Dohrn Insurance Training -- Life Terms
mortgage decreasing term
a form of life insurance offering a temporary death benefit that reduces according to the principal decline of a mortgage, without cash accumulation, in exchange for mortality and expenses charges.
uniformly decreasing term
a form of life insurance offering a temporary death benefit that reduces by the same amount annually, without cash accumulation, in exchange for mortality and expense charges.
term life insurance
a form of life insurance offering a temporary death benefit without cash accumulation in exchange for mortality and expense charges.
interest sensitive whole life
a guaranteed whole life contract that offers a fluctuating rate of return on policy cash accumulation based on current economic and market conditions.
incontestability
a life contract clause that limits the time during which a life insurer may use material misstatements of fraud to deny coverage or rescind the policy.
single premium whole life (SPWL)
a life contract that requires only one premium payment in exchange for a lifetime of guaranteed coverage.
joint life
a life insurance contract which pays policy proceeds only upon the death of the first of two or more insureds covered by a combination plan.
survivorship life
a life insurance contract which pays policy proceeds only upon the death of the last of two or more insureds covered by a combination plan.
entire contract
a life insurance provision that states the agreement between the parties includes the policy and application plus any riders, additional exclusions or changes made to the policy after it was issued.
payor benefit
a rider that waives premium on the life contract of a minor in the event the adult paying the premium becomes totally and permanently disabled or dies.
warranty
a statement made by an insurance applicant which is considered by law to be a statement of absolute truth.
representation
a statement made by an insurance applicant which is considered to be the truth to the best of their knowledge and belief.
variable whole life
a term cost based life policy, requiring a fixed regular target premium that allows the owner to invest the policy in securities and equity accounts, without guarantee by the insurer on the investment amounts.
life settlement
a transaction whereby an individual, who is not terminally ill, sells their life policy ownership to a third party at a discount for a cash settlement.
mutual insurance company
a type of life insurance company that is owned by the policy owners of the company.
stock insurance company
a type of life insurance company that is owned by the shareholders of the company.
rider
a written life insurance contract right that is added to a standard life policy at the time of issuance.
a producer will be required to obtain a statement of good health from a 45-year-old applicant under which of the following circumstances? a. the proposed insured's check for the initial premium has been returned because of insufficient funds. b. the proposed insured suffered from rheumatic fever as a child. c. the proposed insured's brother died of a heart attack at age 43. d. the application and initial premium were submitted 5 weeks before a standard policy was issued.
a.
which of the following life insurance policies would allow tax deductible premiums? a. group life premiums paid by an employer on $20,000 of death benefit for employees. b. a term life policy purchased by an individual c. a variable life policy a husband buys on a wife d. an employer buying a key person policy
a. group life premiums paid by an employer on $20,000 of death benefit for employees.
which universal life death benefit option pays the beneficiary the death benefit plus the cash value when the insured dies? a. option B b. option A c. option A and B d. reduced paid up option
a. option B
if an insured is found to be a substandard risk which of the following actions will the insurer most likely take? a. rate the policy and charge a high premium b. decline the policy c. issue the contract as standard d. require the insured to pay for underwriting costs
a. rate the policy and charge a high premium
the best overall definition of annuity is: a. the scientific spread of capital and income over a projected lifetime b. the death benefit of life insurance paid to a beneficiary c. tax-free retirement income d. a lump sum income tax free old age benefits
a. the scientific spread of capital and income over a projected lifetime
variable annuity
an annuity accumulation or payout based on returns that are not guaranteed by the insurance company but are instead based on consumer investment through the separate account of the insurance company.
immediate annuity
an annuity contract that begins to pay an income to an annuitant shortly after purchase.
indexed annuity
an annuity contract with guarantees to principal upon which returns are based on either stock index or indices from investment period to period subject to a return ceiling.
third party ownership
an applicant for a life or health insurance contract who is not the insured but who must possess insurable interest at the time of policy inception.
renewable term
an optional rider offered in a term contract that requires the company to base future cost on guarantees of standard rating regardless of the insured's actual health.
return of premium
an optional rider offered in a term contract that requires the company to refund to the owner all cost at the end of coverage if the insured is still alive.
increasing death benefit
an optional universal life contract choice that bases the proceeds paid on the combination of original face amount plus the policy account total of the contract on the date of death of the insured.
