by then
A. They assume everyone will have died by that age Insurers use standard mortality tables to determine the probability of death. The reason that age 100 is utilized is because it is assumed everyone will be deceased by that time. In addition, it makes premiums more affordable since costs are not based upon the actual life expectancy of a male or female.
Which of the following is true regarding an irrevocable beneficiary? a. this beneficiary has the right to receive a copy of the policy b. this designation may be changed at any time by the policy-owner c. this beneficiary has no rights in the policy d. this designation may be charged by the owner at his or her discretion
A. This beneficiary has the right to receive a copy of the policy When an individual is named an irrevocable beneficiary, he or she may receive a copy of the policy to determine the policyowner rights. The owner may not exercise any rights unless he or she receives the consent of the irrevocable beneficiary.
What kind of life insurance policy allows a policyowner the choice of investments along with flexible premium payments? A. Variable universal life B. Modified endowment contract C. Adjustable life D. Graded premium whole life
A. Variable universal life
The Consolidated Omnibus Budget Reconciliation Act (COBRA) provides for the continuation of group health insurance coverage for an individual or dependents under specific circumstances. All of the following are considered to be applicable special circumstances, EXCEPT: a. promotion b. death c. termination of employee d. divorce
A. promotion COBRA mandates that employers must provide an employee and any qualified beneficiaries with group health coverage followed by a "qualified event". These qualified events or "special circumstances" include termination of the employee, death or divorce, and a child ceasing to be available for group coverage.
Which benefit is normally payable to a life insurance policyowner when the insured's life expectancy has been severely limited? Reduced paid-up option Accelerated (living) benefit Return of Premium benefit Extended term option
Accelerated (living) benefit
Accidental Death and Dismemberment (AD&D)
Accidental Loss only - must die w in 90 days -if dismembered, you get 50% of death benefit - Death benefit is called Principal Sum - Dismemberment benefit is Capital Sum - Must dismember above ankle or wrist - one of the least expensive policies bc of limited benefits
A copy of the original application for insurance
According to the Entire Contract provision, a policy must contain...
Failure to pay off a loan, tax delinquencies, late payments
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer:
Fair Credit Reporting Act
Act that protects privacy of background information and ensures that information supplied is accurate.
Cash option
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
What is the reason that insurance companies require a minimum number of employees participating in a group insurance plan? Efficiency is maximized Adverse selection is minimized Profits are maximized Claims are minimized
Adverse selection is minimized
ACA
Affordable Care Act; preexisting conditions included in coverage; requires insurance; government; allows for more pts to be covered by medicaid; no lifetime or annual limits; children with parents until 26
proof of loss
After a loss occurs, or after the company becomes liable for periodic payments (e.g., disability income benefits), the claimant has 90 days in which to submit proof of loss.
The highest mortality rate belongs to which group? Age 60 females Age 70 males Age 60 males Age 70 females
Age 70 males
The Secretary of the U.S. Department of Health and Human Services
Alex Azar II
Differentiate between guaranteed and projected amounts, only be used as approved, must identify nonguaranteed values
All of the following are requirements for life insurance illustrations..
There is no limitation on the number of key employee plans in force at any one time, the employer is the owner, payor and beneficiary of the policy, the key employee is the insured
All of the following are true of a key person insurance..
They help to reduce adverse selection against the insurer, they require 100% employee participation, the employer pays 100% of the premiums
All of the following concerning a non-contributory group plan is true:
Tax status, financial experience, and annual income
All of the following info about a customer must be in determining annuity suitability..
The death benefit is $0 at the end of the policy term, the contract pays only in the even if death during the term and there is no cash value, the face amount steadily declines throughout the duration of the contract.
All of the following is in regards to a decreasing term policy...
The plan is a legal method of accumulating money for retirement needs, the plan can discriminate as to who may participate, the plan is not approved for favorable tax treatment by the IRS.
All of the following statements concerning an employer sponsored non-qualified retirement plan are true as follows:
IRS approval requirements, taxation of withdrawals, taxation of contributions
All of the following would be different between qualified and nonqualified retirement plans:
Taxation of withdrawals, taxation of contributions, IRS approval requirements
All of the following would be different between qualified and nonqualified retirement plans:
Lower
All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy?
Limited Pay Whole Life premiums
All paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.
Cost of living rider, accidental death rider, and guaranteed insurability rider
All riders that will cause the death benefit to increase?
Funding business continuation agreements, compensating executives, funding against financial loss caused by the death of a key employee.
All the following are business uses of life insurance:
Rebates are allowed if it's in the best interest of the client
All the following are true regarding rebates except?
The dance from a mutual insurer
All the following could be considered rebates if offered to an insured in the sale of insurance except?
Defamation, misrepresentation, rebating
All the following would be considered an unfair and deceptive practice
Family and Medical Leave Act of 1993
Allows an employee to take an unpaid leave of absence from their employment in the event they are required to provide care for - spause, family member or parent - new child, adoption or foster care - themselves if they get sick and are unable to perform their job - 12 weeks / 12 months is the max - guarantee that employee will be able to return to their job - reinstatement of all benefits - protection of an employee to exercise their rights - protection agains retaliation by an employer
Facility of Payment provision
Allows for a relative to get some of the payment from the benefits because the person is helping paying for the funeral and hospital etc
Guaranteed Insurability Rider
Allows insured to purchas additional amounts of disability income insurance at future dates - future dates are policy anniversary dates -added coverage can be attained but must prove income increase - AKA Additional Purchase or Future Increase Option
Misstatement of Age / Sex or Gender
Allows insurer to adjust the premium if either age or sex is misstated.
Automatic Premium Loan
Allows the insurer to borrow from the cash value to pay unpaid premium after grace period expires. It makes sure that the policy does not lapse
Equity Indexed Annuity
An annuity owner is funding an annuity that will supplement her retirement. Because she does not know what effect inflation may have on her retirement dollars, she would like a return that will equal the performance of the Standard and Poor's 500 index. She would likely purchase a(n)?
Cross-Purchase Buy-Sell Agreement
An arrangement between individuals who agree to purchase the business interest of a deceased owner
Automatic or Treaty Insurance
An automatic acceptance of a risk between the insurance company and the reinsurance company
403(b) plan
An elective deferral plan for employees of organizations such as school systems, churches, and hospitals
She can convert her group policy to an individual policy without proof of insurability within 31 days of leaving the group plan.
An employee has group life insurance through her employer. After five years, she decides to leave the company and work independently. How could she obtain an individual policy?
$10,000, no tax consequence
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?
The insurer will pay the full death benefit from the group policy to the beneficiary
An employee quits his job on May 15 and doesn't convert his group life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. What best describes what will happen?
Profit sharing plan
An employer has sponsored a qualified retirement plan for its employees where the employees where the employer will contribute money wherever a profit is realized. What is this called?
Peril
An example of what caused the loss (ie: death) - a fire
When a large sum of money is used to structure monthly payments, which product is typically used? A 401(k) plan A 403(b) plan A deferred annuity An immediate annuity
An immediate annuity
Viatical settlement
An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with upcoming medical expenses. What option could the insured utilize?
Which of the following is NOT a reason for a business to buy key person life insurance? The reduction in sales as a direct result from death of the key employee A void in leadership if the key person were to die The loss of company revenues while a replacement is being sought An increased pension liability if the key employee dies
An increased pension liability if the key employee dies
Decreasing term
An individual had just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
A portion of the benefit up to a limit is tax free; the rest is taxable
An individual has been diagnosed with Alzheimer's disease. He's insured under a life insurance policy with the accelerated benefits rider. Which of the following is a true statement regarding taxation of the accelerated benefits?
Deferred
An individual has been making periodic payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it?
What type of policy can group term life insurance normally be converted to? An individual renewable policy An individual level term policy An individual permanent life insurance policy A group permanent life insurance policy
An individual permanent life insurance policy
Maximum penalty for habitual willful noncompliance is $2,500
An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to....
Surplus Lines of Insurance
An insurance co that is authorized to sell unauthorized insurance. You can only go to a surplus lines co if you cant get it from a regular insurance company
Authorized Insurance Company
An insurance company that can operate in a state. You need a cCertificate of Authority to operate.
Offer & Acceptance, Consideration, competent parties, and legal purpose
An insurance contract must contain...
Conditional Contract
An insurance contract that requires both the insured and the insurer meet certain conditions in order for the contract to be enforceable is...
Refund the premiums paid
An insured committed suicide 6 months after his life insurance policy was issued. The insurer will...
$9,800
An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however; the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy?
Paid-up option
An insured had a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use?
Paid-up option
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called?
The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?
Accelerated benefits
An insured is diagnosed with cancer and needs help paying for her medical treatment
Adjustment in the amount of the death benefit
An insured misstates her age at the time the life insurance application is taken. This misstatement may result in?
$50,000
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?
Universal Life- allows to have an applicant withdraw a limited amount.
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?
Consideration
An insured pays an annual premium to his insurer. In return, the insurer promised to pay benefits in accordance with the terms of the contract. This is called..
$200,000
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?
If the primary beneficiary predecreases the insured
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
Mutual Policy (Example)
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check fin from the insurer. From what type of insurer did the insured purchase the policy?
Pay the death benefit; due to the incontestability clause it prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact
An insured purchases a policy in 2008 and died in 2013. The insurance company discovers at that time that the insured concealed info during the application process. What can they do?
$8,000, 60 days
And employee quits her job where she has a balance of $10,000 in her qualified plan. The balance is paid out directly to the employee in order for her to move the funds to a new account. If she decides to roll over her plan to a traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax free-roll over?
Attained age
And employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his...
Illegal under any circumstances
And in sure publishes intimidating brochures at portray the insurer's competition as financially and professionally unstable. Which of the following best describes the act?
Completed all continuing education requirements
And insurance producer license may be renewed at the producer has paid the applicable fees, submitted the renewal form to the commissioner, and..
Appointed
And insurance producer may not act as an agent for an insurer unless he/she has become which of the following??
He will have to pay a penalty if he is younger than 59 1/2
And insured has a modified endowment contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true?
A description of a qualified plan's insurance contract may be found in which ERISA reporting form? Annual return/report (Form 5500) Shareholder's report IRS Form 1040 Summary report (Form 6500)
Annual return/report (Form 5500)
Increases annually
Annually Renewable Term policies provide a level death benefit for a premium that?...
A single payment or periodic payments
Annuities are characterized by how they can be paid for which is:
Liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance.
Annuities are most commonly used to fund a persons retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to..
Variable Annuity
Annuity that has a varying rate of return based on the mutual funds in which one has invested
Rebating
Any inducement offered in the sale of insurance products that is not specified in the policy.
conformity with state statuses
Any policy provision that is in conflict with state statutes in the state where the insured lives at the time the policy is issued is automatically amended to conform with the minimum statutory requirements
Federal Regulation 18 USC 1033/1034
Anyone who tries to sell insurance deceptively - can be fined 50k and up to 10 years - If material misrepresentation was the primary cause of the insurance co going under, than the prison scentence could be 15 years
Free Look Provision
Applicant has 10 days to cancel policy
Reinstatement Provision
Applies to the timeframe that an insurer hasn't paid premium but wants the policy back. - You have 3-5 years to reinstate - proof of insurability and back premiums plus interest would have to be paid - If you havent heard back in 45 days, then the policy has been reinstated - policy premium is based on original age
Approval Type Conditional Receipt
Approval starts only after policy has been approved, not any sooner
Kevin has an existing life insurance policy and assigns it to another insurer for a new contract. How would this transaction be treated for tax purposes? As a Section 1035 exchange As a transfer As a rollover As a Section 1040 exchange
As a Section 1035 exchange
24 hours
As a condition for renewal of their licenses, how many hours of continuing education required for all resident and nonresident insurance producers?
How may an insurance company classify an accidental death benefit on a life policy? As an optional policy rider As a provision of the policy As a nonforfeiture option As a mandatory policy rider
As an optional policy rider
Which of the following indicates the person upon whose life the annuity income amount is determined in an immediate annuity? a. contract owner b. annuitant c. beneficiary d. policy owner
B. Annuitant The periodic annuity payments are made to an annuitant. The monthly amount to be paid is based on life expectancy of the annuitant.
If a statement of continued good health must be submitted to an insurer, it must be completed by which of the following? a. MIB b. the applicant c. consumer reporting agency d. the beneficiary
B. The applicant The applicant for insurance is also, generally, the proposed insured as well. If a statement of good health is required of the applicant/proposed insured it is he or she who must complete it.
