Life & Health Test Unit 1-5

Variable Life Policies

- Life insurance plus investments - Must have life insurance license & securities license - Investments are in the seperate account and owner can lose money due to the securities account - Death benefits are guaranteed and can increase

Effective Date of Coverage

- Terms of conditional receipt is issued - Substandard and pays additional premium - date of policy issue - No receipt - policy issue date if premium paid at delivery

Insurable Interest

- a risk of loss - must be proven before policy can be purchased - the relationship does not have to exist at death.

US Patriot Act

- designed to prevent and detect money laundering and financing of terrorism. - report suspicious activity.

ERISA

-protects participants in employee benefit plans -qualified pension plans and group insurance -reporting and disclosure information for plan participants

Buy-Sell Agreement

A legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled. The buyer is the Beneficiary.

Deferred Compensation Plan

A nonqualified retirement plan whereby the employee defers receiving current compensation in favor of a larger payout at retirement (or in the case of disability or death).

Producer's Report

Completed by the producer/agent. Is not attached to the policy if issued.

1. Death expected within 24 months 2. Permanent confinement in a nursing home due to a chronic illness or catastrophic injury

For the accelerated benefit rider, what are the two stipulations when it advances part of the death benefit while the insured is alive?

Cross-Purchase

In Buy Sell Funding, this purchase refers to: when the purchaser of the plan are the surviving owner's of that business. Or if, more then 2 Partners/ Shareholder's requiring many more policies needed.

Entity Purchase

In Buy Sell Funding, this purchase refers to: when the purchaser of the plan is the business entity itself. Usually is used with non incorporated Business Partnership's. (If it is a corporation this can also be called; Stock Redemtion.)

Cash Account

In a Universal Life Policy what refers to the: - Cost of Insurance withdrawn monthly - Fees withdrawn monthly - Current or Guaranteed interest

Changes in the Application

Must be initiated by the applicant

Annual

Out of all 4 Premium Modes a policy owner can select in timeframes to make the payments to keep the policy in force. Which one is the lowest?

Conditional Reciept

Premium is paid with the application. Must be Standard or Preferred Risk.

Binding Reciept

Temporary and not common in Life Insurance

Insurance Effective- later of

Term for date of the application being completed and signed. Medical Exam completed (if required)

Application

The Primary Underwriting Source

Fair Credit Reporting Act

Third Party information Notice to applicant REQUIRED Consumers have rights and can dispute information in files Penalty: Fines (Max of $5,000) and/or imprisonment (one year).

-insured -producer/ agent -applicant, owner (if not the insured)

Three Required Signature's on a Life Application

Backdating

Usually no more than 6 months

1. Juvenile - Death Benefit may increase at a future age 2. Jumping Juvenile - Policy automatically increases at age 18 or 21

What are 2 aspects and types of Juvenile Life Policies?(DB/POI)

1. Human Life Value 2. Needs Approach

What are 2 aspects used when determining the amount of Life Insurance Needed? (HN)

1. Joint Life 2. Juvenile

What are 2 types of Specialized Life Policies? (JJ)

1. Cross Purchase 2. Entity Purchase

What are 2 types of purchases in the, Buy Sell Funding Business use of life insurance?

1. Only lasts for term of policy, similar to renting & not owning 2. Premium increases with age 3. Renewability features expire before age of average life expectancy

What are 3 disadvantages to Term Life Policies?

