Life Insurance Basics
Policy summary
A document that describes the specific information about a policy
What is policy replacement?
A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value
What is a blackout period for social security benefits?
A period of time during which the surviving spouse does not receive benefits
Group policy
A type of policy that is typically issued without proof of insurability from the insured
When must insurable interest exist in a life insurance policy?
At the time of application
When must the policy summary for a life insurance policy be delivered to the policy owner?
At the time of policy delivery
What does "liquidity" mean in a life insurance policy?
Availability of cash value
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 policy issues certificates of insurance to the insureds?
Group policy
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
The existence of insurable interest between the applicant and the insured
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 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?
What are the three main instances when insurable interest exists in life insurance?
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
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
It will decrease
Mortality tables are used by insurance companies to predict what?
Life expectancy and death rates for specific groups of individuals
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
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
The Policy owner
Must have insurable interest in the insured
If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should it be?
Permanent
What type of life insurance offers an applicant a cash value element?
Permanent insurance (usually, whole life)
What are illustrations in a life insurance policy?
Presentations of non guaranteed elements of the policy
What is the main responsibility of a company's underwriting unit?
Risk selection
What are the personal uses of life insurance?
Survivor protection, estate creation and conservation, cash accumulation and liquidity
Estate conservation
Term for when life insurance may be used to pay state inheritance taxes and federal state taxes eliminating the need to sell assets from the estate
Premium
Term that describes the fee a person pays an insurance company to receive coverage
Premium mode
Term that describes the frequency and the amount of the premium payment
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
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
A replacing insurer
The company that issues a new policy during policy replacement
Who is the beneficiary on a key-person life insurance policy?
The employer
Who is responsible for the contents of insurance advertisments?
The insurance company
When planning for survivor protection in life insurance, what needs to be considered?
The insured's current assets, liabilities and survivor's needs
Insurance underwriting
The process of risk selection and classification
Life insurance
The type of insurance that creates an immediate estate
What is the purpose of key person insurance?
To minimize the risk of financial loss caused by the death of a key employee
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
Notice Regarding Replacement
What document must a producer provide to the insured during policy replacement?
To help the public make educated decisions about buying life insurance
What is the main purpose of the regulation on life insurance policy illustrations?
