Life and Health
The main purpose of insurance is to: A. Transfer the risk B. Avoid hazards C. Reduce the risk D. Reduce perils
A. Transfer the risk
14. A life insurance policyowner can transfer the rights without the consent of the insured. A. True B. False
A. True
In life insurance insurable interest must exist: A. When the insurance takes effect, but not at the time of death B. When the insurance takes effect and the loss occurs C. When the insurance takes effect and the loss occurs, but need not exist after the loss occurs D. When the loss occurs
A. When the insurance takes effect, but not at the time of death
Insurance contracts are __________________________ in that contractual performance depends upon an uncertain event. Voidable Conditional Aleatoric Unilateral
Aleatoric
The ____________________ section of a life ins contract explains what the policyholder can and cannot do: Can they sell their ins policy to someone else. How do I borrow against this policy, etc.
POLICY OPTIONS
The _______________ is the first page (or pages) of the policy. The face page presents a summary of the benefits and coverage provided by the policy and contains the following basic information: The agreement between the parties to the contract (i.e. the insuring clause). The amount of coverage provided (face amount) and annual premium. The insured (including their name, age and gender) and the policyholder if different from the insured. The term of the policy (effective date of coverage and termination date) and premium payment period. A list of optional policy provisions/riders and the premium for each.
POLICY FACE
38. Which requires the insured to be 65? A. Long term care B. Social Security C. Medicare part A D. Black out period
C. Medicare part A
ESOP
- Employee Stock Ownership Plan - defined contribution plan in which employees obtain shares of company stock.
Valid Insurance Contract (4 requirements)
1) Mutual assent 2) Consideration 3) Competent Parties 4) Legal Purpose
There are three basic types of life insurance policies, which can be recalled using the acronym W.E.T. Most life ins policies today are of one of these types, or are variations or combinations based on these basics forms.
1. Whole Life. 2. Endowments. 3. Term.
Two benefits provided by SS for survivors and their children;
1. a lump-sum payment for funeral expenses 2. a limited income supplement.
Annuity
A contract that liquidates an estate and accumulates a sum of money as income (retirement plan)
Substandard Risk
A greater than average risk for the insurer
Binding Receipt
A receipt that verifies the agent received money from the applicant. Life insurance cannot be bound.
Deductible
A specific standard dollar amount that the insured must pay before policy benefits are paid.
Return of Premium Rider
Allows for a portion of the premium to be refunded to the insured if he is permanently disabled
Contract
An agreement that outlines the rights and responsibilities of the insurer and the insured.
Life Annuity Certain
Annuity guaranteeing a given number of income payments whether or not the annuitant is alive to receive them
APS
Attending Physicians Statement and Medical Exam required for life insurance that is a certain amount of coverage.
Implied Authority
Authorization to do something even though it is not in writing
What life ins clause states that if the insured's death results from an aviation accident in which the insured was involved other than as a fare-paying passenger on a regularly scheduled airline, the insurer is liable only for the return of premiums paid? This clause is normally used when the applicant is traveling in a non-commercial aircraft or is a pilot or crew member.
Aviation Clause
36. The blackout period ends when the surviving spouse reaches _____. A. 55 B. 60 C. 62 D. 65
B. 60
35. A life annuity with a 10-year period certain: A. Will pay the annuitant only for 120 months. B. is guaranteed to pay for a minimum of 120 months or a maximum of the life of the annuitant. C. Will pay the annuitant for 10 years and continue to pay the annuitant after 10 years but the amount will be less. D. Will pay the annuitant for life and the beneficiary for 10 years after the death of the annuitant.
B. is guaranteed to pay for a minimum of 120 months or a maximum of the life of the annuitant.
2. According to the the California Department of Insurance. which term means "permissive"? A. Oath B. Shall C. May D. Twisting
C. May
Insurance that generally provides coverage for the liability of an individual or organization resulting from negligent acts or errors causing injury to a third party.
Casualty insurance
Conditional
Certain conditions must be met in order for policy to be enforceable/pay out.
What does insurable interest mean in life insurance? Financial interest in having the life of the insured continue Amount of loss must be large enough to cause a hardship Benefits that the policy will develop over the policy life Financial benefits of the policy that the beneficiary will receive
Check!
___________________________(aka:_________________) detail the duties and rights of all parties to the contract. They specify any action that the insured or policyholder must take, or continue to take, for the insurance policy to remain in force and for the insurance company to pay a claim
Conditions, or PROVISIONS
***Whenever you give something up of value, you are giving a _________________.
Consideration
Deferred Annuity
Contract that will make payments at a future date (grows tax deferred)
Which of the following is NOT a primary objective of Estate Planning? Maintaining control of assets by the estate owner. A) Minimizing estate taxes, legal fees and probate costs B) Avoiding probate. C) Probate is the legal process of validating a deceased person's will and transferring assets from the estate. D) All of the choices are correct.
D) All of the choices are correct.
93. What statement is included in all qualified LTC policies? A. This contract provides comprehensive LTC B. This contract provides benefits only after hospitalization C. This contract covers pre-existing conditions D. This contract may qualify you for federal and state tax benefits
D. This contract may qualify you for federal and state tax benefits
A clause that allows the insurer to pay the benefit to an appropriate person of their choice?
Facility of payment
What type of coverage is generally available without a medical examination, and with very limited medical underwriting?
Group
_____________ has a death benefit and premium that increases periodically over the policy's term. These increases are stated in the policy as either a specific dollar amount or as a % of the face amount. T his type of Term life insurance is rarely used except as a rider (e.g. as a cost-of-living benefit) to another plan of ins.
INCREASING TERM
41. Because insurance is a contract of adhesion, ambiguous language in a contract will show which party at fault: A. Insurance company B. MGA C. Insured D. Agent
Insurance company
Mutual Company
Insurance company owned by its policyholders.
A unique feature of a Universal Life contract is its UNBUNDLED design; the contract will clearly define the internal components of the policy- it specifically designates which portion of each premium dollar paid is allocated toward the ___________________________________ a nd how much towards commissions, acquisition costs, underwriting, and administrative costs (expense loading). The balance is then held in a ________________________________, earning a current interest rate that is guaranteed annually and subject to a minimum called a CONTRACT RATE. None of the choices are correct Life of the insured (mortality), Trust (cash value) Insurance element (mortality), Contract fund (cash value) Company Expenses, Savings account
Insurance element (mortality), Contract fund (cash value)
_____________________________ includes any type of insurance contract which guarantees that a specific sum of money will be paid to a designated beneficiary (person, organization, business, or the estate of the insured) upon the death of the insured.
LIFE INSURANCE
Credit Life
Usually decreasing term insurance; however, also is Level Term or Increasing Term. This insurance covers the balance of a loan
Using data collected by insurers and the U.S. Census Bureau over many decades, the Law of _____________________allows the prediction of the likely number of deaths that will occur among specific age groups during a specific period.
Large Numbers
* Choose one: A pure risk involves a chance of: Neither Loss nor Gain Both Loss and Gain Loss Gain
Loss
Health Maintenance Organization (HMO)
Managed care health insurance/organization with an emphasis on preventative care.
in CA, Medicaid is AKA __________________
Medi-Cal
Settlement Options
Mode of distributing the proceeds from the policy in other than a lump sum (fixed period, fixed amount interest only, life income option)
Is a peril and a hazard one and the same? Explain
No. A peril is the direct cause of losses, the chance of perils occurring and the amt. of damage caused by them, are largely dependent on the hazards involved. HAZARD is a circumstance that increases the likelihood or severity of a loss due to a peril.
Mutual companies usually issue ___________________ policies ("par") whereby the policyholders share proportionately in the insurer's earned surplus, or excess premiums, by receiving policy DIVIDENDS (the divisible surplus).
PARTICIPATING POLICIES
_________ is the cause of loss. Examples include fires, thefts, earthquakes, windstorms, flood, disease and other uncertainties.
PERIL
Accidental Death & Disbursement
Pays a death benefit (principal sum) or benefit for losing a limb (capital sum) in an accident.
Dread Disease Policy
Policies purchased to cover a specific disease, cancer, heart disease, etc.
Free Lock Period
Policy owner has the right to return the policy for any reason during a specific number of days and is entitled to a full premium refund. Typically 10 days, or 30 days for seniors of 60yo.
Cancelable
Policy that can be terminated
Family Protection Policy
Policy that provides protection for all family members. Term insurance for children and spouse. If a child converts to a permanent plan of life insurance, evidence of insurability is not required.
Which of the two (pure risk or speculative risk) is the only one that is insurable?
Pure risk
Which will not cause the premiums to go up? Rock Climbing Scuba diving Parachuting Rollerblading
Rollerblading
There are two major "safety nets" available to U.S. citizens and residents that transfer risk by underwriting and providing insurance coverage:
Social insurance provided by government agencies (special non-profit). Private insurance provided by insurance companies (for-profit and non-profit).
Ins for only a certain term or certain period of time is?
Term insurance
Renewable Term Insurance
Term insurance in which the insured has the option of continuing the coverage for a period of time BUT with an increase in premiums based on age.
Accelerated Death Benefit
Terminally ill persons can access part of the policy proceeds prior to death
Premium
The amount paid by the insured (policy owner) to the insurer (company)
Besides the life ins app, the most frequently used sources of underwriting info are: Medical Examination. Attending Physician's Statement (APS). Medical Information Bureau (MIB). Inspection & Credit Reports (a.k.a. Consumer Reports). Telephone Interview with Applicant. Motor Vehicle Reports (from DMV). WHY/what is the purpose of an underwriting reviewing these?
The info gathered from any or all of these sources is reviewed against the company's standards and guidelines to determine insurability and premium classification.
____________is defined as the voluntary giving-up of a known right.
WAIVER
Can I get commission on my own life insurance?
YES!
Irrevocable Beneficiary
beneficiary cannot be changed unless the beneficiary consents. - Typically used by banks or in divorces -Also if the beneficiary wants the contract, they can get it.
It is possible for a mutual company insurer to turn into a stock company; this process is called ______________________.
demutualization.
A pure risk involves a chance of:
gain
Term Insurance
life insurance protection for a specified period of time/designated number of years. AKA: temporary life insurance
A _____________________sum death benefit is paid to a deceased worker's spouse or eligible children. In 2018, this benefit is equal to the lesser of three times the worker's PIA, or $255. What is this payout intended for?
one-time lump sum To offset funeral expenses and is only payable to a surviving spouse or minor children.
*** A stock insurance company is owned by_____________________.
owned by stockholders Ex: Allstate
Dividend
paid on participating policies, return to the policy owners of excess premiums charges for the insurance coverage and are not guaranteed.
The term "non-profit" refers to the fact that these non profit organizations do not have _________________________and use the profits that they make to expand benefits and services for insureds.
shareholders
****A mutual insurance company is owned by_____________________.
the policyholders Ex: State Farm
A security-based life insurance policy in which the insured chooses how the cash values are invested: whole life term life indexed universal variable life
variable life
____________________ is an illustration furnished at any time after the policy that it depicts has been in force for one year or more.
"In Force Illustration"
________________ an illustration furnished in addition to a basic illustration that may be presented in a format differing from the basic illustration.
"Supplemental Illustration"
When someone dies without a will, it is called dying ____________. Property can only be transferred as an intestate distribution under state laws.
"intestate"
In certain circumstances either the insurer or the insured can RESCIND the insurance contract. This means that the contract will be cancelled from its inception and treated as though it never existed. Rescission is also called _________________.
"voiding."
36. Insurance contracts are between how many parties A. 4 B. 3 C. 1 D. 2
2
Cease and Desist Order
A legal term that means "stop doing whatever you are doing"
Fiduciary
A person in a position of financial trust
Annuitant
A person who receives an annuity income benefit/distribution.
Insured
A person/party covered by an insurance policy
Variable Life Insurance
A security based permanent life insurance policy. The policy owner gets to choose how the cash values are invested (separate account)
A pure risk involves a chance of: A. Loss B. Both Loss and Gain C. Gain D. Neither Loss nor Gain
A. Loss
Reciprocal insurers are unincorporated associations that CHOOSE ONE: are/ are not subject to state laws and are managed by an Attorney-in-Fact, appointed by the policyholders and empowered on their behalf to bind them to one another.
ARE
A broad category of ins that includes hospital and medical coverage, long-term nursing care, and disability income policies sold to individuals/businesses, and other organizations on a FROUP basis.
Accident and Health insurance
Juvenile Insurance
An individual insurance policy for children.
Alien Insurance Company
An insurance company incorporated outside the country
Domestic Insurer
An insurance company that conducts business in the state of incorporation/where they conduct business.
Foreign Insurance
An insurance company that is incorporated outside the state where it is conducting business
Admitted Insurer
An insurance recognized by the Department of Insurance to transact insurance: approved or authorized
Non-admitted Insurer
An insurer (company) not licensed to do business in a particular state.
30. In a group life policy, unmarried children may be covered as a dependent till the age of? A. 24 B. 26 C. 19 D. 20
B. 26
37. When does part A of Medicare start: A. 55 B. 65 C. 62 D. 60
B. 65
71. Medicare Part A begins automatically at age: A. 55 B. 65 C. 62 D. 60
B. 65
38. A person who acts in a capacity that requires an active license without having a valid license is guilty of committing: A. Fraud B. A Misdemeanor C. A Felony D. Misrepresentation
B. A Misdemeanor
Insurance contracts are __________________________ in that contractual performance depends upon an uncertain event. A. Unilateral B. Aleatoric C. Conditional D. Voidable
B. Aleatoric
23. In insurance terms, a representation can be considered: A. An absolute fact B. An implied warranty C. An absolute warranty D. None of the above
B. An implied warranty
106. Whole life policies have the distinct feature, that premiums increase over time. A. True B. False
B. False
59. Social Security: A. Pays benefits that actuarially correspond to contributions. B. Is mandatory (compulsory) for most workers. C. Provides contracts for individual insureds. D. Pays all insured workers benefits at age 65.
B. Is mandatory (compulsory) for most workers.
37. The total amount an insurance company is liable to pay out is: A. Policy total B. Limit of insurance C. Aggregate limit D. Indemnity
B. Limit of insurance
29. Which of the following does not qualify for COBRA coverage: A. Divorce B. Marriage C. Death D. Termination
B. Marriage
77. Who submits claims to Medicare part A ? A. Patient B. Medical Provider C. Social Security Administration D. None of the above
B. Medical Provider
52. An event that results in a loss to an insured at a definite time and place or due to repeated exposure can be defined as: A. Negligence B. Occurrence C. Accident D. None of the above
B. Occurrence
1. If an insured carries two occupations How does the insurance company determine how much to charge? A. On the job that he has been working at the longest. B. On the most dangerous job. C. On the job that pays him the most. D. On the job that he works the most hours per week on.
B. On the most dangerous job.
75. A $50,000 whole life policy w/ a cash value of $10,000 has been in force for 11 years. The policy owner is unable to continue the premium payments. (A-C) Which describes the reduce paid-up non-forfeiture option? A. The policy owner begins to receive $200 monthly payments from the insured that will continue for life. B. The cash value is used to purchase a $20,000 paid-up policy C. None of the above
B. The cash value is used to purchase a $20,000 paid-up policy
55. What does a hospital confinement insurance policy pay for? A. An indemnity to the insured for all expenses incurred when the insured is confined to a hospital. B. The daily benefit coverage amount is stated in the policy for each day the insured is confined in the hospital. C. 100% of the covered medical expenses are less the deductible and coinsurance percentage. D. The amount of the actual hospital expenses.
B. The daily benefit coverage amount is stated in the policy for each day the insured is confined in the hospital.
7. Per CA Insurance Code, an ins. policy must specify all except: A. The perils insured against B. The financial rating of the insurer C. The property or life being insured D. The policy period
B. The financial rating of the insurer
86. What is true about a variable annuity? A. The number of annuity units changes. B. The value of the annuity unit may change. C. The value of an annuity unit is immaterial. D. None of the above.
B. The value of the annuity unit may change.
34. All of the following are not true of an annuity except? A. They create an immediate estate. B. They liquidate an estate over a period of time. C. They liquidate an estate in a lump sum. D. They only may be purchased by someone who is 59 1/2.
B. They liquidate an estate over a period of time.
60. All of the following statements about the election of a life insurance policy's settlement options are true except: (A-C) A. The election may be made by the policy owner at the time the application is submitted. B. When no settlement option is chosen, the proceeds are automatically paid to the policy owner's estate. C. The election of a settlement option may be made by the beneficiary if no settlement option is in force at the time of death of the insured.
B. When no settlement option is chosen, the proceeds are automatically paid to the policy owner's estate.
124. What is the period of time when an annuity contract is being funded and growing tax deferred? A. pay up period B. accumulation period C. tax deferred period D. paid up life insurance
B. accumulation period
121. Usually written as decreasing term, level term, or increasing term, this insurance covers the remaining balance of a loan: A. gap insurance B. credit life C. buy sell agreement D. fixed period settlement option
B. credit life
119. A policy in which the face amount of life ins declines over time. A. decreasing whole life B. decreasing term C. increasing term D. limited payment whole life
B. decreasing term
114. Which contract will start making payments at some future date and grows tax deferred? A. whole life B. deferred annuity C. immediate annuity D. universal life
B. deferred annuity
116. The insurer pays the beneficiary equal amounts of money plus interest at regular intervals over a period of years: A. indemnity rider B. fixed period settlement option C. deferred annuity D. per capita
B. fixed period settlement option
A ____________is an insurance licensee who does not work directly for the co. with which they do business but rather represents the prospective customer. They analyze their client's needs to determine the best co to use based on the individual's needs and circumstances. They are licensed to transact property and/or casualty insurance — BUT not life insurance.
BROKER
Per the NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS (NAIC) has developed a Life Insurance Disclosure Model Regulation to help buyers understand basic policy features and evaluate the costs of similar insurance plans. The NAIC regulation requires that ins co provide the client with a _______________________________ that contains descriptions of various types of life insurance policies and providing purchasing advice to prospective policyholders. The regulation also requires agents to clearly identify themselves and the company they represent. An agent cannot represent themselves as a financial planner or investment adviser unless they have the necessary licenses and/or certification. In addition, any references made to dividends or any nonguaranteed items in illustrations or contained in the policy must be identified.
BUYER'S GUIDE
Why is it important that the life insurance plan include periodic reviews (usually annually) to update and adjust the plan as required?
Because a family's needs, resources and financial circumstances change over time.
Why is vending machine travel insurance rare ?
Because travel ins is sold through travel agencies or direct writers. Professional life agents are not authorized to transact travel accident ins.
___________________ is the person(s) designated to receive benefits
Beneficiary
24. California will recognize a group for group insurance minimum of: A. 10 B. 5 C. 2. D. 100
C. 2.
15. Which could not self-fund health insurance: A. Labor union B. Fraternal group C. An individual D. A corporation
C. An individual
57. In a noncontributory plan, disability benefits received are tax-treated in the following manner: A. Billed to gross income B. Employer bills employee C. Beneficiary is taxed full amount D. Tax Free
C. Beneficiary is taxed full amount
18. If a licensee wants to terminate and surrender their license, what must they do? A. Destroy the original license B. Destroy the original and notify the commissioner C. Deliver the license to the commissioner D. Nothing
C. Deliver the license to the commissioner
57. In group insurance, who is the contract between? A. Employee and Employer B. Employee and Insurer C. Employer and Insurer D. The group members and the master policyholder
C. Employer and Insurer
103. Which of the following is not a benefit of insurance? A. It can be a source of investment funds B. It transfers loss C. It reduces risk exposure D. It reduces out-of-pocket expenses
C. It reduces risk exposure
41. According to California Department of Insurance, which term means "permissive"? A. Oath B. Shall C. May D. Twisting
C. May
4. During the disability income elimination period what is true: A. Residual benefits are payable. B. Occupational claims are payable. C. No benefits are payable. D. All claims are payable.
C. No benefits are payable.
4. An applicant, insured, and policy owner are: A. Three different people. B. One person. C. One person up to three different people. D. None of the above.
C. One person up to three different people.
78. An annuity is designed to protect the annuitant from: A. Dying to soon B. Becoming disabled C. Outliving one's resources D. Needing custodial care
C. Outliving one's resources
What is the BLACKOUT PERIOD? A. The period of time following the youngest child's 26th bday until the surviving parent is eligible for benefits (age 60). During this time there are no Social Security benefits payable to the surviving parent. B. The period of time following the youngest child's 21st bday (or up to age 24 if still in school) until the surviving parent is eligible for benefits (age 60). During this time there are no Social Security benefits payable to the surviving parent. None of the choices are correct. C. The period of time following the youngest child's 18th birthday (or up to age 19 if in school) until the surviving parent is eligible for benefits (age 60). During this time there are no Social Security benefits payable to the surviving parent. D. None are correct.
C. The period of time following the youngest child's 18th birthday (or up to age 19 if in school) until the surviving parent is eligible for benefits (age 60). During this time there are no Social Security benefits payable to the surviving parent.
61. Who has the right to change life insurance policy beneficiaries? A. The insurer B. The beneficiary C. The policyholder D. The insured
C. The policyholder
53. Through what kind of liability can a person be held responsible for the actions of other, i.e., negligent acts of a child or employee A. Strict B. Absolute C. Vicarious D. Intentional
C. Vicarious
24. If an insured voluntarily relinquishes his rights, this is an example of: A. Estoppel B. Coercion C. Waiver D. Warranty
C. Waiver
16. When may an agent transact for an insurance company? A. When the agent receives the action notice. B. When the commissioner receives the C. When the appointing company signs the action notice of appointment. D. At the beginning of the fiscal year.
C. When the appointing company signs the action notice of appointment.
122. An effort to keep life insurance policies from lapsing is? A. conversions B. prevention C. conservation D. viatical
C. conservation
48. An effort to keep life insurance policies from lapsing is called? A. conversions B. prevention C. conservation D. viatical
C. conservation
_______________________ insurance can be group or individual coverage purchased by a borrower to ensure repayment of a debt in the event of premature death.
CREDIT LIFE insurance
________________ gives the policyholder the right to exchange the Term Policy for a permanent plan of insurance w/o evidence of insurability. The new premium is usually calculated based on the insured's attained (current) age. This allows the policyholder to purchase a high level of ins coverage while the insured is younger while retaining the option of receiving a reduced amount of permanent coverage at a later date.
Convertibility
Blanket Health Insurance
Cover a group of individuals who are exposed to the same risks. Individuals within the group are changing constantly
30. Which of the following is found in a viatical contract transaction? A. Retention B. Partial assignment C. Conversion D. Absolute assignment
D. Absolute assignment
97. All of the following are Qualified Plans except? A. IRA B. 403B (TSA) C. 401K D. Deferred Compensation Plan
D. Deferred Compensation Plan
39. Which of the following is not covered by Part A of Medicare: A. Home health care B. Hospice C. Hospitalization D. Physicians' services
D. Physicians' services
31. In which of these situations would someone NOT be eligible for COBRA benefits? A. Death of an employee B. Retirement of an employee C. Reduction of work hours D. Termination of an employee for gross misconduct
D. Termination of an employee for gross misconduct
The following would fall under what type of coverage? spouse, children, dependent parents, any other dependents
Dependent Coverage
__________________________ Companies (Direct Response System) These companies hire individuals as agent-employees (a.k.a. direct writers) to market their products. Direct writing companies often use mass marketing methods, such as ads, e- media (Internet/ tv/radio) , direct mail campaigns, to contact the public. In such cases, the prospective client returns a reply card, writes, or calls for further info.
Direct Writing Companies
Occupational Disability Income
Disability income policy that will pay benefits whether on the job or off the job
Coordination of Benefits
Discourages multiple payments for the same claim under two or more policies
___________________________has three primary objectives: 1. Maintaining control of assets by the estate owner. 2. Avoiding probate. 3. Minimizing estate taxes, legal fees and probate costs.
Estate planning
Under the_______________________________ system the agent is a representative of a single insurer and is obligated to submit business only to that company, or at minimum give that company the "first right-of-refusal." This means that if the primary co. cannot issue a standard policy, or a policy at a competitive rate, the agent has the option to submit and place the business elsewhere.
Exclusive or Captive Agency System
T/F answer each 1. Social insurance participation is not mandatory and is not automatic for all eligible taxpayers. 2. Social insurance benefits are not provided under contract or policy but are prescribed by law. Any changes that are made to benefit structures or provisions are made as a result of changes in the law. 3. Social insurance seeks to be adequate to meet the needs of the public rather than be equitable in terms of the ratio of taxation to benefits provided.
F- social ins is mandatory and automatic for all eligible taxpayers T T
38. A speculative risk like a pure risk is insurable A. True B. False
False
T/F: Eligibility The nature and function of the group does not need to fall within the underwriting guidelines of the insurer (ins co) in order to qualify for benefits (e.g. war, military and aviation risks may be excluded).
False
This is a contract policy known as _____________________policy combines Whole Life and Decreasing Term insurance. A monthly income from the term ins is paid to a beneficiary in addition to the "base" face amount if the insured dies during a specific period. The income is provided up to the end of the term period selected. If the insured dies after the end of the term period only the Whole Life face amount is payable.
Family Income Policy
_____________________policy is like a family income policy, except that it is a combo of Whole Life and Level Term that provides income to a beneficiary for the length of the term period selected if the insured dies during that period. The beneficiary also receives the entire face amount of the underlying Whole Life Policy. This amount can be paid at death, at any time during the income period, or at the end of the income period. If the insured dies after the end of the term period, the beneficiary receives only the face value of the Whole Life Policy.
Family Maintenance Policy
Life insurance coverage is also available to working ______ ( ) The benefit amount is a % of the individual's salary until 65, at which point it starts reducing until it levels off at 25% of the employee's pre-retirement annual salary. The fed. govt. pays approximately 1/3 of the monthly premium; the employee pays the remainder.
Federal Employees Group Life Insurance (FEGLI)
Consolidated Omnibus Budget Reconciliation Act (COBRA)
Federal law that applies to employers offering group insurance who have 20 or more employees. Election of employee to continue health insurance benefits under certain events: job, loss or death of spouse.
Employee Retirement Income Security Act (ERISA)
Federal law that outlines plan description and benefits for pension plans. Requires annual reporting and provides equality.
Medicare Supplement Insurance
Fills in gaps left out of Medicare part A and B. Must include the core benefits (medi-gap)
The most commonly sold life insurance policy is?
Final expense policy or barrel insurance (cheap ins)
Insurable Interest
Financial interest in having the life of the insured continue.
______________________ policy is like modified life except that, instead of just one increase in the premium after a certain period of time, the premium starts to increase after the first year in a series of steps. After a gradual increase, the premium becomes level for the duration of the policy.
Graded Premium
__________ insurance plans provide coverage for a specified number of people who work for the same company or have the same affiliation or interests.
Group
__________________________ insurance provides coverage to working people and their dependents who are members of defined groups. Generally, insurability req. are not as strict as in individual life ins., and all, or most, of the premium is paid by a sponsoring organization/employer, etc.
Group Life Insurance
A _____________________________policy has a fixed premium throughout the period of coverage and is the most common type of Level Term.
Guaranteed Level Premium Term
Warranty
Guaranteed truth
Lapse
Happens when the premium for the policy is not paid and grace period has expired.
Name one of the biggest disadvantages of group insurance.
If the insured changes or leaves job or group, they may not be covered under the group and may have to pay much higher ins premium.
Endow
In LIFE insurance, the policy cash value equals the face amount.
The insurer is the __________________________ the insured is:_______________________
Insurance co. (insurer) the policyholder (insured)
The Medical Information Bureau (MIB) is a non-profit organization supported by: Insurance companies State governments All of the choices are correct The federal government
Insurance companies
Viatical
Insurance paid to terminally ill persons. Typically in lump sum. Absolute assignment is required.
____________________ is the the subject of insurance
Insured
Private life insurance John Hancock, NY Life, etc
Is for an individual
A ________________ rider provides an insured who has been diagnosed as being chronically ill or terminally ill (i.e. has a medical condition that would, in the absence of treatment, result in death within a limited period - not less than six months up to 24 months) the option to receive a %of the proceeds before death in order to pay medical expenses, long-term care expenses, or other costs related to the illness. Insurers are required to ensure that their agents can describe the differences between an accelerated death benefit and Long-Term Care coverage. An accelerated death benefit does not reimburse or provide specific coverage for any health, accident, or Long-Term Care insurance benefits, but provides an unrestricted cash amount based on the death benefits payable when the insured has become either chronically or terminally ill as specified. When the insured qualifies for and requests the advance, they may take the accelerated death benefits in a lump sum or choose to receive the benefit in periodic payments for a specified time. The benefit received reduces the amount payable to the beneficiary upon the insured's death (i.e., any remaining death benefits are paid as normal or full proceeds are payable if the accelerated benefit is never used). The following rules apply: · An accelerated death benefit takes effect not more than 30 days following the effective date of the policy provision, rider, endorsement, or group certificate. · Generally, accelerated death benefits are not taxable when paid to a qualifying terminally ill insured, however, amounts paid to a chronically ill person are subject to the same tax requirements that apply to Long-Term Care benefits (i.e. benefits paid that exceed either the cost of actual services received or a specified daily allowance are taxable). Any additional premiums paid for the benefit are not tax deductible.
LIVING NEEDS RIDER
Multiple Employer Trust (MET)
Legal entities in which two or more financially unrelated companies join together to provide group insurance
Renewable term can be best described as: Level death benefit; decreasing premium Decreasing death benefit; level premium. Increasing death benefit; level premium. Level death benefit; increasing premium
Level death benefit; increasing premium
The type of premium in which the insured pays an average amount more than needed to meet the cost of the contract in the early years and less than is necessary for the later years is called? Level premium Natural premium Net premium Gross premium
Level premium
Errors & Omissions Insurance
Liability Insurance which provides coverage for an act, error, or omission that the agent/insurance makes. AKA: professional liability insurance.
Risky sports: Sky dive, Scuba dive, DUIs, Traffic Accidents, Travel Abroad are important to someone purchasing what type of ins?
Life insurance
______________________ ins. proceeds are paid directly to a stated beneficiary, bypassing a will, and are exempt from probate or any other requirements for estate transfer.
Life insurance
______________________ insurance can create an immediate estate for the insured (i.e. provide a LUMP SUM of money payable to the beneficiary) even if they owned no other assets upon death. The process of planning to preserve assets before death is called ______________________________ and is often a very intricate procedure involving expertise of wills, taxes, law and life ins.
Life insurance "estate planning""
What is the most significant difference between life insurance and all other types of insurance policies?
Life insurance provides coverage for an event that is certain to happen. The required uncertainty lies in the questions of when, how, where and specifically to whom the event will occur.
The _________________________________ department is responsible for the identification of prospective clients and the sale of a company's products in the marketplace. The types of activities include advertising, product promotion, sales, agent training and the development of new marketing materials.
MARKETING AND SALES
Conisurance
Major medical policy feature in which the insurer and the insured share in the cost of medical expenses. The patient's portion
The __________________________________ is a centralized computer agency which keeps files of the health history of applicants for individual life insurance. It is a non-profit organization financed by member life insurance companies who report medical impairments found during the underwriting process. Insurers cannot refuse to accept an application solely because of the information contained in the MIB report; there must be other factors used in this decision. The info gathered by the MIB is reported in code form to ins cos when a person applies for insurance. The purpose of the MIB is to prevent fraud and to protect current policyholders against the selection of adverse risks by ins com
Medical Information Bureau (MIB)
_________________ policies are Whole Life contracts that start with a low premium that stays level for an initial period of time. At the end of the specified period, the premium will increase and remain level for the duration of the policy. Modified designs are used to market Whole Life ins to someone who needs a large amount of ins but may not have the financial resources to pay the full premium at the start of the policy.
Modified Life
Consideration
Money or something of value; a legal detriment.
Commission
Money that is paid to an agent for selling an insurance company's policies
Which is used to establish life insurance rates? Mortality, interest, and expense Morbidity, interest, and payments Morbidity, interest, and expense Mortality, savings, and expense Morbidity, interest, and payments
Mortality, interest, and expense
60. An incorporated insurer owned by its policy holders and formed for their benefit is called A. Stock insurer B. Mutual insurer C. Independent insurer D. Broker insurer
Mutual insurer
Are annuities insurance?
