Insurance
Entity Plan
A stock redemption plan
CANHAM
Affordable- the premium for transferring the risk should be affordable for the average consumer
Standard risks
Average health and normal life expectancy and fall into the normal range/premiums
CLOAC
Competent -Sober and of legal age
Express Authority
Is the authority made explicit in a producers written agency agreement with the insurer
All of the following are basic premium factors EXCEPT
The insureds annual income
Process of evaluating a risk to determine the insurance of that client would be ?
UNDERWRITING PROCESS
Fiduciary
involving trust, especially with regard to the relationship between a trustee and a beneficiary./ best interest for the insured
Treaty Reinsurance
the reinsurer accepts all risks of a certain type from the ceding company.
Equity Indexed Life
(indexed whole life) main future is that the cash value is dependent upon the performance of the equity index, such as S&P 500, although there is a guaranteed minimum interest rate indirect links to the stock market
A notice to applicant must be issued to the consumer no later than
3 days after the report was requested
Policy Loan
A nonforfeiture value in which an insurer loans a part or all of the cash value of the policy assigned as security for the loan to the policyowner.
Absolute or Permanent Assignment
A parent may transfer policy ownership to a daughter when she reaches 18
Wavier of Premium
A(n) ____ rider allows you to stop paying premiums and keep your coverage in force if you become disabled.
CANHAM
Accidental- insurance is a method of handling risk. If a loss is certain to occur there is no risk
Riders
Add benefits to a life insurance policy
Original age
Age at the time the original term policy was written
Limited payment whole life
Allow for a lifetime of premiums to be paid in a shorter period of time Such as 10-20 pay whole life
Facility of Payment provision
Allows the insurer to pay all or part of the policy's death benefit to someone other than a designated beneficiary
Entity Plan
An agreement in which a business assumes the obligation of purchasing a deceased owner's interest in the business, thereby proportionately increasing the interests of surviving owners.
Endorsements
Any change made to the contract must be made in writing and agreed to by both the insurer and the policy owner
Binding Receipt
Are effective for 30/60days from the date of application even if the applicant is found to be uninsurable.
Variable Policies
Are permanent insurance policies designed to provide lifetime coverage for the insured and have cash value and a death benefit and won't be taxed on earnings
What's not correct on the executive bonus plan
At the employees death the company receives the death proceeds free of tax
CLOAC
Consideration - giving something of value
Fixed Premium Schedule
Could be a monthly or some other type of payment continuing but if not paid the contract goes out of force
Fixed level benefit
For as long as the policy is in force the face amount remains the same
Payor Benefit Rider
Found in juvenile polices which waivers the premiums if the person paying them (often the parent) is disabled or dies while the child is still a minor
Free Look Provision
Generally 10 days after policy delivery to cancel policy w/ full refund, except 30 days for seniors or for replacement policies.
Variable Life Insurance
Has a separate account instead of guaranteed cash value also called variable whole life or fixed premium variable life
Policy Surrender
In the event that a policyowner surrenders his or her policy to the insurer, proceeds equaling the premium paid into the policy are tax free, while policy surrender proceeds that exceed the cost of the policy are taxable by the IRS. Any pre-tax premium payments and interest earned before forfeiting the plan are taxable as earned income.
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.
Term Life Insurance
Insurance that provides financial protection from losses resulting from a death during a definite period, or term.
Attained Age
Insureds age at time of conversion
Separate Account
Is a fund held by the life insurance company and maintained separately from the insurers general assets
Self-insurance
Is a means of retaining rather than transferring risk, a Bussiness that can pay its own claims
Agency
Is a relationship in which one person is authorized to represent and act for another person or for a corporation.
Incontestability Provision
Is provided to protect the insured, for two years
Primary Beneficiary
Is the first in line to receive the policy's death benefit
Contingent Beneficiary
Is the next in line to receive the policy's death benefit if the primary beneficiary dies before the insured
Reinstatement
Is the restoration of a lapsed policy as originally purchased
Sole proprietor buy sell plan
Life insurance is an idea medium for funding because it makes a reasonable premium and money available when needed
Graded Premium Whole Life
Lower premiums for designated timeframe (typically 5-10 years); payments rise annually thereafter until leveling off
Renewability Feature
Means the policy will renew at the end of its term regardless
Single Premium Whole Life
Paid up for life with one large premium payment
Buy-sell agreement
Person who will buy the business in the event that the owner dies
Interest Sensitive Whole Life
Premiums vary to reflect the insurer's changing assumptions with regard to death investment and expense factors.
Payment of Premium
Provision states that premiums are due in advance that is on or before the date on which the next period of coverage begins
Payment of Claims
Says the insurer will pay the death benefit promptly
The insuring clause does not specify
The length of the grace period
Collateral Assignment
The most com one type of partial assignment is to pledge all or part of the death benefit as collateral for the loan
Guaranteed Interest Crediting
The policies cash value increases steadily over the life of the contract because it is regularly credited
direct-response marketing
There is no producer or agent policies are sold directly to the public by the insurer. This is conducted through mail, or ads
Disability Income Rider
Typically a rider to a life insurance policy, it provides benefits in the form of income in the event the insured becomes totally disabled.
