H&L insurance

Parts of Application

1. General info 2. Medical info 3. Agents report. (Required signature) agent+applicant+owner.

HIPAA applies to groups of

2 or more

A policy states that it will pay a specified face amount if the insured dies during the 20 year premium-paying period and nothing if death occurs after the 20 year period. What type of policy is this?

20-year level term

Morale Hazard

A condition of carelessness or indifference that increases the frequency or severity of loss.

What type of premium is charged on a straight life policy?

A level premium for the life of the insured

Insurance policies are not drawn up through negotiations & an insured has little to say about its provisions. What contract characteristics does this describe

Adhesion

When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what

Adverse selection

The policyowner of a whole life insurance policy is also the insured. What age must the insured attain in order to receive the policy's face amount

Age 100

Whole life policies provide protection until the insured reaches what age?

Age 100

According to the Law of Agency, a principal is represented by whom?

Agent or producer

What are the four elements of an insurance contract

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

Who must be a member of insurance guaranty associations

All insurers authorized to write insurance within a state

What does liquidity mean in a life insurance policy

Availability of cash value

In a variable universal life insurance, to what policy component does the term variable refer

Cash value and death benefit

In variable universal life insurance, to what policy component does the term variable refer

Cash value and death benefit

What happens to the cash value when a whole life insurance policy matures

Cash value is paid to the policy owner

Life insurance policy provisions, options & riders....

Chapter 4

An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation

Decreasing term

What type of life insurance is best suited to cover a mortgage

Decreasing term

Life insurance may be used to pay state inheritance taxes & federal estate taxes eliminating the need to sell assets from the estate. What is this called

Estate conservation

If an employee wants to join group life insurance coverage outside of the open enrollment period, what would the employee have to provide

Evidence of insurability

When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?

Evidence of insurability

What is the main advantage of converting from group life insurance to individual coverage

Evidence of insurability is not required

Three types of agent authority

Express, implied & apparent

What does level refer to in level term insurance

Face amount

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid for what time period

For 20 years or until the insured's death, whichever occurs first.

What type of policy is typically issued without proof of insurability from the insured

Group Policy

What type of policy issues certificates of insurance to the insureds

Group policy

What are the characteristics of the group that underwriters will consider before issuing a group life policy?

Group's purpose, size, financial strength and turnover

whole life insurance

Insurance that is kept in force for a person's entire life and pays a benefit upon the person's death, whenever that may be.

In the agent/insurer relationship, who is considered the principle

Insurer

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 policyowner

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

It will decrease

Insuring Clause

Length of policy & amount of death benefit. Parties of the contract. Premium to be paid.

Universal Life Option A

Level death benefit

Mortality tables are used by insurance companies to predict what?

Life expectancy and the death rates for specific groups of individuals

A whole life policy that requires that the policyowner only pays premiums for a specified number of years is known as what kind of policy

Limited pay whole life

What type of life insurance policy is life paid-up at age 65

Limited-pay whole life

An insurance policy paid a nontaxable dividend to the insured one year & nothing the next. From what type of insurer did the insured purchase the policy

Mutual

Can insurers advertise the existence of the guaranty association during solicitation & sale of insurance policies

No, advertising of the existence of the guaranty association for the purposes of solicitation and sale of insurance policies by insurers is an illegal business practice.

What universal life option has a gradually increasing cash value and a level death benefit?

Option A

What are the death benefit options in universal life policies?

Option A - level death benefit, and Option B - increasing death benefit

What type of life insurance offers an applicant a cash value element

Permanent insurance (usually, whole life)

What document describes the specific information about a policy

Policy summary

What is the term that describes the frequency & the amount of the premium paid

Premium mode

Field Underwriting

Proper solicitation of applicants. Helping prevent adverse selection. Completing the application. Obtaining the required signatures. Collecting the initial premium and issuing receipt. Delivering the policy.