1. Variable Life 2. Variable Universal Life 3. No guarantee death benefit

What are 3 types of Variable Life Policies? (VVN)

1. Buy Sell Funding 2. Key Person 3. Executive Bonus 4. Deferred Compensation

What are 4 Business Uses of Life Insurance? (BKED)

1. Mortality 2. Interest 3. Expenses 4. Net Premium

What are 4 Premium Elements? (MIEN)

1. Fixed Premium 2. Fixed and level death benefit 3. Cash Values 4. Death Benefit

What are 4 aspects of a Traditional Whole Life Policy? (FFCD)

1. Individual vs. Group 2. Term vs. Permanent 3. Participating vs. Non-Participating 4. Fixed vs. Variable 5. Industrial and Home Services

What are 5 Classes of Life Insurance Policies? (I vs. G / T vs. P/ P vs. N / F vs. V / I & H)

1. Survivor Protection 2. Mortgage Payoff 3. Estate Creation 4. Estate Conservation 5. Liquidity 6. Cash Accumulation

What are 6 different Personal Uses of Life Insurance?(SMEELC)

1. Application 2. Medical exam & Testing 3.Attending Physician Statement (APS) 4. AID's testing 5. Medical Information Bureau 6. Consumer Reports 7. Investigative Reports

What are 7 Sources of Information used by Underwriting.(AMAAMCI)

1. Waiver of Premium 2. Waiver of cost of insurance 3. Disability Income Rider 4. Payor Rider

What are four different disability riders? (WWDP)

1. Standard 2. Preferred 3. Substandard 4. Declined

What are the 4 classifications of Risks in the life application's processes? (SPSD)

1. Flexible Premium 2. Cash Account 3. Option A 4. Option B

What are the 4 key points of a Universal Life Policy?(FCOAOB)

1. Annual 2. Semi-Annual 3. Quarterly 4. Monthly

What are the 4 types of Premium Modes that can be chosen for the payment's made by the policy owner? (ASQM)

1. Continuous Premium 2. Limited Payment 3. Single Premium 4. Modified Premium 5. Graded Premium 6. Indeterminate Premium 7. Interest Sensitive

What are the 7 types of Whole Life Policies? (CLSMGII)

1. Insured Term Rider 2. Return of Premium Rider 3. Accidental Death Rider 4. Accidental Death or Dismemberment Rider 5. Guaranteed Insurabilit Rider

What are the five Riders that Affect the amount of Death Benefit?(IRAAG)

1. The cash value 2. Net amount of risk to the insurance company

What are the two components that the death benefit consist of?

1. Bonus is tex deductible to employee's as a Salary Expense. 2. Bonus is included in the employee's gross income.

What are two aspects of an Executive Bonus Plan regarding taxes and gross income inclusiveness?

1. First to die now paid out 2. Second to die (Survivorship Life)

What are two aspects to a Joint Life Policy?

1. Can be changed to permanent Insurance without evidence of insurability 2. No new application required

What are two features of a Convertible Term Life Policy?

1. No new application required/ Does not need to medically qualify 2. New Premium based on attained age/ Same amount of Death Benefit guaranteed but can expire before age of average life expectancy

What are two features of a Renewable Term Life Policy?

Cash Surrender Value

What arises from the policy owners rights to quit a contract and reclaim share of the reserve fund's attributed to the policy? When this is cashed in it also means the policy owner has given up rights to the death benefit.

Executive Bonus Plan

What form of Life Insurance plan refers to the following: - Employee owns and the business pays the premium. - Employee has full access to living benefits while alive - Is used sometimes to replace the employee's yearly bonus. - Also called a "Section 162 Bonus Plan."

the level death benefit (insurance amount only)

What is Option A in a Universal Life Policy?

Increasing Death Benefit (insurance amount plus cash account)

What is Option B in a Universal Life Policy?

Financial obligations that decrease steadily over time. Mortgages/Loans/ or anything requiring regular periodic payments.

What is a Decreasing Term Life Policy good for? ( refering to financial obligations and types of.)

Financial obligations that increase steadily over time. Increasing coverage helps keep death benefit current with inflation.

What is a Increasing Term Life Policy good for? ( refering to financial obligations and what it helps.)

Cash Value

What is an integral part in a Whole Life Policy that reflects the reserves necessary to assume payment of the guaranteed death benefit?

Stated percentage of the face amount each month

What is payable or included with the face amount in a long term care rider for the costs of the: Nursing home, or Nursing/Assisted Living Care.

