Life Insurance Basics

What type of insurance creates an immediate estate?

Life Insurance

all other factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?

Monthly

what term describes the fee a person pays an insurance company to receive coverage?

Premium

what is the main responsibility of a company's underwriting unit?

risk selection

what is the main purpose of the regulation of life insurance policy illustrations?

to help the public make educated decisions about buying life insurance

what type of life insurance offers an applicant a cash value element?

Permanent insurance (usually, whole life)

What is the purpose of the agent's report during the application process?

The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process

who is responsible for the contents of insurance advertisements?

the insurance company

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

the insured's current assets liabilities and survivor's needs

who must have insurable interest in the insured?

the policy owner

In calculating the amount of life insurance needed, what is the needs approach based on?

the predicted needs of a family after the premature death of the insured

when must insurable interest exist in a life insurance policy

at the time of application

what does "liquidity" mean in a life insurance policy?

availability of cash value

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

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

what is teh term that describes the frequency and the amount of the premium payment?

premium mode

what are illustrations in a life insurance policy?

presentations of non-guaranteed elements of the policy

How does the premium mode affect the total premium paid for insurance for the year?

Higher frequency of premium payments will result in higher overall premium

what are the 3 factors that determine the premium for a particular life insurance policy?

Mortality, interest, and expense

What document must a producer provide to the insured during policy replacement?

Notice regarding replacement

what document describes the specific information about a policy?

Policy summary

what is policy replacement

a new policy is issued while an existing policy is terminated or reissued with a reduction in cash value

What is a blackout period for social security benefits?

a period of time during which the surviving spouse does not receive benefits

Mortality tables are used by insurance companies to predict what?

life expectancy

what are the personal uses of life insurance?

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

A business is the owner and beneficary of a key-person life policy. When the business collects the policy benefit, how is it taxed?

the benefit is received tax free

who is a replacing insurer?

the company that issues a new policy during policy replacement

who is the beneficiary on a key-person life insurance policy?

the employer

when must the policy summary for a life insurance policy be delivered to teh policy owner?

at the time of policy delivery

if an applicant for a life insurance policy and the potential insured are 2 different people, what would be teh underwriter's main concern?

the existence of insurable interest between the applicant and the insured

Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?

Estate conservation

what type of policy issues certificates of insurance to the insureds?

Group Policy

what are 3 main instances when insurable interest exists in life insurance?

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

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

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

What is the purpose of key person insurance?

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

if someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should it be?

Permanent

what type of policy is typically issued without proof of insurability from the insured?

group policy

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

it will decrease

what is included in Part 2 of a life insurance application?

Medical information about the prospective thread

What type of insurance would perform the function of cash accumulation?

life insurance

an insured receives a monthly summary for his life insurance policy. He notices that cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

Variable