Life Insurance

To form a valid contract, 4 elements must be present:

-Consideration -Legal Purpose -Offer & Acceptance -Competent Parties

HIPAA Disclosures; If any health information will be shared, applicants must be given full notice of: - - -

-Insurer's information-sharing practices -their right to maintain privacy -an opportunity to refuse to have their information released

Mutual policy dividends are considered to be a non-taxable return of excess premium. Mutual policies are referred to as _______ _____________ because the policy owners participate in the operating results of the company.

Par Policies (or participating policies)

The application is made up of 3 parts

Part 1 - General Part 2 - Health Part 3 - Producer's Report

Cause of loss (Ex. Death, Accidents or Illness)

Peril

A heart condition is a _________ ___________ because it is physically identifiable.

Physical Hazard

The section of the application that includes information regarding the proposed insured physical condition, medical history, and alcohol and drug use is known as: -First part- general information -second part- health information -the entire application -attending physicians statement

second part- health information

Exceptionally large or specialized risk that no authorized insurer can or will cover. In such cases, insurance may be obtained from an unauthorized/non-admitted insurer or a ______ _________ basis

surplus lines

Which of the following is not required to sign the application form? -The Insured -The producer/agent -The Applicant (if not the insured) -The beneficiary

the beneficiary

The process of evaluating a risk to determine if the risk is one that the insurance company wishes to insure is also known as the

underwriting process

A guarantee that something is true is a

warranty

With regards to adhesion, if "a dispute arises over wording..." The courts will rule against the party that

wrote the contract

Insurance policies are ____________ contracts, meaning the insured must pay the premium for coverage and file a claim if a loss occurs.

conditional

We don't use "Conditional ____________ receipts" in Life, Accident & Health

Binding

State License for an insurance company

Certificate of Authority

______________ is the intentional failure to disclose known facts. "Failure to tell the whole truth"

Concealment

Under which of the following receipts is coverage effective as of the date of the application, as long as the applicant is found to be insurable under the company's standard underwriting rules? -Conditional receipt -binding receipt -Standard receipt -Acceptance receipt

Conditional receipt

Which of the following is used to determine a consumer's eligibility for personal credit, insurance, or employment? -Consumer reports -Medical Information Bureau -HIPAA -Consumer Investigative Reports

Consumer Reports

All of the following are names of distinct income need periods EXCEPT: A. Family Dependncy B. Preretirement C. retirement D. Social Security

D

______________ refers to an exchange of value. Think Money. Applicant provides information and premium payment, while the insurer provides promise to pay.

consideration

Smoker vs non-smoker is the only thing insurers can use to

discriminate

A person in a position of financial trust is called a

fiduciary

During the underwriting process, medical exams and testing are paid for by the: -Insurer -Agent/Producer -Underwriter -Applicant

insurer

An _________ is a proposal made by one of the potential parties in a contract.

offer

If a fire causes damage to a building, the fire is a

peril

Agency is a relationship in which one person is authorized to represent and act for another person or for a corporation, In insurance, the insurance agent acts on behalf of the

principal

Insurance companies often purchase insurance to cover their own exposure to loss. This is called

reinsurance

A ______________ is a statement that is believed to be true, to the best of one's knowledge at the time it is given.

representation

Incorporated in any country other than the USA

Alien

The ABC Insurance Co is incorporated in Mexico. While doing business in Texas, it is

An Alien insurer

Reciprocal Insurers are handled by an

Attorney-in-fact (Doesn't actually have to be an attorney though)

Which individual represents only one insurance company?

A Captive Agent

Risk _______________ means eliminating a particular risk by not engaging in a certain activity.

Avoidance

States require companies to have a license to sell insurance in the state. The license is called

A certificate of authority

All of the following statements about stock insurance company are true EXCEPT

A stock company is a participating company (It's a Non-Participating company)

________________ of an offer must be unconditional and unqualified. (With Underwriting approval)

Acceptance

Provisions are written by only one party to the contract, and the other party is required to stick to them. This is considered

Adhesion

Tendency for higher-risk individuals to get and keep insurance more than individuals who represent an average level of risk.

Adverse Selection

Insurance policies are __________ contracts, or "Exchange of 2 unequal values"

Aleatory

All of the following are examples of an insurable interest EXCEPT: A. Sue would like to buy a life insurance policy on her spouse B. Tom would like to buy a life insurance policy on his best friend C. Amy would like to buy a life insurance policy on her business partner D. Michael and Megan would like to buy a life insurance policy for each of their children

B

"Whats the earliest dates coverage goes into effect?"

Date of conditional receipt

The State in which a company is incorporated

Domestic

_______________ was enacted to protect the interests of participants in employee benefit plans

ERISA (Employee retirement income security act)

The ________ __________ of coverage is the date of application or the date of the medical exam "whichever is later."

Effective Date

Represent only one company (Agents represent the insurer)

Exclusive or captive agents

A ___________ is a person in a position of financial trust. The agent has an obligation to act in the best interest of the insured.

Fiduciary

An insurance company incorporate in Wisconsin and conducting business in Wisconsin is known as a domestic company. What kind of company are they considered if they do business in Minnesota?