Statement of Good Health

What is required if there is no premium taken with the application, and or if health has changed then the Agent cannot deliver the policy?

Usually Larger. $10,000- $25,000

What is the Face Value size usually for a Home Service Life Policy? What is the maximum- maximum face amount for this policy?

Usually smaller. $2,000 or less

What is the Face Value size usually for an Industrial Life Policy? What is the maximum face amount for this policy?

Adjustable Life

What is the term for a Flexible whole life policy that the policy owner: - Adjusts the death benefit - Increases required proof of insurability - Adjusts the Premium

STOLI/IOLI

What type of transaction relating to Life Policy Applications is: -Banned in most states -Investors named as beneficiaries

Deferred Compensation Plan

Which Life Insurance Business Use Plan: - is not taxable until worker actually recieves it? - May also qualify an employee after retirement to be at a lower tax bracket? - Benefits are also forfeited if the employee leaves before the specified date.

Traditional Whole Life

Which Life Policies Cash Values refers to: - Guaranteed interest -May be surrenderd -May be borrowed - Endows at age 100

Gross Premium

Which Premium is the amount the policy owner pays annually? When calculating the formula applicable is the following: = Mortality - Interest + Expenses AKA: "Net Premium" + Expenses

Net Premium

Which Premium will fund a benefit with one premium payment? When calculating the formula applicable to determining this premium cost is the following: = Mortality - Interest

Single Premium Whole Life

Which Whole Life Policy has immediate cash values?

Modified Premium Whole Life

Which Whole Life Policy has lower premiums the first three to five years? And the Premium jumps once then levels off?

Graded Premium Whole Life

Which Whole Life Policy's initial premium is lower then whole life but then increases for five to ten years before leveling off?

Interest Sensitive Whole Life

Which Whole Life policy has a current interest rate and a guaranteed interest rate?

Indeterminate Premium Whole Life

Which Whole Life policy's premiums are adjusted by the company and has a maximum guaranteed premium?

Group Life

Which class of Life Policy is a: - Single contract covering an entire group of people. - Usually cost's less then what it would be for that individual to purchase seperately on their own with similar coverage.

Industrial Life

Which class of Life Policy is: - Developed for people of limited means to obtain some of the benefits of Life insurance. - The Face Amounts are usually small; $2,000 or less & mainly used for Burial Expenses.

Home Service Life

Which class of Life Policy's is: - A variation of Industrial Life - Sold by producers, home services in the neighborhood where premiums are collected at the policy owner's homes?

Industrial Life

Which class of Life Policy's premiums usually come due weekly & are collected in person by a producer/Agent going door to door?

Human Life Value

Which of the 2 aspects used to determine the amount of life insurance needed refers to; Current Income?

Needs Approach

Which of the 2 aspects used to determine the amount of life insurance needed refers to; Money for specific needs?

Consumer Reports

Which of the 7 sources of information used by Underwriting apply to the following: Insured must always be informed?

Medical Information Bureau (MIB)

Which of the 7 sources of information used by Underwriting apply to the following: application cannot be solely denied based on the information provided through this, Insured must be informed, and the information is taken from insurance companies?

AID'S Testing

Which of the 7 sources of information used by Underwriting apply to the following: applications may not ask about sexual orientation, testing not based on geographical location, requires insured's written consent?

Investigative Reports

Which of the 7 sources of information used by Underwriting apply to the following:Insured must always give consent?

Risk of loss

Which of the defining types of Insurable Interest apply to the following: - Assumed in one's self and relationship's (spouse,children) - No obvious relationship

Insured Term Rider

Which of the five Riders that Affect the amount of Death Benefit are defined by the following? (IRAAG): - Added to a permanent Policy - Premium lower then if bought as a seperate policy - Rider is for limited time

Guaranteed Insurability Rider

Which of the five Riders that Affect the amount of Death Benefit are defined by the following? (IRAAG): - Allows additional insurance up to the amount of the rider to be added.: * Certain Ages- Usually no older than 40. * Life events- marriage, birth of a child, adoption. * No medical questions asked. * Cost of additional insurance based on the insured's attained (current) age.