Bill is covered by a comprehensive major medical policy with base coverage of $5,000. The policy includes a $500 corridor deductible and 80/20 coinsurance. If the insured suffers an excluded $10,000 hospitalization loss, how much will the insurer pay? a. $1,400 b. $0 c. $7,600 d. $8,600
B. $0 If the loss or claim is excluded, the policy does not pay any benefit.
A survivorship life insurance plan is a specialty type of contract. This type of policy is generally purchased in order to cover how many individuals? a. 3 b. 2 c. 5 d. 7
B. 2 Survivorship life policies are generally used to insure spouses.
A group life insurance plan whose premium is shared by the employer and employees best describes: a. a noncontributory plan b. a contributory plan c. an employer-pay-all plan d. a self funded plan
B. A contributory plan A contributory group plan is one where the employer and the employee share the premium. An insurer will not write coverage for a contributory plan unless 75% of all eligible employees participate.
An individual who purchases a modified life insurance policy expects A. a higher rate of return B. coverage for two people C. an improvement in future income D. a flexible face amount
C. an improvement in future income
In the event a long term care policy is replaced a notice regarding replacement form must be provided to and signed by the applicant at what time? a. anytime during the underwriting process b. at time of policy application c. the notice regarding replacement only applies to disability income policies d. within 30 days following policy delivery
B. At time of policy application Anytime a policy is to be replaced by a new policy, a Notice Regarding Replacement form must be provided to the applicant before or during the initial application process.
An optional health insurance policy provision which allows the insurer to adjust benefit payments under certain situations or permits the insured to receive a reduced premium in other circumstances, best describes: a. payment of claims b. change of occupation c. relation of earnings to insurance provision d. time limit on certain defenses
B. Change of occupation The change of occupation provision is commonly found in a disability income policy. If the insured changes his or her occupation after a policy is purchased, the policy may be kept but something will be reduced. If the occupation change involves going to a more hazardous occupation, there will be a benefit reduction. If the occupation change involves going to a less hazardous occupation, there will be a premium reduction.
A life insurance policy is a legal contract. All of the following must be present in order for this type of contract to be legal and enforceable in a court of law, EXCEPT: a. a paid premium and representations of the applicant b. conditional receipt c. offer and acceptance d. legal capactiy
B. Conditional receipt Four elements must be present in order for a contract to be legal: (1) an agreement (2) a consideration (3) legal capacity (4) legal purpose
It is the fiduciary responsibility of a producer to account for all funds collected from a customer. If a producer does not remit a renewal premium to the issuer, which of the following will occur? a. coverage will lapse since the premium was not made b. coverage will not lapse since payment to a producer is payment to the issuer c. the producer will be prosecuted by the Insurance Commissioner d. the producer will have to attend an ethics course
B. Coverage will not lapse since payment to a producer is payment to the issuer. A premium collected by the producer must be turned in to the insurer. It may not be misappropriated or converted for his or her own use.
What kind of life policy typically offers mortgage protection? A. Whole life B. Decreasing term C. Increasing term D. Level term
B. Decreasing term
Family policies usually provide death benefit coverage: a. for the primary insured only b. for all family members although the benefits differ c. for the working spouses only d. that may be assigned to the tertiary beneficiary
B. For all family members although the benefits differ A family policy provides whole life insurance protection on a primary insured and level term life on the spouse and each of the children. Children are covered by level term insurance from the moment of birth.
An insurer that is licensed to sell insurance in Michigan but has its principal office in Illinois is considered to be which to the following in the former? a. authorized insurer b. foreign insurer c. alien insurer d. surplus lines insurer
B. Foreign insurer A foreign company is one that is licensed in a particular state but is chartered in another.
Walter Bruce purchases a Medigap plan. This type of plan must always include which of the following? a. policy loan provision b. free-look provision c. non-cancellable provision d. beneficiary provision
B. Free-look provision Medigap plans are also called Medicare supplement policies. These plans must always include a free-look provision of 30 days. A free-look provision is also called a "right to examine" provision.
Which statement regarding whole life insurance is accurate? A. Cash value loans are not permitted B. Insurance coverage can continue for life C. Policy normally matures at retirement D. No cash value accumulations
B. Insurance coverage can continue for life
Al purchases a disability income policy. The application is approved on March 4th. The contract is issued on March 10th. It is delivered by the producer on March 13th. When will the ten day free-look period end? a. March 13th b. March 23rd c. March 22nd d. March 24th
B. March 23rd Then ten day free-look period begins when the policy is delivered to the policyowner. During this period, if the policyowner returns the contract to the producer or insurer, he or she will receive a full premium refund.
Which of the following is not a minimum standard requirement for Medigap insurance? a. Medigap plans must be guaranteed renewable for life b. Medigap plans must have a 20-day free look c. Medigap plans must cover preexisting conditions after six months d. Medigap plans must have annual automatic adjustments to reflect changes in Medicare deductibles and copayments
B. Medigap plans must have a 20-day free look Medicare supplement or Medigap insurance must include at least a 30-day free look period. These policies must also include a "guaranteed renewable for life" provision.
What provision found in a life insurance policy allows an insurer to assess an extra charge if the policyowner makes payments on a quarterly basis? a. owners rights provision b. premium paying provision c. consideration provision d. automatic premium provision
B. Premium paying provision The premium payment provision allows an insurer to assess an extra charge when a policy owner pays a premium other than annually. This provision also permits the owner to select the premium mode.
Assets that back the non-guaranteed values of variable life insurance products are held in which account? A. Trust account set up by the insured B. Separate account set up by the insurer C. General account of the insurer D. Money market account
B. Separate account set up by the insurer
An annuity characterized by a lone payment with income beginning years later is known as a: a. single premium immediate annuity b. single premium deferred annuity c. lump sum premium temporary annuity d. annual premium deferred annuity
B. Single premium deferred annuity A single premium deferred annuity is funded with one premium payment. If income is designed to commence at retirement or more than a month after purchase, it is a deferred annuity.
Which of these policies is considered a whole life policy? A. Credit life B. Single premium life C. Renewable life D. Convertible life
B. Single premium life
All the following employees may use a 403B plan for their retirement except..
CEO of a private corporation
A producer selling Medicare Supplement Plans must determine the suitability of purchase with regard to the consumer contemplating the purchase. Which of the following must the producer consider when determining such suitability? a. the health history of the consumer considering purchase b. the appropriateness of recommended purchase c. the compensation arrangement between the insurer and producer d. whether or not a replacement will be involved
B. The appropriateness of recommended purchase
The waiver of premium benefit is usually included in a disability policy without an added premium. The benefit states that the insurer will waive premiums if an insured has been totally disabled for what length of time? a. one month b. three months c. six months d. twelve months
B. Three months The waiver of premium benefit is automatically included in a disability income policy. The waiting period that must be satisfied before premiums are waived is three months.
What is the purpose of a credit disability insurance policy? a. to provide an individual with protection for loss of income b. to cover an outstanding debt c. to protect a financial institution in the event of solvency d. to provide an insured with protection against superannuation
B. To cover an outstanding debt Credit disability insurance is used to cover the amount of an indebtedness. Benefits purchased generally are not in excess of this outstanding loan.
A hazard is a condition present that increases the chance of loss. Which of the following would be considered a hazard? a. residing in a gated community b. using tobacco products c. increasing the replacement cost of property d. a garage suffers fire damage
B. Using tobacco products There are three types of hazards including physical, moral, and morale. Using tobacco products is an example of a physical hazard.
A whole life policy provides permanent insurance protection since it never needs to be converted. All of the following are types of traditional whole life insurance, EXCEPT: a. ten-pay life insurance b. mortgage redemption life insurance c. graded premium life insurance d. single premium life insurance
B. mortgage redemption life insurance Mortgage redemption life insurance is a type of decreasing term life. It is not a permanent type of insurance since it has no cash value.
Indemnity Healthcare plan
Basic, Major Medical - More choice of providers - more out of pocket expenses - more claim forms
Legal purpose, offer & acceptance, and consideration
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements...
conversion privilege for dependents
Beginning October 1, 2010, the Affordable Health Care Act mandated that all policies and plans must provide dependent coverage up to age 26 Adopted children, stepchildren, and foster children usually are eligible for coverage As long as a policy is in force, coverage for a child generally continues until the child marries or reaches the limiting age
A policyowner pays the first annual premium for a $50,000 life insurance policy and dies one month after the policy effective date. Which of these statements is normally true? Premium will be refunded with interest and no death benefit paid Premium received by insurer is considered to be unearned Proceeds are prorated to 1/12th of the full amount Beneficiary receives $50,000 income tax-free
Beneficiary receives $50,000 income tax-free
Loss of earnings test
Benefits are based on eared income, not unearned incom
It is level term insurance
Best description of annually renewable term insurance...
The period of time during which accumulated money is converted into income payments.
Best description of what an annuity period is:
Insurance policy owners
Can do what they please like give there policy away they only need to tell the company about the new assignments (ownership)
Blue Cross Blue Shield Plan
Blue Cross - is designed for hospital benefits Blue Shield - is designed for physicians - operate in limited geographic areas - Not all hospitals except BCBS - operate on a sevice basis - was established as a non profit service organization - premiums are considered prepaid - members are called subscribers
Flexible premium
Both Universal Life and Variable Life have a...
Which of these is NOT considered to be a cost connected with an individual's death? Funeral expense Tax liability Business expenses Probate costs
Business expenses
Funding against financial loss caused by the death of a key employee, funding business continuation agreements, compensating executives
Business uses of life insurance
buy-sell agreement
Buy-sell agreements are normally funded with a life insurance policy
20 hours
Candidates for either a property license or a casualty license must complete how many hours of pre-licensing education?
Insureds
Individuals who transfer risk to a third party
They could be used for a key person coverage, they could be sold for an amount greater than the current cash value, they involve insurance policies with large face amounts.
What is true on life settlements?
Urgent or Minor Care
Clinics that provide care for illnesses such as flu or pink eye; not Emergency department or pcp
Comprehensive Major Medical Plan
Combines a basic plan and major medical plan.
A person age 54 withdraws funds from a tax-sheltered annuity (TSA). What penalty will be assessed? a. 50% b. 20% c. 10% d. 70%
C. 10% Whenever a premature distribution is made from a qualified plan, MEC, or annuity prior to age 59 1/2, a 10% penalty on the funds received will be effected.
According to the proof of loss form provision which appears in a health insurance policy, an insurer must send in a claim form to an injured insured within: a. 60 days of notification b. 20 days of notification c. 15 days of notification d. 90 days of notification
C. 15 days of notification The claim form provision is also referred to as the "proof of loss form" provision. It states that once the insurer is notified that the insured has suffered an accident or illness, it must send out the claim forms within 15 days or expose itself to an unfair claim practice.
When an insured covered by an accident and health policy suffers an accident or illness, he or she must notify the issuer of the loss within: a. 30 days b. 15 days c. 20 days d. 45 days
C. 20 days The Notice of Claim provision stipulates that the insured must notify the insurer of an accident or illness within 20 days of the loss.
As an insurer incorporated, chartered or formed under the laws of this State is referred to as: a. an alien insurer b. a foreign insurer c. a domestic insurer d. an unauthorized insurer
C. A domestic insurer A domestic insurer is one that is chartered or incorporated in a particular State.
Which of the following is not considered a rebate? a. any valuable consideration used as an inducement to contract insurance, not specified in the policy b. stocks and bonds given as an inducement to contract c. a favorable payment plan provided to a policyholder d. a personal service offered as an inducement to contract insurance, not specified in the policy
C. A favorable payment plan provided to a policyholder Various payment or budget plans are not considered rebating. Rebating is an illegal activity.
A 10% penalty is assessed the owner of an annuity contract on the taxable portion of a deferred annuity if a surrender occurs prior to: a. age 100 b. age 65 c. age 59 1/2 d. age 65 1/2
C. Age 59 1/2 A surrender or premature distribution of an annuity, modified endowment contract or a qualified plan will be subject to a 10% penalty if the surrender or distribution is accomplished prior to age 59 1/2. Possible income tax considerations may also be present.
An Accident and Health insurer pays a claim and later finds that the insured's injury was the result of engaging in a felony. What will the insurer do? a. deny the claim and return the premium b. deny the claim c. attempt to recover the claim payment d. assess an extra premium
C. Attempt to recover the claim payment The insurer does not have to pay a claim if an injury or illness results from an insured engaging in any illegal occupation. Therefore the insurer may attempt to recover any benefit previously paid.
Which of these life insurance policies do NOT contain cash value provisions? A. Modified whole life B. Universal life C. Decreasing term life D. Adjustable life
C. Decreasing term life
Insurers offer several types of specialized life insurance plans. A type of life insurance plan that couples cash value life insurance with reducing term life is known as: a. family policy b. family maintenance policy c. family income policy d. family endowment
C. Family income policy A family income policy provides coverage for one individual. The policy consists of whole life and decreasing term insurance. Decreasing term life may also be referred to as reducing term or non-level term coverage.
Which of the following statements is true with regard to the conversion privilege that is available in group life insurance policies? a. group life coverage may be converted to an individual plan of whole life within thirty days of termination of employment. b. group life coverage may be converted to an individual term life plan upon termination of employment c. group life coverage may be converted to an individual whole life plan within thirty-one days of employment termination without proof of insurability d. group life coverage may be converted to an individual whole life plan within thirty-one days of employment termination as long as proof of insurability is provided
C. Group life coverage may be converted to an individual whole life plan within thirty-one days of employment termination without proof of insurability. Group term life policies include a 31-day conversion period for employees who leave an employer. They can take the face amount of coverage with them as long as they convert it to whole life during the conversion period. No proof of insurability is required.
