Life Insurance Basics
The insurance company
Who is responsible for the contents of insurance advertisements?
The employer
Who is the beneficiary on a key-person life insurance policy?
The insured's current assets, liabilities and survivor's needs
When planning for survivor protection in life insurance what needs to be considered?
The policyowner
Who must have insurable interest in the insured?
The benefit is received tax free
A business is the owner and beneficiary of a key-person life policy. When the business collects the policy benefit, how is it taxed?
Policy Replacement
A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value
Variable
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?
It will decrease
If an insured changes his payment plan from monthly to annualy, what happens to the total premium?
Estate conservation
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?
Premium mode
What is the term that describes the frequency and the amount of the premium payment?
Premium
What term describes the fee a person pays an insuranve company to receive coverage?
Monthly
All other factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?
Either on the date of the application or the date of the medical exam (whichever occurs last)
At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
Higher frequency of premium payments will result in higher overall premium
How does the premium mode affect the total premium paid for insurance for the year?
The existance of insurable interest between the applicant and the insured
If an applicant for a lie insurance policy and the potential insured are two different people, what would be the underwriter's main concern?
Mortality tables are used by insurance companies to predict what?
Life expectancy and the death rates for specific groups of individuals
Presentations of nonguaranteed elements of the policy
What are illustrations in a life insurance policy?
Survivor protection, estate creation and conservation, cash accumulation and liquidity
What are the personal uses of life insurance
Policy Summary
What document describes the specific information about a policy?
Notice regarding replacement
What document must a producer provide to insured during policy replacement?
Availability of cash value
What does "liquidity" mean in a life insurance policy?
A period of time during which the surviving spouse does not receive benefits
What is a blackout period for social security benefits?
Medical information about the prospective insured
What is included in part 2 of a life insurance application?
Permanent
If someone wants to buy a life insurance policy that will provide a lifetime protection against premature death, what type of life insurance policy should it be?
The predicted needs of a family after the premature death of the insured
In calculating the amount of life insurance needed what is the needs approach based on?
Mortality, interest, and expense
What are the three factors that determine the premium for a particular life insurance policy?
Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policy owner
What are the three main instances when insurable interest, exists in life insurance?
The process of risk selection and classification
What is insurance underwriting?
To help the public make educated decisions about buying life insurance
What is the main purpose of the regulation on life insurance policy illustrations?
Risk selection
What is the main responsibility of a company's underwriting unit?
To minimize the risk of financial loss caused by the death of a key employee
What is the purpose of key person insurance?
The agent's report discusses the agent's personal observatons about the proposed insured that may help in the underwriting process
What is the purpose of the agent's report during the application process?
Life insurance
What type of insurance creates an immediate estate?
Life insurance
What type of insurance would perform the function of cash accumulation
Permanent insurance (usually whole life)
What type of life insurance offers an applicant a cash value element?
Group policy
What type of policy is typically issued without proof of insurablity from the insured?
Group policy
What type of policy issues certificates of insurance to the insureds?
At the time of application
When must insurable interest exist in a life insurance policy?
At the time of policy delivery
When must the policy summary for a life insurance policy be delivered to the policy owner?
The company that issues a new policy during replacement
Who is a replacing insurer?