an ________ is a product that accumulates capital with interest and then liquidates payments over time, sometimes for life.
annuity
IRA Contributions/Withdrawals a. grow with interest, but interest is taxed b. are available to anyone younger than 59 1/2 c. are made in cash and are not tax deductible d. are made in cash and tax deductible
d. are made in cash and tax deductible
k has a level term policy. what is "level" about k's policy? a. premiums b. interest rate c. cash value d. face amount
d. face amount
R purchased a life policy in which the agent described that the actual cash value rate or return could fluctuate depending on market performance, but still guaranteed a minimum rate or return. R purchased a(an): a. annuity b. variable life c. variable universal life d. interest sensitive whole life
d. interest sensitive whole life
key person
this is a form of business insurance used to protect a business from the possible economic loss suffered due caused by the unexpected death of a crucial employee or partner.
waiver of premium
this is a rider whereby life insurance premium payments are no longer required during periods when the insured is totally and permanently disabled.
reinstatement
this is an automatic contractual right in a life policy that contains a cash value at the time of a lapse allowing the policy owner the option to ask for the policy to be placed back in full force and effect.
inspection report
this is an investigative consumer report relating to the proposed insured's lifestyle, occupation, and economic standing.
modified endowment contract
this is any life insurance contract that fails the 7 pay test thus making any future cash withdrawals a fully taxable event.
endowment point
this is the age at which the cash value of permanent life insurance equals the death benefit of the contract and the proceeds are paid to the living insured.
primary beneficiary
this is the first choice of the policy owner to be entitled to collect the proceeds of an insurance policy.
mode of premium
this is the frequency of payment made by the policy owner to the insurer for coverage to continue.
reduced paid up insurance
this non-forfeiture option off the opportunity, at no additional premium cost, for the policy owner to retain a smaller amount of death benefit than was originally purchased based on the amount of current cash values.
revocable beneficiary
this person or persons who are entitled to collect the proceeds of an insurance policy may be changed at anytime by the policy owner.
irrevocable beneficiary
this person or persons who are entitled to collect the proceeds of an insurance policy may not be changed at anytime by the policy owner unless they provide written consent to the policyholder to be changed by the policy owner.
insuring clause
this provision includes the promises that are exchanged between the parties in an insurance contract.
settlement options
this provision offers alternatives to the life policy owner and beneficiary as to the manner in which proceeds may be paid in addition to a simple lump sum.
optional provisions
written parts of a life contract that may be included in the agreement according to state insurance laws, at the election of the insurance company.
mandatory provisions
written parts of a life contract that must be included in the agreement according to state insurance laws.
increasing term
a form of life insurance offering a temporary and constantly reducing death benefit, without cash accumulation, in exchange for mortality and expenses charges.
level term
a form of life insurance offering a temporary and never changing death benefit, without cash accumulation, in exchange for mortality and expenses charges.
non-forfeiture options
these are rights the policy owner has in a policy with cash value if they no longer wish to continue the policy as originally purchased.
medical information bureau (MIB)
a central database, supported by the life and health insurance industry that accumulates and stores applicant information that may help prevent future insurance fraud by insurance applicants.
unilateral contract
a contract under which only one of the parties is bound to perform.
variable universal life
a flexible premium whole life contract that allows the owner to invest the policy in securities and equity accounts, without guarantee by the insurer on the investment amounts.
r has left his whole life policy lapse. which of the following action will take place? a. his policy is gone forever and cannot be reinstated. b. r's policy automatically goes on extended term in which he has the same face amount and the cash value determines how long coverage is for c. r's policy is converted to a reduced paid up contract which builds cash value within a permanent, reduced face amount policy. d. r's policy surrenders and he pays taxes on the excess over payment
b.