NO!
In a _____________________PLAN the members of the group do not contribute to the cost of the insurance; it is paid totally by the employer. With a noncontributory plan there are two "100%" rules: 1. 100% of the premium is paid by the employer or sponsoring organization. 2. However, 100% of all eligible members or employees must be covered under the plan. This is required to prevent unfair discrimination on the part of the employer.
NONCONTRIBUTORY plan
The __________________ rider guarantees that a Universal Life Policy will not lapse during the insured's lifetime provided that specified amounts of premium are paid, and any outstanding policy loan plus accrued interest do not exceed the policy Cash Surrender Value. Adding the rider creates a policy known as Guaranteed Universal Life (GUL), which is, in effect, a Universal Life policy designed as Term insurance in that it imposes a payment schedule onto a UL policy that allows for a guaranteed lifetime death benefit as long as premiums are paid as scheduled, even if the policy cash value drops to zero.* If premiums are paid later than scheduled or at lower levels than required, the guaranteed period is shortened accordingly. Otherwise, the duration of the death benefit guarantee may be shortened if certain adjustments are made to the policy, e.g. a change in face amount or a policy loan or withdrawal. *Note that some NLG riders guarantee coverage for a specified amount of time-based on the insured's age at issue rather than provide lifetime guarantees.
No Lapse Guarantee (NLG)
Were social insurance (state/fed) programs designed to eliminate the need for private forms of life, health and disability insurance?
No!
Is there a thing as FULL coverage?
No, there is no such thing as FC. We only have the limits we pay the insurance for.
Medical Information Bureau (MIB)
Non-profit central information agency/organization established/supported by insurance companies to aid in speeding up underwriting and helping prevent fraud.
___________________ organizations are often found in the health insurance field providing similar benefits to commercial, for-profit, entities. The term "non-profit" refers to the fact that these organizations do not have shareholders and use the profits that they make to expand benefits and services for insureds.
Non-profit organizations
Nonforfeiture
Not losing cash values, when policy lapses for non-payment. Three options to choose from: cash surrender, reduced paid up, extended term.
Where replacement is involved, the agent must list the contract numbers of all policies to be replaced and present the applicant with a "____________________ which advises the applicant to consider their decision carefully. Who must sign the notice? The agent must also leave with the applicant all printed communications used for presentation and submit a copy of the signed Notice Regarding Replacement to the _________________________ with the application.
Notice Regarding Replacement" The notice must be signed by both the agent and the applicant. replacing insurer
OASDHI- more commonly known, SOCIAL SECURITY, currently provides four main categories of benefits. List them.
Old Age, Survivors, Disability and Health Insurance 1. Retirement benefits for workers and dependents. 2. Survivors benefits for the family of a deceased worker. 3. Disability Income for a covered worker and dependents. 4. Medicare health insurance benefits for the aged.
Aleatory
Outcome depends upon an uncertain future event. A contract in which there will be an unequal exchange of money.
By whom are stock companies owned?
Owned by individuals who contribute capital toa the company through the purchase of shares of stock. These individuals share in company profits and losses through the increase or decline in the market value of their shares of stock. The stockholders elect the board of directors who in turn appoint executive officers to operate and manage the company.
The amount of income the individual will receive after the above factors are taken into consideration is called the ________________. T his is dependent on the covered individual's "Average Indexed Monthly Earnings" (AIME), which is based on the person's wages which have been subject to Social Security FICA payroll taxes and the individual's year of birth. For example, according to the Social Security Administration, a worker who has had maximum taxable earnings since age 22, and who is retiring at age 65 in 2018, would receive a monthly income of $2,589. The benefit provided is also adjusted periodically to reflect increases in inflation, as gauged by the _____________________________________.
PRIMARY INSURANCE AMOUNT (PIA) Consumer Price Index.
A contract's ____________section is the TEETH of an ins contract- what the contract will and will not do. What the RULES are.
PROVISION Life ins has a provision that if you purchase life ins and commit suicide within the first two years- ins will not pay out- The ins will only refund the paid premiums to the family Final expense aka Barrel ins has a provision that f you purchase life ins and DIE within the first two years- ins will not pay out- The ins will only refund the paid premiums to the family.
________________________ are causes of loss and things that make losses worse)
Perils and Hazards
Accumulation Period
Period of time when the annuity contract is being funded (grows tax deferred)
__________________ is the the owner of the policy
Policyholder
Which would have the lowest premium? Standard Risk Substandard Risk Classified Risk Preferred Risk
Preferred Risk
Level Premium
Premium on the policy remains the same throughout the policy length.
Modified Endowment
Prevents a life insurance policy from becoming an investment vehicle
_________ insurance policies can be sold to individuals and families (personal lines policies) or to employers, unions and other associations to provide coverage for business risks or to provide benefits to employees or members (commercial lines policies)
Private
____________________ is the legal process of validating a deceased person's will and transferring assets from the estate.
Probate
________________________ are waiting period before joining a group plan
Probationary Periods (waiting periods)
Rescind (rescission)
Recalling a policy due to misrepresentation or fraud
61 A way for insurers to avoid having to have to pay for large or catastrophic losses A. Claims handling B. Avoidance C. Reinsurance D. Underwriting
Reinsurance
_______________allows the policyholder to continue the same policy for an additional period of time (usually the same as the initial period) without having to show evidence of insurability. The premiums for the renewal period will be higher than at the ORIGINAL AGE of issue to reflect the insured's ATTAINED AGE ( current age) and the insurer's increased risk. Is renewability guaranteed for life?
Renewability No, usually the option to renew is lost once the insured reaches a specified age.
___________________was established in 1965 to provide armed services personnel on active duty with group life ins. The coverage is provided automatically with the cost being shared by the service personnel and the fed gvt. The present maximum level of death benefit is $_______with a $______ supplemental for traumatic injuries. Is this benefit provided with either peacetime mortality and death associated with military conflict? Y/N
SGLI $400,000 death benefit with $100,000 for traumatic injuries Yes, either/or
Life Settlement Statutes On October 11, 2009 Gov ____________________ signed into law Senate Bill (SB) 98 Life Insurance: Contract and Viatical Settlements. This bill repealed existing viatical settlement statutes and in its place created life settlement statutes now contained in Sections 10113.1 and 10113.2 of the California Insurance Code (CIC). Among the changes included in SB 98 were a requirement that any party purchasing life ins must have an insurable interest in the person being insured, and the establishment of new requirements for individuals who transact life settlements.
Schwarzenegger
What MUST accompany the request for an attending physician's statement? Policy illustration Signed application Underwriting criteria Signed authorization from the insured
Signed authorization from the insured
Certain group insurance rules and requirements vary depending on the size of the employer. Generally, a small employer has______eligible employees and a large employer has ______+ eligible employees.
Small: 1-50 Large: 51+
Congress passed the _______________________________ in 1935, which became effective 1-31-37. The original legislation has been amended and modified many times since its original enactment. The original Social Security program provided retirement benefits only to workers who retired at age 65. Then, benefits expanded to include dependents of workers who died prior to retirement. By 1957, disability income benefits were available to people unable to work due to a permanent or long-term total disability. In 1966, the Medicare program became part of the system to provide medical and hospital benefits to those aged 65+ and to certain disabled people.
Social Security Act
What doe STOLI stand for?
Stranger Originated Life Insurance (STOLI)
*The insurer's right to recover its claim payment to an insured from a negligent 3rd party is known as: Arbitration Liberalization Subrogation Assignment
Subrogation
Life insurance pay outs are taxable or tax free?
Tax free
Term Life insurance is classified as __________________ ins because it provides protection for a designated period of time. Permanent Temporary Level Designated
Temporary
Which best describes an Endowment Policy? That which will liquidate a sum of money by the payment of principal and interest That which will pay a face amount if death occurs only within a stated time That which will pay a face amount if the insured dies at any time That which will pay a face amount if either the insured dies during a specified number of years or, if the insured lives, pays the face amount at the end of the same period
That which will pay a face amount if either the insured dies during a specified number of years or, if the insured lives, pays the face amount at the end of the same period
All are required on a life insurance application except? The amount of disability income in force. Health history. Age of the insured. Amount of life insurance in force.
The amount of disability income in force.
Apparent Authority
The appearance of or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.
Rate
The classification the insured is assigned and/or the dollar amount paid for a policy.
Fixed Amount Settlement Options
The death benefit is paid to the beneficiary in a series of fixed amounts until the proceeds plus interest are exhausted.
Employer Control Who is usually in charge of enrollment, premium payment, benefit selection and all other areas of administration (including recordkeeping) that are not the function of the ins company.
The employer or sponsoring organization
Fixed Period Settlement Option
The insurer pays the beneficiary equal amounts of money consisting of principal plus interest at regular intervals over a period of years
Insurance Code
The laws of the state, written by legislature, that regulate insurance companies and agents
When buying Life Insurance, a BASIC ILLUSTRATION must include? Credit Life Insurance An Annuity The name of the insurer, the name of the proposed insured, and a brief description of the policy being illustrated, including a statement that it is a life insurance policy. Variable Life Insurance
The name of the insurer, the name of the proposed insured, and a brief description of the policy being illustrated, including a statement that it is a life insurance policy.
When determining the amount of premium that must be charged for a life insurance policy, which will not be taken into consideration? Interest received The death benefit The number of policyholders expected
The number of policyholders expected
What does the acronym W.E.T. stand for? Whole Life Endowments ,Term Whole Life Endowments Trusts Whole Life Endorsements Term Waivers Endorsements Trusts
There are three basic types of life insurance policies, which can be recalled using the acronym W.E.T.: 1. Whole Life. 2. Endowments. 3. Term. Most life ins policies today are of one of these types or variations of them.
Uniform Simultaneous Death Act
There is no evidence as to which party died first
What type of ownership? An insurance contract that is owned by someone other than the insured is referred to as a "________________ contract The owner retains all rights and has full control of the contract.
Third-Party Ownership Third-party contract.
Modified Endowment Contract (MEC)
This concept applies to permanent life insurance. Prevents a life insurance policy from being used as or becoming an investment vehicle.
45. A deductible is the portion of a loss retained by the insured before the insurer will cover a claim A. True B. False
True
An insured may decide to drop their current ins coverage and replace it with another type of ins or from another carrier. T/F: Replacing an existing policy with a new coverage is common in the property and casualty field. However, with life ins policy replacement is likely to leave the insured in a worse position than before (due to age, pre-existing conditions etc.). Therefore, replacement of life insurance, while permitted, is heavily regulated.
True
Materially Inaccurate Presentations T/F: A violation of this article will occur if an agent or insurer recommends the replacement or conservation of an existing life ins policy or annuity by use of a materially inaccurate presentation or comparison of an existing contract's premiums, benefits, dividends and values.
True
T/F In order to determine an appropriate ins program, the agent must first do a thorough and unbiased analysis of the prospect's needs, objectives, goals and resources. Several questions that should be addressed: What is the intended use of the ins (business or personal)? Are there going to be any significant changes in the needs and circumstances of the insured? Time period required for the insurance policy? How much insurance does the prospect need? Premium that the insured can afford to pay? How long does the insured wish to pay premiums? Will the resources of the insured change, allowing for higher premium payments or unscheduled deposits? What type of policy would best suit the prospect's needs and objectives?
True
T/F: If ins replacement is involved, the replacing (new) insurer must: 1. Forward written notice of the replacement and a policy summary of the proposed life insurance or annuity to the existing (old) insurer, within three biz days from receiving the app. 2. Require the agent to submit the list of the applicant's current life ins, and a copy of the Notice Regarding Replacement.
True
T/F: Although every individual/family have unique issues, there are common expenses resulting from a "bread-winner's" death: Funeral and burial expenses. Medical and hospital expenses. Income to the surviving spouse and/or family for living expenses (rent/mortgage, utilities, groceries, clothing, etc.). Education funds for children and/or surviving spouse. Debts (e.g. mortgage, credit cards, and loans). Retirement income for the surviving spouse. Estate taxes and probate costs.
True
T/F: Each ins co. has its own guidelines and parameters on the definition of insurable versus uninsurable and, as a result, each application for insurance is reviewed by an underwriter individually to determine if the applicant meets the co. standards to qualify for ins. coverage.
True
T/F: In a traditional life ins arrangement, a person who owns a life ins policy has the right to sell the policy to another person for an amount less than the death benefit.
True
T/F: Predetermined Coverage Amount Group coverage amounts must be determined based on a method other than the selection of individuals; usually through occupational classification, number of years of service, or income level.
True
T/F: Premiums being paid for any type of ins. must be reasonable in proportion to the potential benefits received in the event of a loss.
True
T/F: Voluntary plans exist, in which the employees or group members pay the entire premium, in traditional group policies the premium for the plan might be either fully paid by the sponsoring organization (employer) orshared between the employer (sponsoring organization) and the members of the group.
True
T/F: When using illustrations, the insurer must provide each policy owner with an annual report on the status of the policy, as well as other penalties provided by law (e.g. license suspension, revocation and/or fines), an insurer or producer that violates any provision regarding policy illustrations may be enjoined and restrained from continuing the unfair practice.
True
T/F? A number of components must be considered with estate planning: The needs of the beneficiaries and heirs of the estate. The type and amount of property in the estate. How to best administer the estate based on the objectives of the estate owner. The amount of potential taxes, fees and other expenses. The amount of life insurance needed to cover these costs. How to dispose of any business interest. Determine who'll handle the settlement and distribution of the estate.
True
True or False: If confusion arises in the contract's interpretation, it is often settled in courts; the interpretation of policy provisions is not a primary objective of insurance regulation. If a court finds that a party is in contractual breac, the injured party has the right to seek damages, reasonable attorney fees and court costs.
True
True/ False Insurance Incidental to the Group The group must have been formed for a purpose other than simply obtaining ins benefits. They must have a fundamental purpose/common interest other than the need for insurance. Without this requirement, a high-risk group could be formed solely to obtain minimally underwritten coverage, significantly increasing the insurance company's risk.
True
True/False :Composition of the Group The group must be structured so that there will always be an influx of new members into and members leaving the group. The in/out flow of members averages the risk of the group over time, thus minimizing adverse selection.
True
True/False: 401K is not a retirement plan, it simply references the IRS 401 tax code
True
True/False: A group insurance policy may be issued to the trustees of a "trust group" if the fund has been established by two or more employers in the same field or by one or more labor unions. The trustees are the policyholders of the plan; these types of plans cannot benefit the employer, union, or association. The definition or employee or member is the same as in other group coverages. These include officers, managers, proprietors, partners or stockholders.
True
True/False: An employer cannot be the beneficiary of an employee's group life insurance policy.
True
True/False: BUY cell life insurance agreement in CA (state of community property) If two biz partners have an insurance, one married partner dies- the widow becomes the ne partner- THIS provision allows the surviving insured to buy out the widow or family of the dead partner/insured.
True
True/False: Individuals covered under the plan are classified in such a manner that they do not choose their level of benefits, but rather the level is usually determined by salary, position or length of employment.
True
True/False: Life insurance has a future income earning potential. that extends beyond the individual insured to those who are financially dependent upon them.
True
True/False: Once a waiver has been made the right cannot be re-asserted without notice. For instance, by accepting late premium payments, an insurer has waived its right to have premiums paid on time. The insurer is now unable to automatically, and without warning, cancel the policy for late payment. Instead, if another payment is late, they must inform the client that the policy will remain in effect until the next premium due date, but that future payment must be made on time.
True
True/false. The most common types of group plans are those established by employers for the benefit of employees. In the State of California, regular group insurance (or a self-funded health plan in which benefits are paid by the employer from co. assets) can also be issued to any other legitimate group, including the following: Labor and Credit Unions. Fraternal Societies and Co-operatives. Professional organizations. Groups of debtors covered by creditors. Self-employed individuals through a trust arrangement.
True
This rider (a.k.a. GUARANTEED PURCHASE OPTION or GPO) is closely related to the Cost of Living Adjustment. T/F: It gives the insured the option of obtaining additional ins on their own life at certain selected dates in the future, at certain policy intervals, or at specified ages. T/F: Evidence of insurability is required at the time the option is exercised. However, premiums likely to increase due to attained age.
True False
T/F: The rules regarding illustrations apply to all group and individual life insurance policies and certificates except for: Variable life insurance. Individual and group annuity contracts. Credit life insurance. Life insurance policies with no illustrated death benefits on any individual exceeding ten thousand dollars ($10,000). Why so?
True The intent of these rules is to: Ensure that policy illustrations are understandable. Ensure that policy illustrations do not mislead purchasers of life insurance or annuities. This is achieved by: Providing illustration formats. Prescribing standards to be followed when illustrations are used. Specifying the disclosures that are required in connection with illustrations.
T/F: While there could be up to five different parties involved in the application process, typically, the insured, policyholder, applicant, and payor are the same individual.
True If not then, *If the insured and the policyholder are two different individuals, a legitimate economic or familial relationship must exist between the owner and the insured (i.e. insurable interest)
A flexible benefit cash value policy which earns a current rate of interest with flexible premiums is: Adjustable life Endowment MEC Universal life
Universal life
Capitation
Used in HMOs. Doctors receive monthly capitation payments regardless of services based on members in the area.
Fully Insured
Used in Social Security where the worker has pai in for 40 quarters or 10 years.
Contributory Plan
Used in group insurance. Employers require that the employees help pay for their benefit plans by paying part of the premium
___________________________ (a.k.a. Flexible Premium Variable Life) is a comb of Variable Life insurance and Universal Life. The features of each type of policy are blended to create a plan that allows the policyholder/insured to choose from a variety of investment vehicles (replacing fixed interest rate cash values) and offers the flexibility of premium payments and death benefit found in a Universal Life contract. This ins combo and equities offer the policyholder flexibility and potentially higher investment returns, BUT often without the security of guaranteed min. interest rates or death benefits. The same types of investment options that are found in Variable Life contracts are usually found in Variable Universal Life policies. Variable Universal Life policies also fall under the jurisdiction of the Securities & Exchange Commission and the Financial Industry Regulatory Authority in addition to State Department of Insurance regulations.
VARIABLE UNIVERSAL LIFE (VUL)
Upon their military discharge, an insured can opt to convert their SGLI coverage to a five-year Renewable Term Policy called "_____" The insured pays the full premium AND at the end of the five-year period, they have the option of converting the policy to a permanent insurance contract thru any program participating ins.
VGLI "Veterans Group Life Insurance."
__________________________ provision is essentially the same as the waiver of premium benefit in that premiums are waived in the event of a total disability lasting at least six months. In addition, the insured is paid a monthly income during the disability. The amount of this income is usually an amount per $1,000 of the face amount of the life insurance policy to which the rider is attached. A variation of this benefit is the DISABILITY INCOME RIDER, which typically has a waiting period of 3-6 months and will pay a monthly benefit for total and permanent disability but may not waive the premium payment due.
Waiver of Premium with Disability Income
Conservation
When a company or agent tries to prevent a client from replacing an existing life or annuity contract with a different company
Code Section 770
When purchasing a property that is financed, an insurer cannot force the purchaser to buy insurance from a particular agent or broker
In life insurance insurable interest must exist: When the insurance takes effect and the loss occurs When the insurance takes effect and the loss occurs, but need not exist after the loss occurs When the insurance takes effect, but not at the time of death When the loss occurs
When the insurance takes effect, not at time of death
BENEFECIARY PROVISIONS
Who will be the primary beneficiary- How do you want this benefit to be paid out (lump sump, installments, etc.) Beneficiary- is the primary Secondary beneficiary is the contingent.
The policyholder has access to these (accumulated cash value) contract funds thru either a policy loan (with interest rates fluctuating on each contract anniversary date) or thru a partial surrender or withdrawal. There must be enough of the total funds left in the contract to pay the cost of the term ins and expenses; if the contract fund (accumulated cash value)is ever entirely depleted, the policy (Choose one) will or will not lapse?
Will lapse
Annuity benefits policy holders who are very sick?
Yes
Telephone Interview ? May insurers request the applicant's permission to interview them, their spouse or family members, business associates, neighbors, or anyone else who can provide info about the proposed insured's character, reputation, habits, occupation or hobbies?
Yes
Every insurer and life agent offering individual life ins policies or individual annuity contracts that are initially delivered to senior citizens in this state with the use of non-preprinted illustrations of non-guaranteed values must include the following statement (in bold or underlined capitalized print, or in the form of a contrasting color sticker, bright highlighter pen, or in any manner that makes it more prominent than the surrounding material, with at least one-half inch space on all four sides.) 1. "this is an illustration only. an illustration is not intended to predict actual performance. interest rates, dividends, or values that are set forth in the illustration are not guaranteed, except for those items clearly labeled as guaranteed."
Yes!
*** Does the agent have any responsibility in the underwriting of a policy?
Yes, the agent is a "field underwriter" The agent has the duty to report anything that they see. Ex: the agent notices that the client has an unreported dog. An agent report is used in this case to report this
Are catastrophic losses Ex: Perils such as: War, floods, and nuclear accidents often excluded by private insurance companies?
Yes, unpredictable and enormous loss in such a short period of time.
Pre-existing Condition
a health condition or sickness that occurred prior to the issuing of a health policy
Agent
a person appointed by the insurance to represent it and to sell its products/services.
Beneficiary
a person to whom the insurer will pay the proceeds to upon the insured's death.
Joint Life Insurance
a policy written on the lives of two or more people and can be written to pay out at the time of death of the first or second person.
The _________________department focuses on the mathematical and statistical analysis functions of an insurance company. These include developing mortality tables and loss histories, calculating premiums and claim reserves for particular lines of insurance, calculating dividends, and preparing annual financial reports.
actuarial
A ________________ insurer is an organization owned by a parent company that provides insurance to cover the parent company's loss exposures. The parent company may be a multinational corporation, an association of businesses, a group of exporters, or an organization established by a wealthy family as an estate planning tool.
captive insurer
The _________________ department receives, evaluates and handles requests by insureds for indemnification or payment after an insured loss has occurred.
claims department
The most common way to transfer risk is to purchase insurance, which can be defined as a ________________ (i.e. legally binding agreement), or ___________________, that spreads risk among a large number of people
contract social device
Since in life insurance field, an exact "value" cannot be assigned to a person's life, an estimate is made by the insurer based on what?
current income, financial responsibilities (debts, dependents), future income earning power, and assets.
Fill in the blanks: Unlike _______ insurance, the ________, as an insurance provider, has a definite monopoly because many of the types of insurance coverage provided by it are either unavailable or restricted to private sector insurance companies (e.g. flood, nuclear hazard, war risks etc.).
private insurance government
The main objective of estate planning?
to transfer the estate to the heir(s) with a minimum of taxes and other expenses
In order to sell Variable Life contracts in CA, an agent is required to have both:___________________________________________________________________.
1) life agent's license 2) Financial Industry Regulatory Authority registered representative's license (Series-6) or a general securities representative license (Series-7).
Special purpose life insurance is intended for what?
A life ins policy for a special purpose. Ex Quincianera
_________________________ is licensed as a life agent (or a licensed nonresident producer) in this state for one year or longer may act as a life settlement broker by notifying the Commissioner and paying the life settlement broker license fee. One who has not held life agent license for one year must first complete at least 15 hours of education on life settlement transactions and must complete an application and pay the life settlement broker license fee.
A life insurance producer
Choose the best description of "Universal Life": A policy which includes fixed premiums, cash value paying a fixed rate of return and insurance protection A policy which includes fixed premiums, cash value with a flexible rate of interest and insurance protection A policy which includes flexible premiums, cash value paying a current rate of return and insurance protection A policy which includes fixed premiums for a stated period of time, cash value paying a flexible rate of interest and insurance protection
A policy which includes flexible premiums, cash value paying a current rate of return and insurance protection
Term insurance policies ARE or ARE NOT intended to last the whole of an insured's life. When a Term Life plan is sold to cover a person aged 55 or older, certain special rules come into effect. For example, ads for Term Life insurance directed to individuals 55 years of age or older must: A Tv/radio ad for Term Life insurance directed to individuals 55 years of age or older must explicitly state the statement: "policy (or certificate) benefits and limitations should be carefully examined prior to purchase." If the benefits of the advertised policy decrease with the insured's age, while the premium remains constant, that fact must be disclosed The Insurance Commissioner may adopt a Term Life ins monetary value index to be disclosed in all ads and on all policies of Term Life insurance for people 55 years +. In developing such an index, the Commissioner must consider actual premiums and policy benefits and how they are affected with the passage of time. A monetary value index developed in relation to this section will assume an insured's desire to retain coverage for at least 10 years. 1. Clearly distinguish basic life ins benefits from supplemental benefits such as accidental death benefits. 2. Show any limitations, exceptions, or reductions affecting each benefit. 3. Disclose any condition affecting the policy or certificate holder's continued insurability. If Term coverage terminates at a stated age, or at the end of any designated period, that fact and the specified age or designated period must also be disclosed. 4. Disclose any change in benefits resulting from the aging of the insured, policy duration, or any other factor. 5. Disclose any change in premium resulting from the aging of the insured, policy duration, or any other factor. If the insurer retains any right to modify premiums in the future, that fact must also be disclosed.
ARE NOT
The transfer of all or a portion of the policyholder's ownership rights, title, or interest in the policy to another party is called what? To be binding on the insurer, this should be executed in writing and filed with an authorized representative of the company. However, a policyholder does not need the insurer's (ins company's) permission to assign a policy; the insurer will accept the legality and validity of the transfer without question. Insurable interest does not have to exist between the insured and the new owner (known as the "assignee"). The assignee is usually granted all rights of policy ownership, including the right to change the beneficiary. However, any assignment is subject to debts owed to the ins co.
ASSIGNMENT
The complete and irrevocable transfer of all of the policyholder's rights and "incidents of ownership" to another person (the assignee) who then receives full control over the policy and full rights to its benefits is called _____________________________________. This type of assignment transfers the interest in the entire death benefit. For example, when a terminally ill person sells their life ins policy to a Viatical Settlement Company or Life Settlement Provider, the transfer of ownership is achieved through this, an ___________________________________. he Life Settlement Provider becomes the new owner of the policy and can name itself or another person as beneficiary.
Absolute Assignment
The ________________________ rider states that if the insured dies as the direct result of an accident and within a specified period of time (usually 90 days) the face amount of the policy will be increased by a multiple of the original amount- typically double the face amount. Consequently, also called: DOUBLE INDEMNITY RIDER. BUT, it can also be 1½ or 3 times the face amount. Accidental death is strictly defined in that it does not include death resulting from an illness, ailment, or some other disability that develops as an indirect result of the accident. Because of the higher incidences of accidents in older people, this benefit is generally not available beyond age 55 or 60.
Accidental Death Benefit rider
____________ are sometimes known as "field underwriters" because they initiate the underwriting process, assist in the completion of the app, gather the necessary info and required signatures, collect the initial premium, and issue conditional receipts.
Agents
Flexible policies/Riders
An added feature that is added to an existing life insurance
______________ is characterized by a death benefit that reduces gradually in scheduled steps over a specified period of time, ending at zero at the expiration of the policy. The interval between each decrease is usually annual. Payments remain level over the duration of the policy. Since premiums are purchasing death protection directly reflecting the insured's mortality risk, These are the least expensive form of individual life ins. They are most frequently used to insure a mortgage or other indebtedness.
DECREASING TERM
A _________________________ins plan is where an excess premium (deposit) is paid in the first policy year in addition to the regularly required premiums The deposit is then left to accumulate interest for a specified number of years. After this period of time, the policyholder can receive the deposit plus interest or can renew the policy without evidence of insurability. The policy can be converted to a permanent plan of ins at a future date, but if the insured dies before this date, the deposit plus the interest is added to the death benefit. (In another version of this policy the deposit plus interest is used to reduce premium payments in future years.)
Deposit Term ins
ENDOWMENT policies are essentially Whole Life policies with a maturity date earlier than age 100. They provide life ins protection for a limited number of years and cash values that will pay the policyholder a benefit equaling the face amount at the X(choose one) start, end, any time: of the coverage.
END
______________________Policies are specific life ins policies or annuities with an initial face amount of ($15,000) or less and designated for the payment of funeral and burial expenses.
Funeral and Burial Policies
The WAIVER OF PREMIUM provision prevents: A policy from lapsing in the event the policyholder cannot pay due to a temporary disability. Has an initial face amount of fifteen thousand dollars ($15,000) or less that are designated by the purchaser for the payment of funeral and burial expenses. A policy from lapsing in the event the policyholder cannot pay due to a disability. In the event of a total and permanent disability the company will waive any premium payments after a specified period of time (usually six months). Has an initial face amount of fifteen thousand dollars ($10,000) or less that are designated by the purchaser for the payment of funeral and burial expenses
In the event of a total and permanent disability the company will waive any premium payments after a specified period of time (usually six months).
Optional provisions, known as ______________(a.k.a. endorsements), give the policyholder the opportunity to customize the policy to meet specific needs and circumstances. These options are either included at the time the policy is purchased or can be added later with evidence of insurability. They usually require an extra premium, but the extra premium for the rider does not enhance the policy's cash value but rather is used to cover the cost of the increased risk as a result of the inclusion of the benefit.
Life Insurance RIDERS (a.k.a. endorsements)
The least common, and least expensive, option is a _________________ policy where renewability and conversion are subject to proof of insurability, premiums may fluctuate, and even death benefits may vary during the coverage period. The low premium cost of Level Term compared to permanent plans is valuable for families with a need for high coverage but with limited financial means to pay the premium and can allow additional money to be diverted to investments and savings.
Non-Guaranteed Level Premium Term
In what form of insurance listed below will you find insurance protection combined with cash accumulation? Permanent insurance Term insurance Extra insurance Temporary insurance
Permanent insurance
Type of life insurance that is permanent (More costly than term ins)
Permanent insurance: Ex: Whole Life, Universal Variable life, Index Universal life, etc.
The _______________rider is used as a marketing device to encourage the purchase of Whole Life policies. Increasing Term coverage is added to the base policy with a death benefit that equals the cumulative premiums paid to date. If the insured dies within a stated time limit (i.e. the length of the term coverage) this ins is added to the base policy and increases the amount of the death benefit by the total of all premiums paid, thus "returning" the premiums.
RETURN OF PREMIUM RIDER
A ________________________requires one large premium payment at the beginning of the policy period; the policy is then fully paid-up with no further premium payments required. The death benefit provided by this single payment is usually 4-6 xs the payment amount, depending on the insured's age.
SINGLE PREMIUM WHOLE LIFE POLICY
A variation of Joint Life policies is __________________life AKA JOINT AND LAST SURVIVOR, which pays the death benefit (usually $1 million or more) upon the second death rather than the first. This type of policy is frequently used when there will be a large estate tax liability upon the death of the 2nd spouse. The marital deduction allows the deferring of the estate tax payment until after the death of both spouses. The ins proceeds are designated to offset this tax liability.
Survivorship Life
The availability of "tax-advantaged" cash values in SINGLE PREMIUM WHOLE LIFE policies (i.e. tax-deferred growth and tax-free loans) encouraged corp to buy large Single Premium plans and use them as tax shelters; their unintended purpose To mitigate this, in 1988, Congress enacted the __________________, which, among other things, changed the tax law definition of life ins. This act set limitations on the amounts of premium proportionate to death benefits that can be used when purchasing life policies without creating a "Modified Endowment Contract" (MEC). Single Premium Whole Life Policies purchased since June 21, 1988 do not allow fully tax-free loans and are classified as MECs.
Technical and Miscellaneous Revenue Act (TAMRA)
T/F: A licensee licensed to act as a viatical settlement broker or provider as of December 31, 2009 is considered to have met the requirements for licensure as a life settlement broker or provider. Is a life settlement broker license is required for a licensed attorney, certified public accountant, or accredited financial planner who represents the policy owner and whose compensation is not paid directly or indirectly by the life settlement provider? Yes/ No
True No, not required
True or False: Life insurance policies are owned and controlled by an individual or an entity that may or may not be the insured. The owner must have an insurable interest in the insured stemming from a "blood or business" relationship.
