Life Insurance Basics - MD
What is the term that describes the frequency and the amount of the premium payment?
Premium mode
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
When must insurable interest exist in a life insurance policy?
At the time of application
At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
Either on the date of the application or the date of the medical exam (whichever comes last)
What type of policy is typically issues without proof of insurability from the insured?
Group policy
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 partner or someone who has a financial obligation to the policyowner
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
It will decrease
Mortality tables are used by insurance companies to predict what?
Life expectancy and the death rates for specific groups of individuals
What type of insurance creates an immediate estate?
Life insurance
What type of insurance would perform the function of cash accumulation?
Life insurance
What is included in Part 2 of a life insurance application?
Medical information about the prospective insured
All other factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?
Monthly
What are the three 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
If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should is be?
Permanent
What type of life insurance offers an applicant a cash value element?
Permanent insurance (usually, whole life)
What document describes the specific information about a policy?
Policy summary
What term describes the fee a person pays an insurance company to receive coverage?
Premium
What are illustrations in a life insurance policy?
Presentations of non-guaranteed elements of the policy
What is the main responsibility of a company's underwriting unit?
Risk selection
What are the personal uses of life insurance?
Survivor protection, estate creation and conservation, cash accumulation, and liquidity
If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?
The existence of insurable interest between the applicant and the insured
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 policyowner
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
What is insurance underwriting?
The process of risk selection and classification
What is the purpose of the key person insurance?
To minimize the risk of financial loss caused by the death of a key employee
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?
Variable
When must the policy summary for a life insurance policy be delivered to the policy owner?
at the time of policy delivery
What does "liquidity" mean in a life insurance policy?
availability of cash value
Who is the beneficiary on a key-person life insurance policy?
the employer
What is the main purpose of the regulation on life insurance policy illustrations?
to help the public make educated decisions about buying life insurance
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 conversion
What type of policy issues certificates of insurance to the insureds?
Group policy
How does the premium mode affect the total premium paid for insurance for the year?
Higher frequency of premium payment will result in higher overall premium
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
A business is the owner and beneficiary 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