Delaware Life insurance exam

Credit Life Insurance

1. A special type of coverage written to pay off the balance of a loan in the event of the death of the debtor. 2. is a form of group insurance that uses decreasing term life insurance.

What is the grace period in delaware

1. After the insured has paid the initial premium, he or she has a grace period of 30 days or one month within which to pay every subsequent premium. The policy remains in force during the grace period. The insurer may charge interest of up to 6 percent until the premium is paid. 2. If a claim is made during the grace period, the insurer may deduct the amount of the premium plus interest that is due from any amount that it pays on the claim.

What are the two distinguishing features of a Whole Life Insurance Policy?

1. It guarantees the face amount (death benefit) for the insured's whole life. 2. With one exception, it includes a guaranteed cash value that gradually builds inside the policy. (The exception is variable life insurance—its cash values are not guaranteed.)

Ordinary(straight) whole life

1. With ordinary whole life, benefits and premiums remain level and payable through the insured's entire life 2. Death benefits remain level, and level premiums are payable until the insured dies or reaches age 120, whichever comes first. Premiums are guaranteed to remain level despite the insured's increased likelihood of death with older age.

Delaware commissioner general violation penalty

1. fined up to $2,300 for each violation; 2. imprisoned for up to one year; or 3. 2both fined and imprisoned.

convertible term life insurance

1. includes a conversion privilege that lets policyowners exchange their term life coverage for a permanent life insurance policy without having to provide evidence of insurability. The new policy's face amount usually matches the expiring term policy's face amount. 2. Typically, the option to convert a term policy to a permanent policy must be exercised at least a year or two before the policy expires.

What types of relations are deemed insurable interest

1. individuals in themselves 2. spouses in each other 3. parents in their children 4. children in their parents or grandparents (or someone else in the case of financial dependency)

Decreasing term life

1. is most commonly used to cover financial needs, such as a mortgage, that decline over time. 2. Decreasing term premiums remain level for the full coverage term. Because coverage decreases over time, decreasing term premiums are less than level term premiums when the policy is issued. 3. Can be converted to perm plan but now renewed

level term life insurance

1. premiums remain the same throughout the life of the policy 2. With level term, the face amount remains the same and the premiums increase at each renewal point. There is no requirement to prove insurability at renewal.

What are the types of whole life insurance?

1. traditional ordinary (or straight) whole life 2. limited payment whole life 3. modified premium whole life 4. graded premium whole life 5. non-fixed premium whole life 6. indexed life 7. variable life

How long does a producer have to notify the commissioner of address or name change?

30 days

Speculative Risk

A chance of loss, no loss, or gain.

fixed insurance policy

A form of permanent life insurance that guarantees the insurer a fixed death benefit and a minimum rate of return on the the policy's cash value. investing premium received by policy owners making enough profit to cover the promise to pay death benefits

debtor

A person who owes money

When can a producer change an entry made by by applicant

A producer may never, under any circumstances, change an entry made by the applicant on the application. If the producer realizes an error has been made on an application, he or she must meet with the applicant to make and initial any changes.

Risk Transfer

A pure risk is transferred from the insured to the insurer, who typically is in a stronger financial position

A ______ is a statement that is believed to be true to the best of the applicant's knowledge. Provided the applicant answers all questions truthfully, the insurer cannot challenge the contract if it later determines that any of the statements were in fact untrue.

A representation

Premium tax

A tax levied on insurance companies on the receipt of premiums

renewable term life insurance

A type of level term insurance contract that allows the coverage to be renewed for another period or another term without proof of insurability.

Indexed Whole Life

A whole life insurance policy whose death benefit increases according to the rate of inflation. Such policies are usually tied to the Consumer Price Index (CPI).

Agent's Report

A written report from the agent submitted to the insurer along with the application disclosing what the agent knows, observed, or learned about the proposed insured's risks.

risk sharing

Allocating ownership of a risk to another party

Personal Contract

An agreement between an insurance company and an individual that states that insurance policies cover the individual's insurable interest.

Substandard Risk

An applicant or insured who has a higher than normal probability of loss, and who may be subject to an increased premium.

Preferred Risk

An insurance classification for applicants who have a lower expectation of incurring loss, and who, therefore, are covered at a reduced rate.

Surplus Lines Insurance

An insurance co that is authorized to sell unauthorized insurance. You can only go to a surplus lines co if you cant get it from a regular insurance company

Domestic Insurer

An insurance company that conducts business in the state of incorporation.

foreign insurer

An insurance company that is incorporated in another state.

Alien insurer

An insurance company that is incorporated outside the United States.

Conditional Receipt

An interim insuring agreement under which the insurance company agrees to start coverage on the later of either the date of application or the date of the medical exam IF the proposed insured is found to be insurable on that date.

Apparent Authority

Authority that: 1. the contract does not provide 2. the insurer does not intend 3. reasonably appears to the customer to be granted by the insurer based on the producer's statements and the actions (or inactions) of the insurer

Law of Large Numbers

Based on the idea that predictions become more accurate as the number of measurable exposures increase, the law of large numbers is a mathematical principle of probability that underlies insurance premium rate calculations.