True and true (Both true)
The policy takes effect after the acceptance by the ins co. of an offer made by the applicant by an application containing medical, occupational, avocational (i.e. hobbies) and other general info. regarding the insured. In addition to the app the ins co will require the first ________________________ and the _________________________________.
first annual or installment premium AND a medical exam, blood test, urine specimen, or other medical tests needed to evaluate/determine the person's insurability Once requirements are met, the contract is considered in force even if the policy has not been issued or delivered to the insured. The contract will continue in force until its agreed end-date and so long as the subsequent ins premiums are paid..
LTC Long Term Care training (CHOSE ONE:) is or is not required when transacting accelerated death benefit provisions or riders that do not require services, since the benefit is simply an advance on the payment of the death benefit. · LTC training (CHOSE ONE:) is or is not required when an agent is transacting accelerated death benefit provisions or riders that require services to be provided to a chronically ill insured.
is not is
The concept of spreading the financial loss which was created by one person's death among a large number of people, thus minimizing the cost for each individual in the group refers to: 1. The principle of indemnification T 2. he principle of insurance 3. The principle of life insurance 4. The principle of risk
3. The principle of life insurance
Which of the descriptions below would best describe "insurable interest" in reference to life insurance? 1. Interest paid in excess of the premium by the policy 2. Financial benefits that arise out of the policy when the insured dies 3. There must be a loss large enough to create economic hardship 4. Having a financial interest in the insured's life to continue
4. Having a financial interest in the insured's life to continue
Life Settlements evolved from the Viatical Settlement concept and are typically promoted to consumers between the ages of __________-___________. These arrangements include: Allowing someone to purchase life ins on one's life in exchange for an immediate lump sum payment of an agreed amount. Entering into a contract for "free" or "no-cost" ins on one's life. Purchasing a life ins policy for the sole purpose of selling the policy to a third-party, whether immediately or in the future.
65 and 85.
______are legally required to submit all app that are received, but the field underwriter plays a role in the underwriting process as a pre-selector of "good risks" before they are evaluated by the home office underwriter. This role requires the agent to seek out those insurance prospects that exhibit appropriately insurable risk profiles.
Agents
What kind of problems fo Life Settlements present to insurers, legislators and the consumer? T/F: They may be viewed as violations of the principle of insurable interest, which is intended to ensure that a person buying a life ins policy has an economic interest in the continued life - not death - of the insured. T/F: Often vulnerable seniors are targeted consumers by Life Settlement speculators. T/F: Insurers (ins co.s) will often decline to write additional ins there is existing substantial coverage. Once a senior has life ins taken out on their life and sells the policy, the senior may be unable to obtain more life ins at a later date should the need arise.
All TRUE
Which of the following statements regarding advertisements TERM INSURANCE for AGED 55 or OLDER is true? Clearly distinguish basic life insurance benefits from supplemental benefits such as accidental death benefits. Television or radio advertisement for Term Life insurance directed to individuals 55 years of age or older must, in the spoken text, contain the statement "policy (or certificate) benefits and limitations should be carefully examined prior to purchase." Prominently note any condition affecting the policy or certificate holder's continued insurability. If Term coverage terminates at a stated age, or at the end of any designated period, that fact and the specified age or designated period must also be disclosed. All of the choices are true.
All of the choices are true.
_________________ is a type of Level Term Policy that has________-year coverage period that is renewable annually Initially, these policies are an inexpensive form of life ins but, as with all Renewable Term policies, the premium will increase over time to reflect the insured's attained/actual age at each renewal. A common use of ART is as a group life insurance plan.
Annual Renewable Term a one year
This traditional type of Whole Life insurance is a contract that has a fixed level premium and level death benefit. Also known as Straight Whole Life, ____________________ LIFE gets its name from the fact that the premium is payable for the entire life of the insured or until age 100. The plan has guaranteed cash values (resulting in relatively low interest rates) that begin to grow after the first several years and that are available to the policyholder in the form of a fixed interest rate policy loan (usually between 5-8%) or the policy can be surrendered entirely for the accumulation to date.
CONTINUOUS PREMIUM WHOLE life
Cash values are held in a _________________________ earning a current interest rate that is guaranteed annually and subject to a min called a CONTRACT RATE.
CONTRACT FUND
The ___________________ rider increases the face amount of ins (usually without evidence of insurability) at specified intervals by a percentage tied to the Consumer Price Index (CPI) or by an amount stated in the contract. There is an additional premium for the additional coverage provided.
Cost-of-Living Adjustment (COLA) rider
A ________________ Rider provides a designated lump-sum payment if the insured is diagnosed as suffering from a specified critical illness or has undergone a related surgical procedure. The rider typically covers one or more of the following specified conditions: · Cancer. · Coronary Artery Bypass Surgery. · Heart Attack (Myocardial Infarction). · Kidney Failure (End-stage Renal Failure). · Major Organ Transplant. · Stroke. · Heart Valve Surgery.
Critical Illness Rider
______________________________ policies are essentially Whole Life policies with a maturity date earlier than age 100. They provide life insurance protection for a limited number of years (such as a 20-Year Endowment or a specified age (often the retirement age of the insured) and cash values that will pay the policyholder a benefit equaling the face amount at the EOC. (end of cov) They are the most costly form of life ins bc they mature earlier than Whole Life contracts, Endowment policies However, their cash and loan values are also higher at younger ages than other forms of insurance for the equivalent face amounts. These policies are designed to build and accumulate cash values quickly and typically purchased to provide a living benefit for a specified future time or event; for example, retirement, or funding a child's college education. However, the wide availability mutual funds and other forms of investment make demand for Endowment policies rare.
ENDOWMENT policies
This policy combines ins coverage for all the members of a family (wife/husband/children) into one contract known as: ____________policy It usually provides a permanent plan of ins. on the "base insured," and level term "family riders" on other family members. The spouse, and children upon the age of majority (i.e. 18), have the right to convert to a permanent plan of ins up to the amount of the term coverage without evidence of insurability. Once the policy is issued, additional children, including adopted and stepchildren are automatically covered at no extra cost.
FAMILY PROTECTION POLICY
Due to competitive products during the inflationary period of the late 1970s and early 1980s, U.S. ins co began utilizing ins policies with internal rates of return reflecting market conditions and current interest rates. WHAT TYPE OF POLICIES ARE THESE? These "flexible" (or "interest sensitive") policies feature: Flexible, death benefits and premiums. While fixed premium policies provide a reciprocal, fixed death benefit, with flexible policies the policyholder can increase or decrease either or both as individual needs and circumstances change. A cash value accumulation reflects current interest rates and fluctuates as interest rates change. Access to the tax-deferred cash values is available either thrU a policy loan or a partial withdrawal.
Flexible Policies
Which rider gives the insured the option of obtaining additional insurance on their own life at certain selected dates in the future, at certain policy intervals or at specified ages. There is no evidence of insurability required at the time the option is exercised. COST-OF-LIVING ADJUSTMENT (COLA) LIVING NEEDS/ACCELERATED DEATH BENEFIT RETURN OF PREMIUM RIDER GUARANTEED INSURABILITY OPTION (GIO)
GUARANTEED INSURABILITY OPTION (GIO)
The __________________ rider (a.k.a. GUARANTEED PURCHASE OPTION or GPO) is closely related to the Cost of Living Adjustment. It gives the insured the option of obtaining additional ins on their own life at certain selected future dates, at certain policy intervals, or at specified ages. NO evidence of insurability is required at the time the option is exercised. The insured normally has a certain amount of time to exercise an option to purchase the ins (e.g. 90 days) and if additional insurance is not purchased within this time period the option for that particular age expires. When the new coverage is purchased under this option it is issued at standard rates based on the insured's attained age at the option date.
Guaranteed Insurability Option (GIO) rider
An _____________________policy premium can fluctuate based on the insurer's mortality experience, expenses and investment return up to a maximum amount stated in the insurer's premium tables.
Indeterminate Level Premium Term
___________________________ provide face amounts that increase to keep up with inflation and the increased cost-of-living- increases which are typically tied to the Consumer Price Index. The insured either pays an increased premium each time the death benefit increases or pays a higher than average level premium over the life of the policy.
Index-Linked policies
In an ____________________ plan, the cash value pays a return based on increases in an equity index (e.g. the S&P 500), versus a fixed rate as with standard universal life insurance plans.
Indexed Universal Life
________________________ life policies provide protection for two or more insureds. The most common type provides coverage for two people, with the death benefit payable upon the death of either insured regardless of who dies first. In most cases, the surviving insured is named as the beneficiary. This ins is known as _______________(a.k.a. First-to-Die). The survivor then has the option of purchasing an individual contract without evidence of insurability. The premium on a Joint Life contract is less than that of two separate contracts on the same named insureds. T/F: When calculating the premiums, the insurer will usually "average" the cost of the two insureds (based primarily on age) and charge a single premium rate for both lives. T/F: The underwriting requirements are the same as if the insureds were applying for separate contracts of insurance. Joint Life policies are often purchased by WHO? BUT also popular in business situations where they are purchased between stockholder-owners or business partners to guarantee funds for either a business continuation or to buy-out the interest of a deceased partner's heirs.
Joint Life/Survivorship Life JOINT LIFE (1st to die) True True husbands and wives BUT also biz partners
_________________ policies that are purchased on the lives of children. They are primarily intended to cover funeral expenses and often provide relatively small amounts of coverage. However, larger policies might also be purchased to protect the insurability of the child for the future. One of the most common types of juvenile policies is the ___________ JUVENILE. This policy provides a level face amount from the date of issuance until usually age 21 or 25. At this age, the face amount "jumps" to a higher level (e.g. $1,000 increasing to $5,000), which remains level for the policy's duration. The premium normally remains level despite the increase in face amount. A "Payor Benefit" can be included in a child's policy to guarantee that premiums will be paid in the event of the death or disability of the policyholder or premium payor. Premiums are usually waived until the insured reaches age ______________
Juvenile Insurance policies JUMPING JUVENILE. 21 or 25.
__________________ insurance provides a death benefit that remains the same for a specified period. Coverage periods can be as short as one year but are often 1 0, 15, 20 or up to 30 years. This policy is designed to deal with losses due to premature death and does not build any "living benefits" (cash values). A Guaranteed Level Premium Term policy has a fixed premium throughout the period of coverage and is the most common type of Level Term. In an Indeterminate Level Premium Term policy, the premium can fluctuate based on the insurer's mortality experience, expenses and investment return up to a maximum amount stated in the insurer's premium tables. The least common, and least expensive, option is a Non-Guaranteed Level Premium Term policy where renewability and conversion are subject to proof of insurability, premiums may fluctuate, and even death benefits may vary during the coverage period. The low premium cost of Level Term compared to permanent plans is valuable for families with a need for high coverage but with limited resources to pay for it and can allow additional money to be diverted to investments and savings.
LEVEL TERM insurance
Whole Life insurance is permanent ins that provides a _________ death benefit __________ insurance protection and __________ cash value. Increasing, Level, Increasing Decreasing, Increasing, Level Level, Decreasing, Increasing Level, Increasing, Decreasing
Level, Decreasing, Increasing
_____________________ is a person who, on behalf of an owner, and for a fee, commission, or other valuable consideration, offers or attempts to negotiate life settlement contracts between an owner and providers. They represent only the owner and owe a fiduciary duty to the owner to act per the owner's instructions, and in the best interest of the owner, notwithstanding the manner in which the broker is compensated.
Life settlement broker
________________________Rider is designed to provide coverage for one or more necessary health or personal care services provided in a setting other than an acute care unit of hospital-for living benefits such as institutional care (any convalescent, extended care, custodial care, skilled, or nursing home facility), home healthcare (any personal, home health or homemaker services) and community-based care (any hospice, respite care or adult day care.) LTC riders are purchased as additional coverage that is not tied to the death benefit and will not reduce the death benefit when used.
Long-Term Care Rider
The cash value in a Whole Life Policy is invested in the insurer's relatively safe GENERAL ACCOUNT (fixed income funds, real estate, treasury bills etc.) and is credited with tax-deferred, guaranteed interest rates (traditionally 3-5%). This allows the cash value to be structured to grow equal to the death benefit at age 100. At this point the policy is said to have reached its _________________________ (i.e. "matured" or "endowed"), the cash value is paid to the policyholder and the policy ends. The amount of a policy's cash value depends on a number of factors, including: The face amount (i.e. the original death benefit) of the policy. The duration and amount of premium payments. The length of time the policy has been in force. A larger face amount results in a larger cash value while shorter premium payment periods result in quicker cash value growth.
MATURITY DATE
Since 1988, any life-ins policy paid up in 7 payments or fewer (or if any unscheduled premium deposits exceed the 7y limit) automatically become a ________________________________ If an insured policyholder fails, this "seven-pay test" the result is full income taxation of any monies withdrawn or borrowed from the cash value of the policy exceeding the original cost. There is also a 10% penalty on these amounts if they are received before the age of 59½ (i.e. they are treated similarly to IRAs). This class of policies has eliminated sales of Single Premium Whole Life. It is the insurers' responsibility to notify insureds when policies exceed the Seven y-Pay Test and become MECs. It is the producer's responsibility to understand the law and its implications, as well as to provide a full explanation of the ramifications of the law to prospects and clients.
MODIFIED ENDOWMENT CONTRACT (MEC).
Mortgage Redemption Contracts (also known as _____________________insurance) are designed to pay off a mortgage upon the insured"s death. They are typically written as a form of individual Decreasing Term insurance with the face amount decreasing as the debt is paid off, so the amount of ins protection always equals the amount owed. If the borrower/insured dies before the debt is paid, the life ins pays off the debt or leaves a sum of money for the beneficiary to pay off the mortgage.
MORTGAGE PROTECTION ins
Which of the following are TRUE regarding Accidental Death Benefit riders? Accidental Death Benefits are generally for older people (beyond the age of 55) Accidental Death Benefits automatically double the face amount of the policy Accidental Death is loosely defined as death resulting from an illness or accident None of the answers are correct
None of the answers are correct Not typically written for people 55,60 and over Not for illness-strictly accident MIGHT only be double IF the insured dies within typically 90 days (certain period of time) as a result of a direct accident. Accidental death is strictly defined in that it does not include death resulting from an illness, ailment, or some other disability that develops as an indirect result of the accident. Because of the higher incidences of accidents in older people, this benefit is generally not available beyond age 55 or 60.
____________________________ combines a traditional Level Term ins policy with a return of premium feature that allows the policyholder to recoup the full cost of the policy at the end of the term of coverage. A common return-of-premium policy might cost about 25% to 50% more a year than regular term. This additional amount is invested by the insurer to provide the cash for the returned premiums. The amount of the extra charge for the ROP feature is based on the length of time until the policyholder receives the returned premiums. A 30-year ROP Policy is less costly than a shorter one because there is more time for the additional funds to grow. A 35-year-old male in good health might pay 45% more for a 30-year ROP Term Policy than regular Level Term Policy from the same insurer. A 20-year policy for the same insured might cost more than 3xs the cost of regular term, while a 15-year policy could be almost 6xs the cost of traditional Term ins.
Return of Premium Term (ROP Term)
_________________ins is classed as temporary insurance because it provides protection for a designated period of time and must be renewed, or it expires. It is usually purchased to provide insurance for a limited period; typically, one to 30 years. Term policy premiums are low and calculated to be sufficient to cover only mortality costs and expenses for the period insured; The shorter the initial term period, the lower the initial premium. Tho term policies generally build no ________________ , they provide a high level of coverage at a minimal cost. The death benefit is payable only if the death of the insured occurs during the policy term and while the policy is in force. Tho Term Life premiums are low compared to other types of life ins, a feature of many Term policies is the inclusion of a specified initial premium and a schedule/ table, of the allowed yearly min and max premium increases. This permits the insurer to increase the premium within this range at specified intervals. Term insurance policies address the fact that an insured becomes a higher risk over time. To offset this and to accommodate the different needs of insureds, one of three options is usually built into the construction of the Term Policy. The company will: increase the premium, reduce the death benefit or use the level premium concept. As a result, Term Life policies are described by "if" or "how" the death benefit changes during the term of the policy.
Term Life ins no cash value
The word ______________________ is used to describe a product that is comprised of two parts — 1. pure ins protection provided by Annual Renewable Term and 2. a cash value account earning a current interest rate. The premium payments and death benefit are chosen by the policyholder subject to co. minimums. The premium, which may be paid on a flexible instead of fixed basis, is credited to the cash value inside the policy and the mortality cost and admin. charges are deducted. The remaining cash value is credited with current interest rates that are guaranteed on an annual basis. This structure allows the policy to remain in force as long as there is sufficient money in the cash value to meet monthly expenses. This is helpful in the event that the policyholder skips or stops making premium payments, which can be made per the policy's schedule: including "stop-and-go" and lump-sum, unscheduled, premium deposits. One of the unique features of a Universal Life contract is its UNBUNDLED design; the contract will clearly define the policy's internal components. This means that the policy specifically designates which portion of each premium dollar paid is allocated toward the ins element (mortality) and how much towards commissions, acquisition costs, underwriting, and admin costs (expense loading). The balance is held in a CONTRACT FUND (cash value) earning a current interest rate that is guaranteed annually and subject to a minimum called a CONTRACT RATE.
UNIVERSAL LIFE (UL)
The death benefit from a ________policy may be a level amount of ins that can increase, or a level amount plus the cash value, or a level amount plus the premiums paid depending on the option chosen. Option I (Option A) This is the default where the policyholder chooses a level death benefit as the amount of in. This death benefit will equal the cash value plus the remaining pure insurance (decreasing term plus increasing cash value). Initially, the death benefit will remain level; Then, if the cash value starts to approach the stated death benefit before the policy matures, the death benefit will start to increase in an amount equal to the rise in cash value. (The difference between the death benefit and the cash value is known as the "IRS Corridor." This is required to ensure that the policy retains its status as life insurance according to the Internal Revenue Code.) Option II (Option B) This is the more expensive option where the death benefit equals the pure insurance plus the accumulated cash value (level term plus increasing cash value). The death benefit increases by the amount of the annual increases in the cash value. Option III (Option C) Here, death benefit equals the face amount as stated in the policy plus the accumulated total of all premiums paid. The result is a return of the out-of-pocket cost of the ins to the beneficiary. Not all insurers offer this option.
Universal Life Policy
________________________insurance shares many features with other forms of permanent ins including a minimum level face amount and min. premium payments. The primary difference is how the policy revenue grows. In these policies, the cash value is invested in the insurer's (ins co) SEPARATE ACCOUNT, which consists of a portfolio of mutual funds, stocks, bonds, money market accounts, and government securities. The policyholder can choose a specific investment strategy (e.g. more or less aggressive). The interest rates credited will fluctuate depending on the performance of the investments chosen by the policyholder and (choose one) ARE or ARE NOT guaranteed. As with many types of permanent ins, the cash value becomes part of the _____________benefit. Depending upon the performance of the investment chosen by the policyholder, the death benefit can increase or decrease BUT will never fall below a min amount; the amount is stated in the contract. Although Variable Life is a life insurance product, it is also considered to be a security, and as such falls under the jurisdiction of both federal and state regulation. On the federal level, Variable Life insurance is regulated by the SECURITIES AND EXCHANGE COMMISSION (SEC) and the FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA). On the state level, these policies are regulated by state ins. depts.
VARIABLE LIFE insurance ARE NOT death benefit.
The _____________________ provision prevents a policy from lapsing in the event the policyholder cannot pay due to a disability. In the event of a total and permanent disability, the company will waive any premium payments after a specified period of time (usually six months). Many companies will also refund all premiums that the insured has paid since the inception of the disability. The policy remains in full force during the waiver period. The company will continue to waive all premiums that are due for the duration of the insured's disability. In addition, if the policy has cash value the insured still has access to it in the form of a policy loan as if premiums were being paid out-of-pocket to the company. If the insured dies while the premiums are being waived under this option, there is no effect on the amount payable. Another version of this benefit is known as the "waiver of monthly deduction" which waives the monthly deduction on a pre-authorized check payment plan during a disability.
WAIVER OF PREMIUM
_________________________ is a proposal used in the sale of a life ins policy that shows both guaranteed elements and non-guaranteed elements based on the insurer's disciplined current scale. When used in a basic illustration: a) "Disciplined Current Scale" a scale of nonguaranteed elements that is reasonably based on actual recent historical experience. b) "Non-Guaranteed Elements" are premiums, benefits, values, credits or charges under a policy of life ins that are not guaranteed or not determined at issue.
"Basic Illustration"
The difference between the death benefit and the cash value is known as the ____________________ It is required to ensure that the policy retains its status as life insurance according to the Internal Revenue Code.
"IRS Corridor."
____________________________ means a presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years and that is one of the three types defined below:
"Illustration" 1. "Basic Illustration" a proposal used in the sale of a life ins policy that shows both guaranteed elements and non-guaranteed elements based on the insurer's disciplined current scale. When used in a basic illustration: a) "Disciplined Current Scale" a scale of nonguaranteed elements that is reasonably based on actual recent historical experience. b) "Non-Guaranteed Elements" are premiums, benefits, values, credits or charges under a policy of life ins that are not guaranteed or not determined at issue. 2. "In Force Illustration" an illustration furnished at any time after the policy that it depicts has been in force for one year or more. 3. "Supplemental Illustration" an illustration furnished in addition to a basic illustration that may be presented in a format differing from the basic illustration.
The Fed Gvt. has established life insurance programs for active and reserve military personnel, retired veterans and federal employees. Name the three of the most commonly used.
"Servicemembers Group Life Insurance" (SGLI), "Veterans Group Life Insurance" (VGLI) Federal Employees Group Life Insurance (FEGLI).
Whichever method is used, the insurance can be written on an ___________________ basis, meaning that the reinsurer will only pay a portion of the loss that exceeds a dollar threshold retained by the ceding company. The insurance can also be written on a "quota share" basis meaning that each company will share the loss on a pro rata or fixed percentage basis.
"excess of loss"
Insurers generally do not make a profit on most life ins policies until policy years 3-5 due to the high 1st-year acquisition costs and high front-end agent commissions. To keep expenses down and premiums as low as possible, insurers must retain biz "on-the-books" for a long time. This need is called_ "____________________" Long-lasting policies, renewal fees help the insurer recoup policy issuing costs. Plus, agents get renewal commissions. Thus, the insurers retain longer policies to have greater profit to both the ins co, and, potentially, policyholders thru dividends.
"persistency"
Any broker, agent, or other person (other than an insurer) who violates this article is punishable by min: $________fine for the 1st violation. Additional violations can range from $_________ to $_________ per violation. Patterns of action by policyholders who purchase replacement policies from the same agent, after indicating that replacement is not involved, will be considered proof that the agent knew that replacement was intended, and will constitute proof that the agent intended to violate this article. An insurer (ins co) who violates this article is punishable by min: $________fine for the 1st violation. Additional violations can range from $_________ to $_________ per violation.
$1,000 first violation $5,000 to $50,000 per additional violation $10,000 first violation $30,000 and $300,000 per violation.
What are the two main purposes of a Waiting period/Probationary Period with respect to a new employee being eligible for group coverage?
1) Avoids providing immediate coverage for people who join the group after the effective date of the policy. 2) 2) Allows the employer to avoid covering new employees immediately also reduces the employer's expenses, especially if the business is one where there is a high turnover of employees.
Name and give example of the THREE major distribution systems:
1) Captive or exclusive agent (1) Allstate, State Farm, etc 2) Independent Agent-Represents numerous companies- BS, Healthnet contracts- the agent can shop the best insurance for a client. 3) Direct Rider- Geico, AAA, USAA- an agent who is paid a salary-NO commission. The employer gets them a license.
Life Settlements present several problems to insurers, legislators and the consumer: LIST THREE
1) They may be viewed as violations of the principle of insurable interest, which is intended to ensure that a person buying a life ins policy has an economic interest in the insured's continued life - not death. 2) Often, the vulnerable elderly are the consumers targeted by Life Settlement speculators. 3) insurers /ins co. will often decline to write additional ins if substantial coverage already exists on an insured's life. Once a senior has life ins taken out on their life and they sell their policy, the senior may be unable to obtain more life ins at a later date.
Legitimate associations can qualify for group insurance. What are the two requirements for an association group.
1) the group, (union, trade association, civic group) must be a "natural group," which means that it has to have been formed for some other purpose than to secure group insurance benefits. 2) the association has to have been in existence a certain length of time, usually two years.
List the three factors that are used to determine that valid insurable interest exists in a given situation:
1. An individual has a legitimate financial interest in the person or item being insured. 2. The policyholder would experience a potential economic hardship in the event of the insured's death of or the loss/destruction of the insured property. 3. There is no possible gain or profit if payment is made as the result of a loss.
Name the three main types of direct marketing systems:
1. Direct Writing Companies (Direct Response System) These companies hire individuals as agent-employees (a.k.a. direct writers) to market their products. Often, direct writing co. also use mass marketing methods, newspaper/magazine ads, e-media (Internet/ television/radio) and direct mail campaigns, to contact the public. In such cases, the prospective client returns a reply card, writes, or calls for further information. 2. Non-Insurance Sponsors These organizations target select groups of individuals who have a history of making systematic or periodic payments. The most common organizations using this method are banks, stock brokerage firms and credit card companies offering credit or mortgage insurance. 3. Vending Machine Sales RARE! Traditional method of selling TRAVEL ACCIDENT INSURANCE at airports, providing a large amount of coverage for a relatively low premium. Coverage is valid for the duration of the trip only (either round-trip or one-way). Since most travel insurance is sold through travel agencies or direct writers and professional life agents are not authorized to transact travel accident insurance, vending machine sales are rare.
There are four main parts to any insurance policy, which can be recalled using the acronym E.P.I.C.:
1. Exclusions. 2. Policy Face (a.k.a. Title Page or Specification Page). 3. Insuring Agreement (a.k.a. Insuring Clause). 4. Conditions (a.k.a. Provisions).
Insurers' responsibilities to their agents: Insurers /ins co. should: T/F 1. Not permit the agent to act and fulfill all the terms of their employment contract. T/F 2. Recognize all the provisions of this contract. T/F 3. Pay compensation (e.g. commissions) in a timely manner as well as reimbursement for business expenses. T/F 4. Keep the agent informed of new product developments and marketing methods.
1. False 2. True 3. True 4. True
1. The ____________ is the person who is covered by the policy upon whose death or disability promised benefits will be paid to the person entitled. 2. The _______________ is the person or entity (organization, partnership, corporation etc.) who owns the policy and has total control of all rights, privileges, options and benefits contained in the policy. All changes made to the policy must be approved in writing and signed by the policyholder. 3. The _____________is the person or entity named in the contract to receive the promised benefits of the policy upon the insured's death 4. The________________is the individual/organization that fills out the app. 5. The __________ is the party responsible for paying the premiums as they become due. While there could be up to five different parties involved in the app process, in most cases the insured, policyholder, applicant and payor are the same individual. If the insured and the policyholder are two different individuals, a legitimate economic or familial relationship must exist between the owner and the insured (i.e. insurable interest)
1. INSURED 2. policyholder 3. BENEFICIARY 4. BENEFICIARY 5. premium payor
Beyond these two general categories (permanent and temporary) all life insurance contracts fall into one of four classes of policies: List them.
1. Individual Insurance. 2. Group Insurance. 3. Industrial Insurance. 4. Credit Insurance.
There are two methods for transferring or distributing an estate: 1. __________________________ Transfers or Trusts made while the estate owner is still living. These can be done in the form of: a) Gifts. b) Trusts. c) Policy ownership under rights of survivorship. 2. _____________________________ transfer of property post death of estate owner thru the use of a will. The law requires that property can only be transferred at death by means of documents that meet the exact requirements of state statutes.
1. Inter Vivos 2. 2. Testamentary Transfers or Trusts
After the prospective insured is chosen by the agent and the app is submitted, the Home Office underwriter begins the process of "post-selection." Underwriters evaluate and rate a risk based on app info and other sources including the DMV records, medical exams, attending physician statements, special questionnaires, inspection reports and consumer reports. Although each co. has its own criteria for insurability and risk classifications, the info elicited from, and about the applicant is relatively the same. and addresses two primary questions: List both of them:
1. Is the applicant insurable? 2. If the applicant/owner and the insured are two different people, does an "insurable interest" exist between them?
Insurance companies are generally divided into four main departments: List them.
1. Marketing and Sales (a.k.a. distribution systems). 2. Actuarial. 3. Underwriting. 4. Claims.
***List the four main categories of hazards:
1. PHYSICAL HAZARDS include tangible, physical, structural, or operational features of a risk situation. These can typically be seen, heard, touched, tasted, or smelled. Examples: unsafe brakes on a vehicle, the location or structure of a building, an individual's health status, or unsanitary conditions. 2. MORAL HAZARDS can result from a lack of integrity in the character of the proposed policyholder or insured. Example: Dishonest or exaggerated claims is considered a moral hazard. 3. MORALE HAZARDS arise from a state of mind causing indifference or apathy toward loss. Examples: Alcohol, drug abuse and tobacco use. This indifference can result in extreme carelessness or actions taken without reasonable forethought which may cause physical injuries or other losses. 4. LEGAL HAZARDS in the opinion of the insurance co, situations that are more likely than average to result in legal entanglements. Legal hazards are often associated with cases of possible unfair discrimination.
Categories (lines) of insurance:
1. Personal- individual 2.
List the three principal types of losses:
1. Property loss. 2. Liability loss (associated with legal claims). 3. Human loss (i.e. personal losses faced by individuals or families) or Personnel loss (i.e. losses faced by businesses) associated with the death or disability of individuals.
Which of the following are benefits of Life insurance? 1. Replacement of large possible losses with small known losses and security, peace-of-mind and reduction of uncertainty 2. Motivating and stimulating disciplined savings and encouraging loss controls and providing investment capital which is significant to the economy. 3. Keeping families and businesses intact and providing a basis for credit. 4. All of the choices are correct.
1. Replacement of large possible losses with small known losses and security, peace-of-mind and reduction of uncertainty 2. Motivating and stimulating disciplined savings and encouraging loss controls and providing investment capital which is significant to the economy. 3. Keeping families and businesses intact and providing a basis for credit. 4. All of the choices are correct.
There are five basic ways to manage any type of risk (think acronym S.T.A.R.R.):
1. Sharing. 2. Transfer. 3. Avoidance. 4. Reduction. 5. Retention. 2.5.1 Risk Sharing SHARING is a form of risk management frequently utilized by insurers in their contracts with each other. If a particular risk is substantial, insurers will often pool their resources together to share the risk between them. Risk sharing can also refer to situations where a risk is partially retained and partially transferred (see below). 2.5.2 Risk Transfer TRANSFER of risk shifts the potential of loss from one person to another (via lawsuit) or from an individual to a group (by pre-arranged agreement, i.e. insurance). 2.5.3 Risk Avoidance AVOIDANCE (a.k.a. loss prevention) means bypassing any situations, events, or circumstances that create the possibility of a loss. For example, by choosing not to install an in-ground swimming pool, the risks associated with the pool are avoided. Risk avoidance is an effective method of risk management, but it is not always practical or convenient and relatively few risks can be properly handled in this manner. 2.5.4 Risk Reduction REDUCTION of risk occurs when the risk cannot be avoided entirely and instead action is taken to reduce the chance of loss. For example, exercise, proper diet, and not smoking will not eliminate the possibility of illness or death, but it will lessen the probability of illness or death occurring prematurely. 2.5.5 Risk Retention RETENTION of risk (a.k.a. self-insuring) occurs when persons or organizations exposed to risk accept responsibility for the potential loss themselves. Retention is, effectively, the opposite of risk transfer through insurance. Risk retention may be undertaken intentionally in order to share losses; an example being a so-called "self-insured retention" where an insured person is required to pay a portion of covered losses in order to contain an insurance company's costs (e.g. deductibles, co-payments and coinsurance). A risk may also be retained unintentionally due to either a lack of awareness that the risk exists or due to the underestimation of the likelihood of loss. Everyone retains risk to a certain extent since it would be impossible to cover every possible contingency. In fact, while inadvisable in many cases, loss retention can be an effective method of risk management if the potential losses are easily predictable, or the worst possible loss is relatively minor. In such cases a person may reasonably decide to assume the risk themselves. 2.6 Transfer of Risk TRANSFER OF RISK is the basic principle of all insurance. Although risk transfer through insurance will not eliminate the possibility of property loss, liability, death, disability, or illness, it relieves the insured individual of the potential financial losses associated with these risks.
