Chapter 6 - Markets and Social Security

natural group

A "______________" is one formed for a purpose other than procuring or reducing the cost of insurance.

B (*Provide the business with money to recruit and train a replacement employee* A valuable employee with highly specialized knowledge or skills, or who adds significant value to the revenue/profitability of the company is a key person, and wages alone is not a criterion. The death of such a person can negatively impact the business operations. The company may use the death benefit proceeds for any purpose, but one of the most common uses is to cover the expense of recruiting, hiring, and training a replacement, which may take months to accomplish.)

A primary purpose of key person life insurance is to do which of these? A. Provide the family of the deceased employee with up to ten years of the employee's lost future income B. Provide the business with money to recruit and train a replacement employee C. Provide the business with money to pay vested retirement benefits to the heirs of the employee as a lump sum D. Protect the business against the death of any employee earning at least $50,000 per year

insurability insurability

As long as the individual enrolls during the open enrollment, coverage is guaranteed and evidence of _____________ is not required. Individuals who do not enroll during the initial enrollment period are considered late enrollees and must provide evidence of ____________ unless they wait until the next open enrollment period.

business partners, executives, and key employees

Business Uses of Life Insurance - In addition to personal uses of life insurance, the business market also benefits from the purchase of life insurance. Business uses of insurance often mirror individual needs - to cover the unexpected death of _________________ by providing funds for the continuation of the business, not for the heirs of the decedent.

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Currently Insured - A worker must earn at least ____ quarter credits during the full 13-quarter period ending with the quarter in which the worker dies, becomes disabled, or is entitled to retirement benefits.

sponsor insurance company

Group insurance is a contract between the _____________ and the _____________.

D (*The creditor* Credit life insurance is a group form of life insurance that is owned by and benefits only the creditor in the event of the death of the borrower. It may be issued as an indeterminate amount of coverage, as for a credit card, or it may be a single premium type of coverage in the form of decreasing term for a short term debt such as an automobile loan.)

In a credit life plan, who is the beneficiary? A. The wife of the insured B. The husband of the insured C. The children of the insured D. The creditor

Master Policy Certificate of Insurance

In a group insurance plan, the insurer issues a ____________ to the plan sponsor and each participant receives a _____________ covering the participant; and if offered, his/her spouse and dependents. Participants in the plan do not have personal control of the policy or policy changes as with an individual policy.

C (*Choice of beneficiary* In group life insurance the sponsor of the plan (the employer) has control over all facets of the coverage and cost, but the choice of beneficiary is left to the participant (the employee). A group life plan may not benefit the sponsor of the plan.)

In a group life insurance plan, the employee has control over which of the following? A. Choice of insurance company B. Type of policy C. Choice of beneficiary D. Mode of premium payments

D (*40 Credits* To be eligible for SS all benefits and be considered fully insured, a worker must have earned 40 credits.)

In order for a worker to be qualified for all of the benefits available from Social Security how many credits must be earned? a. 30 credits b. 6 credits in the last 13 quarters c. 1 credit for each year of work between age 20 and age 40 d. 40 credits

A (*$1,000 or less* Industrial insurance is typically marketed to low-income persons. Face amounts are available in $1,000 increments (or less). Some states limit the amount of coverage on any one life to no more than $10,000. Premiums are most often paid in cash to an agent on a weekly or monthly basis.)

Industrial life insurance is typically sold in face amounts of : A. $1,000 or less B. $5,000 multiples C. $10,000 to $20,000 D. Up to $50,000

C (*It acknowledges the commitments of the partners to each other and to their heirs to assure the continuation of the business in the event one of them dies unexpectedly* The primary purpose of a Buy-Sell Agreement is to acknowledge the partners' commitment to the business, how the business is valued, and what will happen to the business if one or more of the owners were to die or become disabled.)

One of the purposes of a Buy-Sell Agreement is which of these? A. To provide the business with funds in the event of the death of a key person who is not an owner B. It describes which relatives of a business owner have the right to purchase that person's interest in the business C. It acknowledges the commitments of the partners to each other and to their heirs to assure the continuation of the business in the event one of them dies unexpectedly D. It describes the conditions that will force a sale of the business, as well as the requirements to be met if the business wants to buy the assets of a competitor

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Social Security Insured Status Fully Insured - Fully insured status requires an individual to have earned a minimum of _____ quarter credits, or approximately 10 years of employment. A fully insured worker has permanent coverage under Social Security and cannot lose this status. Benefits that may be received monthly under a fully insured status are: *Retirement at age 62 or older. *Spousal retirement at age 62 or older. *Widows and widowers can begin receiving Social Security benefits at age 60.

A (*Certificate of Insurance* The employees in a group life plan receive a Certificate of Insurance that describes the benefit, identifies the insurance company and policy and certificate numbers, and provides information about changing beneficiaries or filing a claim.)

The Master Policy for a group life plan goes to the employer. What does the employee receive? A. Certificate of Insurance B. Change of beneficiary form C. Copy of the Master Policy D. Claim form package

blackout period

The ________________ is the time between when the youngest child reaches age 16 and the spouse is eligible for retirement benefits at age 60.

Contributory Noncontributory

There are two legal employer-employee groups fitting one of the following definitions: ___________ - Employees must contribute to the premium payments and at least 75% of all eligible employees must participate. ____________ - Employer pays the entire premium with a mandatory 100% of the eligible employees participating. The percentage participation requirements are used to reduce adverse selection.

conversion 31

There is a ____________ period of ___ days in which the employee may, upon termination of eligibility and without evidence of insurability, convert his/her group life insurance benefit to an individual permanent policy.

B (*Employers must enroll 100% of eligible employees* In a contributory group insurance plan, the employer is required to maintain at least 75% participation. Noncontributory group plans require 100% participation. There are some cash value forms of group life insurance, but they do not develop cash value for the employee unless the employee contributes premiums to the plan.)

When a group insurance plan is identified as contributory, it means all of the following, EXCEPT: A. Employees pay a portion of the cost of their benefit B. Employers must enroll 100% of eligible employees C. Employees must be eligible to participate D. Employers are responsible for collecting the premiums employees pay

Franchise (Wholesale)

____________ - This group insurance is unique in that a Master Policy is not issued since underwriting is on an individual basis and individual policies are issued. Therefore, evidence of insurability may be required.

Facility of Payment

_____________ Clause - The insurer may pay to a relative or anyone it deems entitled to the benefits in the absence of a designated beneficiary.

Entity

_____________ Plan - Under this plan, a business entity enters into an agreement in which it is obligated to purchase the deceased owner's interest. The entity typically buys life insurance policies on each of the owners.

Stock Redemption

______________ Agreement - An agreement between the shareholders and a close corporation (a corporation with a small number of shareholders). Each shareholder agrees to sell their shares upon death to the corporation according to the price, terms and circumstances specified in the agreement. This type of buyout is structured so the corporation buys the shares with corporate dollars.

Cross Purchase

______________ Plan - Used when the partners of a business purchase life insurance on each other. At the death of one of the partners, policy proceeds are used to purchase that person's interest in the business from his/her heirs.

Third-Party Ownership (Examples of third-party ownership policies are: A husband buying a policy on a wife. A parent buying a policy on one of their children A business buying a policy on a key employee A business partner buying a policy on another business partner)

________________ - A policy owned by one person insuring the life of another person. The three parties involved in a third-party ownership are the policyowner, insured and insurer.