a Viator has decided to rescind a deal after payment has been made. how many days does a Viator in this situation have? a. 10 days b. 15 days c. 20 days d. 30 days
b. 15 days
the qualifying minimum age for obtaining an insurance producer license is: a. 16 years old b. 18 years old c. 21 years old d. 25 years old
b. 18 years old
a professional ballerina decides that her income earning potential will be limited to 20 years. if she wants permanent insurance protection, the policy that best suits her is a: a. 20 year endowment b. 20 pay life c. 20 year level term d. 20 year decreasing term
b. 20 pay life
a life producer states that the company's policy is approved by the state department of insurance. the producer has violated: a. replacement law b. advertising law c. defamation law d. rebating statues
b. advertising law
v purchased a policy that does not require an agent to purchase nor deliver the policy. when must v receive a buyer's guide? a. before paying a premium b. at policy delivery c. at policy delivery if payment was not made with the application d. at the policy's first anniversary
b. at policy delivery
b has a waiver of premium rider on his life policy and is disabled at age 66. which of the following will occur? a. b's premiums are fully waived until he is healthy again b. b's premiums are not waived c. b's premiums are reduced by half d. b will never have to pay premium again
b. b's premiums are not waived
the provision or clause in an insurance policy which defines the insurance company's promises to the insured is the: a. consideration clause b. insuring agreement c. legal actions provision d. entire contract provision
b. insuring agreement
h and w are married and pay the mortgage with both incomes. there is a concern that if either one would die, the other's salary would not be able to pay the mortgage. h and w should consider: a. survivorship life b. joint life c. whole life for each individual d. term life
b. joint life
d has a policy from a participating insurer and receives a dividend. d would really like to increase her coverage without adding premium to the policy. the dividend option d should select is: a. cash b. paid-up addition c. paid-up option d. one year term option
b. paid-up addition
absolute assignment: a. allows the policyholder to transfer ownership partial on a temporary basis. b. changes the owner of a policy once insurable interest is proven. c. allows the policyholder to take a loan from a term policy. d. allows the policyholder to change the owner of policy fully and on a permanent basis, regardless of insurance interest.
d. allows the policyholder to change the owner of policy fully and on a permanent basis, regardless of insurance interest.
a producer could best explain the free look provision of an insurance policy by telling a prospect which of the following? a. "the insurance company will underwrite the policy only after examine the application for a specified period of time." b. "any time after the policy is issued, you may choose not to accept it and receive a full refund of premiums paid." c. "within a specified time after you receive the policy, you may retire it and receive a full refund of premiums paid." d. "the insurance company may withdraw coverage if it discovers adverse information about you within a specified time after underwriting the policy."
c. "within a specified time after you receive the policy, you may retire it and receive a full refund of premiums paid."
to process an accelerated death benefit claim, the insurer must disclose tp the policy holder any administrative fees. the maximum amount an administrative expense charge may be up to: a. 75% of death benefit b. $100 c. $250 d. $350
c. $250
if a group is non-contributory, what percentage of members must be insured by the policy? a. 75% b. 50% c. 100% d. 0%
c. 100%
how many total course hours are required for a property insurance relicensing? a. 7.5 b. 12.5 c. 20 d. 24
c. 20
h is applying for a life policy on his daughter, who just graduated college. which parties must sign the application? a. h and his daughter b. h and the agent c. h, his daughter, and the agent d. h, the agent, and the director
c. h, his daughter, and the agent
G owns a life insurance policy that provides coverage for as long as she lives, although she will not be requested to pay premium past a specific number of years. G most likely has which of the following policy types? a. 20 year term b. 30 year endowment c. life paid @ age 65 d. whole life
c. life paid @ age 65
an insured has an AD&D rider on their life policy and has an accident. the insurance company has paid a principal sum. which of the following losses would qualify the insured for a principal sum? a. loss of use of one leg b. loss of primary right hand of the insured c. loss of both legs d. partial sight loss in one eye
c. loss of both legs
K is a single mother and is considering buying a life insurance policy on her 10 year old son to protect his insurability as he grows up. K is concerned that if she were to die, no one would be able to pay for her son's policy. K should consider: a. being more death benefit b. establishing a trust as owner of the policy c. purchase a payor benefit rider d. purchase an accidental death benefit rider
c. purchase a payor benefit rider
investigative report
consumer reports based off interviews with family, neighbors, and/or co-workers of a proposed insured who personally know that person and their lifestyle.