Who is required to act in the utmost good faith?

Both: The applicant is expected to answer every application question fully and honestly. The insurer is expected to disclose all relevant information about the policy being applied for.

______ is the deliberate withholding of material facts when applying for insurance.

Concealment. If the concealed facts would have changed the insurer's decision to offer the insurance policy, then the insurer has grounds to void the insurance contract.

With insurance, the insurer determines the contract's terms. It is a take-it-or-leave-it proposition. This is an example of a ____

Contract of Adhesion

Attending Physician's Statement (APS)

Designed to obtain more specific information about a particular medical problem revealed in the application or during the medical examination(From Doctor)

_____ insurance protects producers who are sued because a mistake was made, but does not protect those who willfully engage in an unfair trade practice.

Errors and omissions (E&O)

FINRA

Financial Industry Regulatory Authority. Self imposed regulation agency of NYSE NASDAQ and CFTC

willful misrepresentation is _____ ?

Fraud and grounds for voiding the contract if discovered by the insurer during the policy's contestability period and possibly even afterward depending on its severity.

Binding Receipt

Guarantees coverage from the time the applicant completes the application, even if the insured is later found to be uninsurable. That means coverage is guaranteed throughout the underwriting period, which can extend for several weeks, until the company rejects the application (or issues a different policy). Binding receipts are rarely permitted with life insurance.

Permantant life insurance(Level Premium)

If premiums are paid, the insurance stays in force, and (in most cases) is guaranteed to pay the policy face amount. Common examples include whole life insurance, universal life insurance, and variable life insurance.

Bring-Back Rule

In estate planning, this rule requires life insurance policies transferred from the insured within 3 years before death to be returned to the decedent's estate for valuation purposes.

____ sold by home service insurance companies, is sold in small face amounts, usually less than $10,000 (and frequently between $1,000 and $2,500).

Industrial life insurance

What can and cant insurance company's discriminate against

Insurance company underwriters can discriminate based on relevant risk factors such as the applicant's health, personal habits, job responsibilities and so forth. They cannot discriminate on irrelevant factors such as race, religion, ethnicity, and sexual orientation.

Variable Life Insurance Policy

Insurance contract that provides financial compensation to the insured's named beneficiary if the insured dies while the policy is in force. The insurance company guarantees a minimum death benefit as long as premiums are paid. The cash value of the policy is determined by the performance of separate accounts and is not guaranteed.

Unilateral contract

Insurer makes a legally binding promise to pay benefits if an insured loss occurs

Is life insurance cancelable

Insurers cannot cancel any life insurance policy for any reason other than nonpayment of premiums.

Term life

Is pure insurance protection, with no cash value associated with it. If the insured dies during the coverage term, then the policy's death benefit is payable. If the insured is alive at the end of the coverage term, then the coverage ends, and the policy terminates without value.

What is the term of individual insurance for two people

Joint life insurance

Who do business owners and business partners have insurable interest in?

Key employees

_____ can be transferred without permission from the insurer

Life insurance

What are the federal insurance programs?

Medicaid and Social Securities

____ are owned by their policyowners

Mutual insurance companies

Application process

Part 1 of the application contains the applicant's personal information, including name, address, date of birth, occupation, and beneficiary information. Part 2 covers the applicant's medical history.

____ Are not taxable

Policy divdeneds

insurable interest is never required between the ___________ and ___________

Policy owner and beneficiary

What type of authority do producers have

Producers have both express and implied authority to solicit insurance sales for the insurance companies they represent.

The Life and Health Insurance Guaranty Association is

Provide a safety net for their state's policyholders, ensuring that they continue to receive coverage (up to the limits spelled out by state law) even if their insurer is declared insolvent.

a risk that presents the chance of loss but no opportunity for gain

Pure Risk

Morbidity

Refers to ill health in an individual and the levels of ill health in a population or group.

Insurance Replacement

Replacement occurs when an applicant buys a new life insurance policy or annuity and, at the same time, an existing life insurance policy or annuity is: 1. lapsed, surrendered, forfeited, terminated, or otherwise compromised 2. converted to reduced paid-up insurance 3. continued as extended term insurance 4. reduced in value using nonforfeiture benefits or other policy values 5. amended with a reduction in benefits or term of coverage reissued with a reduced cash value

__________ is the act of declaring that an insurance policy was never in effect.

Rescission. usually occurs when the insurance applicant knew of a potential claim and intentionally concealed it from the insurer, or when the application for coverage or an important document attached to it contains information that is materially false, so that if the insurer knew the truth, the insurer would not agree to insure the risk.

How often does the commissioner check books?

The Commissioner may examine the books and records of an insurer as often as necessary, but at least once every five years.

HIPAA

The Health Insurance Portability and Accountability Act, a federal law protecting the privacy of patient-specific health care information and providing the patient with control over how this information is used and distributed.