Medicare is a federally sponsored program providing health care for individuals age 65 and older. The original two primary parts of the Medicare program include: a. hospital insurance or hospice care b. inpatient hospital services and home health care c. hospital insurance and supplementary medical expenses d. disability benefits and home health care services
C. Hospital insurance and supplementary medical expenses Medicare consists of Part A---Hospital insurance and Part B--Supplementary medical insurance. Part A is subject to a deductible and provides inpatient hospital care, home health care, skilled nursing care and hospice benefits. Part B is subject to coinsurance amounts and a deductible and covers outpatient benefits and physicians costs.
Corporate Owned Life Insurance
Company buys insurance but is allowed to change who is insured -less expensive due to lower fees, commisions
Which of the following best describes self-insurance? a. purchasing coverage from an insurer b. transferring risk to another party c. identifying and funding ones losses d. incorporating
C. Identifying and funding ones losses An individual who embarks on a self insurance program means that he or she identifies the risks to which they are exposed, evaluates the exposures, determines steps to take which control losses, monitors these exposures and funds losses experienced.
All of these are considered features of whole life insurance EXCEPT A. Cash value accumulation B. Permanent coverage C. Initial premium is lower than for an equivalent amount of term insurance D. Policy loans are allowed
C. Initial premium is lower than for an equivalent amount of term insurance
Which of the following statements is true with regard to limited health policies: a. limited policies protect against gaps in coverage that exist in other plans b. limited policies provide benefits for cancer policy c. limited policies must state clearly what coverage they provide d. limited policies cover scheduled surgical expenses if not covered by major medical plans
C. Limited policies must state clearly what coverage they provide Limited policies pay benefits for an individual illness or accident. These policies must state prominently that they are limited in nature. Cancer only or dread disease plans are two common types of limited health insurance policies.
Which of the following policies is characterized by the lowest initial annual premium? a. ten-pay life b. whole life policy c. modified whole life d. thirty pay whole life
C. Modified whole life A modified whole life policy has a lower initial premium than other forms of permanent insurance. It is characterized by a lower premium than a traditional whole life plan in the first few years. It later increases to an amount higher than the whole life policy and remains constant for life.
Qualified plans are those that are approved by the IRS. In order to receive "qualified" status, the plan must meet all of the following conditions EXCEPT: a. must be in writing b. must not be discriminatory c. must comply with the exclusion ratio formula d. must satisfy minimum age and service requirements
C. Must comply with the exclusion ratio formula In order to be considered "qualified" a plan must satisfy IRS requirements including: (1) it must be in writing (2) it must not be discriminatory (3) it must be communicated to all employees (4) it must be provided for the benefit employees and their dependents (5) it must satisfy minimum age and service requirements (6) must provide survivor benefits
Which of the following is a dividend option? a. surrender for cash b. extended term insurance c. one year term insurance d. fixed amount
C. One year term insurance The one year term insurance option allows the policy owner to buy temporary life insurance protection for a year by funding coverage with the dividend payable.
What type of dental procedure provides care for the tissue and gums that surround the teeth? a. restorative b. endodontics c. periodontics d. prosthodontics
C. Periodontics Periodontics provides coverage for the surrounding tissue of the teeth (periodontics = perimeter). Endodontics provides coverage for the pulp/roots of the teeth and prosthodontics provides benefits related to corrective devices such as dentures.
An outline of coverage must be provided to the applicant no later than the time of: a. policy application b. policy submission c. policy delivery d. the conclusion of the 10-day free look
C. Policy delivery The outline is generally provided at the time of policy application, but is required to be provided to the applicant no later than the time the policy is delivered to the owner.
Which of the following life insurance policies is a type of limited payment life insurance plan and provides a greater tax advantage than other permanent plans? a. modified whole life b. graded premium whole life c. single premium whole life d. variable universal life
C. Single premium whole life A single premium life policy is characterized by equity buildup and a lump-sum premium. Since this contract is paid up in a lump sum, the cash value is fully funded (plus future interest). Therefore, the owner may borrow against the tax-deferred cash buildup.
An underwriter may accept a risk but charge an extra premium for a: a. preferred risk b. standard risk c. substandard risk d. declined risk
C. Substandard risk Substandard risk means the underwriter has accepted the risk BUT only if the proposed policyholder pays a higher premium.
Which of the following is the owner of a key-employee disability policy: a. the employee b. the beneficiary c. the business d. the creditor
C. The business
Taxable income may be the result from all of these modified endowment contract (MEC) transactions EXCEPT for A. A cash value loan is taken out B. Automatic premium loan provision is utilized C. The policy is surrendered for less than what was paid into it D. Dividend is issued
C. The policy is surrendered for less than what was paid into it
Which of the following is the person or entity primarily responsible for determining the suitability of a long-term care product for a prospective purchaser? a. the prospective policyowner b. the insurer c. the producer or agent d. the Department of Aging
C. The producer or agent Since most buyers of long term care insurance are senior citizens, it is the responsibility of the person making the sale to determine the product is suitable for the purchaser. This is the responsibility of the insurance agent or producer.
In which of the following ways is an annuity similar to a whole life or term life insurance policy? a. they may both be used to fund a qualified plan b. they both pay a stipulated death benefit c. they are both characterized by prepaid financing d. they both pay a benefit upon the death of the contract owner
C. They are both characterized by prepaid financing Prepaid financing means that the contract owner makes premium payments on a timely basis to purchase protection with regard to a life insurance policy or fund an annuity contract. In other words, it means "funding" the contract.
When an issuer agrees in advance to assume a portion of a risk written by another insurance company, which of the following forms of reinsurance has occurred? a. reciprocal reinsurance b. facultative reinsurance c. treaty reinsurance d. replacement cost reinsurance
C. Treaty reinsurance Treaty reinsurance agreements are also referred to as automatic reinsurance agreements. In this instance, the ceding insurer places coverage with the reinsurance company according to an agreement already in existence beeper the placement occurs.
Heart
Cardiology
Which statement regarding the waiver of premium rider is accurate? Policy loans are used to keep the policy active Cash payment is not directly provided to the policyowner Insurance companies are required to offer this to all policyowners Premiums are waived in the event of bankruptcy
Cash payment is not directly provided to the policyowner
Nonforfeiture options
Cash surrender, extended term, reduced paid-up
Liquidity in a life insurance policy
Cash values can be borrowed at any time
Speculative Risk
Chance of loss or gain
Pure Risk
Chance of loss with no means of profit - only pure risk is insurable
Optional Health insurance provisions
Change of occupation Misstatement of age unpaid premium
Straight life Policies
Charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.
Domestic Insurance Co
Charter located in the state it's doing business in
convertible to permanent insurance upon a child reaching insurance upon a child reaching the maximum age without evidence of insurability.
Children's rider are term insurance covering all of the children in the family, including newly born children, and are...
Newly born children, and are convertible to permanent insurance upon a child reaching the maximum age without evidence of insurability.
Children's rider are term insurance covering all of the children in the family, including:
Adjusting spinal column
Chiropractor
Specialty hospital examples
Chronic care, pulmonary care, physical rehab, wound care, psychiatric problems
The policy owner wishes to provide for the care of her minor child in the event of premature death. To accomplish this, the owner should probably designate as beneficiary: a. a spouse as a revocable beneficiary b. the estate of the deceased c. a favorite charitable organization d. a trust
D. A trust An owner of a life insurance policy may designate anyone as beneficiary whether an individual, trust or alma mater. A trustee must be appointed who will manage the trust funds for the benefit of the minor child.
An annuity may be referred to as a systematic reimbursement of the estate. A type of annuity which provides lifetime benefits for the annuitant and upon the annuitants death, a lump-sum settlement of any undistributed cost of the annuity is referred to as a: a. joint life annuity b. life annuity with 15 years certain c. life annuity with installment refund d. cash refund annuity
D. Cash refund annuity A cash refund annuity provides a lump-sum settlement to the beneficiary of a deceased annuitant.
Insurance Dividends
Considered to be a return of overpaid premiums and is not taxable. You can get the dividend in the form of CRAPPO - Cash - reduction of premium - allow the dividends to accumulate at interest (the money earned on the returned dividend is taxable as ordinary income - Paid up permament addition - you can purchase additional whole life policy and the price will change depending on dividend and age -paid up option - pay up policy earlier than expected - one year term - use dividends to purchase additional term insurance for 1 year (after 1 year, the term expires)
Standard risk
Considered to be the average risk; representative of the majority of people in their age and with similar lifestyles
Contracts of Adhesion
Contracts that are prepared by one party and submitted to the other party on a take it or leave it basis are classified as?
The benefit is received tax free
Corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then
Disability Riders
Cost of living rider - increase in benefit occurs on the yr anniversary of accident Social Security Benefit - proves benefit until SS pays - payable for 1 year Rehab Rider - assists individual to return to work Return of Premium rider - refund of premium every 5-10 years - 50-80% refund premium minus claims pad - very costly Transplant Cosmetic Surger Coverage Impairment Exclusion Rider - excludes coverage for partifular illness - may be temporary or permanent - eliminates pre existing condition
Aviation Exclusion
Coverage exists if on a regularly schedules flights
Long-term care can limit
Coverage for alcoholism
Which of the following is NOT an intended use of an annuity? Obtain income benefits for a stated period of time for more than one person Accumulate assets on a tax-deferred basis Create immediate lifetime income benefits Create new funds upon the death of a wage-earner
Create new funds upon the death of a wage-earner
Which of the following disability buy-sell agreements is best suited for businesses with a small number of partners? Split dollar plan Entity agreement Cross-purchase agreement Key person plan
Cross-purchase agreement
Annuity contracts may be funded with any several methods of payment. Which of the following is not a recognized method of funding this contract? a. flexible premium b. level premium c. lump-sum premium d. certain premium
D. Certain premium Annuity contracts may be funded on a single or lump-sum basis, by level, fixed or contract premiums, or with a flexible premium each year.
Which of the following is a power or duty of the Superintendent or Commissioner of Insurance? a. examines domestic companies once every two years b. prosecutes producers who break insurance laws c. sets life insurance premium rates d. computes the reserves of life insurance policies
D. Computes the reserves of life insurance policies An insurer has the power to determine what amount of surplus it will share annually with a policyowner/insured
Which of the following would not be considered rebating? a. a producer offers to pay a portion of the insureds premium b. a producer provides a television set to a current customer c. a producer offers season tickets to a prospective client d. a producer offers an advantageous premium payment plan to an insured
D. A producer offers an advantageous premium payment plan to an insured
Actuarial Department
Determines the premium rates, reserves and persistency rates of policies
Earnings grow tax deferred, contributions are not currently tax deductible, it can discriminate in benefits and selecting participants
What is true regarding a non-qualified retirement plan?
When an insured files a claim with an issuer, he or she cannot take any legal action against the insurance company until what period of time passes? a. 3 years b. 30 days c. 2 years d. 60 days
D. 60 days Most accident and health insurance contracts provide that the insurer has sixty days to pay a covered claim once all the required paperwork has been submitted to the insurer. This provision states that the insured cannot take legal action against the insurer with regard to the covered claim until this sixty-day period has elapsed.
Eleven years ago, Tom bought a life insurance policy from Jack who is an agent for Benefit Mutual Life. The policy will pay Tom's wife, Lauren, $1,000 per month for twenty years until he dies. Once the monthly income ends, the insurer will pay Lauren a death benefit of $50,000. What type of plan did Tom purchase? a. a $50,000 whole life policy with a family policy rider b. a $50,000 whole life policy c. a $50,000 whole life policy with a family income rider d. a $50,000 whole life policy with a family maintenance rider
D. A $50,000 whole life policy with a family maintenance rider A family maintenance rider provides level term insurance coverage on the primary insured. This rider is generally added to a whole life policy and provides the level term coverage for a specified period of time.
Medical treatment provided for an individual who is injured as a result of attempted suicide is generally: a. included in a major medical plan b. subject to limitations in the policy c. covered in full d. excluded
D. Correct Medical plans contain several exclusions including treatment in a government facility, elective cosmetic surgery, attempted suicide or intentionally inflicted injuries and war.
An underwriter may accept all risks EXCEPT: a. preferred risks b. standard risks c. substandard risks d. declined risks
D. Declined risks Declined means the underwriter, after reviewing all information has rejected the application or contract to offer. No contract is issued or risks accepted.
Each of the following is excluded by Blue Cross/Blue Shield coverage EXCEPT: a. routine examination costs b. injury to an insured while committing a felony c. intentionally self-inflicted injuries d. dental care resulting from an accident
D. Dental care resulting from an accident Routine examinations, injuries resulting from illegal activities and intentionally self-inflicted injuries are always excluded. Dental care resulting from an accident would be covered.
