Exam FX Chapter 2: Life Insurance Basics

at the time of initial licensing, what fee must the viatical settlement provider pay?

$300

insurable interest

possibility of losing money or something of value in the event of a loss

illustrations

presentation or depiction of nonguaranteed elements of a life insurance policy

When can insurable interest exist?

1. policyowners own life 2. life of a family member 3. life of business partner, key employee, or someone who has financial obligation to the policyowner.

an application for a viatical settlement provider license must be submitting to which of the following?

The Insurance Department

a viatical settlement provider must have certain documents before completing the contract. which of the following is NOT one of those documents?

a copy of the insured's birth certificate

viatical settlement

allows someone living with a life-threatening condition to sell their existing life insurance policy and use the proceeds when they are most needed, before their death.

human life value approach (HLVA)

gives the insured an estimate of what would be lost to the family in the event of a premature death of the insured

survivor protection

life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death

lump-sum

payment of the entire benefit in one sum

viatical settlement provider

person (other than viator) enters into or effectuates a viatical settlement contract (not a bank, financial entity, or issuer of life insurance)

a policyowner has sold his life insurance policy to a viatical settlement provider. how long does the provider have to inform the policyowner's insurer that his life insurance policy has been viaticated?

20 days

if a viatical settlement provider transfers ownership of an insurance policy, how long does the insurer have to inform the insured of the change?

20 days

estate

a person's net worth

cash value

equity amount accumulated in permanent life insurance

a policyowner decides to sell his life insurance policy to a viatical settlement company. which of the following is true?

its the viatical settlement provider's responsibility to inform the policyowner's insurance company that the policy has been viaticated.

viatical settlement broker

licensed person that negotiates viatical settlement contracts between the viator and viatical settlement provider (represents viator)

viator

owner of a life insurance policy who enters into or seeks into a viatical settlement contract

viatical settlement purchaser

anyone who gives a sum of money as consideration for a life insurance policy or interest in the death benefits of life insurance policy

which of the following effectuate a viatical settlement contract?

viatical settlement providers

life settlement

any financial transaction in which the owner of a life insurance policy sells a policy that is no longer needed to a third party for some form of compensation, usually cash

when must insurable interest exist?

at the time of application

needs approach

based on the predicted needs of a family after the premature death of the insured looking at factors such as income, amount of debt (including mortgage), and other ongoing expenses.

how often may a viatical settlement provider contact an insured regarding the insured's health status if the insured's life expectancy is more than one year?

once every 3 months

liquidation

selling assets in order to raise capital

adverse selection

tendency of individuals with higher probability of loss to purchase insurance more often than those who present a lower risk

death benefit

the amount paid upon the death of the insured in a life insurance policy

an insured has entered into a viatical settlement but decides that he would like to back out of the contract. which of the following is true?

the insured has 15 calendar days from the effective date of the contract to rescind it.

beneficiary

a person who receives the benefits of a life insurance policy

solvency

ability to meet financial obligations (ex: an insurance company maintains enough assets to pay claims)

life insurance

coverage on human lives

asset protection

use of life insurance to guard one's wealth against creditor claims without engaging in practices that are ultimately illegal, such as concealment or fraudulent transfer