Name the three major differences between social insurance provided by government agencies and private insurance:
1. Social insurance participation is mandatory and is automatic for all eligible taxpayers. 2. Social insurance benefits are not provided under contract or policy but are prescribed by law. Any changes that are made to benefit structures or provisions are made as a result of changes in the law. 3. Social insurance seeks to be adequate to meet the needs of the public rather than be equitable in terms of the ratio of taxation to benefits provided.
In addition to the ins. co an agent, there may be as many as five separate individuals who play various roles in the process of applying for an ins. policy. Name them.
1. The INSURED is the person who is covered by the policy upon whose death or disability promised benefits will be paid to the person entitled. 2. The policyholder is the person or entity (organization, partnership, corp., etc.) who owns the policy and has total control of all rights, privileges, options and benefits contained in the policy. All changes made to the policy must be approved in writing and signed by the policyholder. 3. The BENEFICIARY is the person or entity named in the contract to receive the promised benefits of the policy upon the death of the insured. 4. The applicant is the individual or organization that fills out the application form. 5. The premium payor is the party responsible for paying the ins. premiums when they are due. NOTE: ** While there could up to five different parties involved in the app process, typically, the insured, policyholder, applicant and payor are the same individual. If the insured and the policyholder are two different individuals, a legitimate economic or familial relationship must exist between the owner and the insured (i.e. insurable interest)
The Human Life Value Approach The concept of the "Human Life Value Approach" was first developed in 1924 by Dr. Solomon Heubner who argued that the value of a human life can be expressed as a dollar valuation based on a "bread-winner's" estimated future net earnings. Dr. Heubner looked at four different criteria: List them. Answer why this approach is not frequently used.
1. The individual's net annual salary. 2. The individual's annual expenses. 3. The number of years the individual has left to work until retirement. 4. The value of the individual's dollar as it depreciates over time. It does not consider increases in wages or standard of living, other sources of income or changes in a family situation. Consequently, the "needs approach" or "estate planning" (for those with larger estates and higher net worth) are used more frequently.
A group life or health insurance policy can insure one person, or it can be extended to include the primary insured's dependents. Covered dependents can also benefit from dividends paid or premium refunds generated by the policy. List the five recognized categories of dependents:
1. The insured's spouse. 2. The insured's children. 3. The insured's dependent parents. 4. The insured's registered domestic partner. 5. Any other person for whom dependency can be proven. A dependent is determined by their relationship to the insured, residency in the home, or appearing on the policyholder's income tax return as a financial dependent. Unmarried children, including adopted, stepchildren and foster children, of the insured are eligible for coverage under a group policy until they attain a specified age (19 or age 24 if they remain in school*). There are also special laws that require insurers to provide coverage under a parent's policy indefinitely beyond the maximum age for a child who is incapable of self-support because of disability or physical or mental IMPAIRMENT. CA law requires that health insurance policies that provide coverage on a parent must cover newborns from the moment of birth. The insurer can insist, however, that the parent submit a notice of the birth to the company, and an application and additional premium must be submitted within a specified period. *The Patient Protection and Affordable Care Act of 2010 requires health insurers to cover dependent children up to age 26.
Which best describes a "Captive Agency System"? 1. A person enters into agency agreements as an independent contractor and potentially represents more than one co. at a time. 2. The process of searching for potential customers, selling policies, and servicing existing contracts. 3. All of the choices are correct 4. The agent is a representative of a single insurer and is obligated to only to that company, or give that co. the "first right-of-refusal."
4. The agent is a representative of a single insurer and is obligated to only to that company, or give that co. the "first right-of-refusal."
While "ownership" is the major indicator of insurable interest in many types of insurance (e.g. property and casualty), there are two types of insurable interest in the life insurance field:
1. The interest that exists in close family relationships, based, not only on potential financial loss, but also on the possibility of traumatic emotional loss and is sometimes referred to as a "blood" relationship. 2. On a specific financial interest in the insured person, such as that which business partners have in each other or that creditors have in debtors. In life insurance, insurable interest must exist at the time of application for insurance, but it is not necessary at the time of the insured's death. This is in contrast to property and casualty insurance where insurable interest must exist at both the beginning of the contract and at the time of the loss.
The amount of the benefit received varies with each worker and is based on two factors:
1. The worker's average earnings under Social Security before retirement. 2. The worker's age at retirement (for retirement benefits).
Responsibilities of Agents to Clients Agent should: T/F: 1 Solicit applications for ins, provide timely service to prospects /policyholders. Accept premiums from policyholders and applicants. T/F: 2. Accurately assess an individual's ins. needs to determine the best ins co., and the type of policy, specific riders, other options, including necessary endorsements. T/F: 3. Explain the conditions and requirements under which these policies can be obtained (i.e. app. and underwriting procedures).
1. True 2. True 3. True
Agents' responsibilities to Insurers/Ins co. Agents should: T/F 1. Obey instructions and act in accordance with directions received from the principal. T/F 2. Act with the same degree of care that any prudent and reasonable person would act under the same circumstances. T/F 3. Account for all money and property of the principal and others which comes into the agent's care. T/F 4. Inform the principal of all relevant facts that are pertinent to the agency relationship.
1. True 2. True 3. True 4. True
Not all risks and events are insurable. In most cases, private insurers will only insure pure risks (i.e. those that involve only the chance of loss and not gain) that exhibit the following characteristics: 1. ______________ loss must be uncertain and due to chance. A risk must involve a loss that is fortuitous (i.e. an accident or chance event) and outside of the insured's control. This uncertainty is always viewed from the perspective of the insured person. 2. _________________ loss must be definite and measurable. An insurable risk must involve a potential loss that is definite as to cause, time, place, and amount. 3. _________________________ the amount at risk must be significant. The potential magnitude of the loss must be of such importance or create such a significant economic hardship, that the cost element becomes a minor factor compared to the possible loss. 4. No _________Loss Potential losses cannot be _________________ This type of loss is an unusually large amount of loss incurred in a very short period of time. Ex: Perils such as: War, floods, and nuclear accidents. These types of risks do not allow for accurate predictability, can cause losses in excess of an insurer's capacity to insure and are, therefore, often excluded by private insurance companies. 8.1.5 Random but Predictable Loss Exposures to loss must be random but predictable. The group to be insured must be randomly selected and contain a reasonable proportion of good risks vs. bad risks. In addition, there must be a sufficiently large pool of similar risks to allow the insurer to predict losses accurately using the LAW OF LARGE NUMBERS.
1. Uncertain Loss 2. Definite and Measurable Loss 3. Significant Loss 4. Catastrophic, Catastrophic
Name several advantages to purchasing group basis rather than individual insurance. (Purchasing under a group vs. individually)
1. When ins coverage is offered to a large group (51+ employees) there is usually minimal, or no evidence of insurability required. 2. There are favorable tax benefits in the deductibility of premiums and the tax-free distribution of benefits. 3. All or a significant portion, of the premium is paid by the employer or sponsoring organization. 4. Group coverage can be tailored to meet the needs of a specific group both in the types of coverage written and the amounts of coverage.
Which is a true statement regarding the Social Security program? 1. With only a few exceptions, this is a voluntary program 2. The program provides only a minimum floor of income. Individuals are expected to supplement this with their own personal programs 3. The actuarial value of each person's contributions are closely related to the actuarial value of each person's benefits 4. The program is fully funded
2. The program provides only a minimum floor of income. Individuals are expected to supplement this with their own personal programs
The provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA) apply to companies with what number of employees?
20
Since 1978, fully insured status is due to a person, who works and pays Social Security taxes, earns up to four "credits" (a.k.a. quarters of coverage) per year. The dollar amount earned that qualifies as credit changes annually. Once a person earns ____ credits/quarters (same as ___work years) the worker is fully insured even if there is no longer working.
40 credits-- 10 work years
Within ________ days of receiving notice of replacement, existing insurers or agents that undertake conservation must provide the policyholder with a policy summary for the existing life ins. The replacing (new) insurer may request the (former) existing insurer to provide copies of the summaries and the existing insurer must comply within ____ biz days of the request. The replacing (new) insurer must provide in its policy or written notice delivered with the policy that the applicant has the right to an unconditional refund of all premiums paid within _______days from policy delivery. The (new)replacing insurer must maintain evidence of the Notice Regarding Replacement and policy summary for at least _____ years. The existing (former) insurer must also maintain evidence of policy summaries or other statements used in any conservation effort for at least ______ years.
20 biz days 5 biz days 20 days three years three years
*The Patient Protection and Affordable Care Act of 2010 requires health insurers to cover dependent children up to age ______.
26.
What is the Law of Large Numbers? 1. The smaller the number of individual, but similar, risks that are combined into a group, the easier it is to predict losses for that group over time. 2. The larger the number of individual, but different, risks that are combined into a group, the easier it is to predict losses for that group over time. 3. The larger the number of individual, but similar, risks that are combined into a group, the easier it is to predict losses for that group over time. 4. The larger the number of individual, but similar, risks that are combined into a group, the more difficult it is to predict losses for that group over time.
3. The larger the number of individual, but similar, risks that are combined into a group, the easier it is to predict losses for that group over time.
What is the process called whereby insurers decide which customers to insure and what coverage to offer? 1. Adverse selection 2. Rate making 3. Underwriting 4. Marketing
3. Underwriting
Which best describes a plan where the insured members pay a part of the premium for a group policy? 1. A participating policy 2. A reimbursement policy 3. A "mixed plan" policy 4. A contributory plan
4. A contributory plan
_____________________ used to be the traditional method of selling TRAVEL ACCIDENT INSURANCE at airports, providing a large amount of coverage for a relatively low premium. Coverage is valid for the duration of the trip only (either 1-way, RT). Today, most travel ins. is sold thru travel agencies or direct writers and professional life agents are not authorized to transact travel accident-ins.
6.1.3 Vending Machine Sales
Mr. Reeves purchases a home with a 20-year mortgage and wants to purchase a guarantee that his mortgage will be paid if he should die while the mortgage is in force. Which of the insurance types below would best satisfy this need? A 20-year Decreasing Term Policy A 20-year Level (end) Policy A 20-year Limited Payment Whole Life Policy A 30-year Endowment Policy
A 20-year Decreasing Term Policy
_______________________________is a person who, on behalf of an owner, and for a fee, commission, or other valuable consideration, offers or negotiates life settlement contracts between the owner and ins providers. They only represent the owner and owes a duty to the owner to act according to their instructions, and in their best interest, regardless of the manner in which the broker is compensated. They are licensed as a life agent (or licensed nonresident producer) in CA for one year or longer may act as a life settlement broker by notifying the Commissioner and paying the appropriate license fee. A life insurance producer who has not held life agent license for one year must first complete at least 15 hours of education on life settlement transactions and must complete an app and pay the life settlement broker license fee. A licensee licensed to act as a viatical settlement broker or provider as of December 31, 2009 is considered to have met the requirements for licensure as a life settlement broker or provider. A life settlement broker license is not required for a licensed attorney, certified public accountant, or accredited financial planner who represents the policyholder and whose compensation is not paid directly or indirectly by the life settlement provider.
A Life Settlement Broker
47. Insureds must comply with certain provisions when submitting a claim these include: A Prompt notice of loss or damage B. Submitting claims Ć Notifying the police of theft is involved D. All of the above
A Prompt notice of loss or damage B. Submitting claims Ć Notifying the police of theft is involved D. All of the above
Fair Credit Reporting Act
A federal law that requires a reporting agency to take action if a consumer complains about inaccurate information.
40. What is true of ESOP: A is a qualified employee benefit plan. B. Stands for Employee Stock Ownership Plan. C. Gives employees part ownership in the company. D. All the above.
A is a qualified employee benefit plan. B. Stands for Employee Stock Ownership Plan. C. Gives employees part ownership in the company. D. All the above.
Broker
A licensed fire and casualty licensee who represents the client for a fee.
Reduced Paid-Up Insurance
A life insurance policy that reduced the death benefit for life of insured with no additional premium. A non-forfeiture option.
Participating Life Insurance
A life insurance that allows its policy holders. to participate or share in the insurance company's profits. (Mutual insurer)
Non-participating Life Insurance
A life insurance that does not pay dividends to policy holders.
Noncontributory Benefits
A life or health insurance plan that an employer provides employees in which 100% of the employees are covered.
Incontestable Clause
A life policy cannot be voided by the insurer after a period stated in the policy (2 years)
Paid-Up Life Insurance
A life policy that no longer requires a premium payment, yet still provides protection
Solvency
A measure of financial stability where assets exceed liabilities
Medical Information Bureau (MIB)
A non-profit organization that was established by life and health insurance companies to aid in underwriting. Speeds up underwriting and helps prevent fraud. Also, prevents fraud and over-insurance.
Elimination Period
A period of time after an insured suffers a covered disability until benefits become payable (waiting period)
Insured
A person covered by an insurance policy
105. Under a universal life insurance policy what is true? A policy owner can see how funds are distributed B. death benefit is not fixed C. premium level is not fixed D. all of the above.
A policy owner can see how funds are distributed B. death benefit is not fixed C. premium level is not fixed D. all of the above.
Health Insurance Counseling & Advocacy Program
A service provided by volunteers that advise the elderly about insurance needs for no fee. A written contract that outlines the obligations and responsibilities of the insured and the insurer (company)
Mortality Table
A statistical table that shows the likelihood for a person to die at any given age. Shows the average number of deaths used to establish premium rates.
Corridor Deductible
A sum of money that the insured pays on a health claim after the insurer has paid for the basic benefits but before the major medical portion of the policy pays any part of the claim.
Mordibity Table
A table that shows the average number of sickness or accidents at various ages.
Tax-Deferred
A term that is used when income is earned on an investment but taxes are postponed until benefit payments (qualified plan)
Life Insurance
A type of insurance that pays our upon the insured's death.
Accidental Death and Dismemberment
A type of life and health insurance which pays a lump-sum benefit in the event of either the accidental death or dismemberment of the insured. Pays a death benefit (principal sum) or benefit for losing a limb (capital sum) in the event of an accident.
Payor Rider
A waiver of premium on the juvenile policy. If the premium payor dies or becomes totally disabled, the premium is waived until the insured child reaches a specified age
28. How many days does an insurance company have to give unearned premium back to an agent? A. 10 days B. 15 days C. 25 days D. 30 days
A. 10 days
41. Under Part B of Medicare, what percentage does the insured have to pay, after paying the required deductible? A. 20% B. 80% C. 50% D. 100%
A. 20%
79. After an insured pays the deductible on Medicare Part B, the insured pays what percent of the services received? A. 20% B. 80% C. 50% D. 100%
A. 20%
18. What is true about a modified endowment contract (MEC)? A. A MEC's living benefits (loans, withdrawals, collateralizing) are treated differently. B. A MEC is a popular product that agents should show to clients. C. A MEC is a product that provides the most insurance protection with very low premiums.
A. A MEC's living benefits (loans, withdrawals, collateralizing) are treated differently.
66. The complete transfer by the existing owner of all rights in an insurance policy to another person is: A. Absolute assignment B. Endowment C. Collateral assignment D. Non-forfeiture
A. Absolute assignment
46. A terminally ill person can access part of a life policy proceeds prior to death due to? A. Accelerated death benefit B. Double conversion C. Accidental death rider D. Consideration
A. Accelerated death benefit
58. A fiduciary must hold funds and property, in a position of trust. They must also A. Act in a prudent fashion B. Act as an agent C. Commingle money D. Misappropriate
A. Act in a prudent fashion
47. A disability income policy covers injuries suffered by an insured on or off the job is called? A. An occupational policy. B. A non-occupational policy. C. A wraparound policy. D. Twenty-four hour policy.
A. An occupational policy.
66. A disability income policy covers injuries suffered by an insured on or on called? A. An occupational policy. B. A non-occupational policy. C. A wraparound policy. D. Twenty-four hour policy.
A. An occupational policy.
37. According to the Employee Retirement Income Security Act (ERISA), a plan sponsor must provide the participants with? A. Annual financial statements. B. Plan description and benefits statements. C. Trust and solvency reports. D. Reports of tax qualification fulfillment.
A. Annual financial statements.
90. According to the Employee Retirement Income Security Act (ERISA), a plan sponsor must provide the participants with: A. Annual financial statements. B. Plan description and benefits statements. C. Trust and solvency reports. D. Reports of tax qualification fulfillment.
A. Annual financial statements.
101. What is a hazard? A. Anything that increases the chance of loss B. A broken promise C. Any possibility of financial loss D. A peril or loss of property
A. Anything that increases the chance of loss
13. What is a hazard? A. Anything that increases the chance of loss B. A broken promise C. Any possibility of financial loss D. A peril or loss of property
A. Anything that increases the chance of loss
13. Records of an agent or broker must be available to the commissioner: A. At all times B Only after written notice from the commissioner C 15 days after the license is issued D. Never
A. At all times
50. In order for negligence to exist which of the following must be present A. Breach of the duty to act B. Occurrence of injury or damage C. Duty to act D. All of the above
A. Breach of the duty to act B. Occurrence of injury or damage C. Duty to act D. All of the above
32. If a permanent policy is surrendered, the cash surrender value (CSV) may be used for? A. Cash surrender B. Extended term C. Reduced paid-up D. All the above
A. Cash surrender B. Extended term C. Reduced paid-up D. All the above
73. If a permanent policy is surrendered, the cash surrender value (CSV) may be used for: A. Cash surrender B. Extended term C. Reduced paid-up D. All the above
A. Cash surrender B. Extended term C. Reduced paid-up D. All the above
37 Neglecting to communicate that which a party knows, and ought to communicate for the other party may make a sound decision is: A. Concealment B. Material information C. Boycotting D. None of the above
A. Concealment
90. Neglecting to communicate that which a party knows, and ought to communicate, so that the other party may make a sound decision? A. Concealment B. Material information C. Boycotting D. None of the above
A. Concealment
5. Deductibles, coinsurance, and co-payments in a health insurance policy are cost-effective choices that have the effect of: A. Cost sharing B. Cost avoidance. C. Cost containment D. Cost evasion
A. Cost sharing
39. In which plans do employers make specific contributions to an employee's retirement account? A. Defined contribution plans. B. Individual retirement accounts. C. An amendment. D. A policy provision
A. Defined contribution plans.
95. In which plans do employers make specific contributions to an employee's retire account? A. Defined contribution plans. B. Individual retirement accounts. C. An amendment. D. A policy provision.
A. Defined contribution plans.
23. The main master policy owner of a group health insurance contract is the A. Employer B. Employee members C. Plan administrator D. Agent
A. Employer
23. All of the following are life insurance riders except? A. Extended term B. Guaranteed insurability C. Accidental death D. Waiver of premium
A. Extended term
45. Common life insurance policy riders include all of the following except: A. Extended term B. Guaranteed insurability C. Accidental death D. Waiver of premium
A. Extended term
55. Which of the following is a method of receiving policy proceeds in other than a lump sum (settlement option)? A. Fixed Period Option B. Fixed Amount Option C. Life Income Option-Lifetime Benefit D. All of the above
A. Fixed Period Option B. Fixed Amount Option C. Life Income Option-Lifetime Benefit D. All of the above
59. A beneficiary wants to receive $2,000 per month until the principal and interest are exhausted. Which settlement options should be chosen? A. Fixed amount option B. Cash option C. Fixed period option D. Interest option
A. Fixed amount option
87. Unless the applicant indicates otherwise during the right-to-return period in an individual annuity, the premium for a variable annuity would be invested only in: A. Fixed income investments and money market funds. B. The mutual funds underlying the variable annuity contract. C. The insurer's general fund. D. The insurer's separate account.
A. Fixed income investments and money market funds.
72. Which of the following is not an option for the use of policy dividends? A. Fund the distribution of monthly income payments. B. Purchase paid-up additions. C. Reduce the current premium. D. Purchase one-year term insurance.
A. Fund the distribution of monthly income payments.
21. All are common personal uses of life insurance except? A. Funding a buy-sell agreement. B. Helping to fund a person's retirement. C. Creating emergency funds to avoid the need to liquidate assets. D. Creating an immediate estate.
A. Funding a buy-sell agreement
40. Which of the following is not one of the common personal uses of life insurance? A. Funding a buy-sell agreement. B. Helping to fund a person's retirement. C. Creating emergency funds to avoid the need to liquidate assets D. Creating an immediate estate.
A. Funding a buy-sell agreement.
22. What prevents an insurer from voiding a policy for misstatements after two years? A. Incontestability B. Indemnity C. Misrepresentation D. No loss, no gain
A. Incontestability
42. The policy provision which prevents an insurer from voiding a policy for misstatements after two years is: A. Incontestability B. Indemnity C. Misrepresentation D. No loss, no gain
A. Incontestability
83. An individual might purchase LTC protection out of concern for all of the following except A. Ineligibility for Medi gap coverage. B. Inevitable cost of health care. C. Increasing probability of needed services. D. Existing medical coverage.
A. Ineligibility for Medi gap coverage.
13. The Medical Information Bureau (MIB) is a non-profit organization supported by: A. Insurance companies B. The federal government C. State governments D. All the above
A. Insurance companies
8. Who supports the Medical Information Bureau? A. Insurance companies B. The federal government C. State governments D. All the above
A. Insurance companies
27. This allows only the death benefit earnings to be paid to the beneficiary: A. Interest only option B. Cash option C. Fixed period option D. Fixed amount option
A. Interest only option
57. Which settlement option allows only the death benefit interests to be paid to the beneficiary? A. Interest only option B. Cash option C. Fixed period option D. Fixed amount option
A. Interest only option
15. Which of the following is a true statement about insurance? A. It is a method of transferring risk B. It is for the low income / high risk persons C. It is sold by government officials D. It's a method of retention
A. It is a method of transferring risk
28. Usually, in order to join a group insurance plan without proving insurability, an employee must: A. Join the plan during the enrollment period. B. Join the plan while eligible but after the enrollment period. C. Join the plan during the probationary period. D. Join the plan during the elimination period.
A. Join the plan during the enrollment period.
59. Usually, in order to join a group insurance plan without proving insurability, an employee must: A. Join the plan during the enrollment period. B. Join the plan while eligible but after the enrollment period. C. Join the plan during the probationary period. D. Join the plan during the elimination period.
A. Join the plan during the enrollment period.
47. An individual insurance policy for children is called? A. Juvenile Insurance B. Implied authority C. Guaranteed renewable D. Child rider
A. Juvenile Insurance
20. In non-medical applications, the applicant: A. May have to take a physical examination B. Does not have medical questions on the application C. Never has to take a physical examination D. Must take a physical exam on smaller policies, but not on large policies.
A. May have to take a physical examination
92 Under which circumstances does a party involved in a contract of insurance need to communicate information based solely on their judgment? A. Never B. Only when asked C. Only when relevant to the matter in question D. Always
A. Never
51. Which of the following health plans would have the highest premium? A. Non-cancelable B. Cancelable C. Guaranteed renewable D. Optionally renewable
A. Non-cancelable
69. What is the tax treatment for individual disability income policies? A. Non-deductible premiums and tax-free benefits. B. Non-deductible premiums and taxable benefits. C. Deductible premiums and taxable benefits. D. Deductible premiums and tax-free benefits.
A. Non-deductible premiums and tax-free benefits
2. How are individual disability income policies taxed? A. Non-deductible premiums and tax-free benefits. B. Non-deductible premiums and taxable benefits. C. Deductible premiums and taxable benefits. D. Deductible premiums and tax-free benefits.
A. Non-deductible premiums and tax-free benefits.
56. What is the tax treatment for individual disability income policies? A. Non-deductible premiums and tax-free benefits. B. Non-deductible premiums and taxable benefits. C. Deductible premiums and taxable benefits. D. Deductible premiums and tax-free
A. Non-deductible premiums and tax-free benefits.
36. Which of the following is not considered a disability under the ADA (American with Disability Act)? A. Obesity B. Diabetes C. Sight D. Hearing
A. Obesity
62. Which of the following is not considered a disability under the ADA (American with Disability Act)? A. Obesity B. Diabetes C. Sight D. Hearing
A. Obesity
29. Insurers may purchase reinsurance for a variety of reasons. Which of the following is not a good example of the use of reinsurance? Insurer purchases reinsurance: A. Only on the below average business submitted to them, keeping the good business for themselves B. To avoid capacity problems by reducing the amount of unearned premium C. To more safely insure an exceptionally large account D. All the choices are good examples of reinsurance
A. Only on the below average business submitted to them, keeping the good business for themselves
49. Which of the following must be on ALL insurance policies A. Parties of the contract B. Insurable interest C. Term of the policy D. All of the above
A. Parties of the contract B. Insurable interest C. Term of the policy D. All of the above
43. If the insured has misstated his or her age, and that fact is discovered after the death of the insured, what will the company do? A. Pay the face amount equal to that which the premium would have purchase at the correct age. B. Refuse to pay the claim C. Pay the face amount less 10% penalty D. None of the above
A. Pay the face amount equal to that which the premium would have purchase at the correct age.
5. If an individual or a family suffers a loss due to death or disability of a member, what type of loss is it? A. Personal loss B. Personnel loss C. Human loss D. Needs loss
A. Personal loss
98. If an individual or a family suffers a loss due to death or disability of a member what type of loss is it? A. Personal loss B. Personnel loss C. Human loss D. Needs loss
A. Personal loss
32. The method in which insurance companies receive approval from the DOI before using certain rates A. Prior approval B. Underwriting C. Reinsurance D. Coinsurance
A. Prior approval
35. Insurance companies transfer part of a particularly large risk through what process A. Reinsurance B. Indemnity C. Underwriting D. Transfer
A. Reinsurance
3. The basic feature of an indemnity plan is that the participants: A. Select a provider and submit claims to the insurance company B. Select a provider at work and claims processor C. Pre-select a physician and third-party claims administrator. D. Pre-select a clinic and submit claims to the insurance company.
A. Select a provider and submit claims to the insurance company
18. Participants in an indemnity plan: A. Select a provider and submit claims to the insurance company. B. Select a provider at work and claims processor. C. Pre-select a physician and third-party claims administrator. D. Pre-select a clinic and submit claims to the insurance company.
A. Select a provider and submit claims to the insurance company.
30. The Insurance Code definition of an "insurance broker" is: A. Someone paid to transact insurance on behalf of another person, but not on behalf of the insurer. B. someone appointed by a fire and casualty broker-agent(employer), receiving commissions from the employer, transacting insurance with the insurers the employer represents and acting on behalf of the clients. C. Any agent that writes more difficult to place business with specialty insurers who have appointed him. D. Someone appointed to transact insurance with admitted insurers and receives commissions from them. but acts on behalf of clients.
A. Someone paid to transact insurance on behalf of another person, but not on behalf of the insurer.
88. The insurance code definition of an "insurance broker" is? A. Someone paid to transact insurance on behalf of another person, but not on behalf of the insurer. B. Someone appointed by a fire and casualty broker-agent(employer), receiving commissions from the employer, transacting insurance with the insurers the employer represents and acting on behalf of the clients. C. Any agent that writes more difficult to place business with specialty insurers who have appointed him. D. Someone appointed to transact insurance with admitted insurers and receives commissions from them, but acts on behalf of the clients.
A. Someone paid to transact insurance on behalf of another person, but not on behalf of the insurer.
10. An insurance company pays claims after a self-insured, specified l is imit has been reached is called: A. Stop loss coverage B. Multiple employer welfare arrangement ' C. A coverage delay provision D. Gap insurance
A. Stop loss coverage
14. An insurance company pays claims after a self-insured, specified limit has been reached. This is: A. Stop loss coverage B. Multiple employer welfare arrangement C. A coverage delay provision D. Gap insurance
A. Stop loss coverage
81. In an annuity, which settlement option will pay the annuitant the greater amount over a period of time? A. Straight life. B. Period certain annuity. C. Cash refund annuity. D. Joint and last survivor annuity.
A. Straight life.
94. What type of a retirement plan is used by employees of public school systems? A. TSA B. IRA C. SIMPLE D. KEOGH
A. TSA
19. If a child is born after insurance is purchased, what is correct? A. Term insurance will automatically be provided for the child under the same policy, no additional premium due. B. A new family policy will have to be purchased. C. Term insurance will be provided under the same policy, but for an additional premium. D. Coverage will be provided for the child under the same policy, but only after a waiting period and proof of insurability.
A. Term insurance will automatically be provided for the child under the same policy, no additional premium due.
34. If children are born or adopted after a family policy is issued: A. Term insurance will automatically be provided for the child under the same policy, no additional premium due. B. A new family policy will have to be purchased. C. Term insurance will be provided under the same policy, but for an additional premium D. Coverage will be provided for the child under the same policy, but only after a period and proof of insurability.
A. Term insurance will automatically be provided for the child under the same policy, no additional premium due.
88. A variable annuity applicant requests that the premium be immediately invested in a stock portfolio. The annuity contract is returned to insurer within the cancellation period. What is the applicant entitled to receive? A. The contract value amount on the date the returned contract was received by the insurer. B. A refund of the premium minus the surrender charge. C. A refund of the entire amount paid. D. The contract value amount on the date the contract was delivered to the insured.
A. The contract value amount on the date the returned contract was received by the insurer.
65. The insured and beneficiary die in a car accident. It's unknown who died first. Who would receive the proceeds from the policy? A. The insured's estate. B. Both insured's and beneficiary's estates would receive equal amounts. C. The insurer will keep the proceeds. D. The beneficiary's estate.
A. The insured's estate.
50. The payer rider on a juvenile life policy provides that if the payer dies or becomes totally disabled before the insured juvenile reaches the age specified in the policy: A. The insurer will make the payments until the insured juvenile reaches the specified age. B. The insurer will lend money to keep the policy in force. C. The insured's estate will make the premium payments.
A. The insurer will make the payments until the insured juvenile reaches the specified age.
58. What is true about settlement options? A. The policy owner can choose one at the time of application. B. The policy owner may change the settlement option during their lifetime. C. The beneficiary may choose a settlement option if the policy owner does not specify one. D. All the above
A. The policy owner can choose one at the time of application. B. The policy owner may change the settlement option during their lifetime. C. The beneficiary may choose a settlement option if the policy owner does not specify one. D. All the above
43. Under a universal life insurance policy, what is true? A. The policy owner can see how funds are distributed B. The death benefit is not fixed C. The premium level is not fixed D. All of the above
A. The policy owner can see how funds are distributed B. The death benefit is not fixed C. The premium level is not fixed D. All of the above
6. Loss retention is an effective risk management technique when these conditions exist except: A. The probability of loss is unknown. B. The losses are highly predictable. C. The insured chooses to assume the losses incurred. D. The worst possible loss is not serious.
A. The probability of loss is unknown.
8. Loss retention is an effective risk management technique conditions exist except: A. The probability of loss is unknown. B. The losses are highly predictable. C. The insured chooses to assume the losses incurred D. The worst possible loss is not serious.
A. The probability of loss is unknown.
63. Which is a true statement regarding Social Security (OASDHI)? A. The program only provides a minimum floor of income. Individuals are expected to supplement it with their own personal retirement programs B. With only a few exceptions, this is a voluntary program. C. The program is fully funded.
A. The program only provides a minimum floor of income. Individuals are expected to supplement it with their own personal retirement programs
33. Which is a true statement regarding Social Security (OASDHI)? A. The program provides only a minimum floor of income. Individuals expected to supplement it w/ their own personal retirement programs. B. The actuarial value of each person's contributions are closely related to the actuarial value of each person's benefits. C. With only a few exceptions, this is a voluntary program. D. The program is fully funded.
A. The program provides only a minimum floor of income. Individuals expected to supplement it w/ their own personal retirement programs.