Rick owns a variable universal life policy and chooses a variable death benefit option. What will typically happen to the death benefit as a result of this selection? A. Remain the same B. Decrease but never increase C. Increase but never decrease D. Fluctuate with changes in the cash account
D. Fluctuate with changes in the cash account
An insured submits a claim form that is intentionally and falsely altered in order to receive a benefit. Which term best describes this submission? a. material misrepresentation b. misrepresentation c. theft d. fraud
D. Fraud The best response is fraud because it involves intentional deception. Material misrepresentation may or may not be intentional. Being convicted of theft may result, but falsely filed claims are generally deemed to be fraud.
If an insured wishes to guarantee his or her insurability, what provision or option may be added to a disability income policy? a. a waiver of disability b. cost of living rider c. return of premium provision d. guaranteed purchase option
D. Guaranteed purchase option The guaranteed purchase option (GPO) may also be called the guaranteed insurability benefit (GIB). This rider allows the insured to purchase additional amounts of disability insurance at specified option dates without proving insurability.
Certain elements are not required in order for a risk to be insurable. Which of the following is NOT an element of insurable risk? a. the loss must be accidental and not intentional b. the loss must cause financial harm c. the loss must be measurable and definable d. in a robust economy, premiums charged can be excessive provided the public is willing to pay higher premiums
D. In a robust economy, premiums charged can be excessive provided the public is willing to pay higher premiums. Regardless of the economy premiums cannot be excessive. Premiums must be adequate to cover the loss ratios and provide a profit to the insurer. In addition, premiums must be reasonable. If not reasonably priced, the public would simply decide not to purchase the coverage.
There are several types of insurance licenses available in this state. Which of the following licenses allow the holder to provide insurance advice for a fee as long as the fee is in writing prior to the work being performed? a. managing general agent b. resident producer c. nonresident producer d. insurance consultant or adviser
D. Insurance consultant or advisor A licensed advisor or consultant may charge clients a fee for providing professional insurance advice.
What type of life insurance policy covers two or more persons and pays the face amount upon the death of the first insured? A. Joint and survivorship B. Survivorship life C. Universal life D. Joint life
D. Joint life
Employer paid group medical premiums are deductible to the employer. How are group medical benefits received by the employee taxed? a. they are taxed as ordinary income b. they are taxed at a marginal withholding rate of the employee c. only 50% of the benefit is subject to taxation d. medical benefits are not taxable to the employee because they are not considered an income
D. Medical benefits are not taxable to the employee because they are not considered an income.
All of these statements concerning universal life insurance are false EXCEPT A. Death benefits are normally taxable B. Policy loans are not permitted C. Premiums or face amount cannot be changed D. Policy indicates how much of the premium is used toward company expenses
D. Policy indicates how much of the premium is used toward company expenses
A beneficiary of a straight life annuity with a certain period payout option can choose to receive the remaining installments or elect to: a. receive only the interest each month b. forfeit any remaining values c. convert to a permanent whole life policy d. receive any additional monies by using the cash refund option
D. Receive any additional monies by using the cash refund option The beneficiary may choose to receive the remaining guaranteed cash value as a lump sum payment. This is called the cash refund option.
All of the following statements are true with regard to a tax-deferred annuity, EXCEPT: a. TDAs are utilized by tax-exempt organizations such as nonprofit entities b. TDAs use a salary reduction rather than a tax deduction c. TDAs are used to provide retirement income to recipients d. TDAs accumulate interest on a tax-free basis
D. TDAs accumulate interest on a tax-free basis Tax-deferred annuities are also referred to as Tax-sheltered annuities (TSAs). These qualified plans are available to employees of nonprofit or charitable organizations, employees of educational organizations and clergymen and women.
An individual who has applied for health insurance and given the producer the initial premium. The producer provides the applicant with a receipt that specifies that the individual is covered for at least 60 days from the date of application. Which type of receipt was issued. a. insurability receipt b. approval receipt c. tentative d. unconditional
D. Unconditional An unconditional receipt is also called a binding receipt. Coverage is effective as of the date on the receipt for a specified period of time (or until the insurer declines the application).
Which of these is NOT an underwriting responsibility of a life insurance agent? Asking relevant questions concerning an applicant's avocations Requesting an attending physician's report (APR) Ordering an inspection report Determining the final rate classification
Determining the final rate classification
The Fair Credit Reporting Act is a federal regulation enacted in 1971. Which of the following is its purpose? a. it prevents the use of information concerning an individuals character b. it provides guidelines on premium financing c. it is not applicable to the health insurance industry d. it establishes procedures for consumer reporting agencies
D. it establishes procedures for consumer reporting agencies The fair credit reporting act established rules for insurers who wish to conduct consumer reports on proposed insureds. It also established rights of consumers when their applications were declined due to information in a consumer report.
Not subject to income taxation by the federal government
Death benefits payable to a beneficiary under a life insurance policy are generally
What happens to the purchasing power of benefit payments from a fixed life annuity when the cost of living goes up? Increases Decreases Not affected by inflation Tied to stock index
Decreases
An individual, age 45, would like to help pay for his daughter's college expenses in 10 years. Which annuity would be appropriate for this individual? Joint and survivor annuity Deferred annuity 403(b) plan Immediate annuity
Deferred annuity
All of the following are examples of unfair claim settlement practices EXCEPT Failing to promptly provide a reason for a claim denial Refusing arbitrarily and unreasonably to pay claims Denying unsubstantiated claims on a timely basis Misrepresenting pertinent facts of coverage
Denying unsubstantiated claims on a timely basis
Types of Insurance Companies
Determined by where they are located
Mutual insurers pay dividends to participating policyowners if the insurer has which of the following? Divisible surplus Reciprocal Dividend Agreement Certificate of Authority Participating clause
Divisible surplus
Which statement about group life insurance is INCORRECT? Cost can be shared between employer and employee Each participant requires evidence of insurability A minimum number of employees participating may be required Employer is issued a master policy
Each participant requires evidence of insurability
Non-qualified retirement plan
Earnings grow tax-deferred, contributions are not currently taxable, it can discriminate in benefits and selecting participants
401(k) plan
Elective deferral plan that allows employee to reduce compensation by a stated percentage on a tax deductible/ tax differed basis; often the employer matches the employee contributions
An employer has a group life insurance plan in place for his employees. How would an employee in poor health be treated in this situation? Approved on a graded basis Not eligible for insurance on this plan Eligible for the same type of coverage as the other employees Must pay a rating based on risk
Eligible for the same type of coverage as the other employees
They are tax free to terminally ill insured
What is true regarding taxation of accelerated benefits under a life insurance policy?
ERISA
Employee retirement income security act - its a federal law to protect the interests of the participants and beneficiaries regarding their pension, group insurance and welfare benefit plan - There's an appointed fiduciary that manages benefit plans, must communicate benefit offerings, govern the plan per ERISA guidelines - reports are available to dept of labor and irs and must file annually
SIMPLE plans require this:
Employees must receive a minimum of $5,000 in annual compensation, no other qualified plan can be used, no more than 100 employees.
All of the following pertains to a Simplified employee pension plan (SEP):
Employer contributions are not included in the employee's gross income, SEP's allow the employer to make annual tax-deductible contributions of the 25% of an employee's earned income, SEP's have a higher tax deductible contribution limit than an IRA.
Federal tax advantages of a qualified plan
Employer contributions are tax deductible as ordinary business expense, funds accumulate on tax-deferred basis, employee and employer contributions are not counted as income to the employee for income tax purposes
Are subject to vesting requirements
Employer contributions made to a qualified plan..
Fully Employer Funded healthcare plan
Employer makes regular contributions into fund - 1 plan no need for multiple state plans
Non Contributory Group Disabiity policy
Employer paid premium - premium deductible to employer - benefit is taxable to employee
Employer administered plan
Employer self funds up to a specific dollar amount per person - allows the owner to reduce costs - must be a large group of people - there's a 3rd party administrator to handle logistics
They do not earn lower interest rates than fixes annuities
Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, EIA's have guaranteed minimum interest rates, also less risky than variable annuities, the insurance company also keeps a percentage of the returns.
Both life insurance and a securities license
What license or licenses are required to sell variable life annuities?
Which life insurance settlement option pays a stated monthly payment until both principal and interest are exhausted? Fixed amount installment option Fixed period installment option Life income option Interest only option
Fixed amount installment option
Which life insurance settlement option pays a stated monthly payment until both principal and interest are exhausted? Fixed amount installment option Fixed period installment option Life income option Interest only option
Fixed amount installment option
Cash value available to the policy owner
Example of liquidity in a life insurance contract
$100,000
Example: the insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
Aleatory Contract (Example)
Exchange of unequal values
An officer for a corporation takes out numerous unsecured loans from the company's qualified retirement plan. Which of these rules is the plan in violation of? Key employee rule Top heavy rule Vesting rule Exclusive benefit rule
Exclusive benefit rule
Which life insurance policy option allows the policyowner to have coverage equal to the net death benefit of the lapsed policy? Reduced paid-up nonforfeiture option Accelerated benefits option Extended term nonforfeiture option Cash surrender option
Extended term nonforfeiture option
When an applicant applies for a large amount of life insurance coverage, which of the following would likely NOT be an underwriting requirement? Consumer report Eye examination Urine sample Blood sample
Eye examination
Which statement concerning a decreasing term life policy is accurate? Cash value decreases over the policy period Premium decreases over the policy period Face amount decreases over the policy period Face amount stays the same over the policy period
Face amount decreases over the policy period
Ambulatory Care
Facilities that offer care which does not require overnight stay
Premium, death benefit, and policy period
Features of the Indexed whole life policy that are fixed..
Civil Rights / Pregnancy Discrimination Act
Fed act affecting employers with 15+employees - pregnancies get same medical coverage as everyone else -applies to medical plans, sick leave and disability benefits
Age Discrimination in Employment Act (ADEA)
Federal act affecting employers with 20 + employees - Affects employees age 40+ - compulsory retirement is not allowed - workplace benefits must continue beyond 65 although some reduction may occur - Medical benefits may not be reduces
Which of these is NOT an allowable deduction made from premium payments of the cash value of a variable life insurance policy? Mortality costs Administrative charges Investment management fees Federal premium taxes
Federal premium taxes
Non-profit how do they run
Fees collected are used to run facility but not to make profit
Employer contributions are tax deductible as ordinary business expense,funds accumulate on a tax-deferred basis, employee and employer contributions are not counted as income to the employee for income tax purposes
Follow the following are true of the federal tax advantages of a qualified plan
Employees
For a retirement plan to be qualified, it must be designed for the benefit of
Tax deductible
For an individual who is NOT covered by an employer-sponsored plan, IRA contributions are
Tax deductible
For an individual who is not covered by an employer sponsored plan, IRA contributions are...
Workers Compensation
For employees who suffer work related injury; covers health care and lost wages; employees must have workers comp insurance
Subpoena witness, examine witness under oath, obtained evidence in the form testimony and documents
For the purpose of making an investigation, the commissioner does have the power to do all the following:
Coercion
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as
A business may purchase an annuity for all of the following reasons EXCEPT Structuring a liability settlement payment Funding a non-qualified deferred compensation plan Accumulating assets on a tax-deferred basis Providing a pension to employees
Funding a non-qualified deferred compensation plan
Wellness education subjects
Good nutrition; weight control, exercise
CHAMPUS or Tricare
Govt organization that provides health care benefits for dependents of military personnel May be called Tri Care
A large corporation purchases an accumulation annuity contract where all of the participating employees receive certificates of participation. What is this contract called? 403(b) plan Group deferred annuity Group immediate annuity Joint and survivor group plan
Group deferred annuity
What is the term used for an insurance contract that identifies individuals by relationship to a specific organization? Employer insurance Group insurance COBRA plan Industrial insurance
Group insurance
What is the term used for an insurance contract that identifies individuals by relationship to a specific organization? Employer insurance Group insurance COBRA plan Industrial insurance
Group insurance
100% participation of members is required in noncontributory plans
Group life insurance is a single policy written to provide coverage to members of a group. What statement concerning group life is true?
Annual
What premium payment mode will incur the lowest overall payment?
Tele medicine
Health care delivered electronically, vital signs transmitted
Tricare
Health care program for active duty service members, retirees, and families
common exclusions or restrictions
Health insurance policies frequently cite a number of exclusions or conditions that are not covered. The common ones are injuries due to war or an act of war, self-inflicted injuries, and those incurred while the insured is serving as a pilot or crew member of an aircraft Other exclusions are losses resulting from suicide, hernia (as an accidental injury), riots, or the use of drugs or narcotics Losses due to injuries sustained while committing a felony, or attempting to do so, also may be excluded Foreign travel may not be excluded in every instance, but extended stays overseas or foreign residence may cause a loss of benefits
They are not included as income for the employee, but are taxable upon distribution
How are contributions to a tax-sheltered annuity treated with regards to taxation?