Foreign

Any state or US Territory other than the state where incorporated

Foreign

____________ is an intentional act designed to deceive and induce another party to part with something of value. "Intentional misrepresentation of a material fact"

Fraud

____________ do not cause losses, but they make a loss more likely. (Ex. Gas can stored in a Garage)

Hazard

Insurance policies are contracts of _______________, meaning that the contract is intended to restore the insured to the financial state he or she enjoyed prior the occurrence of a loss--no more, and no less. (Also known as__________________)

Indemnity, Indemnification

Sell the insurance products of several companies and work for themselves or other agents (Agents represent the insured)

Independent Insurance Agents

With regards to Investigative Consumer reports: -Consumers don't have the right to know names of ___________ ordering information -Consumers DO have the right to know names of _____________ ordering information

Individuals, Companies ("People = Companies" on the Test)

Contract that transfers the risk of financial loss from an individual or business to an insurer

Insurance

What is a contract or device for transferring risk from a person, business or organization to an insurance company?

Insurance

The ________________________________ is the principle that makes insurance possible. The larger the group, the more accurately losses can be predicted.

Law of Large Numbers

To be valid, a contract must be for a _______ __________ and not contrary to public policy.

Legal Purpose

Admitted, Authorized or _________________ mean the same thing

Licensed

"All forms of insurance rely on the law of large numbers and risk cooling"

Life, Health, Accident, Property & Casualty

The _________ ______________ ____________ is a non profit insurance trade association that maintains underwriting information on applicants. (Identified by social, not name)

Medical Information Bureau

Which of the following is a non-profit insurance trade association that maintains underwriting information on applicants from hundreds of insurers? -HIPPA -Consumer Reports -Medical Information Bureau -Investigative Consumer Reports

Medical Information Bureau

A _____________ is a representation that is actually false.

Misrepresentation

__________ ____________ arise from an individuals character.

Moral Hazards

Suzanne regularly leaves her side door unlocked when she leaves for work. One afternoon a thief entered her apartment and stole all of her jewelry. What was the type of hazard in this example?

Morale

Tiffany leaves her car unlocked when she goes shopping. She figures her car and the contents are insured so there is no reason to worry. Which type of hazard is this an example of?

Morale

_________ ____________ are a state of mind or careless attitude.

Morale Hazards

-Owned by the policy holders -If company is profitable, excess premiums can be returned to it's policy holders as a nontaxable dividend -Issues participating (par) policies

Mutual Insurer

A __________________ is owned by it's policy holders, also known as policy owners.

Mutual Insurer

Federal Law: Fair Credit Reporting Act (FCRA) states: A __________ ___ ______ ____________ must be issued to all applicants for life or health insurance coverage.

Notice to Applicant

Insurers must not unfairly discriminate between individuals who are in the same risk class. Use of the following is considered unfair discrimination: -Race -Religion -National Origin -?

Place of residence

Agency is the relationship in which one person is authorized to represent and act for another person for a corporation. In insurance, the insurance agent acts on behalf of the

Principal

Only Loss can occur- Loss IS insurable

Pure Risk

The chance your house may burn down, represents a

Pure risk

Wearing a seatbelt in a car is an example of which method of managing risk?

Reduce

Risk _______________ may refer to lessening the chance that a loss will occur.

Reduction

Jill is filling out an insurance application with information that she believes to be true. This information that she is providing is considered a

Representation

Risk _______________ means the individual will pay for the loss if it occurs.

Retention

Uncertainty about whether a loss will occur --"chance something bad could happen"

Risk

"Large number pay small premiums to benefit the few that it covers" is considered

Risk Cooling

Loss or gain can occur - loss is NOT insurable

Speculative Risk

A ___________________ is a business formed as a public or private corporation and owned by its stockholders

Stock Insurer

Which of the following is an above average risk of loss and unfavorable to an insurance company? -Standard -Preferred -Substandard -Declined

Substandard

"Whats the effective date of Life & Health Applications"

The Date of the Application or Medical Exam, whichever is later

What do insurance companies use to help predict how many losses will occur in a group or class of individuals?

The law of large numbers

___________ of risk is what happens with insurance.

Transfer

T.A.R.R.

Transfer, Avoidance, Reduction, Retention

To avoid adverse selection, insurers make an extensive evaluation of information related to a particular risk --- a process called:

Underwriting

Insurance policies are _________ contracts, because only one party is legally bound to perform under the contract. (Insurer promises to pay for a covered loss, Insured does NOT promise to pay the premium)

Unilateral

STOLI has to do with ______________ __________________

Vatical Settlements

A ____________ is a statement that is guaranteed to be true. If a _____________ is not kept, there is a breach of ________________ that voids the contract.

Warranty

"All of the following make up the elements of a legal contract except..."

Written Document

While delivering the policy, the producer must obtain a signed document that the insureds health is the same as when he or she applied of the insurance policy. This document is called: -an inspection report -a delivery receipt -a policy review -a statement of good health

a statement of good health

Life insurance premiums are lowest under which premium payment mode? -monthly -quarterly -semi-annual -annual

annual

"Which is the least expensive 'outlay of funds'?" -annual -semi-annual -quarterly -monthly

annual premium payment mode

The preretirement period, on of the distinct income needs periods, is also known as the: -Blackout period -family dependency period -cash needs period -expense period

blackout period

In a buy-sell agreement, the life insurance policy is written on the: -business -person who will buy the business int eh event that the owner dies -business owner's life -family of the business owner

business owner's life

Mixing personal funds with the insureds or insurers funds

commingling

From a legal standpoint, both exclusive and independent agents represent the

company

For a contract to be binding, both parties must have the legal capacity to make a contract. The insured must be of legal age (TN it's 16 & emancipated) and be mentally ___________ to make an insurance contract.

competent

The failure to disclose known facts is

concealment