`Without____the application is merely an invitation to the insurance company to make an offer to the applicant

The Premium

Term Life Insurance

The policy pays a death benefit only if the insured dies during the term. No money accumulates in the policy (that is, there is no cash value), so at the end of the term, the policy expires with nothing owed the policyowner. 1. Term life costs less than permanent life insurance at just about any issue age. This makes term life especially popular and suitable for relatively temporary financial protection needs 2. However, term life premiums increase with every renewal, making them difficult to maintain in one's older years

Backdating

The practice of making a policy effective at an earlier date than the present. The advantage is that the premium will be slightly lower thereafter. The drawback is that applicants must pay the premium due from the backdated application date to the present.

How long must each licensee keep at his or hers principal place of business records that are available to the commissioner to examine?

Three years

What are the requirements to qualify for a license?

To qualify for a license, an applicant must be at least 18 years old, pay the licensing fees, submit a current state criminal report, be of good reputation and character, and pass the required state examination.

A _____ is a statement that is presented as absolute truth. Promises made by the insurer in the policy are warranties that the policyowner can rely on when the time comes to submit a claim. A warranty that is found to be untrue is grounds for cancelling a contract.

Warranty

Estoppel

When a party to a contract gives up a right without knowingly doing so

Third Party Ownership

When a person(s) other than the insured purchases the insurance policy. There must be an insurable interest between the applicant and the proposed insured when a life insurance policy is first issued

increasing term life insurance

With this type of insurance, the death benefit increases over the term to a preset amount or at a preset rate. The premium normally remains level, though at a higher level than either level term or decreasing term.

What is the penalty for a cease and desist order

a monetary penalty of up to $11,500 for each violation suspension or revocation of the individual's license

Incontestability period delaware

a provision stating that the insurer cannot dispute the validity of a policy after a two years

insurable risk

a pure risk that is faced by a large number of people and for which the amount of the loss can be predicted

Those who are at risk the most to buy insurance

adverse selection

Reinsurance

an arrangement by which the primary insurer that initially writes the insurance transfers to another insurer part or all of the potential losses associated with such insurance

Payment of Premium

clause will state time and place of payment of premiums.

Delivery Receipt

commences the free-look period during which the policyowner may review the policy and, if desired, return it for a full refund.

The Gramm-Leach-Bliley (GLB) Act prevents ___________________

financial institution from disclosing a consumer's nonpublic personal information to an unaffiliated third party unless it gives consumers prior notice and a chance to refuse disclosure

An industrial term or whole life insurance policy offers __________

individual coverage in small face amounts, traditionally ranging from $1,000 to $25,000 or so. Modest premiums are paid frequently—weekly is common—and in many cases an insurance agent meets personally with the policyowner at home to collect the premium.

Implied Authority

insurers allow their producers to engage in many sales-related activities not expressly listed in any agreement but that are recognized as essential to the job

Who elects the Delaware Commissioner

is elected by qualified Delaware voters for a term of four years and is commissioned by the Governor

Ordinary life insurance

is generally issued in face amounts greater than $25,000 (in some cases, $1 million or more). Premiums are payable monthly, quarterly, semiannually, or annually.

Credit accident and health insurance

is insurance on a debtor(s) in connection with a specific loan or credit transaction to provide indemnity for payment of a debt due while the insured debtor is disabled.

Delaware commissioner

is responsible for ensuring that insurance laws are faithfully executed in Delaware.

Difference between ordinary whole life and limited pay whole life

is the period over which premiums are paid. Premiums for limited payment life insurance policies are payable for a shorter time than ordinary life premiums.

An expense factor

is worked into the premium calculation. It reflects the costs (other than mortality) that the insurer expects to incur on the policy. In determining its load factors, insurers are generally guided by three objectives: cover total operating costs (e.g., salaries, benefits, commissions, and field expenses) provide a safety margin to account for higher than expected mortality losses contribute to profits

Participating Whole Life

issued by mutual insurance companies, the policyowner is eligible for policy dividends declared by the insurance company.

Non participating insurance

issued by stock insurance companies, do not pay policy dividends. Stock company profits are distributed to their stockholders as stock dividends.

Securities and Exchange Commission (SEC)

monitors the stock market and enforces laws regulating the sale of stocks and bonds

What is a basic requirement of purchasing group life insurance

one not formed for the express purpose of purchasing group insurance.

Single Premium Whole Life

one-time lump sum premium payment to provide a level death benefit to the maturity of the policy. Single premium policies generate immediate cash value due to the size of the lump sum premium payment.

Express Authority

the authority of an agent, stated in the document or agreement creating the agency(agent and insurer)

limited-payment life insurance

the insured has lifetime protection, and premiums are level, but they are paid only for a certain period

Rebating

the practice of giving an individual a premium reduction or some other financial advantage not stated in the policy as an inducement to purchase the policy

Adverse Selection

the problem of incomplete information - of choosing alternatives without fully knowing the details of available options

Conditional Contract

which means the insurer's promise to pay benefits is conditional on specified events occurring: 1. With life insurance, payment of the face amount is conditional on the insured's death. 2. With health insurance, benefits are conditional on the insured incurring covered medical expenses or suffering a covered loss.

Variable Life Insurance

whole life insurance that invests the cash value of the policy in stocks or other high-yielding securities that are not insured and not guranteed (Sub Accounts)