3 years following the date of its last authorized use
How long must an insurer keep a copy of an authorized form in its records?
3 accounts: life insurance, annuities, and health insurance
How many accounts must to Tennessee life and health insurance Guaranty association maintain?
12 hours
How many credit hours of excess continuing education or producers allowed to carryover to the next renewal cycle?
$3,000
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?
It is approved by the IRS
If I retirement plan or annuity is "qualified," this means...
5 days
If a (consumer) requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?
Fixed period
If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?
Changes to an application may involve drawing a line through the first answer, record the correct answer, and have the applicant initial the change, one may note on the application the reason for the change, and if all else fails one may destroy the application and complete a new one.
If a change needs to be made to the application for insurance, the agent may do all of the following....
Applicants present physical condition, present occupation, and past medical history.
In classifying a risk, the Home Office underwriting department will look at all of the following..
relation of earnings to insurance
If disability income benefits from all disability income policies for the same loss exceed the insured's monthly earnings at the time of disability, the relation of earnings provision states that the insurer is liable only for that proportionate amount of benefits as the insured's earnings bear to the total benefits under all such coverage
Elimination or Waiting periods
If disabled, there is no benefit paid for a certain period of time. The longer the waiting time, the lower the cost or higher the deductible
What effects the amount of the person premium?
If it does not effect their life span it does not effect their premium
24 Hour Coverage vs Limited at work
If its difficult to determine where the disability occurred (carpel tunnel, back injuries) then its difficult to determine which policy pays
A single premium deferred annuity sometimes contains a bailout feature. Which statement regarding this feature is correct? If the interest rate falls below a specified level, the surrender charge is waived If the interest rate rises above a certain level, the surrender charge is waived It allows the Life and Health Guaranty Association to bailout the insolvent insurer A reinsurer will make the remainder of the annuity payments if the original insurance company becomes insolvent
If the interest rate falls below a specified level, the surrender charge is waived
The policyowner
If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who had the ownership rights?
Day
If the producer continues to violate the entrance code, I knew so penalty will be assessed every?
unpaid premiums
If there is an unpaid premium at the time a claim becomes payable, the amount of the premium is to be deducted from the sum payable to the insured or beneficiary.
Unfair trade practices
If you insurance company makes a statement that it's policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered?
XYZ Insurance Company gives direct authority to its producers to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the producer the right to collect premiums? Implied authority Apparent authority Express authority Assumed authority
Implied authority
From trustee to trustee
In a direct rollover, how is the money transferred from one plan to the new one?
Participation Rate
In a guarenteed annuity like an equity index annuity, the insurance co will keep a % of the index gain as a fee for the guarentee
The owner
In a life settlement contract, whom does the life settlement broker represent?
Annuitization Period
In an annuity, the accumulated money is converted into a stream of income during what time period?
insurance with other insurer
In attempting to deal with the potential problem of overinsurance, the insurance with other insurer provision states that benefits payable for expenses incurred will be prorated in cases where the company accepted the risk without being notified of other existing coverage for the same risk.
Automatic premium loan
What protects the insured from an unintentional policy lapse due to a nonpayment of premium?
It is never legal to limit coverage based on marital status
In which of the following situations is it legal to limit coverage based on marital status?
Premium amounts and surrender values
Included in a policy summary
Controlled business insurance
Includes the insurnace writting the the business of the licensees self or by virtue of the influence with the buyer (spouse, family member)
Which tax would an IRA participant be subjected to on distributions received prior to age 59 1/2? 10% tax penalty for early withdrawal Capital gains tax Income tax and penalty tax Ordinary income tax
Income tax and penalty tax
Which statement regarding the certificate of insurance is accurate? It is an insurance contract between the employer and insurer Indicates evidence of an employee's insurance coverage Each certificate of insurance is underwritten on an individual basis It is issued by the employer to the employee
Indicates evidence of an employee's insurance coverage
Basic Plan
Individual plan that reimburses all or some of the healthcare expense. The insured does not have to pay a deductible but the services are limited AKA first dollar coverage 3 Benefits: 1) Daily room and board - designed to reimburse room and board. There is a predetermined amount and predetermined number of days. Any expesnses have to be paid by insured 2)Miscellaneous / Ancillary Expenses (xrays, medication, lab test etc) - its usually a multiple of the DBR (ie 100x the dbr). 3) Surgical Expense benefit - its often added with additional premium - Any costs exceeding the maximum is up to the insured. 4) Physicians Expense Benefit - outpatient benefit or doctors office. - it will pay only up to a specific amount stated in the contract
Characteristics of group life insurance
Individuals covered under the policy receive a certificate of insurance, certificate holders may convert coverage to an individual policy without evidence of insurability, and amount of coverage is determined according to non discriminatory rules.
Debtor in Creditor
What relationship is not an example of insurable interest?
preexisting conditions
Medical expense and disability income policies usually exclude paying benefits for losses due to preexisting conditions pertaining to illness, disease, or other physical impairments Such exclusions are subject to the "time limit on certain defenses" provision. Any preexisting condition that the insured has disclosed clearly in the application usually is not excluded or, if it is, the condition is named specifically in an excluding waiver or rider.
Have lower premiums
Insureds who have been classified as preferred risk will...
Cash Value Loan
Insurer loans the money and attaches a comparable portion to the cash value as collateral
Who makes up the Medical Information Bureau?
Insurers (this is so the insurers can compare the info that have collected on the individual)
When a large face amount is requested by an applicant it is protocol to do this..
Insurers commonly require HIV testing; the insurer must abide by a variety of rules created by its respective state.
Stock
Insurers who are owned by stockholders who have the usual rights of ownership, including the right of voting?
403(b) Plam (TSA)
Internal revenue code provision that specifically provides for an individual retirement plan for public school teachers is a(n)
The free look provision
Is a mandatory provision that allows the insured to examine a policy, and if dissatisfied for any reason, return the policy for a full refund of any premiums paid
social security disability
Medically determinable physical or mental impairment that can result in blindness, death or last at least 12 months
Violent Crime Control Act
It is illegal for an individual who's been in a crime involving dishonesy, breach of trust of fiduciary responsibility to work in the business of insurance without consent from the insurance regulatory official
Purpose of a conditional receipt
It is intended to provide coverage on a date earlier than the age of the issuance of the policy
claim forms
It is the company's responsibility to supply a claim form to an insured within 15 days after receiving notice of claim If it fails to do so within the time limit, the claimant may submit proof of loss in any form, explaining the occurrence, the character, and the extent of the loss for which the claim is submitted
Which life insurance settlement option pays lifetime benefits to two or more people? Life income with period certain Joint Joint and survivor Life income
Joint and survivor
Alien insurer
Licensed, however, is outside of the U.S.
Foreign insurer
Licensed, however, not in the state the indivisible resides.
Income for 2 or more recipients until they die
Life income joint and survivor settlement option guarantees
2
Life insurance cost indexes are our only useful when comparing a minimum of how many similar policies?
Generally not taxed as income
Life insurance death proceeds are..
That the cash value will not be lost
Nonforfeiture values guarantee which policyowner?
Franchise Insurance
Life or health insurance plan for covering groups of persons with individual policies uniform in provisions, although perhaps different in benefits. Solicitation usually takes place in an employer's business with the employer's consent. Generally written for groups too small to qualify for regular group coverage. May be called wholesale insurance when the policy is life insurance.
They could be used for a key person coverage, they could be sold for an amount greater than the current cash value, they involve insurance policies with large face amounts
Life settlements
entire contract
Like its counterpart in a life insurance policy, the entire contract provision in a health insurance policy protects the policy owner in two ways. It states that nothing outside of the contract (the contract includes the signed application and any attached policy riders) can be considered part of the contract It also assures the policyowner that no changes will be made to the contract after it has been issued, even if the insurer makes policy changes that affect all policy sales in the future
Which of these is NOT relevant when determining the amount of personal life insurance needed? Existing life insurance coverage Local unemployment rates Household income Household debt
Local unemployment rates
Medicare supplement does not pay for
Long term care, like a Nursing home
LTCF
Long time care facilities
In Ohio, viatical settlement brokers are permitted to do all of the following EXCEPT Charge a fee for their services Advertise the availability of viatical settlements Introduce viators to settlement providers Make the first transaction up to 30 days before approved for a license
Make the first transaction up to 30 days before approved for a license
Serious
Managed care knows that prevention of ___ illnesses will Lowe medical cost
It commences when the policy is delivered
Mandatory free look in a life insurance policy
Misrepresentation on the application is Intentional Concealed Material Twisting
Material
The guaranteed insurability rider
May be structured to allow for specific additional amounts of insurance to be purchased at specific ages, dates, and events without proving insurability; however, the coverage is purchased at the insured's attained age and the maximum allowable purchase is specified in the base policy. This rider usually expires at the insured's age of 40.
Term rider
May be used to customize a permanent life insurance policy to meet the needs of the policyowner
6 credits
Minimum number of credits required for partially insured status for Social Security disability benefits is
Which of the following is TRUE about a qualified retirement plan that is "top heavy"? More than 30% of plan assets are in key employee accounts More than 40% of annual additions are for key employee accounts More than 50% of plan assets are in key employee accounts More than 60% of plan assets are in key employee accounts
More than 60% of plan assets are in key employee accounts
Net Premium
Mortality + Interest costs
Gross Prium
Mortality + interest costs + expense costs
The factors for premium rates
Mortality, Interest earnings, expenses
Life insurance premiums are based on what three factors? Mortality, interest, dividends Morbidity, interest, expenses Mortality, interest, expenses Morbidity, interest, dividends
Mortality, interest, expenses
Medicare supplement or Medigap is designed to pay
Most or all of Medicares deductibles
A policy summary
Must be delivered along with the policy and will provide the producer's name & address, the insurance company's home office address, the generic name of the policy issued, and premium, cash value, surrender value & death benefit figures for specific policy years.
Keogh Plan as employer
Must contribute the same amount to eligible employees that they contribute to their own plan
Insurance company that is owned by its policy owners
Mutual insurance company
Can any group form an insurance plan
NO , you need a common bond (eg trade association)
Urgent care
Needs prompt tx
Viatical Settlement Broker
Negotiaties bw the 2 parties no more than 2% of amount paid to viator as compensation
Does group insurance require medical examinations?
No there are not and medical examinations to guard against adverse selection
Do Dental typical dental plans cover orthodontics
No they usually only cover preventative measures not major services
Section 162 bonus plans
Non qualified benefit - allows employer to purchase life insurance for the person who was going to get the bonus - it is an employer expense and reduces employee's total bonus, but the money goes to the employee's beneficiary
When funds are transferred directly from one IRA to another IRA, what percentage of the tax is withheld? 10% 20% 30% None
None
Consumer reports
What reports include written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources?
Accuse care
Pt needing constant and close monitoring and care for severe conditions
assisted living facility
Pts are often retired and wish to have ADLs taken care of for them; often receive help with doctor visit, errands, entertainment and company of other residents
Nosocomial Infection
Pts get sick form hospitals
Lungs
Pulmonology
Annually Renewable Term
Purest form of term insurance; death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
Local rehab facility
RIOSA, warm springs
Not for profit agencies
Raise funds for medical research and public education about health problems; assistance to pts; funded by donations, grants, fundraisers, memberships
Which of these occurrences could improve an insurer's ability to reduce premiums? Expense factor increase Mortality rates increase Rate of earnings on investments increase Requiring monthly premium payments instead of annual
Rate of earnings on investments increase
The Director may suspend a producer's license when the producer Fails to notify the insurance department of change of premium trust account location Rebates a portion of the commission to the insured Shares commissions with similarly licensed producers Fails to report annual commission earnings to the insurance department
Rebates a portion of the commission to the insured
An agent misrepresents policy benefits to convince a policy owner to replace policies
Rebating is an unfair trade practices and is regulated by law all of the following would be considered to be rebating except
How are qualified Roth IRA distributions normally treated for tax purposes? 10% penalty tax is applied Taxed as ordinary income Capital gains tax is applied Received income tax-free
Received income tax-free
What happens to the death benefit of a life insurance policy if the insured elects a partial payment from the accelerated (living) benefit provision? None will be given Increased Reduced No change
Reduced
How do benefit payments fluctuate over time in a variable life annuity? Benefit payments stay fixed Reflects changes in the market value of assets in a separate account Annuitant controls any benefit payment changes Any benefit payment fluctuations have to be approved in writing by the owner
Reflects changes in the market value of assets in a separate account
Must allow the policyowner to return the policy for a full refund
Regarding the free-look provision, the insurance company
Must allow the policyowner to return the policy for a full refund.
Regarding the free-look provision, the insurance company..
variable contracts
Regulated seperately but in a coordinated fashion between the Department of Insurance, the SEC, NASD
Food and Drug Administration (FDA)
Regulates release of medication on market; food safety such as listeria in ice cream, leading to food recalls
Single Premium Whole Life
Requires the entire premium to be paid in one limp sum at the policy's inception.