what is the fee for a non-resident Illinois producer license? a. $180 every two years b. $250 biannually c. $150 biennially d. $380 biennially
d. $380 biennially
a life insurance company has a developed a new policy type. in five years, they will have their next examination report done. how long must the insurer keep a copy of the advertising associated with the new policy? a. 2 years b. 3 years c. 4 years d. 5 years
d. 5 years
a policy owner may assume all of the following rights EXCEPT: a. naming the beneficiary b. selecting dividend options c. borrowing cash value d. adjusting premium/death benefit at any time
d. adjusting premium/death benefit at any time
which of the following describes interest allocation in an indexed annuity? a. the insurance company usually takes a minimal initial return in good markets. b. the annuity has a floor minimum interest return. c. the annuity has a maximum cap rate which is usually higher than a fixed annuity. d. all of the above
d. all of the above
which of the following is true regarding a return of premium rider? a. it must be added at the time of application. b. it will increase the cost of premiums. c. it can be added on either term or permanent insurance. d. all of the above
d. all of the above
an insured has recently joined the marine corps and their insurance company has indicated to the insured that an increase in premium will result from this action. the insurance company: a. is well within their rights to raise premium based on induction to military service as this represent a greater risk to the insurer. b. is allowed to increase rates based in military service in certain policy types. c. may face action by the director because this is an example of unfair claims practice. d. may face action by the director because this is an example of unfair discrimination.
d. may face action by the director because this is an example of unfair discrimination.
g has a credit life policy and is replacing that with a whole life policy. the agent must: a. formally replace coverage and include all forms to the insured b. notify the existing insurer with a notice regarding replacement form c. sign the application and forward all signed documents to the replacing insurer to send to the existing insurer d. none of the above
d. none of the above
a policy holder purchased a single premium whole life policy in 2001 at age 30. in 2012, the policyholder takes a loan out. which of the following is CORRECT regarding taxation of this loan? a. the loan is taken tax free b. the loan is taxable c. the loan is not allowed d. the loan is taxable plus a 10% penalty
d. the loan is taxable plus a 10% penalty
in an ______ _______ ______, there is a floor minimum rate of return, a capped maximum interest rate and it is common for insurer to take initial interest in the good markets.
equity indexed annuity
non contributory group
group life whereby 100% of those employees eligible are covered because the employer is paying the entire cost.
limited pay whole life
insurance coverage is provided for the insured's entire life but premium payments are considered and are paid in a shorter time frame than over the entire lifetime of the insured.
universal life
known as "flexible premium whole life," this contract provides coverage on an annual renewable term cost basis while allowing a policy account to grow providing lifetime coverage.
whole life
known as "permanent" insurance, this coverage can never be outlived by the insured and the cash value will equal the death benefit at the endowment point of the contract, currently age 115.
interest/market/sensitive life products
life insurance contracts that pay a fluctuating rate of return on policy cash accumulation based on current economic and market conditions.
______ _______ ______ _______ ________ is an example of a limited pay whole life policy because the policy is paid up sooner than age 100 but coverage still applies for the insured entire life or until endowment.
life paid @ age 65
a _______ _______ rider would waive premiums until K's son would hit age 21-25 if she were to die while he was still a minor child.
payor benefit
separate account
premiums received by an insurer are placed here and are under the control of the insured as to where this money will be invested on a basis that is not guaranteed to the insured.
a _______ ______ _______ rider must be added at application for an added cost and can be found on either permanent or temporary policies.
return of premium
proceeds
the amount paid by an insurance company to the beneficiary or estate of the insured upon their death.
issue date
the date, month and year written on the first page of a life insurance contract indicating the first day of coverage.
underwriter
the employee of an insurer who reviews data relating to a proposed insured and makes the decision of whether or not to offer coverage as well as the pricing at which it will be offered to the insured.
substandard risk
the issuance of a life contract at a premium cost that is greater, by some percentage, than a standard issue policy.
insurable interest
the legal requirement stating that a life contract may not be issued as a wager on human life and that, instead, the owner of a proposed life policy must demonstrate a legitimate risk transfer need and potential economic loss as a result of the proposed insured's death.
target premium
the suggested amount that needs to be paid by the insured to maintain lifetime coverage under a Universal Life type policy.
viatical settlement
the transfer of ownership of life insurance when the insured has less than two years to live and sells the entire policy or a share of ownership, at a discount to the face amount, in exchange for immediate cash payment.
policy provisions
the written language of a life policy which, when taken together, constitutes the entire contract between the owner and the insurer.