Life insurance- Basics

Bequests

An insured may wish to leave funds to their church, school, or other reorganization at the time of their death.

what is the purpose of a disclosure statement in life insurance policies? A. To protect agents and insurers against lawsuits B. To explain features and benefits of a proposed policy to the consumer C. Yo obtain important underwriting information form the applicant D. To help consumers compare policy prices

B. To explain features and benefits of a proposed policy to the consumer

Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy? A. The employer is the owner and the key employee is the beneficiary B. The key employee is the owner and beneficiary C. The key employee is the owner and the employee is the beneficiary D. The employee is the owner and beneficiary

D. The employer is the owner and beneficiary

Debt cancellation

Insurance may be used to create a fund to pay off debts of the insured such as home mortgage or auto loans

Key Person Insurance

protects against the loss of a key employee or key executive by making the business the beneficiary if a key person dies. The business is the applicant, policy owner, premium payer and Beneficiary.

Buy-Sell Agreement

A legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled.

Which of the following would be least likely to be considered a legitimate need that will be paid by insurance proceeds? A. Vacation travel expenses B. Travel expenses for family to come to the funeral C. Debt cancellation D. Daycare

A. Vacation travel expenses

A policy available to business owners that provides payment for normal business expenses in the event that the owner is disabled is called A. Recurrent Disability B. Business overhead expense C. Credit accident and health coverage D. Partial disability

B. Business overhead expense

all of the following information about the applicant is identified in the general information section of a life insurance application except A. Gender B. Occupation C. Education D. Age

C. Education

Which of the following types of insurance policies would perform the function of cash accumulation? A. Credit life B. Increasing term C. Whole life D. Term life

C. Whole life

what describes the specific information about a policy? A. Illustrations B. Buyers guide C. Producers report D. Policy summary

D. Policy summary

Preretirement Period

This is the period after the children are no longer dependent upon the surviving spouse for support, but before the surging spouse qualifies for social security survivor benefits

Family Dependency Period

This is the period when, should the insured die prematurely, the surviving spouse will have dependent children to support. The family's income need will be greatest during this period.

D. Cash values can be borrowed at any time

What does "liquidity" referred to in a life insurance policy? A. the death benefit replaces the assets that would have accumulated if the insured had not died B. The policy owner receives dividends checks each year C. The insured receives parents each month in retirement D. Cash values can be borrowed at any time

Executive Bonus

an arrangement where the employer offers to give the employee a wage increase in the amount of the premium on a new life insurance policy on the employee

Solicitation of insurance

attempt to persuade a person to buy an insurance policy

Needs Approach

based on the predicted needs of a family after the premature death of the insured.

Human Life Value Approach

Gives the insured an estimate of what would be lost to the family in the event of the premature death of the insured. It calculates an individual's life value by looking at the insured's wages, inflation, the number of years to retirement, and the time value of money.

Emergency Reserve Funds

Insurance proceeds may be used to assist in paying for sudden expenses following the death of insured, such as travel expenses and lodging for family members coming from a distance.

Education Funds

Insurance proceeds may be used to pay for the children's education expenses so they can remain in school, or sometimes a surging spouse who has worked in the home caring for the children will need to receive education or training in order to re-enter the job market.

Cross Purchase

used in partnerships when each partner buys a policy on the other

Stock Redemption

used when the corporation buys one policy on each shareholder

Entity Purchase

used when the partnership buys the policies on the partners

Attempting to determine how much insurance and individual would require based upon their financial objectives is known as A. Viatical approach B. Needs approach C. Human life value approach D. Estate planning

B. Needs approach

Which of the following will be included in a policy summary? A. Copies of illustrations and applications B. Comparisons with similar policies C. Primary and secondary beneficiary designations D. Premium amounts and surrender values

D. Premium amounts and surrender values

Retirement Period

During this period, the surviving spouse's working income ceases and his Social Security and outside retirement benefits begins

Limit of Liability

The face value/amount or death benefit of an individual life insurance policy, subjected to any exclusions or riders as applicable, minus any outstanding policy loans and interest payments due to the insurer.

retirement fund

insurance proceeds may be used as a source of retirement income

Under the fair credit reporting act, if the consumer challenge is the accuracy of the information contained in his or her report, the reporting agency must A. Respond to the consumers complaint B. Defend the report if the agency feels it is accurate C. Change the report D. Send an actual certified copy of the entire report to the consumer

A. Respond to the consumer complaint

Stock Purchase

used by privately owned corporations when each stockholder buys a policy on each of the others