Which of these is NOT considered the responsibility of a producer in the underwriting process? Collecting additional medical information if needed Promptly sending the completed application to the insurance company Forwarding any material personal observations to the insurer Selecting the final approval date
Selecting the final approval date
Which of these factors does NOT influence an applicant's need for life insurance? Lifestyle of the applicant Number of dependents Future educational costs of the dependents Self-maintenance expenses
Self-maintenance expenses
Service Plans for Heathcare
Service plans include PPO, HMO and BCBS - prepaid benefit - less choice - less paperwork - less out of pocked
Which of the following would NOT be appropriate for an immediate annuity? A lottery winner who opted for a lump-sum payment Setting up a college savings fund for a young child A beneficiary collecting the face amount of a life insurance policy Someone who just won a large settlement
Setting up a college savings fund for a young child
When an annuity contract has been surrendered, how will the surrender charges affect the final contract settlement? Settlement will be reduced Settlement will be increased Settlement will not be affected Settlement will be held in escrow until surrender charges are paid
Settlement will be reduced
Surrender Charges
Should an owner transer monies before the stated period of time, their are charges; one can take out 10% without charge
insurance with other insurers
Similar to the previous, the insurance with other insurers provision calls for the prorating of benefits that are payable on any basis other than expenses incurred
intermediate vs skilled care
Skilled care is 24 hours a day and intermediate is daily but not 24 hour
Buy-sell agreements are normally funded with a life insurance policy
What statement is true concerning buy-sell agreements?
Insurable interest
Stranger-originated life insurance (STOLI) policies are in direct opposition to the principle of...
Which of these annuity features is meant to discourage withdrawals and exchanges? Annuitization Annual fees Withdrawal penalty Surrender charges
Surrender charges
How does the cost for a survivorship life policy compare to the cost of combining two separate life insurance policies? Survivorship life policy is lower Survivorship life policy is higher Depends on the investment performance of the underlying accounts Both have the same actuarial costs
Survivorship life policy is lower
Rated
Synonym for a substandard risk classification
Admitted insurer
Synonym for authorized insurer
Health Savings Account (HSA)
Tax-sheltered savings account similar to an IRA but created primarily to pay for medical expenses.
Dividends are not taxable
Taxation on dividends in participating policies?
Types of Trusts
Testamentary Trust Inter Vivos Trust Class Designations
Local cardiac hospital
TexSan Heart Hospital
Waiver or premium
Th rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called?
Adhesion
That the policy owner must adhere to the terms of the contract ie: pay the premiums
Payments earn interest and and grow tax deferred.
The "accumulation period" is the period of time over which the annuitant makes payments (premiums) into an annuity.
Annuity owner
The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant or the beneficiary.
Standard, substandard, and preferred
The 3 risk classifications used by underwriters for life insurance
Insurance companies from adverse selection by high risk persons
The Medical Information Bureau (MIB) was created to protect...?
One-year Term option
The dividend option in which the policyowner used dividends to purchase a term policy for one year is referred to as the...
Becomes terminally ill
The accelerated benefits provision for an early payment of the death benefit when the insured..
Which of the following statements is TRUE if the owner of an IRA names their spouse as beneficiary, but then dies before any distributions are made? Surrender charge is applied The account can be rolled into the surviving spouse's IRA Distributions will be received tax-free if surviving spouse is over age 59 1/2 Future distributions are payable to the owner's estate
The account can be rolled into the surviving spouse's IRA
The annual dividend is retained by the company, the interest is credited at a rate specified by the policy, the policyholder has the right to withdraw the accumulations at any time.
The accumulation at interest option
Retention
The act of the individual taking on the risk themselves, or retaining some of the cost themselves
Tax-deductible contributions
The advantage of qualified plans to employers is
Fraternal Agent
The agent of the fraternal organization that can sell the insurance
Deductible
The amount a pt must pay before the insurance pays a percent
Accumulation at Interest
The annual dividend is retained by the company, the interest is credited at a rate specified by the policy, and the policyholder has the right to withdraw the accumulations at any time
Insurable Interest
The applicant has more to gain if he lives then if the insured dies
Insurance Repsentations
The applicants statements on an insurance application
Grace period
The automatic premium loan provision is activated at the end of the...
Principal Sum
The benefit dollars received from accidental death. Dismemberment is always 50% of the benefit
Irrevocable Beneficiary
The can be changed only with the written consent of that beneficiary
Performance or the policy portfolio
The cash value of a variable life policy is not guaranteed and fluctuates with the_________________ in which the premiums have been invested by the insurer.
The amount and frequency of premium payments
The consideration clause states that the value offered by the insured is the premium and statements made in the application, so it will include the information about..
Is the premium and statements made in the application, so it will include the information about the amount and frequency of premium payments.
The consideration clause states that the value offered by the insured...
consideration clause
The consideration clause states the amount and frequency of premium payments.
What happens when a policyowner borrows against the cash value of his life insurance policy? The death benefit would be reduced by the outstanding loan balance No additional loans can be taken out in the future The amount borrowed is added to the policyowner's gross income for tax purposes The interest on the loan is tax-deductible
The death benefit would be reduced by the outstanding loan balance
Annually Renewable Term
The death protection component of Universal Life Insurance is always..
Annually Renewable Term
The death protection component of Universal Life Insurance is always....
Insurance Considerations
The easiest way to protect yourself and your organization from the legal liability and financial loss associated with environmental safety risks is through insurance. Coverage by insurance allows the facility to transfer the potentially devastating financial risk of a future loss for the cost certainty of a monthly or yearly payment (i.e., premium).
Life insurance adds to what?
The estate of the individual
Concealment
The failure to disclose material facts. Concealment is grounds for recission by either party
Utmost Good Faith
The fair and equal bargaining by both parties in forming the contract, where the applicant must make full disclosure of risk to the company, and the insurance company must be fair in underwriting the risk.
Occupational Safety and Health Administration (OSHA)
The federal regulatory compliance agency that develops, publishes, and enforces guidelines concerning safety in the workplace.; safety on the job; monitors workplace for PPE; frayed electrical cords, lunch next to urine
nonforfeiture clause option
The insurer's surrender the policy at its current cash value. Only any excess of value is taxable as income. Once the policyholder opts for cash surrender, the policy is immediately inactive.
insuring clause
The insuring clause is the part of the health insurance policy that states the kind of benefits provided and the circumstances under which they will be paid
Offer & Acceptance, consideration, competent parties, and legal purpose
The four essential elements of all legal contracts:
As of the application date (because FULL premium was taken during application)
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?
Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes? The gain is treated as taxable income and a penalty tax is imposed on the gain The gain is treated as taxable income but no additional penalties are applied The gain is not taxable but a penalty is assessed Surrendering an MEC is considered a tax and penalty-free transaction
The gain is treated as taxable income and a penalty tax is imposed on the gain
Convalescence
The gradual recovery of health and strength after illness
illegal occupation
The illegal occupation provision specifies that the insurer is not liable for losses attributed to the insured's being connected with a felony or participation in any illegal occupation.
Primary Insurer
The insurance company that is transfering its risk to another insurance company
legal actions
The insured cannot take legal action against the company in a claim dispute until after 60 days from the time the insured submits proof of loss.
Face amount of the policy, the beneficiary's life expectancy, and projected interest rates.
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following:
change of beneficiary
The insured, as policyowner, may change the beneficiary designation at any time unless a beneficiary has been named irrevocably.
Who reports an agent's termination of appointment to the Director? The agent The insurer The Insurance Department The State
The insurer
intoxicants and narcotics
The insurer is not liable for any loss attributed to the insured while intoxicated or under the influence of narcotics.
How is it determined whether an insurer is allowed I write business in a state?
The insurer's domicile of location of incorporation will determine whether a company is domestic, foreign, or alien
Annually Renewable Term
The least expensive first year premium payment is found in..
Incontestability clause
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the?
When the income payments begin
The main difference between immediate and deferred annuities is...
What determines how much an annuitant is paid for a variable annuity? Varies according to how many outstanding annuity units Payments fluctuate as annuitant gets older The market value fluctuations of the securities backing it Varies according to the insurer's investments in its general account
The market value fluctuations of the securities backing it
misstatement of age
The misstatement of age provision allows the insurer to adjust the benefit payable if the age of the insured was misstated when application for the policy was made If the insured was older at the time of application than is shown in the policy, benefits would be reduced accordingly The reverse would be true if the insured were younger than listed in the application
notice of claim
The notice of claim provision describes the policyowner's obligation to the insurer to provide notification of loss within a reasonable period of time Typically, the period is 20 days after the occurrence or a commencement of the loss, or as soon thereafter as is reasonably possible
Entire Contract
The original or photo copy of original application with the policy too
Which statement concerning a deferred annuity is correct? The contract cannot be assignable by the owner Requires a single premium payment The owner can be the beneficiary, annuitant, or neither Benefits start immediately after contract formation
The owner can be the beneficiary, annuitant, or neither
Receive a policy loan, assign the policy, and designate a beneficiary.
The ownership provision entitles the policyowner to do what?
Receive a policy loan, assign the policy, designate a beneficiary
The ownership provision entitles the policyowner to...
payment of claims
The payment of claims provision in a health insurance contract specifies how and to whom claim payments are to be made. Payments for loss of life are to be made to the designated beneficiary If no beneficiary has been named, death proceeds are to be paid to the deceased insured's estate. Claims other than death benefits are to be paid to the insured
Viator
The policy owner who considers viatication (the seller)
Whole life policy
The policyowner is entitled to policy loans
grace period
The policyowner is given a number of days after the premium due date during which time the premium payment may be delayed without penalty and the policy continues in force Depending on the state, the minimum grace periods typically specified are seven days for policies with weekly premium payments (i.e., industrial policies), 10 days for policies with premiums payable on a monthly basis, and 31 days for other policies
Policy assignment
The policyowner may assign a part of the policy (collateral assignment) or the entire policy (absolute assignment)
Policy assignment
The policyowner may assign a part of the policy or the entire policy.
A life insurance illustration showing future premiums being paid out of nonguaranteed values must disclose that These policy premiums will vanish The policy guarantees payment of these premiums The policyowner forfeits the option of paying these premiums from other sources The policyowner may need to resume premium payments depending on actual results
The policyowner may need to resume premium payments depending on actual results
The policy contains sufficient cash value to cover the cost of insurance.
The policyowner of a Universal Life Policy may skip paying the premium and the policy will not lapse as long as..
The policy contains sufficient cash value to cover the cost of insurance
The policyowner of a Universal Life Policy may skip paying the premium and the policy will not lapse as long as...
The death benefit can be increased by providing evidence of insurability.
The policyowner of an adjustable life policy wants to increase the death benefit. In order to to do that, what may happen?
The death benefit can be increased by providing evidence of insurability.
The policyowner of an adjustable life policy wants to increase the death benefit. What is the result of this?
Life expectancy
What term means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?
The existing and replacing insurer are the same and the transaction involves credit for life insurance
The protocol for replacement does not apply to which of the following situations?
Entire contract
The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the..
Help protect policy owners and beneficiaries against financial loss caused by the insolvency of an insurance company
The purpose of the Tennessee Guaranty Association is to
cancellable policies
The renewability provision in a cancellable policy allows the insurer to cancel or terminate the policy at anytime Cancellable policies also allow the insurer to increase premiums
optionally renewable policies
The renewability provision in an optionally renewable policy gives the insurer the option to terminate the policy on a date specified in the contract.
guaranteed renewable policies
The renewal provision in a guaranteed renewable policy specifies that the policy must be renewed (as long as premiums are paid) until the insured reaches a specified age, such as 60 or 65.
Fiduciary responsibility
The requirement that an agent not co-mingle insurance monies with their own fund is known as?
Tertiary Beneficiary
The third in line to receive the benefits of a life insurance policy.
time of payment of claims
The time of payment of claims provision provides for immediate payment of the claim after the insurer receives notification and proof of loss. If the claim involves disability income payments, they must be paid at least monthly if not at more frequent intervals specified in the policy
Assignment
The transfer of owner rights from 1 party to another 1) Absolute assignment 2) Colateral Assignment
2 years
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years?
Annuity Classifications
The way the annuity is funded Fully Funded - 1 lump sum Periodic premium - can pay in level or flexible
Settlement Options
The way the policy is paid off and could be selected at time of policy origination 5 options 1) Lump Sum 2) Fixed Period (allows for income for a definite period of time) 3) Fixed amount (can be altered) 4) Interest Only (only interest is paid out and is taxable) 5) Life Income - single premium ineediate annutiy
Increasing Term is a type of TERM INSURANCE
There are several types of whole life polices. The first three, Straight life, limited payment, and single premium, are the basic forms of whole life.
Key Person Insurance
There is no limitation on the number of key employee plans in force at any one time, the employer is the owner, Payor and beneficiary of the policy, the key employee is the insured.