Accidental Death or Dismemberment Rider

Which of the five Riders that Affect the amount of Death Benefit are defined by the following? (IRAAG): - Amount of the rider is the principle sum (100%) - paid in addition to the face amount if death due to an accident. - Death must occur within 90 days of accident date. - Also pays a living benefit if dismemberment occurs. - Dismemberment is called the capital sum- usually a percentage of the principle sum (100%) - If multiple dismemberment claims while insured is alive, the principle sum is the maximum paid for all claims combined.

Accidental Death Rider

Which of the five Riders that Affect the amount of Death Benefit are defined by the following? (IRAAG): - Death due to an accident. - Death must occur within 90 days of accident. - Doubles or triples the face amount.

Return of Premium Rider

Which of the five Riders that Affect the amount of Death Benefit are defined by the following? (IRAAG): - Increasing term insurance rider. - Amount of rider equal to all premiums paid. -Death must occur while rider is in force.

Waiver of cost of insurance (universal Life)

Which of the four disability riders refer to the following: - Deductions from the cash account are waived. - Has a waiting period - (which life policy applied)

Disability Income Rider

Which of the four disability riders refer to the following: - Pays insured a monthly income while disabled. - X dollars per month per $1,000 face amount

Payor Rider

Which of the four disability riders refer to the following: - Pays the premium of a juvenile policy if the adult premium payor either; dies, or is disabled. - May reqire the adult to provide evidence of insurablity

Waiver of Premium

Which of the four disability riders refer to the following: - Written if the Insured and owner are the same person. - Waives future premium payments as long as the insured is disabled. - Has a waiting period. - Company will pay future premiums after waiting period. - Will reimburse insured for premiums paid during waiting period. - Once no longer disabled, insured pays future premiums.

Step-Rate Premium

Which premium refers to the payment of a higher premium at each renewal?

Long Term Care Rider

Which rider may: - Advance of the death benefits while insured is living - Reduces the death benefit payable upon death - May pay for: Home Care, Assisted Living, Nursing Home Care.

Accelerated Benefits Rider

Which rider; - Advances part of the death benefit while the insured is alive. - Reduces death benefit payable to beneficiary upon death of the insured. - Disclosure by company of affect on death benefits and other benefits (Medicaid etc.)

Term Life

Which type of Life Insurance Policy applies to the following: - Only offer's death benefit - remains in force for a specified period of time - No Death Benefit will be payable if death occurs after expired term.

Term Life Policy

Which type of Life Insurance Policy is the simplest type out of Term, Whole and Universal Policies?

Increasing Term

Which type of Term Life Insurance Policy applies to the following: - Death Benefit begins at 0 and Increases over the term of coverage. - Premium Increases and keeps pace with the rising costs of living expenses

Decreasing Term

Which type of Term Life Insurance Policy applies to the following: - Death Benefit decreases until reaching 0 at the end of the policy term. - Premium remains level.

Level Term

Which type of Term Life Insurance Policy applies to the following: - Death Benefit is Level. - Premium is level for Term.

Return of Premium Term

Which type of Term Life Insurance Policy applies to the following: - Premiums higher than a regular term policy. - Premiums paid by the insured are paid back if the insured is alive at the end of the policy term.

Equity Indexed Universal Life

Which type of Universal Life Policy has: - Current interest on cash account - Up or down based on the stock market index - Account still guaranteed by the company

Agent Delivery

Which type of obtaining, soliciting, or servicing of life policies requires the Producer/Agent to get a signed delivery reciept?

- Spouse - Children - Family - Exchange of Insured

Who are considered other insured riders? ( have insurability interest? SCFE)