What type of whole life insurance policy generates immediate cash value

Single premium whole life

What type of whole life insurance policy generates immediate cash value?

Single premium whole life

What are the personal uses of life insurance

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

What type of life insurance policy offers pure death protection

Term

What elements of an adjustable life policy can be changed by the policyowners

The amount and payment period of the premium, the face amount, and the period for protection

Which of the following is NOT a characteristic of a group long term disability plan?

The benefit can be up to 50% of one's yearly income

In annually renewable term policies, what is the annual premium based upon

The insured's attained age

In annually renewable term policies, what is the annual premium based upon?

The insured's attained age

When planning for survivor protection in life insurance, what needs to be considered

The insured's current assets, liabilities and survivor's needs

In calculating the amount of life insurance needed, what is the needs approach based on

The predicted needs of a family after the premature death of the insured

How is the premium determined in a joint life insurance policy

The premium is based on the average age of the insureds

How is the premium determined in a joint life insurance policy?

The premium is based on the average age of the insureds

In term policies, what happens to the premium throughout the term of the policy?

The premium remains level

What is insurance underwriting

The process of risk selection and classification

Group Conversion

There is a conversion period of 31 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

Why are policy loans not available on term insurance

There is no cash value to borrow against

What is the purpose of key person insurance

To minimize the risk of financial loss caused by the death of a key employee

What is the purpose of establishing the target premium for a universal life policy?

To prevent the policy from lapsing

Between adjustable life and universal life policies, which one provides more flexibility to the policyowner

Universal Life

In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing

Universal Life

In a joint life policy, when is the death benefit paid

Upon the first death

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

Moral Hazard

When the act of insuring an event increases the likelihood that the event will happen

When would a 20-pay whole life policy endow?

When the insured reaches age 100

When does an adjustable life policy accumulate cash value

When the premiums paid are more than the cost of the policy

What type of life insurance provides permanent protection?

Whole life

Physical Hazard

a physical condition that increases the frequency or severity of loss

Group life insurance policies are written as what type of insurance

annually renewable term

The death protection component of a universal life policy is expressed as what type of coverage

annually renewable term

The death protection component of a universal life policy is expressed as what type of coverage?

annually renewable term

peril

cause of loss

Who is the beneficiary on a key-person life insurance policy

employer

Who is responsible for the contents of insurance advertisements

insurance company

Single Premium Whole Life

involves a large one-time-only premium payment at the beginning of the policy period and from that point on the policy is completely paid for. (Immediate cash value)

What type of insurance creates an immediate estate

life insurance

Who is insured under a juvenile life policy

minor

Incontestability

prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years

Regarding taxation, how does the cash value of a universal life policy accumulate

tax deferred

Under Option B in a universal life policy, what happens to the death benefit?

the death benefit increases each year by the amount of the cash value increases

If an insured terminates membership in a group life insurance, to what type of insurance can the insured convert the coverage?

whole life

If an insured terminates membership in group life insurance, to what type of insurance can the insured convert the coverage?

whole life

When must the policy summary for a life insurance policy be delivered to the policy owner

At the time of policy delivery

Adjustable Life Insurance

Combines features of both term and whole life coverage with the length of coverage and amount of accumulated cash value as the adjustable factors. Premiums may be increased or decreased to fit the specific needs. Such adjustments are not retroactive and apply only to the future.

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

Annually Renewable Term

The death protection component of Universal Life Insurance is always..

If an applicant for a life insurance policy & the potential insured are two different people, what would be the the underwriter's main concerb

The existence of insurable interest between the applicant and the insured

Document required for an insurance company to transact insurance

Certificate of authority

Dividends

Company's share profits to the shareholders based on the corporation's performance.

Underwriting

Is the risk selection & classification process

What are the five characteristics of an ideally insurable risk

Loss must be. 1 due to chance. 2 definite & measurable. 3 statistically predictable. 4 not catastrophic & 5 coverage cannot be mandatory.