Taxation of accelerated benefits under a life insurance policy
They are tax free to terminally ill insured
Life settlements
They could be sold for an amount greater than the current cash value, they involve insurance policies with large face amounts, they could be use for a key person coverage
Whole life
What type of insurance policy would perform the function of cash accumulation?
HR-10 (Keogh Plan)
Two attorneys at law and operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose...
Palliative Care
Tx aimed at comfort not curing
What is the face amount of a $50,000 graded death benefit life insurance policy when the policy is issued? $0 $50,000 Under $50,000 initially, but decreases annually over time Under $50,000 initially, but increases annually until fully insured
Under $50,000 initially, but increases annually until fully insured
Gradually increases each year by the amount that the cash value increases.
Under Option B the death benefit includes the annual increase in cash value so that the death benefit...
Benefit payment amounts are not guaranteed
Under a variable annuity, the issuing insurance company does not guarantee a minimum interest rate or the benefit payment amounts.
reinstatement
Under certain conditions, a policy that has lapsed may be reinstated. Reinstatement is automatic if the delinquent premium is accepted by the company or its authorized agent and the company does not require an application for reinstatement. If it takes no action on the application for 45 days, the policy is reinstated automatically. To protect the company against adverse selection, losses resulting from sickness are covered only if the sickness occurs at least 10 days after the reinstatement date.
Respond to the consumer's complaint.
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must...
Both the principal and interest are liquidated together over the selected period of time
Under the fixed-period option, a specified period of years is selected, and equal installments are paid to the recipient.
time limit on certain defenses
Under the time limit on certain defenses provision, the policy is incontestable after it has been in force a certain period of time, usually two years. This is similar to the incontestable clause in a life insurance policy. Unlike life policies, a fraudulent statement on a health insurance application is grounds for contest at any time, unless the policy is guaranteed renewable.
other insurance in this insurer
Under this provision, the total amount of coverage to be underwritten by a company for one person is restricted to a specified maximum amount, regardless of the number of policies issued
Cash surrender
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
Which of the following is NOT considered to be an expense for surviving family members of a deceased wage earner? Estate taxes Unemployment tax expenses Funeral expense Living expenses
Unemployment tax expenses
USDHHS
United States Department of Health and Human Services: the federal executive department; disease control and prevention; biomedical research; regulation of food, drugs, and medical devices; health care delivery
Universal Life Option A
Universal life option A (Level Death Benefit Option) Policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as require by the IRS.
2 years
Unless revoked or suspended how long does a producers license remain in effect in Tennessee?
Statement of good health, payment of premium, and delivery receipt.
Upon policy delivery, the producer may be required to obtain?
Reinstatement provision
Upon policy reinstatement to pay all overdue premiums with interest before the policy is reinstated
30 days
Upon receipt of notice of appointment, the commissioner must verify the insurance producer is eligible for appointment within how many days?
The beneficiary will only receive payments of the interest earned on the death benefit.
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?
Level fixed
Variable life insurance is based on what kind of premium?
State and federal government, the insurance department, and the SEC.
Variable life insurance is regulated by..:
Cerrtificate of Authority
What an insurance company needs to have in order to operate in a state
Workers compensation
What are examples of a business use of life insurance?
Insurance and cash account
What are the two components of a universal policy?
Coverage until death or age 100.
What characteristic makes whole life permanent protection?
Recipient's life expectancy and amount of principal
What determines the amount of each installment paid in a life income option arrangement?
It remains the same no matter how many children are added to the policy
What happens to the premium on the children's rider in a life insurance policy?
It is term coverage that is convertible to permanent insurance at or prior to the child reaching the maximum coverage age
What happens when a children's rider is added to an insured's permanent life insurance policy?
Coverage ends and the policy cannot be reinstated
What happens when a policy is surrendered for its cash value?
The amount of premium payment
What information will be stated in the consideration clause of a life insurance policy?
Injury / Accident vs sickness / illness
an outside event that causes injury vs an internal sickness
Reciprocal Organization
an unincorporated organization whereby members insure eachother. managed by an attorney in fact
Timeframe for filing relevant Suspicious Activity Reports
Within 30 days of INITIAL DISCOVERY
3 days
Within how many days of requesting an an investigative consumer report must an (insurer) notify the consumer in writing that the report will be obtained?
3 days
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?
NAIC model health insurance policy provisions
Years ago, the National Association of lnsurance Commissioners (NAIC) developed a model Uniform Individual Accident and Sickness Policy Provisions Law Almost all states have adopted this model law or similar legislation or regulations The purpose of the NAIC law was to establish uniform or model terms, provisions, and wording standards for inclusion in all individual health insurance contracts
profit-sharing plan
a benefit whereby employees may share in the profits of the business
Non Occupational Policy
a disability policy for coverage only off the job - part of a group policy
Occupational Policy
a disability policy that provides coverage on and off the job - usually bought the self employed
Misrepresentation
a false statement made by an applicant but that does not effect the issue of the policy ie if the applicant puts the wrong address.
Market value Adjusted Annuity
a fixed annuity which shifts some of the investment risk to contract holder
class beneficiary
a member of a group, e.g., children of the insured
current assumption whole life insurance
a nonparticipating whole life policy in which the cash values are based on the insurer's current mortality, investment, and expense experience. Low interest rates increase premiums
Unilateral
a one sided contract - only 1 side makes a legally enforcable agreement. (The insurance co has to adhere to the contract) but the insured person doesn't have to pay premiums forever
Idemnity
a policy holder or insured is made whole without profiting from the loss.
Pure Risk
a risk that presents the chance of loss but no opportunity for gain
Tax sheltered annuity
a savings plan where pre-tax money is deposited to earn interest over a period of time. Available to employees of certain non profits
Multiple Employer Trust (MET)can ppo
a trust to get groups of people with similar interest to pool together to buy group insurance
Fixed Annuity
after the insurance co gets the funding, they guarentee a minimal rate return. more conservative; money goes into general account
Noncontributory Group life
all of the eligible person within that company must be insured
Equity Indexed Annuity
allows for stock market appreciation with downside protection; guarantee of principal;
Guaranteed Minimum Withdrawal
allows owner to protect the value agains downside market risk by allowing the annuitant to withdraw a stated % of account per year
Conversion Provision
allows policy owner to convert 1 type of life insurance to another - have to convert to same or lower death benefit
Underwriting
an attempt to determine if coverage should be issued as applied, issued on a rated basis (ie higher premium) issued on a preferred rate or denied
Agreement
an offer and acceptance or a meeting of the minds
The surrender charge on many deferred annuity contracts are waived when the annuitant becomes unemployed annuitant dies or becomes disabled contract's interest rate falls below a stated percentage contract is canceled within the first year
annuitant dies or becomes disabled
Centers for Disease Control and Prevention (CDC)
another division of the USDHHS; concerned with causes, spread, and control of diseases in populations; monitor and prevent outbreaks
Residual Disability Rider
another form of partial disability -based on a % of lost income - fluctuates monthly and may exceed 50% (unlike partial disability which pays up to 50% and for a limited time) - if you lose 80% of income, you get the full disability
$1000 for each violation
any person acting as an insurance producer without a valid license may be fined up to
Fair Credit Reporting Act of 1970
applicant has right to see all the stored information upon which the policy is either approved or denied
In a qualified retirement plan, the yearly contributions to an employee's account are not tax-deductible are restricted to minimum levels set by the IRS are restricted to maximum limits set by the IRS must be matched dollar-for-dollar by the employer
are restricted to maximum limits set by the IRS
Qualified Withdrawals
before 59.5 yrs of age, theres a 10% irs penalty
Irrevocable Beneficiary
beneficiary cannot be changed - used by banks or in divorces - if beneficiary wants the contract, he can get it
Malingering
characterized by the intentional creation of false or grossly exaggerated physical or psychological symptoms
An employee welfare plan exempt from ERISA regulations would be church plans indemnity plans split dollar plans accident only plans
church plans
Field Underwriting Duties
completing the application and collecting the premium (agent doesnt issue policy)
The payment of the first premium, the promise to pay a covered loss, and the agreement to abide by policy conditions are all examples of consideration legal purpose representation acceptance
consideration
Setting up a college savings fund for a young child continue after the purchase payments stop continue after the benefit payments start continue after the annuitant dies continue after the annuity has been surrendered
continue after the purchase payments stop
The policy provision that permits an employee to change from a group plan to an individual plan is called the assignment provision conversion provision certificate provision modification provision
conversion provision
Medicare Part A (Hospital Insurance)
covers Medicare inpatient care, including care received while in a hospital, a skilled nursing facility, and, in limited circumstances, at home. Starts November first
24 Hour Coverage
covers all disabilities (on or off the job) - covers medical benefits for occupation injuries -more cost effective - less administrative issues
When a sum of money undergoes capital liquidation, that sum will increase in value remain the same indefinitely decrease in size create tax deductions
decrease in size
Deferred Annuity
defer payment to a later date
Disability Policy
defined as the inability to perform your own normal occupation or daily duties - designed to offset loss of income due to accident or sickness - can be more restrictive and therefore lower premiums - the more liberal the definition the higher the premium - must be under physician care to get paid and dr must verify by filling out claim form
Point of Service Plan
designed to provide a higher level of managed care - allows your physician to refer in or out of network
Underwriting department
determines whether the applicant can get insurance
Informational
document and process information; such as pt address and insurance
Supplemental Major Medical
elimates the insured from having to pay any deductible.
When determining the accumulation value of a deferred annuity, the total is calculated by taking the premiums paid plus interest minus bailout option charge surrender charges taxes owed expenses and withdrawals
expenses and withdrawals
Lloyds Association
group of individuals who share the risk and the exposure - known for insuring unusual risks
Straight life or Pure life annuity
income for life with no refund to survivor. largest monthly income because its the highest risk.
No Loss / No Gain
indemnity only, no profit so you cant have 2 policies covering the same thing
Life Income Option
installment payments are paid only while the beneficiary is alive and cease on the beneficiary's death
Facultative Reinsurance
insurance co and re insurance co make their own agreement per loss exposure
When premiums are calculated, one factor would be the expenses of the beneficiary insurance company policyowner producer
insurance company
Medical Information Bureau
intercompany databank with info gathered from previous applications; helps eliminate high risk applicants
Exclusion Ratio
investment in the contract/expected return
An accident and health insurance policy my not be issued unless
it contains a change in beneficiary provision
Stop Loss
it limits the amount of out of pocket expenses to the insured - adds to price of premium - certain benefits are limited like certain types of rehab (alcohol) - can lower the price of a policy by increasing the stop loss amount
Qualified Annuity
it receives tax deductibility and tax deferred growth
Multiple Employer Welfare Association (MEWA)
its a method for small employers to band together with other similar groups to buy group insurance - must have common affiliation (ie chamber of commerce)
During the early years of a whole life insurance policy, the cash value will normally be equal to the total premiums paid more than the total premiums paid less than the total premiums paid unavailable as a policy loan
less than the total premiums paid
Cash refund Annuity
lifetime of annuity payments and payment of undistributed annuity costs
A life insurance company's spendthrift clause would have no effect if the beneficiary is paid the proceeds as a fixed-period installment life income option fixed-amount installment lump-sum payment
lump-sum payment
An employer that offers a qualified retirement plan (as opposed to a non-qualified plan) to its employees is eligible to avoid ERISA regulations make tax-deductible contributions to the plan make tax deductible contributions to key employees only make partial tax-deductible contributions to the plan
make tax-deductible contributions to the plan
The contract owner in a single premium deferred annuity (SPDA) receives immediate benefit payments makes only one premium payment can make tax-free withdrawals until the principal is recovered is also the beneficiary
makes only one premium payment
A trustee-to-trustee transfer of rollover funds in a qualified plan allows a participant to avoid mandatory income tax withholding on the amount transferred paying transfer fees paying trustee fees ever paying income taxes on the distributions
mandatory income tax withholding on the amount transferred
Per Stirpes
means per family line ie if 5 children and 1 dies, then 4 children and the kids of the 5th would get the $
Per Capita
means per person or per head ie: if 5 children existed but 1 dies, the $ goes to 4 children
Variable Annuity
money is put into separate accounts and the growth will fluctuate. The payouts are also variable
Two months
must ensure a pair that's benefit claim after receiving the product of death?
Class Designations
names a "class" instead of each name specifically like "all my children born into the marriage..."
The contractual rights that allow the owner of a deferred annuity to surrender the cash value several years before the annuity date are called nonforfeiture options settlement options conversion options surrender options
nonforfeiture options
The contractual rights that allow the owner of a deferred annuity to surrender the cash value several years before the annuity date are called nonforfeiture options settlement options conversion options surrender options
nonforfeiture options
Sarah, age 88, is a life annuitant who has lived beyond her life expectancy. The funds for additional benefit payments will be derived primarily from funds that were obtained from the state's Guaranty Association accumulated from the invested principal given up by the annuitant's refund beneficiary not distributed to life annuitants who died before life expectancy
not distributed to life annuitants who died before life expectancy
Elements of a Contract
offer, acceptance, consideration
Accidental Death Rider (multiple indemnity rider)
only provides benefit if death is caused by an accident and death must occur within 90 days; its cheap bc it can only take effect if caused by accident and if you die w/in 90 days.