21. When an agent accepts premium from the insured and uses the money for personal gain, it is considered: A. Theft B. Fraud C. Concealment D. Misrepresentation
A. Theft
102. Which of the following is true about term insurance? A. There is a death benefit B. There is a death benefit with cash value C. There is increasing death benefit D. The most expensive form of life insurance
A. There is a death benefit
42. What is true of term insurance? A. There is a death benefit B. There is a death benefit with cash value C. There is increasing death benefit D. The most expensive form of life insurance
A. There is a death benefit
35. A wrongful act other than a crime or breach of contract is a: A. Tort B. Proximate cause C. Liability D. Hazard
A. Tort
18. The main purpose of insurance is to: A. Transfer the risk B. Reduce perils C. Avoid hazards D. Reduce the risk
A. Transfer the risk
5. Insurable interest must exist at what time in a life insurance policy: A. When the insurance takes effect, but not at the time of death. B. When the loss occurs. C. When the insurance takes effect and the loss occurs. D. When the insurance takes effect and the loss occurs, but need not exist after the loss occurs.
A. When the insurance takes effect, but not at the time of death.
12. Which of the statements concerning the usual coordination of benefits provision is correct? A. When the plans both have the provision, coverage as an employee is primary to coverage as a dependant. B. Medicare coverage is always primary to "medical coverage". C. Coverage under any plan with the provision is primary to coverage under any plan without the provision.
A. When the plans both have the provision, coverage as an employee is primary to coverage as a dependant.
54. Which statement concerning the usual coordination of benefits is correct? A. When the plans both have the provision, coverage as an employee is primary to coverage as a dependant. B. Medicare coverage is always primary to "medical coverage". C. Coverage under any plan with the provision is primary to coverage under any plan without the provision. D. None of the above
A. When the plans both have the provision, coverage as an employee is primary to coverage as a dependant.
29. The probationary period in a group health policy is intended for people: A. Who joined the group after the policy effective date. B. Without health coverage after a qualifying event. C. Who declined to join the group at the time of eligibility. D. With a pre-existing condition when they joined the group.
A. Who joined the group after the policy effective date.
17. A peril is defined as: A. A cause of loss B. Increases the chance of loss C. A hazard D. An accident
A. a cause of loss
115. What is added to the policy when a terminally ill person can access part of a life policy proceeds prior to death? A. accelerated death benefit B. double conversion C. accidental death rider D. consideration
A. accelerated death benefit
127. A beneficiary that only receives proceeds if there are no living beneficiaries is called? A. contingent beneficiary B. survivorship C. straight life settlement option D. conditional beneficiary
A. contingent beneficiary
110. What allows an insured to change the current plan to another without proof of insurability? A. conversion B. switching clause C. alleatory D. adhesion
A. conversion
113. What discourages multiple payments for the same claim under two or more policies? A. coordination of benefits (COB) B. indemnity C. 24-hour coverage D. consideration
A. coordination of benefits (COB)
123. Policies purchased to cover a specific disease such as cancer or heart disease as? A. dread disease B. conditional receipt C. adverse selection D. paid up life insurance
A. dread disease
2. All of the following are not obligated to perform in an insurance contract except? A. insurer B. insured C. both parties D. neither party must perform
A. insurer
99. ESOP: A. is a qualified employee benefit plan. B. Stands for Employee Stock Ownership Plan. C. Gives employees part ownership in the company. D. All the above.
A. is a qualified employee benefit plan. B. Stands for Employee Stock Ownership Plan. C. Gives employees part ownership in the company. D. All the above.
64. The Uniform Simultaneous Death Act: A. is used when the time of death of the insured and beneficiary cannot be determined. B. Allows the money to go to the beneficiary's estate. C. Pays both the primary and the contingent beneficiary. D. Prevents the insurer from paying the death benefit.
A. is used when the time of death of the insured and beneficiary cannot be determined.
31. Due to tax changes, certain life policies have been affected. What is true about a modified endowment contract (MEC)? (A-C) A. its living benefits (loans, withdrawals. collateralizing) are treated differently. B. it's a popular product that agents should show to clients. C. it provides the most insurance protection with very low premiums.
A. its living benefits (loans, withdrawals. collateralizing) are treated differently.
118. An individual insurance policy for children is? A. juvenile insurance B. implied authority C. guaranteed renewable D. child rider
A. juvenile insurance
101. How do life insurance companies establish what premiums to charge? A. mortality, interest and expenses B. morbidity, interest C. morbidity, expenses D. mortality, expenses
A. mortality, interest and expenses
120. Which policy is not designed to pay policy-owners dividends? A. nonparticipating life policies B. participating life policies C. noncontributory benefits D. contingent beneficiary
A. nonparticipating life policies
125. What allows for a disability income policy premium portion be refunded to an insured if they aren't permanently disabled? A. return on premium rider B. pay up period C. free look period D. accidental death and dismemberment
A. return on premium rider
49. What allows for a portion of premium to be refunded to an insured if they are NOT permanently disabled? A. return on premium rider B. pay up period C. free look period D. accidental death and dismemberment
A. return on premium rider
While group plans are rarely underwritten on an individual basis, underwriting for the group as a whole still occurs. The following legal requirements apply to this process: Nondiscriminatory Groups A group cannot be defined in a way that increases the opportunity for ___________________________________ (i.e. the acceptance of too many bad risks) or is unfairly discriminatory. In other words, insurer must have legitimate grounds for the group's classification and the insurance cannot provide different levels of benefits to people in the same classification (e.g. occupation or income level) within the group.
ADVERSE SELECTION
Mortality Risk Factors Name the seven major risk factors that a life insurance considers when quoting a policy.
AGE: mortality increases with age. As a result, initial premium amounts for individual life insurance tend to be higher at older ages. GENDER/SEX: statistically life expectancy for men is shorter than for women and, therefore, males are a higher mortality risk. PAST AND CURRENT HEALTH HISTORY: A health questionnaire forms a major part of the application form. OCCUPATION: classifications are based on the frequency of deaths, exposure to hazards, and nature of the occupational duties. Generally, those working in "white collar" occupations present very little risk to insurance companies. In contrast, those working in "blue collar" industries represent a higher degree of risk for the insurer due to physical labor involved in many of these occupations. If the applicant/insured works in two different jobs, the insurance company will classify the individual (and subsequently charge a premium rate) according to the risk of the insured's most hazardous job, regardless of the number of hours worked. AVOCATIONS— Special Questionnaires Dangerous or high-risk hobbies (avocations) such as mountain climbing, scuba diving, and parachuting add to the probability and severity of a loss. In order to accurately ascertain how these activities will affect a risk, insurers will use special questionnaires to obtain more specific and detailed information. PHYSICAL CONDITION People in good physical health are less likely to contract an illness or disease or suffer an accidental injury which may lead to death. Ins. co have charts showing what an individual should weigh in proportion to height and build (small frame, medium frame, or large frame). Statistically, people who exceed these guidelines by more than 20% have a higher incidence of illnesses such as cardiovascular and heart disease, cancer, diabetes, and respiratory disorders. MORALE HAZARDS Excessive use of alcohol, drug abuse and, especially, tobacco use, are major indicators of early mortality. Tobacco use is so problematic that insurers use separate mortality tables for smokers and non-smokers. LIFE INSURANCE APPLICATIONS An agent must be able to identify the types of info required on the app, why insurers attach them to a life policy, and why they become part of a life policy. Identify how/why each of the following applies to eligibility and/or rating factors to affect rating structures: chronic or ongoing conditions and catastrophic conditions. Know what is required when an application reveals conditions that require more info.
In the ins field, an ____________ is anyone who solicits insurance, assists in evaluating and placing risks, or collects premiums on behalf of an ins. co. They represent the ins co (or PRINCIPAL) thru an appointment by that company. There are two general types of so-called "agency building systems" used by insurance companies: (List them)
AGENT 1. The Independent Agency System 2. The Exclusive or Captive Agency System
Contingent Beneficiary
AKA Secondary beneficiary. An alternate beneficiary is designated to receive the policy proceeds in the event that the primary beneficiary dies before the insured.
Life Paid-Up
AKA limited payment whole life policy Premiums are paid for a specific number of years, but the policy still endows at 100yo
Last Survivor Policy
AKA: Second to Die policy. Written for $1m or more. Pays out when 2nd person dies. Mostly used by spouses for estate planning.
Insurance contracts are ____________________(i.e. dependent on chance) in that contractual performance depends upon an uncertain event.. There must always be an element of chance involved in the insured situation. Since there is an uncertain outcome for both parties to an aleatoric contract, the dollar values exchanged by the parties are nearly always unequal. For example, a person covered by health insurance may be fortunate enough to never use it and may, therefore, pay more to the insurer than they receive in benefits. Conversely, another insured may suffer health problems that cost the insurer substantially more than they have received in premiums.
ALEATORIC
Investment vehicles that provide, either immediately or at some future date, fixed or variable income payments for a specified number of years or for the life of the recipient(s).
ANNUITY contracts
The _____________ is the primary source of info submitted by the agent to the co and must be completed accurately and truthfully to the best of the agent's ability. Applications may be "medical" (i.e. requiring an initial medical exam) or "non-medical" depending on the amount of insurance and the age of the insured. Both types of application contain signed statements by the proposed insured giving detailed info about family history and current and past personal health. ______________________________________do not require a medical exam unless the statements given on the app indicate that a physical is needed. Part I — General Information The first part of the application asks for the age and other general info about the proposed insured including their name, address, sex, marital status and occupation (including exact job duties and annual income). There are also questions regarding the contract being applied for, including: Type of insurance policy. Death benefit amount. Beneficiary (name and relationship) as well as those names and relationships of any contingent beneficiaries. Any other life insurance coverage in effect with the same or other insurers. Other applications pending with other insurers. Ownership information. Any errors made on the application can be corrected and initialed by the applicant.
APPLICATION NON-MEDICAL APPLICATIONS
_______________ is the transfer of all or a portion of the policyholder's ownership rights, title, or interest in the policy to another party. To be binding on the insurer, the assignment should be executed in writing and filed with a company's authorized representative. However, a policyholder does not need the insurer's permission to assign a policy; the insurer will accept the legality and validity of the transfer without question. Insurable interest does not have to exist between the insured and the new owner (known as the "assignee"). The assignee is usually granted all rights of policy ownership, including the right to change the beneficiary. However, any assignment is subject to debts owed to the ins co.
ASSIGNMENT
_____________________ is a complete and irrevocable transfer of all of the policyholder's rights and "incidents of ownership" to another person (the assignee) who then receives full control over the policy and full rights to its benefits. This type of assignment transfers the interest in the entire death benefit. For example, when a terminally ill person sells their life ins policy to a Viatical Settlement Company or Life Settlement Provider, the transfer of ownership is achieved through this. The Life Settlement Provider becomes the new owner of the policy and can name itself or another person as beneficiary.
Absolute Assignment
39. To qualify as an insurable risk: A. Losses must be definable B. Losses must be accidental C. Losses must be enough to cause hardship to the insured D. All of the above
All of the above
In brief, the most important general benefits of insurance are: True/False: 1. Keeping families and businesses intact. 2. Providing a basis for credit. 3. Motivating and stimulating disciplined savings and encouraging loss controls. 4. Providing investment capital which is significant to the economy. 5. Replacement of large possible losses with small known losses. 6. Security, peace-of-mind and reduction of uncertainty.
All of the above are TRUE.
Which are components to be considered in Estate Planning? All of the choices are correct How to best administer the estate based on the objectives of the estate owner and the amount of potential taxes, fees and other expenses The needs of the beneficiaries and heirs of the estate the type and amount of property in the estate. The amount of life insurance needed to cover these costs.
All of the choices are correct
Which of the following choices are TRUE regarding Modified Endowment Contracts (MEC)? Since 1988, any life ins policy that is paid-up in fewer than 7payments or sooner than 7 years (or if any unscheduled premium deposits exceed the 7-year limit) automatically becomes a MODIFIED ENDOWMENT CONTRACT (MEC). It is the insurers' responsibility to notify insureds when policies exceed the 7y-Pay Test and become MECs. It is the producer's responsibility to know the law and its implications, to provide full explanation of the law's ramifications to prospects and clients. If an insured policyholder fails, the "7y-pay test" the result is full income taxation of any monies withdrawn or borrowed from the cash value of the policy exceeding the original cost. There is also a 10% penalty on these amounts if they are received before the age of 59½ (i.e. they are treated similarly to IRAs). This classification of policies has virtually eliminated sales of Single Premium Whole Life.
All of the choices are correct
Which of the following is a true statement? When someone dies without a will, it is called dying "intestate" and property can only be transferred as an intestate distribution under state laws The proper objective of any life insurance program is to provide the amount and type of insurance the prospect needs at a premium he or she can reasonably afford. All of the choices are correct For Estate Planning purposes, the two main methods that may be used in order to calculate the proper amount of life insurance are 1. Human Life Value Approach 2. Needs Analysis
All of the choices are correct
Which of the following are common exclusions? WAR CLAUSE HAZARDOUS ACTIVITIES CLAUSE AVIATION CLAUSE All of the choices are correct also SUICIDE clause
All of the choices are correct also SUICIDE clause
Return of Premium Rider
Allows for a portion of the premium to be refunded to the insured is permanently disabled
Waiver of Premium
Allows for the waiver of premium payments in the event of the total disability of the insured
Conversion
Allows insured to change the current plan to another plan, usually without evidence of insurability. Also a changing of a mutual company to a stock company.
Tax-Deferred
Allows the cash values to accumulate without tax penalties and postpones taxation to a later date. A term used when income is earned on an investment but taxes are postponed until benefit payments (qualified plan)
1. Life insurance creates which of the following A. Cash flow B. An Immediate Estate C. Liquidating an estate D. None of the above
An Immediate Estate
Agent's Appointment
An agent becomes "appointed" or approved to sell insurance for specific insurance companies
Buy Sell Agreement
An agreement that the deceased partner's interest will be sold to the surviving partners at the stated price
Contingent Beneficiary
An alternate beneficiary designated to receive the policy proceeds in the event that the primary beneficiary dies before the insured.
Life Annuity Curtain
An annuity that pays income to the annuitant for life or to their beneficiary for a certain period if the annuitant dies.
Commisioner of Insurance
An elected official who oversees all of the responsibility of the Dept. of Insurance.
Insurance Policy
An implied warranty and a promise as to the future.
_______________are often purchased by those planning for retirement and payments are typically made to a person who has reached retirement age and has outlived their ability to earn an income thru employment.
Annuities
Adhesion
Any ambiguous contract language, the court would side with the policy owner.
What is a hazard?
Anything that increases the chance of loss
Adverse Selection
Applicant, who is uninsurable or presents a higher than average risk, attempts to obtain a policy from an insurer at standard rates.
84. Ed has annuity for which he has paid $50,000 in after tax dollars over the last 20 years. At 65, he will receive $4,000/year annual income based on a life expectancy of 25years which will yield $100,000. The amount of taxable income will be: A. Nothing B. $2,000 C. $800 D. $4,000
B. $2,000
103. Which of the following would have the lowest initial premium? A. 30-year term insurance B. 10-year term insurance C. Whole life insurance D. Universal Life insurance
B. 10-year term insurance
55. Which of the following will cost the most? A. 14 day elimination period; 3 year benefit period. B. 14 day elimination period; 5 year benefit period. C. 90 day elimination period; 5 year benefit period. D. 180 day elimination period; 5 year benefit period
B. 14 day elimination period; 5 year benefit period.
80. Which of these long term care policies has the highest premium? A. 14 day elimination period; 3 year benefit period. B. 14 day elimination period; 5 year benefit period. c. 90 day elimination period; 5 year benefit period. D. 180 day elimination period; 5 year benefit period.
B. 14 day elimination period; 5 year benefit period.
91. Which of these long term care policies have the highest premium? A. 14-day elimination period; 3-year benefit period. B. 14-day elimination period; 5-year benefit period. C. 90-day elimination period; 5-year benefit period. D. 180-day elimination period; 5-year benefit period.
B. 14-day elimination period; 5-year benefit period.
60. In a group life policy, Unmarried children may be covered as a dependent till the age of? A. 24 B. 26 C. 19 D. 20
B. 26
70. The Social Security blackout period ends when the surviving spouse reaches the age A. 55 B. 60 C. 62 D. 65
B. 60
25 In a contributory plan, what percent of eligible employees must participate? A. 50% B. 75% C. 100% D. Percentage depends on the size of the group
B. 75%
26. When a group plan is contributory, what percentage of eligible employees must participate? A. 50% B. 75% C. 100% D. Percentage depends on the size of the group
B. 75%
80. If your client has an annuity and wants to have quaranteed income for the rest of his life, what settlement option should he choose? A. Joint Life B. A Life Annuity C. An Annuity Certain D. Whole Life
B. A Life Annuity
12. What could be purchased in order to cover all students at a university? A. An ASO B. A blanket policy C. A franchise policy D. A self-insured plan
B. A blanket policy
109. What should be added to policy in order to share a death benefit among a group of children? A. Survivorship beneficiaries B. A class beneficiary designation C. Named beneficiaries D. None of the above
B. A class beneficiary designation
44. In order to share a death benefit among a group of children, what should be added to policy? A. Survivorship beneficiaries B. A class beneficiary designation C. Named beneficiaries D. None of the above
B. A class beneficiary designation
30. Which insurance company is owned and formed for the benefit of its members A. Lloyds of London B. A mutual insurer C. Demutualization D. Captive companies
B. A mutual insurer
26. Which of the following is true regarding participation in a group health plan? A. Minimum participation of 15 years is required for a contributory group health plan. B. A non-contributory group health plan must involve all members. C. A contributory group health plan must involve all members. D. A minimum of 79% of all members is required for a non-contributory group health plan.
B. A non-contributory group health plan must involve all members.
27. Which is true regarding participation in a group health plan? A. Minimum participation of 15 years is required for a contributory group health plan. B. A non-contributory group health plan must involve all members. C. A contributory group health plan must involve all members. D. A minimum of 79% of all members is required for a non-contributory group health plan
B. A non-contributory group health plan must involve all members.
26. This rider will pay a portion of the death benefit prior to the insured's death due to a serious illness: A. Waiver of premium B. Accelerated death benefit C. Cost of living D. Disability income
B. Accelerated death benefit
54. Which rider will pay a portion of the death benefit due to a serious illness and prior to the insured's death ? A. Waiver of premium B. Accelerated death benefit C. Cost of living D. Disability income
B. Accelerated death benefit
50. The measuring system used under long term care: A. Case management B. Activities of daily living C. The gatekeeper mechanism D. Co-insurance
B. Activities of daily living
78. A measure for rating an individual's need for LTC benefits is... A. Case management B. Activities of daily living C. The gatekeeper mechanism D. Co-insurance
B. Activities of daily living
85 A measure for rating an individual's need for LTC benefits is called: A. Case management B. Activities of daily living C. The gatekeeper mechanism D. Co-insurance
B. Activities of daily living
48. In a disability income insurance policy, an insured is eligible for a waiver of premium benefit: A. Under the age of 65. B. After the first six months of disability. C. During maternity leave. D. During delayed retirement.
B. After the first six months of disability.
45. Which of the following statements defines partial disability? A. A disabled employee while he is working part-time and receiving lost income under their long-term disability benefit. B. An employee who loses sight in one eye because of an accident on the job. C. An employer contributing half of the disability benefit to an employee out on long term disability.
B. An employee who loses sight in one eye because of an accident on the job.
87. In insurance terms, a representation can be considered: A. An absolute fact B. An implied warranty C. An express warranty D. None of the above
B. An implied warranty
58. In a non-contributory group disability income policy. What is the tax treatment for the employee? A. Employee can use the premiums for a tax deduction B. Benefits are included in the employees gross income C. Benefits are tax free D. All of the above
B. Benefits are included in the employees gross income
33. The type of insurance used to cover all students at a university would be called? A. An ASO B. Blanket Ins C. Franchise policy D. Self insured
B. Blanket Ins
61. The type of insurance used to cover all students at a university? A. An ASO B. Blanket insurance C. Franchise policy D. Self insured
B. Blanket insurance
16. An individual has a non-cancelable health policy. A. Can change the terms of the policy. B. Can cancel or refuse to re-new for non-payment. C. Can change the premiums. D. Can cancel the policy.
B. Can cancel or refuse to re-new for non-payment.
22. Which of the following is considered ordinary life insurance: A. Mortgage insurance. B. Continuous premium whole life insurance. C. Group insurance. D. 30-year decreasing term insurance.
B. Continuous premium whole life insurance.
9. An amount that must be paid after the basic health policy benefits are exhausted and before the excess coverage becomes effective is: A. Coinsurance B. Corridor deductible C. Extended benefits D. Co-payment
B. Corridor deductible
15. An applicant for an insurance license had another professional license revoked. What would the commissioner most likely do? A. Nothing, it did not involve insurance B. Deny the application without a hearing C. Take it under advisement D. Deny after a hearing
B. Deny the application without a hearing
12. With whom are policy forms filed? A. Insurance Services Office (ISO) B. Department of Insurance (DOI) C. National Council on Compensation Insurance (NCCI) D. Internal Revenue Service (IRS)
B. Department of Insurance (DOI)
84. With whom are policy forms filed? A. Insurance Services Office (ISO) B. Department of Insurance (DOI) C. National Council on Compensation Insurance (NCCI) D. Internal Revenue Service (IRS)
B. Department of Insurance (DOI)
64. Under Social Security, when does an individual receives retirement benefits?. A. Age 65 B. Depends upon the individual date of birth C. Age 100 D. Age 67
B. Depends upon the individual date of birth
5. The waiting period on a disability income policy is called which of the following? A. Eligibility period B. Elimination period C. Probationary period D. Black out period
B. Elimination period
17. HMOs are involved in all of the following except: A Controlling costs by encouraging preventative care. B. Emphasizing the use of specialty physicians. C. Providing health care services. D. Providing health care financial coverage.
B. Emphasizing the use of specialty physicians.
21. Which is not a characteristic of an HMO: A. Controlling costs by encouraging preventative care. B. Emphasizing the use of specialty physicians. C. Providing health care services D. Providing health care financial coverage
B. Emphasizing the use of specialty physicians.
41. Which of the following are common insurance policy provisions? A. Reinstatement, suicide, pre-existing conditions. B. Entire contract, grace period, reinstatement. C. Entire contract, incontestability, pre-existing conditions. D. Grace period, suicide, right to return.
B. Entire contract, grace period, reinstatement.
36. When a family policy covers children, all of the following are true except? A. The coverage is term insurance. B. Evidence of insurability is required if coverage for children is permanent insurance C. There is no additional charge for covering new additions to the family. D. All children living with the family are covered even if born or adopted after the policy is issued.
B. Evidence of insurability is required if coverage for children is permanent insurance
108. The premium paid for supplemental benefits (i.e. accidental death benefit) add to the cash value of a policy. A. True B. False
B. False
51. Compensatory damages in a hearing will generally determine the amount of punitive damages. A. True B. False
B. False
54. An insurer organized in a state outside the state of California can referred to as what kind of insurer: A. Domestic B. Foreign C. Alien D. Admitted
B. Foreign
6. Which describes an insurer who has enough financial resources only to provide for all its liabilities and for all reinsurance of all outstanding risks? A. Guaranteed B. Insolvent C. Solvent D. Non-participating
B. Insolvent
1. All of these are contributing factors to concept of morbidity except A. Health B. Intelligence C. Age D. Sex
B. Intelligence
82. A life annuity with a 10-year period certain: A. Will pay the annuitant only for 120 months. B. Is guaranteed to pay for a minimum of 120 months or a maximum of the life of the annuitant. C. Will pay the annuitant for 10 years and continue to pay the annuitant after 10 years but the amount will be less. D. Will pay the annuitant for life and the beneficiary for 10 years after the death of the annuitant.
B. Is guaranteed to pay for a minimum of 120 months or a maximum of the life of the annuitant.
38. All are incorrect of an IRA except? A. It requires forfeiting of any remaining funds when the owner dies. B. It grows tax deferred. C. Distributions must start by age 65. D. There are no rules regarding when distributions must start
B. It grows tax deferred.
92. Which of the following is true about an IRA? A. It requires the forfeiting of any remaining funds when owner dies. B. It grows tax deferred. C. Distributions must start by age 65. D. There are no rules regarding when distributions must start
B. It grows tax deferred.
19. The insured should be compensated for his loss, returning him to the condition that existed prior to the loss. This is the principle of indemnity. Which of the following is correct? A. It is based on the law of small numbers B. It is a basic principle of insurance C. It is based on the law of supply and demand D. It involves the principle of adhesion
B. It is a basic principle of insurance
27. To what does 24-hour coverage refer? A. It is medical coverage which provides around the clock protection B. It is the joint issuance of a worker's compensation policy with a disability insurance policy or other medical coverage for non-occupational injuries and illnesses Ć It refers to the fact that a person needs 24 hour nursing care D. It means that there is a waiting period of 24 hours before coverage begins
B. It is the joint issuance of a worker's compensation policy with a disability insurance policy
52. In the event of an accidental death, the principal sum of a life policy will be paid: A. Over the course of a set period. B. On a sliding schedule. C. In one lump sum. D. As a monthly indemnity.
C. In one lump sum.
112. What is a characteristic of level premium? A. It increases on a scheduled basis through the policy period B. It remains the same throughout the policy period C. It decreases at a constant rate through the policy period D. All of the above
B. It remains the same throughout the policy period
45. What is a characteristic of level premium? A It increases on a scheduled basis through the policy period B. It remains the same throughout the policy period. C. It decreases at a constant rate through the policy period D. All of the above
B. It remains the same throughout the policy period.
38. In order to deal with the financial consequences of the death of a senior sales manager, a corporation could purchase: A. Group life insurance B. Key person insurance C. Business overhead expense insurance D. Ordinary life insurance
B. Key person insurance
2. A pure risk involves a chance of: A. Gain B. Loss C. Both A & B D. Neither A or B
B. Loss
56. On a life policy when a settlement option has not been specified, the usual method of distribution is: A. Extended term B. Lump sum payment C. Life income D. Reduced paid-up
B. Lump sum payment
52. Which of the following renewability provisions of a disability contract is likely to change thecontract the least and cost the most? A. Continuous indemnity contract. B. Non-cancelable contract. C. Guaranteed renewable contract. D. Expense arrangement contract.
B. Non-cancelable contract.
7. Which of the following is an example of loss retention? A. Buying health insurance B. Not purchasing collision insurance on your auto C. Placing a watercraft endorsement on your homeowner's policy D. Removing dry brush from your house's premises.
B. Not purchasing collision insurance on your auto
43. John has two jobs. How would the insurance company rate him? A. On the job that he has been working at the longest. B. On the most dangerous job. C. On the job that pays him the most. D. On the job that he works the most hours per week on.
B. On the most dangerous job.
29. The beneficiary class designation that means beneficiaries who are surviving will receive equal amounts of the death benefit is_____. A. Class beneficiaries, equal shares B. Per capita C. Per stirpes D. Per diem
B. Per capita
63. The beneficiary class designation that means beneficiaries who are surviving will receive equal amounts of the death benefit is: A. Class beneficiaries, equal shares B. Per capita C. Per stirpes D. Per diem
B. Per capita
53. A disability income policy's social insurance supplement (SIS) benefit rider: (A-C) A. Pays benefits regardless of any social insurance benefits provided. B. Provides a benefit if the insured does not qualify for social insurance benefits. C. Provides a benefit only if the insured is totally disabled and qualifies for social insurance plan benefits.
B. Provides a benefit if the insured does not qualify for social insurance benefits.
31. What effect does increasing a deductible have on a policy A. Increases the premium payment B. Reduces the premium payment C. Increases likelihood of getting insurance D. Increases Insurance policy benefits
B. Reduces the premium payment
36. What can an insurer do when a fraudulent and intentional omission is committed on part of the insured proving a warranty false? A. Have the insured imprisoned for up to 6 months B. Rescind the contract C. Force the insured to pay a fine D. Force the commissioner to fine and imprison the insured
B. Rescind the contract
25. When an insurance policy is cancelled by the insured, and the company retain for the protection provided plus expenses, cancellation is said to be on a: A. Flat basis B. Short rate basis C. Pro rata basis D. Fixed basis
B. Short rate basis
83. Mary receives a large bonus from her company. She purchases an annuity that will start paying her $400/month immediately called: A. Deferred annuity. B. Single premium immediate annuity. C. Accumulation annuity. D. Variable annuity.
B. Single premium immediate annuity.
9. An agent who replaces an existing life insurance contract must do all of the following except: A Submit a copy of the replacement notice to the applicant B. Submit a copy of the replacement notice to the existing insurer C. Submit a copy of the replacement notice to the replacing insurer D. Obtain a signed statement from applicant as to whether insurance is to be replaced.
B. Submit a copy of the replacement notice to the existing insurer
51. In order to activate the the chronically ill trigger of a long term care policy, the insured must not be able to perform: A. One ADL B. TWO ADLS C. Three ADLs D. Four ADLs
B. TWO ADLS
86. In order to activate the chronically ill trigger of a long term care policy, the insured must not be able to perform: A. One ADL B. TWO ADLs C. Three ADLS D. Four ADLs
B. TWO ADLs
11. During the underwriting process for a life insurance policy, what is true about issue relating to HIVIAIDS? A. The insurer is not require to inform the applicant about HIV/AIDS testing B. The applicant must sign a separate disclosure form to allowed for this testing C. The insurer does not need the applicant written consent D. None of the above
B. The applicant must sign a separate disclosure form to allowed for this testing
19. During the underwriting process for a life insurance policy, what is true about issue relating to HIV/AIDS? A. The insurer is not require to inform the applicant about HIV/AIDS testing B. The applicant must sign a separate disclosure form to allowed for this testing C. The insurer does not need the applicant written consent D. None of the above
B. The applicant must sign a separate disclosure form to allowed for this testing
62. Who is the only party in a life insurance policy who has rights after the death of theinsured? A. The policy owner B. The beneficiary C. The applicant D. The insured
B. The beneficiary
42. To be classified as accidental under a disability income insurance policy, the following criteria must be used: A. Only the cause need be accidental. B. The cause may be intentional, but the result must be accidental. C. Both the cause and the result must be accidental. D. Only the result need be accidental.
B. The cause may be intentional, but the result must be accidental.
64. To be classified as accidental under a disability income insurance policy, the following criteria must be used: A. Only the cause need be accidental. B. The cause may be intentional, but the result must be accidental. C. Both the cause and the result must be accidental. D. Only the result need be accidental.
B. The cause may be intentional, but the result must be accidental.
8. To be classified as an accident under a disability income insurance policy what is true: A. Only the cause need be accidental. B. The cause may be intentional, but the result must be accidental. C. Both the cause and the result must be accidental. D. Only the result need be accidental
B. The cause may be intentional, but the result must be accidental.
15. A hospital confinement insurance policy pays: A An indemnity to the insured for all expenses incurred when the insured is in the hospital B. The daily benefit coverage amount stated in the policy for each day the insured is confined in the hospital. C. 100% of the covered medical expenses less the deductible and co-insurance percentage. D. The amount of the actual hospital expenses.
B. The daily benefit coverage amount stated in the policy for each day the insured is confined in the hospital.
71. Which statement about policy dividends is true? A. Dividends can be guaranteed. B. The insured usually selects the dividend option at the time of policy purchase. C. Dividends are issued only with non-participating policies. D. All dividends are taxable.
B. The insured usually selects the dividend option at the time of policy purchase.
35. Who is affected by the "black out period"? A. The insured B. The insured's spouse C. The insured's children D. The insured's dependent parents
B. The insured's spouse
69. What individual collecting Social Security benefits would be affected by a black out period? A. The insured B. The insured's spouse C. The insured's children D. The insured's dependent parents
B. The insured's spouse
31. An agent held one appointment with a lent held one appointment with an insurance company. The appointment was terminated. What is correct? A. The license is active until the end of the term B. The license is inactive C. The agent must be re-appointed by the same company D. The agent is required to have another action notice of appointment tiled within 30 days
B. The license is inactive
13. What is the stop loss provision? A. The maximum amount the insurer will pay on behalf of the insured in a policy period. B. The max amount the insured will be required to pay in a policy period. C. The total amount the insurer will pay on any one claim. D. The maximum lifetime amount the insurer will pay on behalf of the insured.
