Chapter 3 Basics of Life Insurance
The pre retirement period, one of the distinct income needs periods, is also known as the
Black out period
In a buy-sell agreement, the life insurance policy is written on the
Business owner's life
Which of the following describes an employer that agrees to pay an employee a stated amount of income beginning at retirement rather than paying them the money now?
Deferred compensation plan
In Life Insurance contracts, when must Insurable interest exist?
Only at the time the policy is purchased
Which of the following factors does NOT have an effect on the insurance?
Producer Certification
Which of the following classes of life insurance has a death benefit only. increasing premiums temporary coverage and expires at end of the term?
Term Life insurance
Which of the following states the purpose of life insurance is to replace the economic value of an individual?
The Human Life value principle
Which of the following is NOT a personal use of life insurance?
Third party ownership
The assets left behind after an individual's death is known as
an estate
When the owner of a life insurance policy is not the insured, there are three parties to the contract. Which of the following is not a party to this type of contract?
beneficiary
Which of the following terms refers to how easily an asset can be turned into cash without loss of value?
liquidity
All of the following are examples of an insurable interest except
tom would like to buy life insurance on his best friend
Which of the following types of insurance has premiums that are due weekly and are collected in person by producers who go door to door?
Industrial life insurance
Classes of life insurance policies
- Individual vs. Group - Term vs. Permanent - Participating vs. Non-participating - Fixed vs. Variable - Industrial & Home Service
Business uses of life insurance
-Buy-Sell Funding -cross purchase -Entity purchase -Key Person -Executive Bonuses -Corporate-owned Policies
Insurable Interest
-a risk of loss -assumed in one's self and relationships (spouse, children) -No Obvious relationship -Must be proven before policy can be purchased -the relationship doesn't have to exist at death
Premium elements
-mortality -interest -expenses -net premium -Mortality minus premium -Net Single
Personal uses of Life insurance
-survivor protection -mortgage payoff -estate creation -estate conservation -liquidity -cash accumulation
Which of the following premiums is the morality element minus the interest element?
Net Premium
All of the following are examples of buy-sell agreements EXCEPT
executive bonus plan
Determining amount of Life insurance needed
*human life value (current income) *needs approach (money for specific needs)
gross premium
-net premium plus expenses -gross annual
Premium Mode
Annual, semi - annual, quarterly, monthly -annual is the lowest
All of the following are names of distinct income needs periods except
Social Security