Life and Health Insurance

Life Settlement

A financial transaction in which the owner of a life insurance policy sells a policy that is no longer needed to a third party for some form of compensation

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 term illustration in a life insurance policy refers to

A presentation of nonguaranteed elements of a policy.

Lump-sum

payment of the entire benefit in one sum

Classification of Risks

preferred, standard, substandard

Another name for a substandard risk classification is

rated

Underwriting

risk selection and classification process

Liquidation

selling assets in order to raise capital

Death Benefit

the amount paid upon the death of the insured in a life insurance policy

Viatical Settlement

the sale of a life insurance policy by a terminally ill insured to another party, typically to investors or investor groups, who hope to profit by the insured's early death

Entity Purchase

used when the partnership buys the policies on the partners

Cross Purchase

when each partner buys a policy on the other

How long does the viator have to rescind contract?

15 days

Viatical transfers ownership, how long does the insurer have to inform the insured of the change?

20 days

Solvency

Ability to meet financial obligations

Who must be a member of insurance guaranty associations?

All insurers authorized to write insurance within a state

Mode of Premium Payment

Annual, semiannual, quarterly, monthly

Insurable interest must exist

At the time of application

When must insurable interest exist in a life insurance policy?

At the time of application

Business Uses of Life Insurance

Buy- sell agreement

Needs Approach

Determines how much benefit would be necessary to replace the loss income & increased expenses due to premature death of the insured.

Human Life Value Approach

Determining the value of an individual's life requiring calculation of future earnings, wages, expenses, inflation, and time until retirement

Inspection Report

General report of the applicants finances, character, work, hobbies, and habits

Human Life Value Approach

Gives the insured an estimate of what would be lost to the family in the event of the premature death of the insured.

When are creditors not exempt from proceeds of life insurance?

If creditors can show evidence of valid assignment

Adverse Selection

Individual with higher probability of loss to purchase insurance more often than those who present lower risk

The policy owner must have

Insurance interest in the life of the insured

The mode of premium payment

Is defined as the frequency and the amount of the premium payment.

What's a true statement about participating life insurance policy?

It pays dividends to policy owners

During replacement of life insurance, a replacing insurer must do

Obtain a list of all life insurance policies that will be replaced

What are three main instances when I durable interest exists in life insurance?

Own life, family member, business partners or someone who has financial obligation to policy owner

An applicant wants to buy a policy that has a cash value element, what should she buy?

Permanent

Liquidity

Policy's cash values can be borrowed against at any time and used for immediate needs.

Who must have insurable interest in the insured?

Policyowner

Illustrations

Presentation or depiction of non guaranteed elements of a life insurance policy

What are illustrations in a life insurance policy?

Presentations of nonguaranteed elements of the policy

Personal Uses of Life Insurance

Survivor protection, estate creation and conservation, cash accumulation and liquidity

Viatical Settlement Provider license must be submitted to

The insurance department

Three recognized areas in which insurance interest exists

Their own life, life of family member, life of a business partner/key employee/someone with financial obligation to policy owner

What is the purpose of the buyers guide?

To allow the consumer to compare the costs of different policies

What is the best reason to purchase life insurance rather than annuities?

To create an estate

Purpose of a disclosure statement in life insurance policies?

To explain features and benefits of a proposed policy to the consumer

What is a duty of a viatical settlement broker?

To negotiate contracts between viatical settlement providers and viators, on behalf of viators

Insurance interest

To purchase insurance, policy owner must face the possibility of some loss with death

Who effectuates viatical settlement contracts

Viatical settlement providers

What is the name of the insured who enters into a viatical settlement?

Viator

If an applicant for a life insurance policy and person to be insured by policy are two different people, the underwriter would be concerned about

Whether an insurable interest exists between the individuals

terminally ill

a condition that can reasonably be expected to result in death within 24 months

Minor

a person under legal age

estate

a person's net worth

chronically ill

an individual is unable to perform at least two activities of daily living (ADL's) including eating, toileting, transferring, bathing, dressing, or continence.

life insurance

coverage on human lives

cash value

equity amount accumulated in permanent life insurance

Survivor Protection

life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death