B. The max amount the insured will be required to pay in a policy period.
48. What is unoccupied: A. There are people living in the building but no furniture B. There may be furniture but no people in a building C. There are no people and no furniture D. The same as vacant
B. There may be furniture but no people in a building
79. What is true about annuities? A. They create an immediate estate. B. They liquidate an estate over a period of time. C. They liquidate an estate in a lump sum. D. They only may be purchased by someone who is 59 1/2.
B. They liquidate an estate over a period of time.
34. The system in which insurers determine who to insure and that rates to charge is known as A. Insurance B. Underwriting C. Indemnity D. Reinsurance
B. Underwriting
30. Which of the following would require a securities license to sell? A Universal life B. Variable life C. Adjustable life D. All of the above
B. Variable life
37. Which of the following is not considered a disability under the ADA? A. Cancer B. Wearing glasses C. Aids D. Diabetes
B. Wearing glasses
28. All statements about the election of a life insurance policy options are true except? A. The election may be made by the policy owner at the time the application to submitted. B. When no settlement option is chosen, the proceeds are automatically paid to the policy owner's estate. C. The election of a settlement option may be made by the beneficiary it no settlement option is in force at the time of death of the insured.
B. When no settlement option is chosen, the proceeds are automatically paid to the policy owner's estate.
1. Life insurance creates which of the following? A. cash flow B. an immediate estate C. liquidity in an estate D. all of the above
B. an immediate estate
84 Long Term Care (LTC): A. Is needed by the indigent. B. is least needed by the very poor and the very rich. C. is a provided coverage under Medicare. D. Medi-Cal is a LTC policy purchased by many middle-class individuals.
B. is least needed by the very poor and the very rich.
70. Social Security: A. Pays benefits that actuarially correspond to contributions. B. is mandatory (compulsory) for most workers. C. Provides contracts for individual insureds. D. Pays all insured workers benefits at age 65.
B. is mandatory (compulsory) for most workers.
129. A term that is used when income is earned on investment but taxes are paid when are issued is? A. taxable income B. tax deferred C. grace period D. endow
B. tax deferred
50. A term that is used when income is earned on investment but taxes are paid when benefits are issued: A. taxable income B. tax deferred C. grace period D. endow
B. tax deferred
Insolvency
Bankrupt/Assets do not equal paid out capital
12. The process whereby an insured suffers a loss and is paid to return him to his prior financial condition is: A. Insurable interest B. Pure risk C. Indemnity D. Ceding
C. Indemnity
What is the important distinction between being "covered" under Social Security and being "eligible" for benefits?
Being "covered" means that the individual is participating in the program thru regular tax contributions. Covered persons may or may not be eligible for a particular category of benefits based on their contributions and the criteria needed to receive that type of benefit. Whereas, being "eligible" for benefits is based on the individual's "insured status" as follows: Fully Insured Status Being FULLY INSURED entitles the worker and family to retirement, premium-free Medicare Part A, and survivor's benefits. Since 1978, fully insured status is due to a person, who works and pays Social Security taxes, earns up to four "credits" (a.k.a. quarters of coverage) per year. The dollar amount earned that qualifies as credit changes annually. Once a person earns 40 credits/quarters ( 10y of work) the worker is fully insured even if there is no longer working.
34. Under the FMLA (Family and Medical Leave Act), how many weeks of leave must be provided in a 12-month period due to pregnancy? A. 6 weeks B. 4 weeks C. 12 weeks D. 16 weeks
C. 12 weeks
55. In a disability income policy, when would the first benefit check be issued after a 90 day A. 90th day of continued disability B. 91st day of continued disability C. 121st day of continued disability D. 120th day of continued disability
C. 121st day of continued disability
4. How many days does an insurer have to return unearned premiums to an insured? A. 10 Days B. 15 Days C. 25 Days D. 30 Days
C. 25 Days
14. How long must an agent maintain records? A. 10 years B. 6 years C. 5 years D. 2 years
C. 5 years
24 In group insurance the employee receives: A. An individual policy B. The master contract C. A certificate of insurance D. None of the above
C. A certificate of insurance
25. In group insurance the employee receives: A. An individual policy B. The master contract C. A certificate of insurance D. None of the above
C. A certificate of insurance
58. In group insurance, what does the employee receive? A. An individual policy B. The master contract C. A certificate of insurance D. None of the above
C. A certificate of insurance
30. COBRA would apply to which of the following? A. An employee is terminated due to gross misconduct. B. An employee leaves to take a job with better pay and benefits. C. A dependent of an employee who is terminated. D. An ex-spouse of an employee remarries
C. A dependent of an employee who is terminated.
17. In the California Insurance Code there is a definition that reads, in short, "...a person who offers to advise for a fee, any insured having interest in life or disability insurance contracts..." This is: A. An insurance broker paid on a fee for service. B. A solicitor. C. A life and disability analyst. D. A claims adjuster.
C. A life and disability analyst.
11. Which of the following could you buy at an airport? A. Travel insurance B. Life insurance C. Accidental death and dismemberment D. Funeral insurance
C. Accidental death and dismemberment
51. A return of premium rider: (A-C) A. Allows the insured to cancel a policy within 90 days of delivery and receive a 100% refund of premium. B. Allows the insured to waive premium if the insured becomes totally disabled. C. Allows buying term insurance that pays an additional amount equal to premiums paid.
C. Allows buying term insurance that pays an additional amount equal to premiums paid.
25. What is true of a return of premium rider? A. Allows the insured to cancel a policy within 90 days of delivery and receive a 100% refund of premium. B. Allows the insured to waive premium if the insured becomes totally disabled. C. Allows for the periodic return of a percentage of the premium to the insured if he is not permanently disabled.
C. Allows for the periodic return of a percentage of the premium to the insured if he is not permanently disabled.
36. All of the following are true statements concerning the treatment of federal income tax on insurance products except? A. Premiums paid for individual life insurance policies are not tax deductible. B. Employers can deduct as a business expense the cost of insurance premiums paid to benefit employees. C. Annuity death benefit proceeds are exempt from all taxation. D. Life insurance death benefits are generally exempt from federal income tax.
C. Annuity death benefit proceeds are exempt from all taxation.
85. All are true statements concerning the treatment of federal income tax on insurance products except: A. Premiums paid for individual life ins policies are not tax deductible. B. Employers can deduct the cost of insurance premiums paid to benefit employees as a business expense. C. Annuity death benefit proceeds are exempt from all taxation. D. Life ins death benefits are exempt from federal income tax.
C. Annuity death benefit proceeds are exempt from all taxation.
47. The Social Security definition of disability is the inability to engage in: A. An approved occupation. B. An activity with a given level of compensation. C. Any substantial gainful activity. D. The person's chosen career.
C. Any substantial gainful activity.
65. The Social Security definition of disability is the inability to engage in: A. An approved occupation. B. An activity with a given level of compensation. C. Any substantial gainful activity. D. The person's chosen career.
C. Any substantial gainful activity.
72. The Soc Sec definition of disability is the inability to engage in? A. An approved occupation. B. An activity with a given level of compensation. C. Any substantial gainful activity. D. The person's chosen career.
C. Any substantial gainful activity.
11. All are valid reasons for the insurance commissioner to deny the application for an insurance license except: A. Applicant does not have a good business reputation B. Applicant is not properly qualified to perform C. Applicant does not have a California business address D. Applicant lacks integrity
C. Applicant does not have a California business address
62. To be consider currently insured under Social Security, a worker must have. A. At least 12 quarters of coverage during a 13 quarter period B. At least 40 quarters of coverage during 13 quarter period C. At least 6 quarters of coverage during 13 quarter period D. There is no requirement to be considered currently insured
C. At least 6 quarters of coverage during 13 quarter period
71. To be consider currently insured under social security, a worker must have? A. At least 12 quarters of coverage during a 13 quarter period B. At least 40 quarters of coverage during 13 quarter period C. At least 6 quarters of coverage during 13 quarter period D. There is no requirement to be considered currently insured
C. At least 6 quarters of coverage during 13 quarter period
25. CA Insurance Code requires television commercial selling term life insurance to individual 55 or older must inform the consumer that: A. Passing by a physical exam is a requirement for benefits B. Anyone who purchase term life insurance who's 55 or older will receive a senior discount C. Benefit and limitations should be considered prior to purchase D. All of the above
C. Benefit and limitations should be considered prior to purchase
95. California Insurance Code requires television commercial selling term life insurance to individual 55 or older must inform the consumer that? A. Passing a physical exam is a requirement for benefits B. Anyone who purchase term life insurance who's 55 or older will receive a senior discount C. Benefits and limitations should be considered prior to purchase D. All of the above
C. Benefits and limitations should be considered prior to purchase
48. All statement about SS disability benefits are true except: A. Benefits are based on the level of a worker's earnings up to the time of the disability. B. Benefits will continue only while the worker cannot work at all. C. Benefits are designed to replace the entire amount of a workers' earnings. D. Workers must be totally and permanently disabled for at least five months to be eligible for benefits.
C. Benefits are designed to replace the entire amount of a workers' earnings.
68. All of the following statements about Social Security disability benefits are true except: A. Benefits are based on the level of a worker's earnings up to the time of the disability. B. Benefits will continue only while the worker cannot work at all. C. Benefits are designed to replace the entire amount of a workers' earnings. D. Workers must be totally and permanently disabled for at least five months to be eligible for benefits.
C. Benefits are designed to replace the entire amount of a workers' earnings.
73. All statements about Social Security disability benefits are true except? A. Benefits based on the level of a worker's earnings up to the time of the disability. B. Benefits will continue only while the worker cannot work at all. C. Benefits replace an entire amount of a worker's earnings. D. Workers must be totally and permanently disabled for at least five months to be eligible for benefits.
C. Benefits are designed to replace the entire amount of a workers' earnings.
19. If a doctor is paid a fixed monthly fee for each patient by the HMO, it is referred to as: A. Open panel B. Closed panel C. Capitation D. Gatekeeper system
C. Capitation
22. A doctor that is paid a fixed amount per month, relating to per person, he is paid on what type of pay scale: A. Open panel B. Closed panel C. Capitation D. Gatekeeper system
C. Capitation
57. A person that sells insurance for only one company is A. Agent B. Broker C. Captive agent D. Independent agent
C. Captive agent
35. Which of the following is NOT a correct statement about the children's coverage under a family protection policy? (A-C) A. If children are born or adopted after policy is in force, they are automatically covered B. There is no additional premium payment for additional children. C. Children are subject to a health examination.
C. Children are subject to a health examination.
59. An illegal pracitce that occurs when an agent mixes personal funds with the insured's or occurs insurer's funds A. Theft B. Stealing C. Commingling D. Robber
C. Commingling
6. Which is not an example of cost sharing in a health ins policy? A. Coinsurance B. Co-payment C. Coordination D. Deductible
C. Coordination
17. Insurers make an adjustment to the cash value account of a universal life policy each time a payment is made. They add the premium paid and: A. Current rate of interest. B. A general expense charge. C. Current rate of interest with adjustments for mortality and a general expense charge. D. Mortality and general expense charge.
C. Current rate of interest with adjustments for mortality and a general expense charge.
29. Insurers make an adjustment to the cash value account of a universal life policy each time a premium payment is made, they add the premium paid and include all except: A. Current rate of interest. B. A general expense charge. C. Current rate of interest with adjustments for mortality and a general expense charge. D. Mortality and general expense charge.
C. Current rate of interest with adjustments for mortality and a general expense charge.
85. If a licensee wants to terminate and surrender his license, what must they do? A. Destroy the original license B. Destroy the original and notify the commissioner C. Deliver the license to the commissioner D. Nothing
C. Deliver the license to the commissioner
14. The Medical Information Bureau (MIB) reports contain: A. All insured members who have received physician services. B. The names of people who are insured. C. Disabilities and health conditions discovered during examination affecting insurability D. Health conditions that developed after issuance of the policy.
C. Disabilities and health conditions discovered during examination affecting insurability
14. Supplemental insurance used to pay for hospital confinement to treat cancer is also known as: A Specified medical B. Urgent stay C. Dread disease D. Temporary major medical
C. Dread disease
7. Which of the following describes the concept of utmost good faith? (a-C only) A. A judge usually would resolve a dispute over unclear language in an insurancecontract in favor of the insured. B. Only the insurer is bound by the terms of the insurance contract. C. Each party to a contract should be able to rely on the representations of the other party.
C. Each party to a contract should be able to rely on the representations of the other party.
63. Under COBRA, a qualifying event ensures that an employee who loses coverage can? A. Transfer coverage to another group. B. Convert to an individual policy. C. Elect to continue coverage. D. Request a waiver of premium.
C. Elect to continue coverage
39. Under COBRA, a qualifying event ensures that an employee who loses coverage can: A. Transfer coverage to another group. B. Convert to an individual policy. C. Elect to continue coverage. D. Request a waiver of premium
C. Elect to continue coverage.
104. Under family life, when are children covered? A. Term insurance is automatically applied B. Deductibles increase considerably upon adding the child C. Evidence of insurability is not required D. Only children born in the residing state are covered
C. Evidence of insurability is not required
3. When advertising on the internet in California, an agent or broker must provide all except A. Name of the licensee B. Office address C. Expiration date of the license D. License number
C. Expiration date of the license
81 When advertising on the internet in CA, an agent or broker must provide all except? A. Name of the licensee B. Office address C. Expiration date of the license D. License number
C. Expiration date of the license
22. An act which requires a reporting agency to take action if a consumer complains about inaccurate information is: A. EPO B. Medical Information Act C. Fair Credit Act D. COBRA
C. Fair Credit Act
102. Grouping people by similar characteristics is? A. Unfair discrimination B. Prejudice C. Fair discrimination D. A basic principle of insurance
C. Fair discrimination
16. Grouping people by similar characteristics is: A. Unfair discrimination B. Prejudice C. Fair discrimination D. A basic principle of insurance
C. Fair discrimination
105. An insurer cancels a policy and returns the entire premium. This is called? A. Short rate B. Pro-rata C. Flat cancellation D. No fault
C. Flat cancellation
26. An insurer cancels a policy and returns the entire premium. This is: A. Short rate B. Pro-rata C. Flat cancellation D. No fault
C. Flat cancellation
13. All of the following are considered ordinary life insurance except? A. 20 Pay Life B. A whole life policy C. Group Life D. None of the above
C. Group Life
23. Which is NOT considered ordinary life insurance? A. 20 Pay Life B. A whole life policy C. Group Life D. None of the above
C. Group Life
47. Which of the following riders gives the policyholder the right to purchase additional life insurance regardless of insurability? A. Incontestability B. Accelerated death benefit C. Guaranteed insurability D. Waiver of premium
C. Guaranteed insurability
32. Lou Jones, who has earned the CPCU designation, holds individual licenses as insurance as agent and broker. He employs two solicitors in his agency. Which of the following is a true statement about names? A. He can use Lou Jones Insurance Company B. He can use Lou Jones and Company C. He can use Lou Jones. CPCU. AAl, on his insurance stationery and other forms D. All of the above
C. He can use Lou Jones. CPCU. AAl, on his insurance stationery and other forms
42. Part A of Medicare covers? A. Outpatient hospital services B. Doctor's services C. Hospice care D. Drugs administered in a hospital
C. Hospice care
53. Which of the following will LTC not cover? A. Home health care B. Adult day care C. Hospital acute care unit D. Alzheimer's disease
C. Hospital acute care unit
79. Which of these expenses is never covered by a LTC ins policy? A. Home health care B. Adult day care C. Hospital acute care unit D. Alzheimer's disease
C. Hospital acute care unit
88. Which of the following expenses is never covered by a LTC insurance policy? A. Home health care B. Adult day care C. Hospital acute care unit D. Alzheimer's disease
C. Hospital acute care unit
73. All of the following are not covered under Part A of Medicare, except? A. inpatient physicians' and surgeons' services B. Private duty nursing C. Hospital stays and inpatient mental health care D. The first 3 pints of blood
C. Hospital stays and inpatient mental health care
2. Under which health care plan are the insureds required to file settlement claim forms A. Preferred Provider Organization (PPO) B. Health Maintenance Organization (HMO) C. Indemnity D. Point of Service (POS)
C. Indemnity
51. Under which health care plan are the insureds required to file settlement claim forms? A. Preferred Provider Organization (PPO) B. Health Maintenance Organization (HMO) C. Indemnity D. Point of Service (POS)
C. Indemnity
14. All of the following will not keep up with inflation except? A. Whole Life B. Term ins C. Index whole life D. Mortgage ins
C. Index whole life
25. Which of the following policy will keep up with inflation? A. Whole Life B. Term ins C. Index whole life D. Mortgage insurance
C. Index whole life
49. Which statement is true regarding Medicare supplement insurance plans? A. Insurers may offer only broad coverage plans that contain both core benefits and additional benefits. B. Insurers may freely offer whatever supplemental coverages they prefer to market. C. Insurers may offer policies that contain only the core benefits. D. Insurers may create insurance policies for approval by the California Department of Insurance
C. Insurers may offer policies that contain only the core benefits.
82. Which statement is true regarding Medicare supplement insurance plans? A. Insurers may offer only broad coverage plans that contain both core benefits and additional benefits. B. Insurers may freely offer whatever supplemental coverages they prefer to market. C. Insurers may offer policies that contain only the core benefits. D. Insurers may create insurance policies for approval by the California Department of Insurance
C. Insurers may offer policies that contain only the core benefits.
6. Insurance has a number of characteristics. Which of the following is not one of them? A. If there is ambiguous language in an insurance contract, it will be resolved in the insured's favor. B. Parties to a contract should be able to rely upon the honest representations of the other party C. It involves a catastrophic exposure D. The insurer is bound to perform under the contract
C. It involves a catastrophic exposure
68. Which statement best describes a life insurance policy dividend? A. It is a stockholder's right. B. It is found in a non-participating whole life policy and in a comparable participating policy. C. It is a distribution of excess funds accumulated by the insurer on participating policies. D. It is the interest paid to the policyholder from the cash value of a permanent insurance policy.
C. It is a distribution of excess funds accumulated by the insurer on participating policies.
11. Which is the best description of a premium? A. It is the commission received by the insurance agent. B. It is funds received by a insurer to realize the benefit of the policy. C. It is the amount an insured pays for each unit of coverage normally quoted as so many dollars per $1,000 of coverage per year. D. None of the above.
C. It is the amount an insured pays for each unit of coverage normally quoted as so many dollars per $1,000 of coverage per year.
7. What is premium? A. It is the commission received by the insurance agent. B. It is funds received by an insurer to realize the policy's benefit. C. It is the amount an insured pays for each unit of coverage normally quoted as so many dollars per $1.000 of coverage per year. D. None of the above.
C. It is the amount an insured pays for each unit of coverage normally quoted as so many dollars per $1.000 of coverage per year
12. Which of the following is the best description of a whole life insurance policy? A. It will liquidate a capital amount by payments of principal and interest. B. It pays the face amount only in the event of death and within a stated number of years. C. It pays the face amount whenever death occurs during the entire span of life. D. It pays the face amount either in the event of death within a stated period or at the end of that period.
C. It pays the face amount whenever death occurs during the entire span of life.
21. Which of these best describes a "whole life" contract? A. It will liquidate a capital amount by payments of principal and interest. B. It pays the face amount only in the event of death and within a stated number of years C. It pays the face amount whenever death occurs during the entire span of life. D. It pays the face amount either in the event of death within a stated period or at the end of that period.
C. It pays the face amount whenever death occurs during the entire span of life.
21. Which of the following is not a benefit of insurance A. It can be a source of investment funds B. It transfers loss C. It reduces risk exposure D. It reduces out of pocket expenses
C. It reduces risk exposure
24. Industrial life insurance policies provides a death benefit of what amount: A. 20,000 B. 150,000 C. Less than 10,000 D. 100,000
C. Less than 10,000
33. Renewable term can be best described as: A. Increasing death benefit; level premium. B. Decreasing death benefit; level premium. C. Level death benefit; increasing premium. D. Level death benefit; decreasing premium.
C. Level death benefit; increasing premium.
26. From lowest to highest, which of the following requires most premium for life insurance policies? A. Single premium Whole Life, Ordinary life, Modified life B. Ordinary life, Modified life, Single premium Whole Life C. Modified life, Ordinary life, Single premium Whole Life D. Ordinary life, Single premium Whole Life, Modified life
C. Modified life, Ordinary life, Single premium Whole Life
15. What is the correct order of initial premium for life insurance policies, from lowest to highest? A. Single premium whole life, Ordinary life, Modified life B. Ordinary life, Modified life, Single premium whole life C. Modified life, Ordinary life, Single premium whole life D. Ordinary life, Single premium whole life, Modified life
C. Modified life, Ordinary life, Single premium whole life
12. Which of the following is used to establish life insurance rates? A. Mortality, savings, and expense B. Morbidity, interest, and expense C. Mortality, interest, and expense D. Morbidity, interest, and payments
C. Mortality, interest, and expense
54. During the disability income elimination period: A. Residual benefits are payable. B. Occupational claims are payable. C. No benefits are payable. D. All claims are payable.
C. No benefits are payable.
81. After receiving care by a doctor, how is the insured notified of Medicare's decision to cover the claim? A. Explanation will be found in your policy B. Doctors billing statement C. Notice from the Centers for Medicare & Medicaid Services D. None of the above
C. Notice from the Centers for Medicare & Medicaid Services
77. After receiving care by a doctor, how is the insured notified of Medicare's decision to cover the claim? A. Explanation will be found in your policy B. Doctors billing statement C. Notice from the social security administration D. None of the above
C. Notice from the social security administration
53. The commonly used 30, 60, 90 and 180 days in disability terminology refers to A. Amount paid by the insured before benefits are payable. B. Payable amount split by the insured and the insurer. C. Number of days for which no benefits are payable. D. Number of days in which benefit payments end.
C. Number of days for which no benefits are payable.
6. In disability policies, 30,60, 90 refers to: A. Amount paid by the insured before benefits are payable. B. Payable amount split by the insured and the insurer. C. Number of days for which no benefits are payable. D. Number of days in which benefit payments end.
C. Number of days for which no benefits are payable.
68. The commonly used 30. 60, 90 and 180 days in disability terminology refers to me. A. Amount paid by the insured before benefits are payable. B. Payable amount split by the insured and the insurer. C. Number of days for which no benefits are payable. D. Number of days in which benefit payments end.
C. Number of days for which no benefits are payable.
92. Which is included under a comprehensive LTC policy? A. Nursing Facility only B. Home Care only C. Nursing Facility and Home Care D. None of the above
C. Nursing Facility and Home Care
24. When may a representation be withdrawn? A. At any time as long as all parties agree B. It cannot be withdrawn C. Only before the insurance is in effect D. Only after the policy is in effect
C. Only before the insurance is in effect
22. A house located next to a dynamite plant is considered what kind of hazard. A. Moral B. Legal C. Physical D. Liability
C. Physical
31. All of the following statements are false except? A. Policy dividends are taxable. B. Non-participating policies receive dividends. C. Policy dividends cannot be guaranteed. D. Policy dividends can be guaranteed.
C. Policy dividends cannot be guaranteed.
70. Which of these statements is correct? A. Policy dividends are taxable. B. Non-participating policies receive dividends. C. Policy dividends cannot be guaranteed. D. Policy dividends can be guaranteed.
C. Policy dividends cannot be guaranteed.
10. Identify which has the lowest premium payment: A. Standard B. Substandard C. Preferred D. None of the above
C. Preferred
16. Which of the following would have the lowest premium? A. Standard B. Substandard C. Preferred D. None of the above
C. Preferred
18. A health maintenance organization (HMO) plan contains costs by promoting A. After-hours care B. Generic care C. Preventative care D. Fee for service care
C. Preventative care
20. How does an HMO keep costs down: A. After-hours care B. Generic care C. Preventative care D. Fee for service care
C. Preventative care
56. How does an HMO contain costs? A. After-hours care B. Generic care C. Preventative care D. Fee for service care
C. Preventative care
9. When an insurere cancels a policy and only retains earned premium, this is: A. Flat cancellation B. Short rate cancellation C. Pro-rata cancellation D. Continuous cancellation
C. Pro-rata cancellation
90. The term used to apply to a break (rest) given to people caring full time for an individual in their home is: A Restoration B. Intermediate care C. Respite D. None of the above
C. Respite
17. Which of the following will not cause the premiums to go up? A. Parachuting B. Rock Climbing C. Rollerblading D. Race car driver
C. Rollerblading
93. A contribution to which of the following retirement plans does not allow for a tax deduction in the year the contribution is made? A. IRA B. 401K C. Roth IRA D. KEOGH
C. Roth IRA
98. Which of the following would qualify for a Keogh plan? A. Employer B. Key Person C. Self Employed D. None of the above
C. Self Employed
15. What has to accompany the request for an attending physician's statement: A. Underwriting criteria B. Signed application C. Signed authorization from the insured D. Policy illustration
C. Signed authorization from the insured
9. This must be attached to a request for an attending physician's statement: A. Underwriting criteria B. Signed application C. Signed authorization from the insured D. Policy illustration
C. Signed authorization from the insured
Which of the following is true regarding STOCK companies? A. Stock companies are owned by policyholders who contribute capital through the purchase of policies. B. None of the choices are correct C. Stock companies are corporations owned by individuals who contribute capital to the company through the purchase of shares of stock. D. Stock companies are a special type of non-profit organization authorized to insure members and their families against the possibility of accident, sickness, or death.
C. Stock companies are corporations owned by individuals who contribute capital to the company through the purchase of shares of stock.
104. The insurer's right to recover its claim payment to an insured party is known as? A. Arbitration B. Liberalization C. Subrogation D. Assignment
C. Subrogation
23. The insurer's right to recover its claim payment to an insured from an known as: A. Arbitration B. Liberalization C. Subrogation D. Assignment . Transfer
C. Subrogation
The insurer's right to recover its claim payment to an insured from a negligent 3rd party is known as: A. Assignment B. Liberalization C. Subrogation D. Arbitration
C. Subrogation
20 Who is allowed to work with non-admitted carriers when the insurance cannot be found in the ordinary market? A. Non-ordinary companies B. Health only agents C. Surplus lines brokers D. Gap insurance
C. Surplus lines brokers
49. A disability policy described as "guaranteed renewable" is one where the insurance company: A. Surrenders the right to change any of its terms or to change the premiums. B. Surrenders the right to change any of its terms but may change the premiums with the consent of the insured. C. Surrenders the right to change any of its terms but may change the premiums.
C. Surrenders the right to change any of its terms but may change the premiums.
46. To what does lapse refer A. The insurer decides not to continue insuring a customer B. The insured voluntarily cancels there coverage C. Termination due to non-payment D. A policy that is cancelled upon its effective date
C. Termination due to non-payment
10. Why is having a large number of similar exposure units important to to insurers? A. The insurer increases its market share with every insured. B. The greater the number insured, the greater the amount of premium cover losses. C. The greater the number of insureds, the more accurately the insurer losses and set appropriate premiums. D. Law of Large numbers only applies to groups not individuals
C. The greater the number of insureds, the more accurately the insurer losses and set appropriate premiums.
77. Non preprinted illustration selling non guaranteed individual annuity policies to an individual must include a statement providing the following information: A. This illustration guarantees all benefits B. This illustration is a retirement plan C. The illustration is an illustration only and not a prediction of actual performance D. None of the above
C. The illustration is an illustration only and not a prediction of actual performance
16. The adjustments that an insurer makes to a universal life policy's cash value account when a premium is paid include all except: A. The insurer subtracts for mortality and general expenses. B. The insurer adds the current rate of interest. C. The insurer subtracts the policy surrender charge. D. The insurer adds the current premium payment
C. The insurer subtracts the policy surrender charge.
28. The adjustments that an insurer makes to the cash value account of a universal lite policy each time a premium payment is made include all of the following except: A. The insurer subtracts for mortality and general expenses. B. The insurer adds the current rate of interest. C. The insurer subtracts the policy surrender charge. D. The insurer adds the current premium payment.
C. The insurer subtracts the policy surrender charge.
39. The mathematical rule that states that as the number of individual but similar exposure units increase, the easier it is to predict losses is.. A. Insurable interest standard B. Contract law C. The law of large numbers D. Materiality
C. The law of large numbers
91. The mathematical rule that states that as the number of individual but similar exposure units increases, the easier it's to predict losses is A. Insurable interest standard B. Contract law C. The law of large numbers D. Materiality
C. The law of large numbers
96. What is a difference between a defined contribution plan and a defined benefit plan? A. The party making the contribution. B. The contract period requiring specific payments. C. The penalties for early distribution. D. The party receiving the contribution.
C. The penalties for early distribution.
66. Which definition of disability is the most difficult for a disabled person to satisfy? A. The own-occupation definition used by the Social Security administration B. The typical definition of partial disability used by disability income policies. C. The total disability definition used by the Social Security Administration. D. The typical definition of temporary disability used by disability income policies
C. The total disability definition used by the Social Security Administration.
7. Which has the most difficult definition to satisfy for disability? A. Partial disability in a disability income policy. B. Temporary disability in a disability income. C. Total disability under Social Security. D. The definition of disability is the same on all disability policies.
C. Total disability under Social Security.
10. According to Proposition 103, the commissioner of insurance became an elected official the commissioner may serve: A. As many terms for which he is elected B. One term only C. Two consecutive terms (8 years) D. No mention is made in the insurance code as to term limits
C. Two consecutive terms (8 years)
27. A flexible benefit cash value policy which earns a current rate of interest with flexible premiums is: A Adjustable life B. Endowment C. Universal life D. MEC
C. Universal life
117. Also known as "per head", this disburses equal share of proceeds: A. representation B. contingent beneficiary C. per capita D. consideration
C. per capita
3. The entire contract of an insurance policy contains: A. policy, not the application B. policy ,application ,oral representations C. the policy and when attached the application D. the policy and all sales literature
C. the policy and when attached the application
128. A security-based life insurance policy in which the insured chooses how the cash values are invested: A. indexed universal B. term life C. variable life D. whole life
C. variable life
When each member of an insured group fills out an enrollment card, they are given a ___________________________ which can be anything from a several-page document resembling a policy to a wallet-sized card. The certificate is evidence of coverage and sums the members' benefits, terms of coverage, and rights under the group plan.
CERTIFICATE OF INSURANCE,
Insurance contracts are _________________ because when a loss occurs certain conditions must be satisfied in order for claims to be paid. .
CONDITIONAL
_______________ is an attempt by the existing insurer to dissuade a policyholder from replacing existing life ins or annuity. T his does not include routine admin procedures such as late payment reminders or reinstatement offers.
CONSERVATION
Insurance policies are _______________________because they are drawn up by the insurance and offered to applicants who, upon acceptance, agree to adhere to the terms of the contract. Only the insurance has control over the original policy's wording and content. Thus, if there is any ambiguity in the contract's wording, it is resolved against the insurer, the party who wrote the contract, and in favor of the insured.
CONTRACTS OF ADHESION
If the cost of the group insurance is shared on any basis between the employer and the employees, the plan is called a ________PLAN. T he plan must be offered to all eligible employees. However, at least 75% of all eligible members must elect to participate and be covered by the plan. This enrollment requirement is imposed by ins. companies to minimize adverse selection. Even with a minimum of 75% of the eligible members being covered, there will still be some poor risks in the group, but the number of poor risks is more likely to be off-set by the number of good risks.
CONTRIBUTORY plan
42. Failure to disclose material fact is: A. Concealment B. Fraud C. Waiver D. Estoppels
Concealment
This section of a life ins specifies the duties and rights of both parties to the contract. The policy's basic conditions, or provisions, specify the owner's and insurer's rights and responsibilities, while optional provisions allow the policyholder to customize the policy to meet specific coverage needs and objectives.
Conditions
Decreasing Term Insurance
Coverage in which the face amount of a life insurance policy declines by a stipulated amount over a period of time
Key Person Insurance
Covers decreased business earnings due to a death or disability of a key employee. (Ex. Senior sales manager, etc.)
