Life Insurance Basics

Mortality tables are used by insurance companies to predict what?

Life expectancy and the death rates for specific groups of individuals

All other factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?

Monthly

Who is the beneficiary on a key-person life insurance policy?

The employer

What is the purpose of key person insurance?

To minimize the risk of financial loss caused by the death of a key employee

What is the main responsibility of a company's underwriting unit?

Risk selection

A business is the owner and beneficiary of a key-person life policy. When the business collects the policy benefit, how is it taxed?

The benefit is received tax free.

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

It will decrease.

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriters main concern?

The existence of insurable interest between the applicant and the insured

When planning for survivor protection in life insurance, what needs to be considered?

The insured's current assets, liabilities and survivor's needs

What term describes the fee a person pays an insurance company to receive coverage?

Premium

What is included in part 2 of a life insurance application?

Medical information about the perspective insured

What are illustrations in a life insurance policy?

Presentations of nonguaranteed elements of the policy

What are the personal uses of life insurance?

Survivor protection, estate creation and conservation, cash accumulation and liquidity

What is the main purpose of the regulation on life insurance policy illustrations?

To help the public make educated decisions about buying life insurance.

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

Variable

When must insurable interest exist in a life insurance policy?

At the time of application

When must the policy summary for a life insurance policy be delivered to the policy owner?

At the time of policy delivery

What does "liquidity" mean in a life insurance policy?

Availability of cash value

What type of insurance creates an immediate estate?

Life insurance

What type of insurance would perform the function of cash accumulation?

Life insurance

What document must a producer provide to the insured during policy replacement?

Notice regarding replacement

What document describes the specific information about a policy?

Policy Summary

What is the purpose of the agent's report during the application process?

The agent's report discusses the agent;s personal observation about the proposed insured that may help in the underwriting process

Who must have insurable interest in the insured?

The policy owner

In calculation the amount of life insurance needed, what is the needs approach based on?

The predicted needs of a family after the premature death of the insured

Life insurance may be used to pay state inheritance taxes and federal estate taxes elimination the need to sell assets from estate. What is this called?

Estate conservation

What are the three factors that determine the premium for a particular life insurance policy?

Mortality, interest and expense

What is a blackout period for social security benefits?

A period of time during which the surviving spouse does not receive benefits

Who is a replacing insurer?

The company that issues a new policy during policy replacement

What is policy replacement?

A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value.

What type of life insurance offers an applicant a cash value element?

Permanent insurance (usually, whole life)

What type of policy issues certificates of insurance to the insureds?

Group policy

What are the three main instances when insurable interest exists in life insurance?

Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policyowner

What is insurance underwriting?

The process of risk selection and classification

Who is responsible for the contents of insurance advertisements?

The insurance company

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

Either on the date of application of the date of the medical exam (whichever occurs last)

What type of policy is typically issued without proof of inscrutability from the insured?

Group policy

How does the premium mode affect the total premium paid for insurance for the year?

Higher frequency of premium payments will result in higher overall premium

If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should it be?

Permanent

What is the term that describes the frequency and the amount of the premium payment?

Premium mode