OR Life and Health Insurance: Flash Cards from Exam FX. Chapter: Life Insurance Basics
What is the main responsibility of a company's underwriting unit?
Risk selection
What document must a producer provide to the insured during policy replacement?
The Notice Regarding Replacement
What is the purpose of the agent's report during the application process?
The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process.
Who is a replacing insurer?
The company that issues the new policy during policy replacement.
Who must have insurable interest in the insured?
The policy-owner
What is policy replacement?
A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value.
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.
What type of life insurance offers an applicant a cash value element?
Permanent insurance (usually, whole life)
What term describes the fee a person pays an insurance company to receive coverage?
Premium
What is a blackout period for Social Security benefits?
A period of time during which the surviving spouse does not receive benefits.
When must the policy summary for a life insurance policy be delivered to the policy owner?
At the time of policy delivery.
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 type of insurance creates an immediate estate?
Life insurance
What type of insurance would perform the function of cash accumulation?
Life insurance
What is included in Part 2 of a life insurance application?
Medical information about the prospective insured.
What are the illustrations in a life insurance policy?
Presentations of non-guaranteed elements of the policy.
What is the main purpose of the regulation on life insurance policy illustrations?
To provide standards that will protect and educate consumers. 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
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
What type of policy is typically issued without proof of insurability from the insured?
Group policy
If someone wants to buy a life insurance policy that will provide lifetime policy that will provide lifetime protection against premature death, what type of life insurance policy should it be?
Permanent
What does "liquidity" mean in a life insurance policy?
The policy's cash values can be borrowed against at any time and used for immediate needs.
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 Key Person insurance?
To minimize the risk of financial loss caused by the death of a key employee.
What are the three factors that determine the premium for a particular life insurance policy?
1) Mortality 2) Interest 3) Expense
What are the personal uses of life insurance?
1) Survivor protection 2) Estate creation 3) Cash accumulation 4) Estate conservation 5) Liquidity
When must insurable interest exist in a life insurance policy?
At the time of the application.
What type of policy issues certificates of insurance to the insureds?
Group policy
What is the term that describes the frequency and the amount of the premium payment?
Premium mode
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 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 insured's current assets, liabilities, and survivor's needs.
What are the three main instances when insurable interest exists in life insurance?
1) Insuring your own life. 2) Insuring the life of a family member. 3) Insuring the life of a business partner, or someone who has a financial obligation to to the policy-owner.
What document describes the specific information about a policy?
Policy summary
All other factors being equal, which premium payments made will require an overall higher premium: monthly or annual?
Monthly
Mortality tables are used by insurance companies to predict what?
Life expectancy and the death rates for specific groups of individuals.
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
It will decrease.
Who is the beneficiary on a key-person life insurance policy?
The employer
Who is responsible for the contents of insurance advertisements?
The insurance company
What is insurance underwriting?
The process of risk selection and classification.