13. If an insurer pays an insured $25,000 in lost wages, $45,000 for physicians' visits and hospital costs and $15,000 for physical therapy treatments and later finds out that the claim was fraudulent, the insured may be fined as much as? A. $25,000 B. $60.000 C. $85,000 D. $170,000
D. $170,000
17. If an insurer pays an insured $25k in lost wages, $45k for physician's visits and hospital costs and $15kfor physical therapy treatments and later find that the claims was fraudulent. How much may the insured be fined? A. $25,000 B. $60,000 C. $85,000 D. $170,000
D. $170,000
33. The purpose of the CA Life and Health Guarantee Association is: A. To help small insurers with less capital to compete with larger insurers. B. To protect life policy holders and/or insured's when any member insurer becomes insolvent C. To guarantee that any promises made by any insurer's sales or marketing units are fulfilled. D. (Subject to certain limitations) to protect life and health policy holders and/or insureds when member insurers become insolvent.
D. (Subject to certain limitations) to protect life and health policy holders and/or insureds when member insurers become insolvent.
93. The purpose of the California Life and Health Guarantee Association is: A. It helps small insurers w/ less capital to compete w/ larger insurers. B. To protect life policyholders and/or insured' when any member insurer becomes insolvent. C. To guarantee that any promises made by any insurer's sales or marketing units are fulfilled. D. (Subject to certain limits) to protect life and health policyholders and/or insured's when member insurers become insolvent.
D. (Subject to certain limits) to protect life and health policyholders and/or insured's when member insurers become insolvent.
44. A lady name Doris, age 30 misstated her age as 25 to obtain coverage at $10.00 per $1,000.00 of coverage instead of $12.00 per $1,000.00. The adjusted death benefit will be calculated at A. 20/25 X face amount B. 25/30 X face amount C. 12/10 X face amount D. 10/12 X face amount
D. 10/12 X face amount
27. How many days does an agent have to return unearned premium to an insured? A. 25 days B. 10 days C. 30 days D. 15 days
D. 15 days
27. The COBRA provisions apply to companies with ____ employees? A. 10 B. 40 C. 60 D. 20
D. 20
38. The provisions of the Consolidated Omnibus Budget Reconciliation Act (COBRA) apply to companies with what number of employees? A. 10 B. 40 C. 60 D. 20
D. 20
35. The Family and Medical leave act does not apply to? A. Adoption B. Sickness C. Pregnancy D. A husband and moves with his wife who has been transferred out of the country
D. A husband and moves with his wife who has been transferred out of the country
9. Per CA Insurance Code, what must appear on a Notice of Claim form given to an insured? A. Telephone number of the Department of Insurance B. Information regarding the Arson Bureau C. Information regarding an Insurance Claims Analyst Bureau D. A notice stating that any person who knowingly presents a false, or fraudulent claim is guilty of a crime; and may be subject to fines and confinement in state prison
D. A notice stating that any person who knowingly presents a false, or fraudulent claim is guilty of a crime; and may be subject to fines and confinement in state prison
83. Per CA Ins Code, what must appear on a Notice of Claim form given to an insured? A. Telephone number of the Department of Insurance B. Information regarding the Arson Bureau C. Information regarding an Insurance Claims Analyst Bureau D. A notice stating that any person who knowingly presents a false, or fraudulent claim, is guilty of a crime; and may be subject to fines and confinement in state prison
D. A notice stating that any person who knowingly presents a false, or fraudulent claim, is guilty of a crime; and may be subject to fines and confinement in state prison
33. All of the following are required to be on a life insurance policy illustration except? A. The name of the insured B. The page number C. The amount of insurance D. A statement that the benefits in the illustration are guaranteed
D. A statement that the benefits in the illustration are guaranteed
76. All of the following are require to be on a life insurance policy illustration except? A. The name of the insured B. The page number C. The amount of insurance D. A statement that the benefits in the illustration are guaranteed
D. A statement that the benefits in the illustration are guaranteed
67. What is involved in a viatical contract transaction? A. Retention B. Partial assignment C. Conversion D. Absolute assignment
D. Absolute assignment
10. An insurer's loss reserve for a claim is: A. Equal to claims paid divided by earned premium reserve, not including loss adjustment expense B. The maximum amount the insurer will have to pay to close the claim The exact amount the insurer will have to pay to close the claim D. An estimate of the amount that the insurer will pay C. The exact amount the insurer will have to pay to close the claim. D. An estimate of the amount that the insurer will pay.
D. An estimate of the amount that the insurer will pay.
32. At what age does a child become eligible for group health? A. 19 B. 21 C. 22 D. As stated in the policy
D. As stated in the policy
3. A risk management technique that eliminates a loss exposure and reduces the chance of loss to zero iS A. Loss prevention B. Retention C. Loss reduction D. Avoidance
D. Avoidance
97. A risk management technique that eliminates a loss exposure and reduces the chance of loss to zero is? A. Loss prevention B. Retention C. Loss reduction D. Avoidance
D. Avoidance
34. Under tort law, a person can face a claim for legal liability on the basis of all except: A. Absolute liability B. Intentional tort C. Negligence D. Breach of contract
D. Breach of contract
89. Under tort law, a person can face a claim for legal liability on the basis of all except? A. Absolute liability B. Intentional tort C. Negligence D. Breach of contract
D. Breach of contract
67. Under an individual guaranteed renewable health contract, the insurer has the right to? A. Discontinue coverage on the basis of employment. B. Cancel the policy for health reasons. C. Make unilateral benefit changes. D. Change premiums for a class of insureds.
D. Change premiums for a class of insureds
50. Under an individual guaranteed renewable health contract, the insurer has the right to: A. Discontinue coverage on the basis of employment. B. Cancel the policy for health reasons. C. Make unilateral benefit changes. D. Change premiums for a class of insureds.
D. Change premiums for a class of insureds.
3. All are used to determine group disability income rates except: A. Average age of the insureds who make up the group. B. Maximum indemnity period. C. Length of the waiting/elimination period. D. Location of the insured entity.
D. Location of the insured entity.
19. Under an individual guaranteed renewable health contract, the insurer has the right to: A. Discontinue coverage on the basis of employment. B. Cancel the policy for health reasons. C. Make unilateral benefit changes. D Change premiums for a class of insureds.
D. Change premiums for a class of insureds..
4. A provision stating that persons with health insurance and their insurers will share covered losses in an agreed proportion is called: A. The stop-loss provision B. Comprehensive insurance C. Percentage insuring D. Co-insurance
D. Co-insurance
52. A provision stating that persons with health insurance and their insurers will share covered losses in an agreed proportion is called? A. The stop-loss provision B. Comprehensive insurance C. Percentage insuring D. Co-insurance
D. Co-insurance
100. How are ESOP usually invested? A. Mutual Funds B. Money Markets C. Corporate Bonds D. Company stock
D. Company stock
54 Which will not be covered by a standard long-term care policy? A. Intermediate care B. Custodial care C. Skilled nursing care D. Convalescent care
D. Convalescent care
89. Which of the following is not a standard level of care for a LTC policy? A. Intermediate care B. Custodial care C. Skilled nursing care D. Convalescent care
D. Convalescent care
11. When a claimant is covered by more than one health plan, the situation is resolved through: A. Maximum benefit payment amounts B. Coinsurance C. Integration D. Coordination of benefits
D. Coordination of benefits
52. Which is not a benefit trigger under long term care: A. Alzheimer's disease B. Incontinence C. Dementia D. Deafness
D. Deafness
87. Triggers to receive long term care (LTC) benefits include the following except: A. Alzheimer's disease B. Incontinence C. Dementia D. Deafness
D. Deafness
5. When a mutual insurance company changes to a stock insurance company, it is referred to as? A. Mutualization B. Stock split C. Stock buy-out D. Demutualization (or, Conversion)
D. Demutualization (or, Conversion)
28. Under COBRA, which of the following is a qualifying event? A. Promotion B. Relocation C. Marriage D. Divorce
D. Divorce
89. The federal act that protect s group plan participants, establish pension equality, and mandates strict reporting and disclosure requirements is: A. COBRA B. DEFRA C. TEFRA D. ERISA
D. ERISA
7. On a major medical policy when two or three family members have satisfied the deductible for the entire family, this is referred to as: A. Per-cause deductible B. Calendar year deductible C. Corridor deductible D. Family deductible
D. Family deductible
8. Per CA Department of Insurance fraud is considered a(n): A. Misdemeanor B. Warning C. Infraction D. Felony
D. Felony
What does insurable interest mean in life insurance? A. Financial benefits of the policy that the beneficiary will receive B. Amount of loss must be large enough to cause a hardship C. Benefits that the policy will develop over the policy life D. Financial interest in having the life of the insured continue
D. Financial interest in having the life of the insured continue
53. All of the following are true of a major medical plan except? A. Deductibles B. Coinsurance C. Maximum limits D. First dollar coverage
D. First dollar coverage
8. What is not a feature of major medical policies? A. Deductibles B. Coinsurance C. Maximum limits D. First dollar coverage
D. First dollar coverage
19. What must an insurer do, who accepts an application from an application from an agent who is not appoint by that insurer if they subsequently issue a policy based on that application: A. The agent must become an employee of that insurer within 30 days or re-submit the application B. Add the agent's name on the company's list of approved agents C. Send the agent an employment approval notice within 30 days of policy issuance D. Forward to the insurance commissioner a notice of appointment within 14 days of receipt of the application
D. Forward to the insurance commissioner a notice of appointment within 14 days of receipt of the application
34. Social security retirement benefits are only for employees who have satisfied which? A. Medicare insured B. Currently insured C. Defined insured D. Fully insured
D. Fully insured
61. Retirement benefits under Social Security are available only for workers who are: A. Medicare insured B. Currently insured C. Defined insured D. Fully insured
D. Fully insured
80. What right does an individual have if there is a disagreement on a decision on the Medicare will pay? A. He may ask for a second opinion from the Department of insurance. B. He can stop paying premiums until the claim in resolved. C. He may change Medicare carriers. D. He can ask a Medicare carrier to review the decision
D. He can ask a Medicare carrier to review the decision
45. What right does an individual have if there is a disagreement on a decision on the amount Medicare will pay? A. He may ask for a second opinion from the Department of Insurance B. He can stop paying premiums until the claim in resolved. C. He may change Medicare carriers. D. He can ask a Medicare carrier to review the decision.
D. He can ask a Medicare carrier to review the decision.
56. A person that solicits, negotiates and effects contracts on behalf of an insurer is a: A. Agent(producer) B. Captive agent C. Solicitor D. Independent agent
D. Independent agent
28. The insurance commissioner: A. Is appointed by the governor B. Is elected by the state legislature C. Is appointed by the state attorney general D. Is elected by the public
D. Is elected by the public
94. The insurance commissioner: A. Is appointed by the governor B. Is elected by the state legislature C. Is appointed by the state attorney general D. Is elected by the public
D. Is elected by the public
Fixed Period Settlement Option
Once a person has died, the death proceed is paid out as a level amount of money, which is principal and interest over a specified period of time
46. Which of the following is not a principal factor used to determine group disability income rates? A. Average age of the insureds who make up the group. B. Maximum indemnity period. C. Length of the waiting/elimination period. D. Location of the insured entity.
D. Location of the insured entity.
40. Under COBRA (Consolidated Omnibus Budget Reconciliation Act) all are qualifying events, except? A. Employee becomes eligible for Medicare B. Reduction in hours or Termination (other than for gross misconduct) C. Death of employee D. Marriage
D. Marriage
40 Physician services in the hospital, doctor's office, or clinic are covered under: A. Medicare Part A; no additional premium B. Medicare Part A; additional premium due C. Medicare Part B; no additional premium D. Medicare Part B; additional premium due
D. Medicare Part B; additional premium due
76. Physician services in the hospital, doctor's office, or clinic are covered under? A. Medicare Part A; no additional premium B. Medicare Part A; additional premium due C. Medicare Part B; no additional premium D. Medicare Part B; additional premium due
D. Medicare Part B; additional premium due
78. Physician services in the hospital, doctor's office, or clinic are covered under: A. Medicare Part A: no additional premium B. Medicare Part A: additional premium due C. Medicare Part B; no additional premium D. Medicare Part B; additional premium due.
D. Medicare Part B; additional premium due.
26. Any person who meets with a senior at the Senior home, is required to deliver a notice in writing to the senior's home. They must receive this notice prior to the initial meeting within how many days of the meeting? A. 12 hours prior to the meeting B. 6 hours prior to the meeting C. No notice is required D. No less than 24 hours
D. No less than 24 hours
69. Must one pay income tax on policy dividends? A. Yes, because they add to the income of the policyholder. B. Yes, because they are a type of interest earned. C. No, because they are never reported by the company. D. No, because they are looked upon by the federal government as a return to the policyholder of excess premium charged.
D. No, because they are looked upon by the federal government as a return to the policyholder of excess premium charged.
10. Which of the following is not a disability, according to the ADA (Americans with Disabilities Act)? A. Deafness B. Blindness C. Diabetes D. Obesity
D. Obesity
46. Medicare supplement policies must: A. Market anything they want to market. B. Sell only additional coverages and not only the core benefits. C. Whatever federal law allows as the insurance code does not address Medicare supplements. D. Offer core benefits.
D. Offer core benefits.
48. The guaranteed insurability rider provides that the policy owner can purchase more insurance: A. Any time during the policy owner's life without proof of insurability. B. On the lives of his dependents at certain specified ages. C. On his own life at specified ages provided the policy owner is insurable. D. On his life at certain specified ages with no proof of insurability.
D. On his own life at certain specified ages without proof of insurability
24. The guaranteed insurability rider provides that the policy owner can purchase more insurance: A. Any time during the policy owner's life without proof of insurability. B. On the lives of his dependents at certain specified ages. C. On his own life at specified ages provided the policy owner is insurable. D. On his own life at certain specified ages without proof of insurability.
D. On his own life at certain specified ages without proof of insurability.
16. Certain healthcare providers are called "service type providers". This means: A. They are more service oriented than the average provider. B. Payments for service are made directly to the insured. C. They provide broader services to their insureds. D. Payments for services are made directly to the provider.
D. Payments for services are made directly to the provider.
74. Medicare Part A provides for all of the following except: A. Home health care B. Hospice C. Hospitalization D. Physicians' services
D. Physicians' services
29. All might make an agent act unethically except: A. Being mostly concerned about earnings B. Associating with unethical agents C. Being pressured as production is not up to quota D. Placing clients' interests first
D. Placing clients' interests first
91. According to the Employee Retirement Income Security Act (ERISA) fiduciary standards, benefit plans are operated for: A. Plan sponsors and beneficiaries. B. Plan sponsors and employees. C. Plan participants and employees. D. Plan participants and beneficiaries.
D. Plan participants and beneficiaries.
32. Which statement about HICAP is false? A. Stands for Health Insurance Counseling Advocacy Program B. Serves people needing information about Medicare C. Does not sell or endorse any specific types of insurance D. Provides assistance for a fee based upon ability to pay
D. Provides assistance for a fee based upon ability to pay
41. Which of the following statements about HICAP is false? A. Stands for Health Insurance Counseling Advocacy Program B. Serves people needing information about Medicare C. Does not sell or endorse any specific types of insurance D. Provides assistance for a fee based upon ability to pay
D. Provides assistance for a fee based upon ability to pay
20. Which of the following is an example of reducing risk probability A. Buying OTC B. Reducing premium payments C. Increasing deductibles D. Putting a fence around a pool
D. Putting a fence around a pool
44. Which is not a coverage found under hospice care? A Pain relief B. Symptom management C. Counseling D. Rehabilitation
D. Rehabilitation
76. Which of the following is not provided by hospice care? A. Pain relief B. Symptom management C. Counseling D. Rehabilitation
D. Rehabilitation
32. Which type of insurance guarantees the right to renew the policy each year, regardless of health, but with an increase in premium? A. Convertible term B. Level term C. Decreasing term D. Renewable term
D. Renewable term
44. The pricing of a disability policy is based on the financial loss of a certain group of people over a certain period of time known as: A. Frequency B. Rapidity C. Occurrence D. Risk
D. Risk
65. The pricing of a disability policy is based on the financial loss of a certain group of people over a period of time known as: A. Frequency B. Rapidity C. Occurrence D. Risk
D. Risk
1. According to the California Department of Insurance, which term means "mandatory"? A. Oath B. May C. Warranty D. Shall
D. Shall
82. Per the CA Dept. of Insurance, which term is mandatory? A. Oath B. May C. Warranty D. Shall
D. Shall
67. Jeanette, a young working woman suffered a bad injury while visiting her mother. She was completely paralyzed and is not expected to recover. Which program might pay her disability income benefits? A. Workers compensation B. Medicare C. Medi-Cal D. Social Security
D. Social Security
9. Jeanette, a young working woman completely paralyzed suffered a bad injury while visiting her sister. She was paralyzed. Which program might pay her disability income benefits? A Workers compensation B. Medicare C. Medical D. Social Security
D. Social Security
43. Who qualifies for coverage under hospice care: A. Persons needing acute care B. Family caregivers C. Persons needing custodial care D. Terminally ill persons
D. Terminally ill persons
75. Hospice care is for: A. Persons needing acute care B. Family caregivers C. Persons needing custodial care D. Terminally ill persons
D. Terminally ill persons
75. Who is hospice care for? A. Persons needing acute care B. Family caregivers C. Persons needing custodial care D. Terminally ill persons
D. Terminally ill persons
1. Which of the following best describes a "Captive Agency System"? A. All of the choices are correct B. Is the term given to the process of searching for potential customers, selling policies, and servicing existing contracts. C.. A person enters into agency agreements as an independent contractor and potentially represents more than one company at a time. D. The agent is a representative of a single insurer and is obligated to submit business only to that company, or at minimum give that company the "first right-of-refusal."
D. The agent is a representative of a single insurer and is obligated to submit business only to that company, or at minimum give that company the "first right-of-refusal."
18. All of the following are required on a life insurance application except: A. Health history. B. Amount of life insurance in force. C. Age of the insured. D. The amount of disability income in force.
D. The amount of disability income in force.
39. The distinct feature of the alternative funding method known as self funding is: A. It applies to large companies. B. It is designed for entrepreneurs. C. No evidence of insurability is required. D. The benefits are tailored to the needs of the participants.
D. The benefits are tailored to the needs of the participants.
4 Why is having a large number of similar exposure units important to insurers? A. The greater the number insured, the more premium is collected to offset fixed costs. B. The insurer increases its market share with every insured. C. The greater the number insured, the greater the amount of premiums collected to help cover losses. D. The greater the number of insured's, the more accurately the insurer can predict losses and set appropriate premiums.
D. The greater the number of insured's, the more accurately the insurer can predict losses and set appropriate premiums.
86. Why is having a large number of similar exposure units important to insurers? A. The greater the number insured, the more premium is collected to offset fixed B. The insurer increases its market share with every insured. C. The greater the number insured, the greater the number of premiums collected to help cover losses. D. The greater the number of insureds, the more accurately the insurer can predict losses and set appropriate premiums.
D. The greater the number of insureds, the more accurately the insurer can predict losses and set appropriate premiums.
107. All of the following are correct regarding variable life, except: A. It is state and federally regulated B. The insured chooses how the cash is invested C. It can be structured as whole life D. The insurance company attains all the risk of investments
D. The insurance company attains all the risk of investments
72 What is the first step in submitting a claim to Medicare? A Medicare submits all expenses to the insurance company. B. The insured submits expenses to Medicare C. The Medical provider submits expenses to the insured D. The medical provider submits expenses to Medicare
D. The medical provider submits expenses to Medicare
74. What is the first step in submitting a claim to Medicare? A. Medicare submits all expenses to the insurance company. B. The insured submits expenses to Medicare C. The Medical provider submits expenses to the insured D. The medical provider submits expenses to Medicare
D. The medical provider submits expenses to Medicare
49. While an insurer is paying the premium for a life insurance policy under the waiver of premium rider: A. The insurer is named as the primary beneficiary. B. The cash value does not increase. C. The dividend payments cease. D. The policy remains in full force in every respect.
D. The policy remains in full force in every respect.
74. In life insurance, what happens to non-forfeiture values? A. They may be lost for non-payment of premiums. B. They are lost by cancellation of the policy. C. They never increase with time. D. They are not lost by non-payment of premiums.
D. They are not lost by non-payment of premiums.
20. Why would someone need key person insurance? A. To provide health insurance benefits to key employees. B. To give a key employee the ability to purchase the business. C. To give retirement benefits to key employees. D. To cover decreased business earnings due to the death of a key employee.
D. To cover decreased business earnings due to the death of a key employee.
True /False: Fraternal societies are usually incorporated without capital stock, and membership of the society is not required in order to purchase insurance from them.
First part yes, 2nd part NO- Membership of the society is required to purchase ins from them.
37. What is the purpose of "key person" insurance? A. To provide health insurance benefits to key employees. B. To give a key employee the ability to purchase the business. C. To give retirement benefits to key employees. D. To cover decreased business earnings due to the death of a key employee.
D. To cover decreased business earnings due to the death of a key employee.
8 If it is proven that another person's negligence contributed to an injury, what gives the injured party the right to seek compensation? A. Case law B. Contract law C. Criminal law D. Tort law
D. Tort law
99. It is proven that another person's negligence contributed to an injury, what gives the injured party the right to seek compensation? A. Case law B. Contract law C. Criminal law D. Tort law
D. Tort law
96. A risk is: A. A peril B. Certainty of loss C. Proximate cause D. Uncertainty of loss
D. Uncertainty of loss
A risk is: A. A peril B. Certainty of loss C. Proximate cause D. Uncertainty of loss
D. Uncertainty of loss
100. What is the process called whereby insurers decide which customers to insure and what coverage to offer? A. Adverse selection B. Rate making C. Marketing D. Underwriting
D. Underwriting
A. Adverse selection B. Rate making C. Marketing D. Underwriting
D. Underwriting
33. Which of the following is not a method for risk management A. Transfer B. Avoidance C. Retention D. Variance
D. Variance
46. The insured is totally and permanently disabled. The insured's policy continues in full force without further premium payment as the policy contains a: A. Grace period provision B. Guaranteed insurability rider C. Reinstatement provision D. Waiver of premium rider
D. Waiver of premium rider
60. Social Security benefits are available when participants fulfill which eligibility requirement? A. Age B. Yearly income C. Units D. Years worked
D. Years worked
31. A mentally handicapped child who is a dependent under the parents group life policy will remain in the policy until what age? A. 20 B. 22 C. 26 D. any age
D. any age
111. What pays double the death benefit if the insured dies as a result of an accident: A. survivorship B. double conversion C. indemnity D. none of the above
D. none of the above
"_____________________________" refers to methods used to market the insurer's products to businesses and the public. This can be done directly by the insurer or through the use of intermediaries. In other words, these are methods of distribution used to market various types of policies directly to the consumer.
DISTRIBUTION SYSTEMS
Terminating coverage, classifying an individual as a substandard risk, or declining an application, are examples of __________________________ DECISIONS However, the substandard rating is still an "acceptable" rating for the insurer; the extra premium charge makes up for the additional risk.
DVERSE UNDERWRITING DECISIONS.
D.I.C.E represents the contract's structure
Declaration page (dec page) FIRST page Here we see basic /general info: who/what is insured, amt of ins, when policy starts/ends/expires. I C E
________________ life insurance policies do not contain specific EXCLUSIONS for death caused by a pre-existing medical or health condition, from hazardous occupations, or other activities, except for the common exclusions of war, suicide, aviation and certain hobbies. If any other hazardous conditions exist, the insurer will either "rate" the policy (i.e. charge a higher premium for a higher risk) or the application will be declined as uninsurable and premiums will be returned. In addition, insurers will not shorten the period for coverage of a life ins contract because of any pre-existing conditions
Declined
_____________________factors are the anticipated expenses the insurer will incur as a result of issuing the contract. These expenses are added to the calculation and may include premium taxes, costs of licenses and fees, and the expenses of policy acquisition (underwriting and other costs associated with "putting the policy on the books").
EXPENSE LOADING factors
Custodial Care
Describes the kind of care a person needs who cannot perform the activities of daily living
Common Disaster Clause
Determines the order of death when the insured and beneficiary die in the same accident.
Insurers allocate a portion of premiums paid by insureds, is the ___________________________ premium, to the company's loss experience, expenses and profit for the year-to-date. The portion of the premium which applies to coverage for the remainder of the year is the ___________________________ premium. In other words, as time passes, more and more of the insured's advanced premium payment is earned by the insurance company as they provide coverage. By the end of the period paid for, the insurer will have earned the entire premium payment. For example, if a premium is paid annually, at the end of nine months, one quarter of the premium remains unearned.
EARNED PREMIUM UNEARNED PREMIUM
The rule that prevents the insurer from re-asserting the waived right without due warning is known as _________________
ESTOPPEL.
The _______________ section of the contract is where the ins co states what it will not do, or in what circumstances insurance protection will not be provided. What are the 4 most common types of exclusions found in life ins contracts?
EXCLUSIONS Suicide clause Aviation Clause War Clause Hazardous Activities Clause
___________________ agents are seen as self-employed "direct sellers" by the IRS (not to be confused with "direct writers"). Ins co.s will often provide their exclusive agents with training and an allowance for office expenses, traditional "employee" benefits such as health ins, 401K, life insurance, credit union membership, etc.
EXCLUSIVE AGENTS
Each person or item of property that is exposed to the risk of loss is known as an _______________________. Naturally, there is an element of uncertainty involved with each of these units concerning the timing, amount, and severity of a potential loss. The exposure to the uncertain possibility of loss is known as a ___________________________, which might result from the ownership of property or the possibility of injuring others (Property and Casualty Insurance) or from an important financial relationship (Life and Health Insurance).
EXPOSURE UNIT LOSS EXPOSURE.
Per Capita
Each surviving child will receive an equal share of proceeds.
Conservation
Effort to keep life insurance policies from lapsing
Monopolistic
Employers only can buy workers compensation insurance through a state run fund
Rider
Endorsement to an insurance contract that modifies policy clauses and provisions.
44. Provisions that deny coverage for certain perils: A. Exclusions B. Declarations C. Endorsements D. Condition
Exclusions
Occasionally, an interest in the insured may be created when a person with no prior insurable interest has incurred losses after the insured's death. For instance, a person who has paid for funeral expenses. When the policy benefits are to be paid to someone who has a legal entitlement other than the named beneficiary the transfer of funds is permitted through a contract provision called __________________________ This clause allows the insurer to pay the benefit to an appropriate person of their choice.
FACILITY OF PAYMENT.
____________________________ SOCIETIES are a special type of non-profit organization authorized (under sections of the state insurance code relating to organizations that conduct charitable and benevolent activities) to insure members and their families against the possibility of accident, sickness, or death. Fraternal societies are usually incorporated without capital stock, and membership of the society is required in order to purchase insurance from them.
FRATERNAL BENEFIT SOCIETIES
Concealment
Failure to communicate information which a party to a contract knows and should communicate
4. What does insurable interest mean in life insurance? A. Amount of loss must be large enough to cause a hardship. B. Financial interest in having the life of the insured continue. C. Financial benefits of the policy that the beneficiary will receive. D. Benefits that the policy will develop over the policy life.
Financial interest in having the life of the insured continue.
Surplus Lines Broker
Found in Property and Casualty insurance. Can place insurance with non-admitted insurers
43 Misrepresentation, deceit or trickery can be defined as: A. Materiality B. False warrant C. Conditional concealment D. Fraud
Fraud
Contestable Period
Generally, the first two years in life insurance. During this period if the insurer finds any reason to dispute the information on the application, the insurer can rescind the policy or deny the claim.
_________________ is a circumstance that increases the likelihood or severity of a loss due to a peril.
HAZARD
________________________ plans are variations of Industrial Life policies. These policies are usually issued in face amounts of _______________to _________________with payments made either thru mail or a monthly check withdrawal.
HOME SERVICE LIFE * Rare also* $10,000 to $15,000 As with Industrial Life, the small face amounts issued limit the demand for these types of plans.
What life ins clause states that if individuals are employed in hazardous occupations (e.g. high voltage line repair), engage in hazardous hobbies (e.g. scuba diving), or participate in hazardous sports (e.g. auto racing), may or may not be covered depending on the insurer's underwriting guidelines? If covered, an increased or "rated" premium may be charged to compensate for the additional risk involved.
Hazardous Activities Clause
Long-Term Care Insurance
Health insurance that provides funds for people who need home health care, extended health care or nursing home care
The insurable interest rule supports the principle of _______
INDEMNITY.
Ins co. use two general types of so-called "agency building systems" In an ___________________ system, a person enters into agency agreements as an independent contractor and often represents more than one co. at a time. They search companies for the best product based on a client's individual needs. The agent owns their sold policy's records and renewals. The agent is not controlled by a company, but pays all administrative and office expenses (e.g. rent, telephone, secretarial, office supplies, etc.) out of earned ______________________.
INDEPENDENT AGENCY COMMISSIONS
________________________ is a permanent insurance plan developed as a for the needs of 19th century industrial and factory workers. Issuance of small amounts of ins coverage, usually $1,000 or less (in CA, the total FACE AMOUNT (i.e. the original insurance limit as stated on the front or "face" page of the policy) or aggregate of INDUSTRIAL LIFE sold to any one insured and in force at any one time CANNOT exceed $______ to pay for last illness and burial expenses for industrial workers and offered individuals who could not afford larger policies a way to purchase some measure of ins protection. Typically, an ins co rep would call on the insured each week or month (on a route called a "debit") to collect premiums which ranged from five cents to one dollar.
INDUSTRIAL LIFE* $10,000) With the increase in industrial workers' income levels, increased consumer awareness, as well the development of group benefits and federal SS benefits, Industrial Life insurance is rare and represents less than 1% of life insurance today.
In order to avoid situations where a person may be encouraged to act negligently or fraudulently, all insurance contracts must contain an element of ____________________________ This means that the policyholder must be in a relationship with the insured person that a legitimate financial loss will be sustained if the event insured against occurs. __________________ can be thought of as the economic interest that a person would have in the safety or preservation of the "subject" or "object" (i.e. person or property) being insured.
INSURABLE INTEREST Insurable interest
3. An applicant, insured, and policy owner are: A. Three different people. B. One person. C. One person up to three different people. D. None of the above.
One person up to three different people.
Standard Risk
One that falls within the company's guidelines without requiring additional charges or special restrictions
policies that are personal, two-party, contracts between the policyholder and the insurance co. (insurer) under which the co. has a legally enforceable obligation to make all benefit payments for which premiums have been paid. They are referred to as personal contracts because the individual person is insured, not, for example, that person's property. In this two-party agreement, the first party is the policyholder. For ex: in a life insurance contract, the policyholder is either the proposed insured or some other person who has an interest in the insured's life to continue or who will suffer losses in the event of the insured's death. The second party is the (ins co) insurer who, after receiving premium payments and truthful info. regarding the insured, promises to pay a specific amount, or provide specified benefits, to a designated beneficiary.
INSURANCE POLICIES
The __________________, which appears on the face page, specifically identifies the type of policy and is a promise that the ins co will provide the ins amount shown in exchange for the premium and compliance with the policy's terms. The LIMIT OF LIABILITY (a.k.a. measure of liability) in the contract is the amount payable upon the occurrence of the insured event as stated in the contract's Insuring Agreement. In a life insurance policy, the Insuring Agreement also states that the death benefit will be paid to a named beneficiary after the insurer receives proof of death (e.g. a death certificate).
INSURING AGREEMENT
Which is a common practice when using a non-medical application for life insurance? They are used for any amount of ins and any age of proposed insured No medical examination is required by the insurance company There is no limit on amount of ins, but the insured must qualify by age If answers given on the health statement do not meet underwriting standards the insurer may require a medical examination
If answers given on the health statement do not meet underwriting standards the insurer may require a medical examination
A typical suicide clause states: If the insured dies by suicide within the first five years of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After five years the insurer will pay the full death benefit in the case of suicide. If the insured dies by suicide within the first two years of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After two years the insurer will pay the full death benefit in the case of suicide. If the insured dies by suicide within the first year of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After one year the insurer will pay the full death benefit in the case of suicide. If the insured dies by suicide within the first three years of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After three years the insurer will pay the full death benefit in the case of suicide.
