Life Insurance Basics
Which of the following must be disclosed in all advertisements and policies of term life insurance for individuals 55 years of age or older?
insurance monetary value index
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
it will decrease
All other factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?
monthly
what are the three factors that determine the premium for a particular life insurance policy?
mortality, interest and expense
what type of life insurance offers an applicant a cash value element?
permanent insurance (usually, whole life)
What is the term that describes the frequency and amount of the premium payment?
premium mode
When must insurable interest exist in a life insurance policy?
At the time of application
Who must have insurable interest in the insured?
Policyowner
a business is
the benefit is received tax free
Who must be a member of insurance guaranty associations?
all insurers authorized to write insurance within a state
at what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
either on the date of the application or the date of the medical exam (whichever occurs last)
What are illustrations in a life insurance policy?
Presentations of nonguaranteed elements of the policy
What is insurance underwriting?
The process of risk selection and classification
Who is the beneficiary on a key-person life insurance policy?
The employer
What are three main instances when insurable interest exists in life insurance?
insuring your own life, the life of a family member or the life of business partners or someone who has a financial obligation to the policy owner
Mortality tables are used by insurance companies to predict what?
life expectancy and the death rates for specific groups of individuals
What is included in part 2 of a life insurance application?
medical information about the prospective insured
what document describes the specific information about a policy?
policy summary
in calculating 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
What is the purpose of the agents report during the application process?
The agent's report discusses the agents personal observations about the proposed insured that may help in the underwriting process.
life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. what is this called?
estate conservation
The responsibility of making certain that an application for insurance is filled out completely, correctly, and to the best of his or her knowledge is the responsibility of who?
The producer
An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?
application
which of the following methods of calculating the amount of life insurance needed takes into account the insureds wages, years until retirement, and inflation?
Human life approach
what are the personal uses of life insurance?
Survivor protection, estate creation and conservation, cash accumulation and liquidity
Which of the following is not required on an illustration used in the sale of a life insurance policy?
The name of the primary and secondary beneficiaries
what does liquidity mean in a life insurance policy?
availability of cash value
Which of the following is not true regarding the needs approach method of determining the value of an individuals life?
need is predicted using the number of years until the insureds retirement
Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?
no, advertising of the existence of the guarantee association for purposes of solicitation and sale of insurance policies by insurers is an illegal business practice.
what term describes the fee a person pays an insurance company to receive coverage?
premium
Which of the following is an example of liquidity in a life insurance contract?
the cash value available to the policy owner
which of the following is the best reason to purchase life insurance rather than annuities?
to create an estate
what is the purpose of insurance guarantee associations
to protect policy owners, insureds and beneficiaries from financial losses caused by insolvent insurers
An applicant who receives a preferred risk classification qualifies for
Lower premiums than a person who receives a standard risk
based on human life value approach, which of the following is not used to calculate an individuals life value?
predicted needs of the family after the insureds death - this is for the needs approach
If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's 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 insureds current assets, liabilities and survivors needs
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
who is responsible for the contents of insurance advertisements?
the insurance company
What is the purpose of key person insurance?
To minimize the risk of financial loss caused by the death of a key employee
When must the policy summary for a life insurance policy be delivered to the policy owner?
at the time of policy delivery
in the executive bonus plan, who is the owner of the policy and who pays the premium?
executive is the owner and executive pays the premium
what is the main responsibility of a company's underwriting unit?
risk selection
What type of insurance creates an immediate estate?
life insurance
