H&L insurance
Parts of Application
1. General info 2. Medical info 3. Agents report. (Required signature) agent+applicant+owner.
HIPAA applies to groups of
2 or more
A policy states that it will pay a specified face amount if the insured dies during the 20 year premium-paying period and nothing if death occurs after the 20 year period. What type of policy is this?
20-year level term
Morale Hazard
A condition of carelessness or indifference that increases the frequency or severity of loss.
What type of premium is charged on a straight life policy?
A level premium for the life of the insured
Insurance policies are not drawn up through negotiations & an insured has little to say about its provisions. What contract characteristics does this describe
Adhesion
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what
Adverse selection
The policyowner of a whole life insurance policy is also the insured. What age must the insured attain in order to receive the policy's face amount
Age 100
Whole life policies provide protection until the insured reaches what age?
Age 100
According to the Law of Agency, a principal is represented by whom?
Agent or producer
What are the four elements of an insurance contract
Agreement (offer and acceptance), consideration, competent parties, and legal purpose
Who must be a member of insurance guaranty associations
All insurers authorized to write insurance within a state
What does liquidity mean in a life insurance policy
Availability of cash value
In a variable universal life insurance, to what policy component does the term variable refer
Cash value and death benefit
In variable universal life insurance, to what policy component does the term variable refer
Cash value and death benefit
What happens to the cash value when a whole life insurance policy matures
Cash value is paid to the policy owner
Life insurance policy provisions, options & riders....
Chapter 4
An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation
Decreasing term
What type of life insurance is best suited to cover a mortgage
Decreasing term
Life insurance may be used to pay state inheritance taxes & federal estate taxes eliminating the need to sell assets from the estate. What is this called
Estate conservation
If an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide
Evidence of insurability
When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?
Evidence of insurability
What is the main advantage of converting from group life insurance to individual coverage
Evidence of insurability is not required
Three types of agent authority
Express, implied & apparent
What does level refer to in level term insurance
Face amount
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid for what time period
For 20 years or until the insured's death, whichever occurs first.
What type of policy is typically issued without proof of insurability from the insured
Group Policy
What type of policy issues certificates of insurance to the insureds
Group policy
What are the characteristics of the group that underwriters will consider before issuing a group life policy?
Group's purpose, size, financial strength and turnover
whole life insurance
Insurance that is kept in force for a person's entire life and pays a benefit upon the person's death, whenever that may be.
In the agent/insurer relationship, who is considered the principle
Insurer
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
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
It will decrease
Insuring Clause
Length of policy & amount of death benefit. Parties of the contract. Premium to be paid.
Universal Life Option A
Level death benefit
Mortality tables are used by insurance companies to predict what?
Life expectancy and the death rates for specific groups of individuals
A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy
Limited pay whole life
What type of life insurance policy is life paid-up at age 65
Limited-pay whole life
An insurance policy paid a nontaxable dividend to the insured one year & nothing the next. From what type of insurer did the insured purchase the policy
Mutual
Can insurers advertise the existence of the guaranty association during solicitation & sale of insurance policies
No, advertising of the existence of the guaranty association for the purposes of solicitation and sale of insurance policies by insurers is an illegal business practice.
What universal life option has a gradually increasing cash value and a level death benefit?
Option A
What are the death benefit options in universal life policies?
Option A - level death benefit, and Option B - increasing death benefit
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 is the term that describes the frequency & the amount of the premium paid
Premium mode
Field Underwriting
Proper solicitation of applicants. Helping prevent adverse selection. Completing the application. Obtaining the required signatures. Collecting the initial premium and issuing receipt. Delivering the policy.
What type of whole life insurance policy generates immediate cash value
Single premium whole life
What type of whole life insurance policy generates immediate cash value?
Single premium whole life
What are the personal uses of life insurance
Survivor protection, estate creation and conservation, cash accumulation and liquidity
What type of life insurance policy offers pure death protection
Term
What elements of an adjustable life policy can be changed by the policyowners
The amount and payment period of the premium, the face amount, and the period for protection
Which of the following is NOT a characteristic of a group long term disability plan?
The benefit can be up to 50% of one's yearly income
In annually renewable term policies, what is the annual premium based upon
The insured's attained age
In annually renewable term policies, what is the annual premium based upon?
The insured's attained age
When planning for survivor protection in life insurance, what needs to be considered
The insured's current assets, liabilities and survivor's needs
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
How is the premium determined in a joint life insurance policy
The premium is based on the average age of the insureds
How is the premium determined in a joint life insurance policy?
The premium is based on the average age of the insureds
In term policies, what happens to the premium throughout the term of the policy?
The premium remains level
What is insurance underwriting
The process of risk selection and classification
Group Conversion
There is a conversion period of 31 days in which the employee may, upon termination of eligibility and without evidence of insurability, convert his/her group life insurance benefit to an individual permanent policy
Why are policy loans not available on term insurance
There is no cash value to borrow against
What is the purpose of key person insurance
To minimize the risk of financial loss caused by the death of a key employee
What is the purpose of establishing the target premium for a universal life policy?
To prevent the policy from lapsing
Between adjustable life and universal life policies, which one provides more flexibility to the policyowner
Universal Life
In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing
Universal Life
In a joint life policy, when is the death benefit paid
Upon the first death
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
Moral Hazard
When the act of insuring an event increases the likelihood that the event will happen
When would a 20-pay whole life policy endow?
When the insured reaches age 100
When does an adjustable life policy accumulate cash value
When the premiums paid are more than the cost of the policy
What type of life insurance provides permanent protection?