If the insured dies by suicide within the first two years of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After two years the insurer will pay the full death benefit in the case of suicide.
_____________________ are used in the sales process to identify and explain critical benefits of the insurance policy. They are hypothetical examples used to represent policy results, such as the performance of guaranteed and non-guaranteed interest rates. Since they (answer) have a significant impact on the client's decision to purchase the proposed policy, their use is carefully regulated.
Illustrations
Usual, Customary, and Reasonable (UCR)
In health insurance, the fee paid based on the geographical location
Non-Medical Application
In life insurance, an application on an insured that does not require the insured to take a physical
A legal term that affects insurance and prevents individuals from using insurance as a profit-making device. It asserts that the basic function of an insurance policy is to repay (indemnify) a person for a loss. In other words, indemnity means to restore the insured person, in whole or in part, to the financial condition that existed prior to the loss with no chance for profit. In many cases, it is relatively easy to assess the amount necessary to indemnify a person, since the amount relates to specific health bills, repair estimates or other definite losses. Since in life insurance field, an exact "value" cannot be assigned to a person's life, an estimate is made by the insurer based on current income, financial responsibilities (debts, dependents), future income earning power, and assets.
Indemnity
Which class of insurance represents the greatest percentage of life insurance written and in-force in the US This classification includes Term Life policies and the various forms of cash value ORDINARY LIFE insurance (i.e. Whole Life, Endowments and Universal Life etc.) sold to individuals and families. Three main characteristics of individual life insurance are: Hints: 1) Min overage amount required? 2) Premiums pd to whom, and in what premium payment increments? 3) Are these policies typically written individually or in group?
Individual Life Insurance 1. is written for coverage amounts of at least $1,000. (Most co. require at min $10,000 to control underwriting costs and profitability.) 2. Premiums are paid directly to the ins co on an annual, semi-annual, monthly or quarterly basis. 3. Policies are usually underwritten individually.
Guaranteed Renewable Insurance Contract
Insured guaranteed to renew the policy at each renewal date. Insurer cannot change the terms but may change the premiums for an entire class
List common examples of insurable interest relationships:
Insured in him or herself. Parent in a child. Employer in a key-employee. Creditor in a debtor. Spouses in each other. Blood relatives (brother to sister, parents, etc.). Business partners in each other. Owner in property.
_________________________________ A method which calculates the cost of life ins, taking into account the time value of money (investment returns on sums placed in premium dollars had these sums been invested elsewhere). This method is similar to the traditional net cost method but is more accurate because it accounts for an interest rate. Measurements and comparisons of policy costs are not 100% precise because coverage provided may differ between policies and dividends and interest rates are assumptions only. A policy is never cost effective for a consumer if it does not meet that individual's needs, objectives and goals.
Interest Adjusted Cost Method
Which of the following statements regarding exposure is NOT true? It is the risk assumed by the insurer. It is measured in degrees. It is measured in units. It is used to determine insurance premiums.
It is measured in degrees. Exposure is the degree of risk an insurance company is willing to assume and pay out in the event of a loss. Insurance premiums are calculated by multiplying the rate and the number of exposure units.
Master Contract Policy
It is used for group insurance. Employer owns the master policy, which outlines the coverage by the insurer. Employees receives a certificate of insurance
Life Settlement Statutes: On October 11, 2009, Gov. Schwarzenegger signed into law Senate Bill (SB) 98 Life Insurance: Contract and Viatical Settlements. What did this bill do?
It repealed existing viatical settlement statutes and in its place created life settlement statutes now contained in Sections 10113.1 and 10113.2 of the CA Ins Code (CIC). Among the changes included in SB 98 was a requirement that any party purchasing life ins must have an insurable interest in the insured person, and the establishment of new requirements for individuals who transact life settlements.
Unlike traditional Whole Life, in a _____________________policy, level premiums are payable only for a specified period of time (such as 10, 20, or 30 years) or to a specified age (65, 75, or 80) after which the policy is fully PAID-UP (i.e. the policy is still in force, but no more premiums are required). Premium amounts vary according to the duration of the payment. The shorter the payment period is, the higher the annual payment, as the overall number of payments will be fewer. Paying for the policy in a shorter time period allows the policyholder to avoid the problem of having to make payments when their income has been reduced by retirement. The "name" of the policy indicates how long premiums are payable. For example, 20-Pay Life or 30-Pay Life means that the policy is fully paid up in 20 years or 30 years respectively, from the time of issuance regardless of age. For ex: Life Paid-Up At 65 indicates that the policy will be fully paid up at the insured's age 65 regardless of the age at issue. NOTE: Even though premium payments are limited to a specified period of time/age, the ins coverage extends over the insured's lifetime or to age 100 when cash values will equal the death benefit (i.e. it is still Whole Life insurance).
LIMITED PAYMENT WHOLE LIFE POLICY
With __________________a.k.a. Stranger Originated Life Insurance, or STOLI arrangements), a third-party investor or speculator, with no relationship to an individual, initiates the purchase of a policy written on that individual's life. At first, the insured also owns the policy, thus satisfying the insurable interest requirement. The speculator pays the 1st premium for the ins and then buys the policy from the insured through an absolute assignment (naming themselves as beneficiary), thereby profiting upon the insured's death. Life Settlements evolved from the Viatical Settlement concept and are typically promoted to consumers between the ages of 65 and 85. Such arrangements include: Allowing someone to purchase life ins on one's life in exchange for an immediate lump sum payment of an agreed amount. Entering into a contract for "free" or "no-cost" insurance on one's life. Purchasing a life insurance policy for the sole purpose of selling the policy to a third-party, whether immediately or in the future.
Life Settlements
___________broker is a person who, on behalf of an owner, and for a fee, commission, or other valuable consideration, offers or attempts to negotiate life settlement contracts between an owner and providers. A life settlement broker represents only the owner and owes a fiduciary duty to the owner to act according to the owner's instructions, and in the best interest of the owner, notwithstanding the manner in which the broker is compensated. A life ins producer who has been licensed as a life agent (or a licensed nonresident producer) in this state for one year or longer may act as a life settlement broker by notifying the Commissioner and paying the life settlement broker license fee. A life ins producer who has not held life agent license for one year must first complete at least 15 hours of education on life settlement transactions and must complete an application and pay the life settlement broker license fee. A licensee licensed to act as a viatical settlement broker or provider as of December 31, 2009 is considered to have met the licensing as a life settlement broker or provider. A life settlement broker license is not required for a licensed attorney, certified public accountant, or accredited financial planner who represents the policy owner and whose compensation is not paid directly or indirectly by the life settlement provider. In a traditional life insurance arrangement, a person who owns a life insurance policy but no longer needs it has the right to sell the policy to another person for an amount less than the death benefit.
Life settlement broker
__________________ risk, or likelihood of death, grows with age; every year that passes a person is slightly more likely to die than the year before. To compensate, insurers will charge higher amounts to those applying for insurance at older ages.
MORTALITY
Life insurers have developed ______________ tables, which predict how many persons per 1,000 in a particular age group will die in a given year. From these tables ,basic life insurance charges and premiums are calculated. There is also a __________________built into life insurance costs in case the number of actual deaths is higher than anticipated in mortality projections. This mechanism helps absorb unexpected losses and lessens the insurer's risk of bankruptcy.
MORTALITY TABLES "safety adjustment mechanism"
_________________ COMPANIES are owned by policyholders who contribute capital through the purchase of policies. These companies usually issue PARTICIPATING POLICIES ("par") whereby the policyholders share proportionately in the insurer's earned surplus, or excess premiums, by receiving policy DIVIDENDS (the divisible surplus). The policyholders also elect a board of directors that is responsible for the operation of the company.
MUTUAL COMPANIES
Information ONLY: The Needs Analysis The most commonly used to determine life insurance needs and is also referred to as the "Capital or Income Needs Analysis." The agent first makes an analysis of the financial needs and objectives of the family (or business) if the primary income earner were to die. After the overall requirements are determined they are weighed against existing resources (income and assets) to determine the prospect's unmet need. This method considers such factors as: 1. Need for last illness and burial expenses. 2. Income needs fo the family post primary wage earner's death. 3. Need for funds to pay off a mortgage or other debts. Other sources of income such as SS benefits, Workers' Comp, the deceased's pension, personal savings, investments, etc., that will be available to meet these needs. 4. The amount of income from all life insurance contracts (either individual/group) that will also help in meeting these needs. 5. The needs approach is not only limited to planning for the unforeseen death of a wage earner but also considers the family's "living needs." These often include: a) funding a child's college education, b) emergency funds, c) income replacement if disabled or providing income at retirement.
NA
Most stock insurers issue ___________________POLICIES ("non-par") that do not entitle the policyholder to share in company profits or earnings.
NONPARTICIPATING POLICIES
______________________________Sponsors are organizations that target select groups of individuals who have a history of making systematic or periodic payments. Ex: banks, stock brokerage firms, credit card cos offering credit or mortgage ins.
Non-Insurance sponsors
The MODE OF ___________________________ refers to the frequency of premium payments made by the policyholder. Common premium modes are annual (once per year), semi-annual (twice per year), quarterly (four times per year), monthly via mail and pre-authorized checks (automatically debited from a checking account). The out-of-pocket cost to the policyholder is lower for annual premium payments compared to more frequent payments because of the added mode factor that takes into consideration interest earned on prepaid premiums and lower administrative costs to the insurer.
PREMIUM PAYMENTS
Probationary Periods Insurance companies require that employees be actively at work for a specific period of time before they are eligible for coverage under a group policy. This period of time is referred to as the "waiting" or ______________________. Its purpose is to avoid providing immediate coverage for people who join the group after the effective date of the policy. Allowing the employer to avoid covering new employees immediately also reduces the employer's expenses, especially if the business is one where there is a high turnover of employees.
PROBATIONARY PERIOD.
Double Indemnity or Accidental Death Rider
Pays double the death benefit if insured dies as a result of an accident
Straight line Settlement Option
Pays the payee a specified income for their lifetime. Upon the payee's death, the income/payment stops.
Underwriter
People who assess risk and determine classification of the insured
Nonoccupationally Disability Income Policy
Policy that will only pay a claim when the disability occurs off the job.
Ordinary Insurance
Policy written on individual basis. It is either term insurance, permanent insurance or an endowment policy.
insurance that provides protection to an insured whose property is stolen, damaged or destroyed by an insured peril.
Property insurance
California Insurance
Protects the insured if the insurance company becomes insolvent.
OASDHI (Old Age, Survivors, Disability and Health Insurance)
Provides a minimum floor of retirement
Disability Income Insurance
Provides the insured with an income after being disabled due to an accident or illness
__________________INSURERS are unincorporated associations that enable individuals and business firms to insure one another. In effect, the policyholders are both the insured and the insurer; each policyholder agrees to insure all of the other policyholders in the association and, in turn, is insured themselves.
RECIPROCAL INSURERS
Another factor affecting the premium cost is the requirement that, under certain circumstances, insurance companies purchase _________________________. It is insurance for insurance companies. It is the spreading of a risk among a number of insurance companies in the event that the risk is either unusually costly, higher than normal, or the insurability of the risk is borderline. Any of these factors present the chance that if one company had to pay a claim for a total loss the size of the claim would adversely affect the financial status of the company, perhaps causing it to go bankrupt.
REINSURANCE
____________________ is any transaction that discloses to a new life ins or a new annuity what the existing life insurance or annuity will be: lapsed, forfeited, surrendered or otherwise terminated. Converted to reduced paid-up ins, extended term, or otherwise reduced by the use of nonforfeiture benefits. Amended to reduce either the benefits or the term of coverage. Reissued with any reduction in cash values. Pledged as collateral for a loan or subjected to substantial (over 25% of the loan value in the policy) borrowing of the loan values.
REPLACEMENT
The Dept of Insurance establishes ______________________________________ (a maximum amount that the insurer is allowed to write on any single risk) for ins co who license in CA. A way to exceed these limits, the ____________________________ insurer (i.e. the original or "ceding" company) must share the insurance risk with a number of other companies known as _________________________.
RETENTION LIMITS PRIMARY INSURER RESINSURERS
______ the uncertainty of loss, is the reason that people buy any type of insurance: to provide economic protection against losses that may result from an event such as death, illness, accident or retirement. Name the two types of this.
RISK 1. PURE RISK involves only the chance of loss if a particular event occurs. Examples: the possibility of loss associated with injury, or death from an accident. There is no opportunity for gain or profit involved. Only pure risks are insurable. 2. SPECULATIVE RISK involves both the chance of loss as well as the possibility of gain or profit. Examples: Gambling and stock market investment Because there is a chance for both gain as well as loss involved, speculative risks are not insurable.
Contingent (Secondary) Beneficiary
Receives the policy proceeds if the primary beneficiary is deceased, also called contingent beneficiary
_________________________ COMPANIES (a.k.a. Capital Stock Companies) are corporations owned by individuals who contribute capital to the company through the purchase of shares of stock. These individuals share in company profits and losses through the increase or decline in the market value of their shares of stock. The stockholders elect the board of directors who in turn appoint executive officers to operate and manage the company. Most stock insurers issue NONPARTICIPATING POLICIES ("non-par") that do not entitle the policyholder to share in company profits or earnings.
STOCK companies
What is better than a 401k (Not a retirement/pension plan) ?
Section 7702-Putting money in life insurance policy- if done correctly, we put in tax free, money grows- tax deferred until money is pulled out.
These two questions are asked when offering which type of ins? What's the purpose of this life insurance? What is your exposure?
Specifically life ins
Representation
Statements that are made to the best of one's knowledge.
Broadly speaking, there are two main forms of life insurance: 1) ___________________________ insurance provides protection for a limited period and includes any form of TERM INSURANCE (level, annually renewable, decreasing, increasing, mortgage and credit life). These policies expire at the end of a specific period and generally do not accumulate cash values. When issued by mutual companies, These type of policies may credit dividends to policyholders. 2) AKA CASH VALUE plans, __________________________ insurance can provide coverage for the insured's entire life (or up to a max age) while building equity w/in the contract. This category includes the various forms of Whole Life (continuous premium, limited-pay, and single-premium), Endowments, Industrial Life, funeral policies, and the more flexible Universal Life, Variable Life and Variable Universal Life plans.
TEMPORARY INSURANCE PERMANENT INSURANCE.
In California, as in most states, the NAIC Model Group Insurance Bill has standardized the legal requirements of group insurance contracts. Under the current law: A ___________________________ is defined as one that has at least 10 people insured under one master contract. Some states and companies do accept smaller numbers. CA's minimum is two.
TRUE GROUP
Short Rate Cancellation
The insured no longer wants the insurance coverage, the company returns the unearned premium minus administration fees and cancels the policy
Benefit Period
The length of time over which the insurance benefits/income will be paid for each illness, disability or hospital stay.
Cash Surrender Value
The money in a permanent policy that the policy owner is entitled if he/she no longer wants the policy
6. The entire contract is: A. The policy, the application, and any oral representations. B. The policy and any sales literature presented by the agent. C. The policy by itself, but never the application. D. The policy, and when attached, the application.
The policy, and when attached, the application.
Any Occupation
Total disability as the insured's inability to perform the duties of any occupation for which the insured is reasonably qualified by education, training, or experience
___________________________________ A method which calculates the cost of a life ins policy by taking into consideration the premiums paid at the end of a specified period of time less the cash value and dividends that have accumulated in the policy. However, three disadvantages to using this method: 1. It assumes the policyholder will have the policy for exactly the number of years used in the calculation. 2. All dividends and cash values are only assumptions, projections, and current figures. If dividends or cash values are higher or lower than expected, cost averages are affected. 3. The calculation does not take into account when the premium is paid, that is, the time value of money.
Traditional Net Cost Method
________________________ is the basic principle of insurance)
Transfer of Risk (the basic principle of insurance)
*The main purpose of insurance is to: Avoid hazards Reduce the risk Transfer the risk Reduce perils
Transfer the risk
There are two types of reinsurance agreements entered into by insurance companies: 1. _________________ reinsurance involves the automatic sharing of multiple risks assumed by the ceding company with particular reinsurers. The types of insurable risk and values of the contracts are agreed in advance by the insurers involved. 2._________________________ reinsurance is negotiated on an individual basis with each party free to act in their own best interests in accepting or rejecting a particular risk. The reinsurer retains the "faculty" or ability to accept or reject each risk offered by the ceding company; so, there must be an offer and acceptance on each reinsurance contract.
Treaty Specific or facultative
126. Fixed period, fixed amount, and interest only are all settlement options. A. True B. False
True
T/F: These ins. replacement requirements do not apply to: Credit life insurance, group life insurance or group annuities.
True
Life insurance is purchased as an investment also? T/F
True, such as in Cash value to save money for retirement, borrow from that account (instead of getting a bank loan) In CA-if receiving child support, you can ask the judge to make sure that the person has life insurance- insurable interest.
Life Paid-Up
Type of policy with premiums that are fully paid up within a stated period of time, but endows at age 100.
Basic underwriting requirements vary based on ins. co.. Who cannot be too strict or too lax in their assessments? the aim is to approve as large a number of moderate, predictable, risks as possible while minimizing adverse selection. This ideal is referred to as a "profitable distribution of exposures."
UNDERWRITERS
The process of selecting and classifying risks (i.e. deciding which customers to insure, and what coverage to offer) is known as: What is its fundamental purpose?
UNDERWRITING The fundamental purpose of underwriting is to screen the ins. co against adverse selection (too many high risks) while allowing enough applicants through to maintain the insurer's profitability.
Insurance contracts are (choose one:) bilateral or unilateral agreements becase...... (explain)
UNILATERAL ("one-sided") because only one party (the insurer/ins co.) makes an enforceable promise and must live up to its side of the agreement. The ins col is the only party legally bound by the contract. The applicant makes no promises to the insurer and is not required by law to pay premiums. While, the insurer (ins co) can cancel the contract if premiums are not paid , the insurer cannot require that they be paid.
A risk is
Uncertainty of loss
40. Aleatory in nature refers to: A. Ambiguous language B. Enforceable C. Unequal exchange by two parties D. Waiver of a promise
Unequal exchange by two parties
Eligibility/Enrollment Period
Used in life and health group benefits. Period of time a employee can enroll for benefits without proof of insurability
Common Disaster Clause
Used when Insured & Primary Beneficiary die in the same accident
What life ins clause states that if used by the insurer, states that if the insured's death occurs under wartime or military service conditions, the co will only be liable for a return of cumulative premiums paid or the cash values, whichever is greater. Generally, this provision is inserted only in policies issued during declared or undeclared war. It is the practice of most ins co.s to cancel the war clauses in their issued policies after a wartime emergency has been lifted
War Clause
Conversion (Demutualization)
When a mutual insurance company changes to a stock insurance company
Insurability
When applying for life or health insurance, insured must meet certain criteria established by the insurance company
5. In life insurance insurable interest must exist: A. When the insurance takes effect, but not at the time of death. B. When the loss occurs. C. When the insurance takes effect and the loss occurs. D. When the insurance takes effect and the loss occurs, but need not exist after the loss occurs.
When the insurance takes effect, but not at the time of death.
Expense loading refers to _______________
admin costs
Enrollment Percentage Employers and sponsoring organizations are required to meet the member participation percentage and premium payments guidelines. This is designed to prevent both _______________and __________________.
adverse selection and unfair discrimination.
The relationship between the agent and the ins. co. is governed by __________ law. The agent's authority is defined in a "contract of agency" between the agent and the principal (insurer). Under this authority, the agent and the company are considered one-and-the-same. For an agent acting on behalf of a principal (insurer/ins co) , there are four main assumptions that are a part of this relationship: T/F 1. The agent doesn't legally represents the principal. T/F 2. Contracts made by the agent are contracts of the principal. T/F 3. Payment made to the agent is considered to be the payment made to the principal. T/F 4. The knowledge of the agent is assumed to be knowledge of the principal/ins co. Thus, the agent is legally, morally, and ethically required to disclose to the insurer any MATERIAL INFORMATION that is discussed, observed, or acquired during the application process.
agency law. False- the agent DOES legally represent the ins co. True- they belong to the insurer/ins co. True- payments belong to the ins. co True!
Life ins premium rates are expressed as an annual dollar cost per $____________________ of face amount. Rates must be high enough to cover co expenses and the costs of paying claims while still generating a reasonable profit.
an annual dollar cost per $1,000 of face amount.
Accident
an unforeseen, unexpected unfortunate incident that happens unintentionally, typically resulting in damage or injury.
Consideration
anything of value exchanged for a promise or for performance that is required to make an instrument binging between the contracting parties.
ANNUITY contracts choose one: are or are not insurance policies, tho they can be seen as a "life-related product."
are NOT
In the ins industry, "__________" is the term for the process of searching for potential customers, selling policies, and servicing existing contracts. Individuals who market insurance products as intermediaries between insurers and general public are known as _______________ or the "field force" and include brokers and agents.
marketing PRODUCERS
Every group policy containing life insurance or disability income benefits must allow for an " _____________" upon discontinuance of the policy. This extension applies to employees who became totally disabled while insured by the policy and continue to be totally disabled. In this case, "discontinuance" means the termination of a policy or coverage between the group sponsor and the insurance company; not the termination of any individual member's coverage. The following rules apply: Policies containing life insurance benefits without disability provisions need only provide the disabled employee with the same rights of conversion to an individual life policy that the employee would have been entitled to if employment had terminated. Policies containing life insurance benefits and disability provisions must allow CONVERSION PRIVILEGES and not allow the discontinuance to affect the disability benefit. Policies providing hospital, medical, or surgical benefits must extend benefits for expenses directly relating to the condition causing the total disability for at least 12 months from the date premium payments cease. The extension of benefits may be terminated when the employee is no longer totally disabled or when a succeeding carrier provides replacement coverage without limitation to the disabling condition.
extension of benefits
Social Security is a compulsory UNFUNDED program. What does this mean?
meaning that current tax revenues are used to provide benefits on a pay-as-you-go basis.
Currently insured status requires fewer credits than fully insured status but only qualifies an individual for limited benefits payable to eligible dependent children and/or an eligible surviving spouse under the age of 60. To achieve CURRENTLY INSURED status the worker must:
have at least six credits earned during a 13-quarter period which ends with the calendar quarter in which the covered person died, became eligible for retirement benefits or became disabled. In order to ensure that the individual has earned the required six credits over the last 3y (i.e. 12 quarters), Social Security takes the quarter and year of death or disability and subtracts three from the year; the period begins with the quarter of the resulting year that corresponds to the quarter of death or disability. For example, Jane died on May 21, 2015, which is part of the second quarter of 2015. The date three years prior to this is May 21, 2012 (in the second quarter of 2012). So, the 13-quarter period begins with the start of the second quarter of 2012 and ends with the following thirteenth quarter, which begins in April 2015. Therefore, if Jane earned at least six credits in the time period between May 21, 2012 and April 1, 2015, she was "currently" insured when she died.
The underlying principle of all life insurance lies in economics and the concept of "________________________" Therefore, "human life value" could be reasonably defined as the value today of an individual's income (both present and future) that is dedicated to dependents. In this sense, "human life value" can be thought of as the financial existence of an individual, a family or a business. This existence can be threatened by death, disability or retirement, any of which will affect income to some degree. This, then, is the fundamental purpose of life insurance; to protect and conserve "human life value" — that of the insured and those dependent on the insured. While the out-of-pocket cost of insurance may be significant, the benefits received from an insurance policy potentially far outweigh the actual monetary cost.
human life value.
Widows /widowers are eligible for income benefits at age 60 or at any age ______________________________________________________________. Surviving dependent children are eligible for benefits if: Unmarried children under age 18 (or up to age 19 if they are attending elementary or secondary school FT. Stepchildren, grandchildren or adopted children can also qualify. Children at any age if disabled before age 22, and remain disabled. The period of time following the youngest child's 18th birthday (or up to age 19 if still in school) until the surviving parent is eligible for benefits (age 60) is called the BLACKOUT PERIOD.
if they are responsible for a child age 16 or less, or a child is disabled
To restore the insured person, in whole or in part, to the financial condition that existed prior to the loss with no chance for profit?
indeminity
Unlike __________agents, ______________ agents do not own the records or renewals of the policies that they have sold.
independent agents, exclusive agents
Workers' Compensation Insurance
insurance purchased by employers to cover their employee work related injuries. Employers are responsible regardless of fault.
With group insurance, the MASTER CONTRACT is between the ____and the _____, AKA_________, who selects the types and amount of coverage the group will have and pays all or a portion of the premium.
insurer and the group sponsor, (i.e. an employer, trade association, professional organization, union, lodge etc.). The sponsor, also known as a master policyholder.
The ________________that premiums will be paid also affects the cost of insurance. Various life policies can be paid for with a single premium, over the whole of a person's life or over a limited period. Generally, the longer the premium payment period is, the smaller the amount of each payment and vice versa.
length of time
Group Insurance
life or health insurance provided for large numbers of people who have something in common, such as the same employer
Stop Loss Prevention
limits the total out-of-pocket expenses incurred by the insured to a specific dollar amount
A risk management technique that eliminates a loss exposure and reduces the chance of loss to zero is:
loss reduction
The __________________________ is based on the risk of death at successive ages and other demographic factors like gender and occupation. Regardless of the insured's age at the time the contract is issued, each successive year that the policy is in force (as the insured becomes older) presents a greater risk that the insured will die. As a result, the mortality cost for the insurer increases each year as the chance of the company paying the death benefit also increases. To compensate for this increased risk as the insured ages, life insurance policies must do one of the following: Increase the premium. Reduce the death benefit. Charge an averaged, level premium over the term of the contract. This is referred to as the _________________________________.
mortality factor LEVEL PREMIUM CONCEPT.
"___________________system" because the products are not marketed at the outset by a field force of self-employed agents.
non-agency building system
The Federal Insurance Contributions Act (FICA) ensures that the majority of U.S. workers, including self-employed individuals, do what? However, certain categories of federal and state employees, some union employees, and railroad workers covered under the Railroad Retirement System are not required to pay the FICA tax but have a separate system of qualification for benefits
pay into the program through federal taxes that are withheld from payroll checks. (required to pay the Social Security tax.)
Losses typically arise as the result of the action of_______________
perils.
While property and casualty coverage, life insurance, and annuities are frequently issued as either ___________ or ________________ lines policies, disability income and accident and health plans are most often sold as only _______________lines
personal or commercial commercial
The actual dollar amount paid upon the death of the insured is known as the _____________________________. benefit. This benefit is equal to the face amount plus any optional benefit increases chosen or accumulated dividends; minus any loans or withdrawals, or past due premiums. Clearly, larger face amounts and additions to the policy will result in higher premiums overall.
policy death benefit
Nonparticipating Life
policy that does not pay the policy owner a dividend.
Participating Life
policy that pays the policy owner a dividend
With individual insurance, the contract is between the _________ who is often also the insured, and the __________ .
policyholder and the insurer (ins co)
In order to indemnify their insureds and still generate enough income to maintain operations into the future, it is important for ins. co. to predict __________________________________. By studying the group's past loss experiences/risks, the insurer is able to estimate the likelihood of future losses for that group using the principles of probability and statistics. This process necessarily involves looking at groups of exposures that are uniform or similar in composition (e.g. similar age, sex, occupation, health history, geographic location, etc.). Pooling of such similar risks or "homogeneous exposure units" provides an accurate basis for predicting potential losses using the Law of _______________________. The premise of this mathematical rule is that the larger the number of individuals, but similar, risks that are combined into a group, the easier it is to predict losses for that group over time.
potential losses as accurately. as possible. Law of Large Numbers* It is important to note that the Law of Large Numbers only allows the insurer to predict losses for large groups facing similar risks; it does not allow the insurer to predict losses faced by individual insureds.
PREMIUM and PREMIUM RATES should not be confused. The __________________is the overall amount specified in the policy as the charge for the various insurance benefits provided. T The __________________________is the price for each exposure unit covered by the ins. Actuaries calculate the ins company's premium rates . With life ins policies, premium rate calculations follow this formula: Mortality (M) - Interest (I) + Expenses (X) = Premium Rate
premium premium rate
The proper objective of any life insurance program is to provide the amount and type of insurance the prospect needs at a ......
premium they can reasonably afford.
Medicare
provides health insurance for Americans 65 and older who have worked and paid into the system, as well as to younger people with disabilities.
Cost of Living Rider
provides increases in the amount of insurance protection without requiring the insured to provide evidence of insurability and is designed to keep up with inflation. (Tied to the consumer price index)
Preferred Provider Organization (PPO)
provides services at pre-determined contracted rates.
In most cases, private insurers will only insure _________________risks (i.e. those that involve only the chance of loss and not gain)
pure risk
The purpose of ___________________ laws ensure that full and clear info (as well as accurate and complete disclosure) is provided to allow the policyholder to make the best decision. Note that the intent of replacement law is to protect the consumer, not the interests of agents and insurers.
replacement laws
Many life ins policies charge a higher premium than necessary to cover the insured's mortality risk and company expenses, placing the excess amounts into a ____________________ When the insured dies, the insurer uses this reserve plus its' own funds up to the policy limit, to pay the death benefit. This reserve, which is credited with TAX DEFERRED interest as it accumulates, is called the policy's "cash value" or "equity." It is the amount the insured is entitled to if the policy is surrendered, or it can be used as collateral for a loan against the policy.
reserve fund.
Regarding Whole Life insurance, consider various types of premium payment plans - List some:
single premium, limited pay, modified pay, level, etc. for each type of policy.
Stock Companies (owned by ____________________) Mutual Companies (owned by___________________________________)
stockholders policyholders/policy dividends
Unearned Premium
the amount of money the insured paid to the insurer (company that has not been used to provide coverage to the insured.
Group policy premiums calculated based on _______________of the group as a whole. The insurance cannot benefit the sponsoring organization (e.g. employer); they must be paid to the covered member or their dependents. Individuals covered under the plan are classified in such a manner that they do not choose their level of benefits, but rather the level is usually determined by salary, position or length of employment.
the experience
Insurer
the insurance company
2. A life insurance policy is a unilateral contract. who is obligated to perform under the contract? A. The insured B. The insurer C. Both D. Neither
the insurer (ins co)
FACILITY OF PAYMENT. is a clause that allows....
the insurer to pay the benefit to an appropriate person of their choice.
Blackout Period is when........................... Is the parent receiving benefits during this time?
the period prior to the surviving parent being eligible for benefits (age 60) . NO SS benefits payable to the surviving parent during blackout period. Example: an eligible 43-year-old widower has an 11-year-old daughter (under 16) SS will provide only up to seven years of payments at which the child will turn 18 . At this time, the widower will only be 50 (not yet 60) so the SS benefits will stop. In this case, the Blackout Period lasts 10 years. (The woman being 50 >60)- wont receive SS benefits for 10 years.
An ins contract owned by someone other than the insured is referred to as a "______________________contract." The owner retains all rights and has full control of the contract.
third-party contract.
Per Stirpes
through roots maintains the order of beneficiaries.
"human life value" is the value today of an individual's income (both present and future) that is dedicated to dependents. Thus, the financial existence of an individual, a family or a business, which is threatened by death, disability or retirement, any of which will affect income to some degree. Therefore, the fundamental purpose of life insurance: ________________________________________________________________________________________. While the out-of-pocket cost of ins may be significant, the benefits to received from an ins policy potentially far outweigh the actual monetary cost.
to protect and conserve "human life value" — that of the insured and those dependent on the insured.
Why were state and federal social /health insurance programs established?
to respond to the needs of people who are who have become disabled, lived beyond their income-producing years, or are/were financially dependent on someone who has died.
According to the typical SUICIDE CLAUSE, if the insured dies by suicide within the first ____years of the policy period the contract is void and the insurance company is only liable for the amount of premiums paid. After two years the insurer will pay the full death benefit in the case of suicide.
two years
The ______________________department is responsible for the evaluation, selection and distribution of insurable risks in a manner that is fair for the members of the group of insureds and profitable for the insurance company.
underwriting department