Non Forfeiture Options
options available only to policy owner and only if there is cash value in the policy - Surrender for Cash - The amount of value that exceeds premium payment is taxable
Extended Level Term Insurance
owner of policy can convert the whole life policy to a level term policy -must have the same death benefit
Dividends from a stock company are paid to stockholders, whereas in a mutual company, dividends are reinvested as capital gains, used to reduce rates for policyowners paid quarterly to corporate officers in the form of a bonus paid to the policyowners paid to both the policyowners and shareholders
paid to the policyowners
Joint & Survivor
payment to two or more annuitants and if one dies, the other still gets payments
Annuity Certain
pays income only for a certain period of time
A life annuity feature which provides benefit payments for a minimum number of years, no matter when the annuitant dies, is called fixed period period certain installment refund straight life
period certain
A contingent beneficiary is described as the primary person who receives the death benefits if the insured dies person who receives the death benefits if the primary beneficiary dies before the insured person who receives the death benefits if there is no named beneficiary person whose approval is needed before a beneficiary designation is changed
person who receives the death benefits if the primary beneficiary dies before the insured
Policy Delivery
policy can be delivered 1)certified or registered mail 2) personally delivered by agent 3) 1st class mail with signed receipt 4) by any other means approved by superintendent
A signed good health statement may be collected by a life producer at the time of policy issue application policy delivery physical examination
policy issue
Revocable Beneficiary
policy may change at any time and requires change of beneficiary form
Reduced Paid - up Permanent Insurance
policy owner surrenders the policy and uses existing cash value to purchase smaller, fully paid up whole life policy
Surrender for Cash
policy owner takes the money thats been built up in their policy
PPO
preferred provider organization; private health insurance, network list, preventive medicine, premium and copays may be higher, no PCP to go to specialists
Where is the difference between a standard risk and a substandard risk reflected? backdating coverage is not offered premium charges back-end charges
premium charges
Individual Disability Tax considerations
premium is not tax deductible but benefits are tax free
An owner's cost basis for a non-qualified deferred annuity is typically the same as the annuity's cash value premiums paid into the annuity benefits payable to the annuitant interest earned within the annuity
premiums paid into the annuity
An owner's cost basis for a non-qualified deferred annuity is typically the same as the annuity's cash value premiums paid into the annuity benefits payable to the annuitant interest earned within the annuity
premiums paid into the annuity
Market conduct
refers to the marketing practices of insurers and agents that involve interaction with insureds, claimants, or consumers
Ron recently purchased an immediate, straight life fixed annuity. His benefit payments will discontinue after a stated number of years remain a constant dollar amount for the duration of the annuity period pay a lump sum if the annuitant dies vary according to the underlying investment performance
remain a constant dollar amount for the duration of the annuity period
Ron recently purchased an immediate, straight life fixed annuity. His benefit payments will discontinue after a stated number of years remain a constant dollar amount for the duration of the annuity period pay a lump sum if the annuitant dies vary according to the underlying investment performance
remain a constant dollar amount for the duration of the annuity period
Gramm-Leach-Bliley Act
requires financial institutions to ensure the security and confidentiality of customer data
Simple Plans (IRA)
retirement plan often offered to employees of smaller businesses; the business matches funds placed in the retirement fund by the employee up to a certain % of the salary; tax-sheltered, tax deferred, or pre-tax
A life insurance producer's underwriting duties may include approving or declining a life insurance application seeking additional information requested by the insurance company ordering an MIB report determining the rate classification of the applicant
seeking additional information requested by the insurance company
Which plans are suitabile for self funding
short term disability, dental, vision, lefal expense and basic medical plans (all small payouts)
Waiver of Premium Rider
should the owner be disabled and cant earn an income, after 6 months, all premiums will be paid by the insurer during the disability period; After 6 months, the premiums will be repaid
Recurrent Disability
should the same disability reappear within 6 months after supposed recover, the disability will be considered a recurrence or continuation of original disability - no new elimination or waiting period - if disability reappears after 6 months, a new disability and elimination period is initiated
Mortality Tables
show statistical averages or possibility of death at a certain age - helps determing premium
Warranty
statement made by applicant to be totally true; generally used when underwriting property and casualty
War Policy Exclusions
status exclusion - no insurance if part of military Results exclusion - coverage provided if death is direct result of battle or maneuver Suicide
The back-end charge typically associated with an annuity that has been cancelled during the early contract years is called a back-end assessment cancellation fee surrender charge tax penalty
surrender charge
If an employer pays for accidental death and dismemberment insurance for its employees, the amount paid by the employer is generally tax deductible to the business non-deductible to the business partially deductible to the business considered taxable income to each employee
tax deductible to the business
The premiums paid by an employer for his employee's group life insurance are usually considered to be tax-deductible to the employer partially deductible to the employee tax-deductible to the employee taxable income to the employee
tax-deductible to the employer
The interest credited to the cash values of personally-owned non-qualified annuities is considered a tax credit tax-deferred tax-deductible tax-exempt
tax-deferred
The interest paid during an annuity's payout period is considered nontaxable taxable as ordinary income taxable as capital gains tax-deductible
taxable as ordinary income
Decreasing Term Insurance
term insurance in which the annual premium remains constant but the face amount of the policy declines each year
Subscribers
term used for those who participate in an HMO or BCBS plan
An insurable risk requires that the chance for both a loss or gain exists the loss must be catastrophic that the chance of loss be calculable that the loss must be incalculable
that the chance of loss be calculable
Actual authority
the actual authority that an agent has as stipulated in his contact
Attorney in Fact
the agent in a reciprocal organizaiton that can sell the insurance
Earned Premium
the amount of premium that has been paid to date
Loss Exposure
the amount of risk in dollars the insurance company is taking
Unearned Premium
the amount that has not been paid to date but if he pays more, than he gets it back
The absolute assignment of a life insurance policy results in the assignee receives all incidents of ownership the assignee receives partial incidents of ownership the transfer of ownership is revocable at the discretion of the original policyowner evidence of insurability must be proven before ownership is transferred
the assignee receives all incidents of ownership
Implied Authority
the authority that the agent has that is not specifically listed in their contract
Recission
the cancellation of a contract; goes back to policy inception with all premiums paid minus and payments; usually do to fraud, concealment or material misrepresentation
Aleatory
the concept of recieving a value greater than what was paid based on a possible future happening
Master Contract
the contract given to the policyowner of a group contact and verifies that coverage is provided
Return of Premium Rider
the death benefit will increase in proportion to the premium increases
Corridor Deductible
the deductible between a basic and major medical policy
rate - up
when insurance co rates up the premium because the applicant has higher risk
Partial Disability Rider
the inability to perform some but not all of your daily duties - addedonly as a rider - will pay only 50% of disability benefit up to 6 months
National Institutes of Health (NIH)
the medical research agency of the United States and has the mission of acquiring knowledge to help prevent, detect, and treat disease and disability; antibiotics and vaccines for infections such as Zika
Annuity Period
the payout period of an annuity
Accumulation Phase
the period of time by which the owner of the contract pays in to the annuity; a beneficiary must be named if the policy owner dies during the accumulation phase.
Annuity Phase
the period of time when the owner recieves payment;
Entire Contract Provision
the policy owner is entitled to the entire contract so that he knows any riders or waivers
Malingering
the reason the disability income does not pay 100% income is because there wouldnt be any incentive for person to get better - long term plans last more than 1 yr to age 65
Viatical Settlement
the sale of a life insurance policy by a terminally ill insured to another party, typically to investors or investor groups, who hope to profit by the insured's early death
Waiver
the voluntary surrendering of a known right like military premium
The reason for backdating a policy is to avoid being considered a substandard risk due to a recent cancer diagnosis to obtain a premium rate based on an earlier age to decrease the face amount to decrease the Contestable period
to obtain a premium rate based on an earlier age
General hospital
treat a wide range of conditions and age groups
Inter Vivos
trust creauring during the life of the insured
In an individual retirement account (IRA), rollover contributions are subject to capital gains tax subject to ordinary income tax partially limited by dollar amount unlimited by dollar amount
unlimited by dollar amount
Free Look Provision / Right to Examine Provision
upon delivery of the policy, the policy owner has 10 days to review the contract and a full refund on payment would occur
Mortality rate is not
used to determine health insurance rates
Absolute Assignment
when all rights of the original owner passes to another party (parent to child)
Partially self funded healthcare plans
when an employer bears a portion or some of all of claim risk 1) Stop loss coverage - plan is self funded by employer up to a point and insurer assumes losses beyond that. For large empoloyers only 2) ASO Contracts - employer pays 100% of claims buts hires paid 3rd party to provide admin services. More cost effective. Pays claims from a co bank account 3) 501c3 trust - designed for voluntary employee benefit account. provides for tax deductibility of employee contributions and tax deferred growth
Personal
when benefits are provided to an individual
The conversion option for group term insurance may be exercised by an employee at any time while still employed within 2 years of the hire date within 31 days of terminated employment after providing proof of insurability
within 31 days of terminated employment
Are maternity benefits in an employer sponsor health insurance plan
yes they are included Because of the 1979 civil rights act where every company with more then 15 employees must provide maternity benefits
Simplified Employee Pension (SEP)
A qualified plan in which a smaller employer contributes specified amounts directly into IRA accounts on behalf of eligible employees
insurance benefit
Advantage, privilege, right, or financial reimbursement
skilled care
medically necessary care given by a skilled nurse or therapist, Must be available 24 hours a day
annuity
payment received every year
Joint Life Annuity
payment to two or moer annuitants which ceases upon death of either
Section 529 Plans
- state provided - can be funded by after tax dollars - can pay prepaid tuition - All earnings exempt from federal taxes - If withdrawn for unqualified withdrawl, 10% penalty
Catch-up Contributions
-for those aged 50 or older -additional $1,000 annually **Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) - established the catch up provisions**
Employer qualified retirement plan employees must be
21 and worked for a year
Accidental Death Benefit Rider
A life insurance policy rider providing for payment of an additional benefit when death occurs by accidental means.
Medical Information Bureau (MIB)
An information database that stores the health histories of individuals who have applied for insurance in the past. Most insurance companies subscribe to this database for underwriting purposes.
Insurance Dividends
Considered to be a return of overpaid premiums and is not taxable. You can get the dividend in the form of CRAPPO - Cash - reduction of premium - allow the dividends to accumulate at interest (the money earned on the returned dividend is taxable as ordinary income - Paid up permament addition - you can purchase additional whole life policy and the price will change depending on dividend and age -paid up option - pay up policy earlier than expected - one year term - use dividends to purchase additional term insurance for 1 year (after 1 year, the term expires)
Joint Life Policy
Covers two or more lives and provides for the payment of the proceeds at the death of the first among those insured, at which time the policy automatically terminates.
Section 1035 (Policy Exchanges)
Due to the fact that life insurance, annuities and endowments are all similar in nature (though they have their differences), the IRS, under certain circumstances, allows for the exchange of one policy for another without taxation to the individual, as long as funds are not distributed to the individual in the process.
Social security primary insurance amount
Equal to workers retirement benefit at full retirement age or disability benefit
ERISA (Employee Retirement Income Security Act)
Federal law that increased the responsibility of pension plan trustees to protect retirees, established certain rights related to vesting and portability, and created the Pension Benefit Guarantee Corporation
Employee Retirement Income Security Act (ERISA)
Federal law that increased the responsibility of pension plan trustees to protect retirees, established certain rights related to vesting and portability, and created the Pension Benefit Guarantee Corporation
Errors and Omissions Insurance
Insurance which financially protects an architect against claims for damages resulting from professional negligence. Also called professional liability insurance.
Fraternal Benefit Societies
Life or health insurance companies formed to provide insurance for members of an affiliated lodge, religious organization, or fraternal organization with a representative form of government.
NAIC
National Association of Insurance Commissioners
Insurance twisting
When a person knowingly makes misleading statements about the policy, to make a sale
Aleatory Contract
a contract where the values exchanged may not be equal but depend on an uncertain event
Flexible Premium Annuity
allows the owner to vary the premium payments
Policy Replacement
if a policy is to be replaced then you must provide in writing the information about the policy that is going to be submitted with the application
Roth IRA
private retirement plan that taxes income before it is saved, but which does not tax interest on that income when funds are used upon retirement Distributions don't have to start before 70.5
expense loading
the amount needed to pay all expenses, including commissions, general administrative expenses, state premium taxes, acquisition expenses, and an allowance for contingencies and profit
Whole Life Insurance Policy
the cash value is greatest at the end of the policy period, and the insurance protection is greatest at the start of the policy