Whole life
Physical Hazard
a physical condition that increases the frequency or severity of loss
Group life insurance policies are written as what type of insurance
annually renewable term
The death protection component of a universal life policy is expressed as what type of coverage
annually renewable term
The death protection component of a universal life policy is expressed as what type of coverage?
annually renewable term
peril
cause of loss
Who is the beneficiary on a key-person life insurance policy
employer
Who is responsible for the contents of insurance advertisements
insurance company
Single Premium Whole Life
involves a large one-time-only premium payment at the beginning of the policy period and from that point on the policy is completely paid for. (Immediate cash value)
What type of insurance creates an immediate estate
life insurance
Who is insured under a juvenile life policy
minor
Incontestability
prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years
Regarding taxation, how does the cash value of a universal life policy accumulate
tax deferred
Under Option B in a universal life policy, what happens to the death benefit?
the death benefit increases each year by the amount of the cash value increases
If an insured terminates membership in a group life insurance, to what type of insurance can the insured convert the coverage?
whole life
If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?
whole life
When must the policy summary for a life insurance policy be delivered to the policy owner
At the time of policy delivery
Adjustable Life Insurance
Combines features of both term and whole life coverage with the length of coverage and amount of accumulated cash value as the adjustable factors. Premiums may be increased or decreased to fit the specific needs. Such adjustments are not retroactive and apply only to the future.
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
Annually Renewable Term
The death protection component of Universal Life Insurance is always..
If an applicant for a life insurance policy & the potential insured are two different people, what would be the the underwriter's main concerb
The existence of insurable interest between the applicant and the insured
Document required for an insurance company to transact insurance
Certificate of authority
Dividends
Company's share profits to the shareholders based on the corporation's performance.
Underwriting
Is the risk selection & classification process
What are the five characteristics of an ideally insurable risk
Loss must be. 1 due to chance. 2 definite & measurable. 3 statistically predictable. 4 not catastrophic & 5 coverage cannot be mandatory.
What is included in part 2 of a life insurance application
Medical information about the prospective insured
What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100?
Single premium 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
What is the purpose of the agents 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
Universal life option b
The policy provides for an increasing death benefit that is made up of the policy face amount plus the cash value account
What happens to the premium in an annually renewable term life policy
The premium increases with each renewal
What is the purpose of insurance guaranty associations
To protect policyowners, insureds and beneficiaries from financial losses caused by insolvent insurers
Survivorship Life
Two or more insureds. Pays upon death of the last
What term describes the fee a person pays an insurance company to receive coverage
premium
What policy component must decrease in decreasing term insurance
Face amount
straight life insurance
Life insurance that requires the payment of premiums until the face value is reached or the insured is deceased; also called ordinary life or whole life
Universal life policies have two types of interest rates. What are they
Guaranteed and current
If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?
unilateral
Free Look Period
An amount of time provided to an insured in order to examine the insurance policy.
When must insurable interest exist in a life insurance policy
At the time of application
The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility
Fiduciary
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
Term Insurance
Life insurance coverage for a specified period of time, less expensive than whole Temporary, no cash value, no loans matures at death. Level increasing & decreasing. Renewable & convertible. Maximum protection, lowest cost, increasing term for riders & decreasing terms for debts.
Who must have insurable interest in the insured?
Policyowner
What is the major difference between the most common types of whole life policies: straight life, limited payment & single premium
Premium payment mode
What are illustrations in a life insurance policy
Presentations of nonguaranteed elements of the policy
Avoidance
Prevent a specific lost by not exposing oneself to that activity is called
What are the strategies used by underwriters to prevent adverse selection
Restriction of coverage, refusal to accept a risk & accepting a risk at a higher rate
What is the main responsibility of a company's underwriting unit
Risk selection
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
Whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy (the insured) dies at age 80 & there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary
The full death benefit
When agents act within the scope of their contract, their actions will be assumed to be the acts of whom
The insurer
Variable Life Insurance
life insurance in which the benefits are a function of the returns being generated on the investments selected by the policyholder
Group Life Insurance
life insurance that provides a master policy for a group; each eligible group member receives a certificate of insuranc
Avoidance
A reaction to conflict that involves ignoring the problem by doing nothing at all, or deemphasizing the disagreement.
Medical Information Bureau (MIB)
non-profit central information agency that was established by a number of insurance companies to aid in underwriting. Speeds up underwriting and helps prevent fraud.
Joint Life
A single policy that is designed to insure two or more lives. Pays out when the first person dies
All other factors being equal, which premium payment mode will require an overall higher premium monthly or annual
monthly
What happens to the premium in an annually renewable term life policy?
The premium increases with each renewal
What are the three factors that determine the premium for a particular life insurance policy
mortality, interest, and expense
Limited Pay Whole Life
A variation of whole life insurance that charges a level annual premium and provides a level, guaranteed death benefit to the insured's age 100 and will endow for the face amount if the insured lives to age 100. Limited-pay life is designed so that the premiums for coverage will be completely paid-up well before age 100.
What are the living benefits of whole life insurance
Loan values
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 occurs last)
Universal life policies have two types of interest rates. What are they?
Guaranteed and current
Who is entitled to the cash values in a life insurance policy
Policyowner
Who owns a group life insurance contract
The employer (also known as the sponsor of the group)
What is the purpose of establishing the target premium for a universal life policy
To prevent the policy from lapsing
When does an adjustable life policy accumulate cash value?
When the premiums paid are more than the cost of the policy
Attending Physician Statement (APS)
A statement usually obtained from the applicant's doctor. About their medical history.
What is the term for the cause of loss insured against in an insurance policy?
Peril
Universal Life Insurance
permanent cash-value insurance that combines term insurance (death benefits) with a tax-sheltered savings/investment account that pays interest, usually at competitive money market rates