What is included in part 2 of a life insurance application

Medical information about the prospective insured

What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100?

Single premium whole life

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

What is the purpose of the agents 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

Universal life option b

The policy provides for an increasing death benefit that is made up of the policy face amount plus the cash value account

What happens to the premium in an annually renewable term life policy

The premium increases with each renewal

What is the purpose of insurance guaranty associations

To protect policyowners, insureds and beneficiaries from financial losses caused by insolvent insurers

Survivorship Life

Two or more insureds. Pays upon death of the last

What term describes the fee a person pays an insurance company to receive coverage

premium

What policy component must decrease in decreasing term insurance

Face amount

straight life insurance

Life insurance that requires the payment of premiums until the face value is reached or the insured is deceased; also called ordinary life or whole life

Universal life policies have two types of interest rates. What are they

Guaranteed and current

If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it?

unilateral

Free Look Period

An amount of time provided to an insured in order to examine the insurance policy.

When must insurable interest exist in a life insurance policy

At the time of application

The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility

Fiduciary

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

Term Insurance

Life insurance coverage for a specified period of time, less expensive than whole Temporary, no cash value, no loans matures at death. Level increasing & decreasing. Renewable & convertible. Maximum protection, lowest cost, increasing term for riders & decreasing terms for debts.

Who must have insurable interest in the insured?

Policyowner

What is the major difference between the most common types of whole life policies: straight life, limited payment & single premium

Premium payment mode

What are illustrations in a life insurance policy

Presentations of nonguaranteed elements of the policy

Avoidance

Prevent a specific lost by not exposing oneself to that activity is called

What are the strategies used by underwriters to prevent adverse selection

Restriction of coverage, refusal to accept a risk & accepting a risk at a higher rate

What is the main responsibility of a company's underwriting unit

Risk selection

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 existence of insurable interest between the applicant and the insured

Whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy (the insured) dies at age 80 & there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary

The full death benefit

When agents act within the scope of their contract, their actions will be assumed to be the acts of whom

The insurer

Variable Life Insurance

life insurance in which the benefits are a function of the returns being generated on the investments selected by the policyholder

Group Life Insurance

life insurance that provides a master policy for a group; each eligible group member receives a certificate of insuranc

Avoidance

A reaction to conflict that involves ignoring the problem by doing nothing at all, or deemphasizing the disagreement.

Medical Information Bureau (MIB)

non-profit central information agency that was established by a number of insurance companies to aid in underwriting. Speeds up underwriting and helps prevent fraud.

Joint Life

A single policy that is designed to insure two or more lives. Pays out when the first person dies

All other factors being equal, which premium payment mode will require an overall higher premium monthly or annual

monthly

What happens to the premium in an annually renewable term life policy?

The premium increases with each renewal

What are the three factors that determine the premium for a particular life insurance policy

mortality, interest, and expense

Limited Pay Whole Life

A variation of whole life insurance that charges a level annual premium and provides a level, guaranteed death benefit to the insured's age 100 and will endow for the face amount if the insured lives to age 100. Limited-pay life is designed so that the premiums for coverage will be completely paid-up well before age 100.

What are the living benefits of whole life insurance

Loan values

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)

Universal life policies have two types of interest rates. What are they?

Guaranteed and current

Who is entitled to the cash values in a life insurance policy

Policyowner

Who owns a group life insurance contract

The employer (also known as the sponsor of the group)

What is the purpose of establishing the target premium for a universal life policy

To prevent the policy from lapsing

When does an adjustable life policy accumulate cash value?

When the premiums paid are more than the cost of the policy

Attending Physician Statement (APS)

A statement usually obtained from the applicant's doctor. About their medical history.

What is the term for the cause of loss insured against in an insurance policy?

Peril

Universal Life Insurance

permanent cash-value insurance that combines term insurance (death benefits) with a tax-sheltered savings/investment account that pays interest, usually at competitive money market rates