Modified Premium Whole Life
Usually more affordable than straight whole life policies in the first few years (often around 3-5 years) then becomes slightly higher than straight whole life for the remainder of its coverage. This type of plan is useful for college students just starting out in the work world, who cannot initially afford whole life insurance.
Universal Life Insurance
Was designed for people who want flexible premiums and flexible coverage over the course of their lifetime
Indeterminate Premium Whole Life
Whole life policies that provide a lower initial premium which can fluctuate up to a maximum premium as stated in the policy.
Industrial Life Insurance
a type of insurance in which the policies are sold in small amounts and an agent of the company collects the premiums at the insured's home
Convertability
allowing you to switch from term insurance to a more permanent type of policy without evidence of insurability and doesn't need an application
illiquid assets
assets which are not able to be sold quickly which carry higher risk of losing money
Regular notices sent to policyowners for payment of their life insurance policy premiums reflect:
gross premium
Insuring Clause
sets forth the company's basic promise to pay benefits upon the insured's death.
Mortality table reflects
the average number of deaths that will occur during a given year for a given age group of individuals.
Level Premium
the premium that does not change throughout the life of a policy regardless of age and or sickness
Reciprocal Insurers
unincorporated groups of people that agree to insure each other's losses under a contract. The members of the group are called subscribers
Direct Writing Companies
usually pay salaries to employees whose job function is to sell the company's insurance products from a company office. This type of producer is not usually paid a commission and the insurer owns all of the business produced.
Home Service Life Insurance
whole life insurance issued in policies with relatively small face amounts, often $1,000 or less
Level Term
you pay the same amount for the entire term of the policy
Principal
Agency is a relationship in which one person is authorized to represent and act for another person or for a corporation. In insurance the insurance agent acts on behalf of the guy
Which of the following statements regarding fixing an application is NOT TRUE
An agent under no circumstances may fix the application after the applicant already signed it
Risk Retention Group (RRG)
Is an insurer formed for the sole purpose of providing liability insurance to its policyholders
Ceding insurer
The company reducing its risk.
Application Signatures
-insured -producer/agent -applicant/owner
Surplus lines insurer
A non-admitted insurer that is eligible to insure risks that have been exported by a surplus lines licensee in accordance with a surplus lines law.
Deferred Compensation
A non-qualified plan under which an employer promises to pay a portion of an employee's current compensation in a future year
Deferred Compensation Plan
A nonqualified retirement plan whereby the employee defers receiving current compensation in favor of a larger payout at retirement (or in the case of disability or death).
Underwriters when issuing policies to applicants who do not measure up to a standard rating including all of the following except ?
AVERAGING TOTAL RISKS PENDING
CLOAC
Acceptance- insurer accepts risk as presented
Attorney-in-fact
Administration, underwriting, sales promotion, and claims handling for the reciprocal insurance are handled by an
Cross Purchase Plan
An agreement that provides that upon a business owner's death, surviving owners will purchase the deceased's interest, often with funds from life insurance policies owned by each principal on the lives of all other principals.
Executive Bonus Plan
An employee benefit plan in which an employer gives an employee a bonus in the amount of the premium payments on a life insurance policy. The employee has access to the policy's living benefits
Mutual Insurer
An insurer that is owned by its policyholders known as policy owners and does not have any stock or holders
Attending Physician's Statement (APS)
An underwriter may ask the proposed insureds regular doctor for a (APS) to find out about current medical history
property and casualty insurance
Are personal contracts but life and health policies are not
Investigative Consumer Reports
Are reports containing information obtained by interviewing individuals who know something about the consumer such as associates friends and neighbors.
Insurance policies
Are unilateral or one sided
Conditional Receipt
As long as the applicant is found to be insurance under the company's standard underwriting rules. If the applicant is found to be insurable under the underwriting rules the receipt is conditional whenever they receive this receipt the insurance is effective
STARR
Avoidance- risk avoidance means eliminating a particular risk by not engaging in certain activity. For example an individual who does not drive avoids the risk of injuring someone in a collision and being held liable for those damages
The pre retirement period one of the distinct income needs periods
BLACK OUT PERIOD
Substandard Risk
Below average life expectancy, high risk life insurance and the premium is way above average and very unfavorable to the company
CANHAM - elements of insurable risk
Calculable- premiums must be calculated based upon prior loss statistics did that particular risk in order to predict future losses.
Cybil cannot have their own individual policy
Cannot be there own key person
The report issued by the medical information bureau
Does not need the signature by the agent and or the insured or applicant !!
Stock Insurance Company
Does not participate, it is a non participating company
What policy will protect me from messing up
ERRORS AND OMISSIONS POLICY
Insurers operating costs
EXPENSE LOAD
Fraternal Benefit Societies
Exist for the benefit of their members and offer insurance as one of the benefits of membership.
3 parts to an application
General information Health information Producers report based on character/habits
Backdating
Goes as far as 6months no more
Net premium is the premium before loading or the mortality element minus the interest element.
Gross premium is the net premium plus the expense element referred to as the loaded premium, the annual premium is the amount a policy owner pays for a policy
CANHAM
Homogenous- the individual risks that the insurer covers must all be similar or homogenous in regard to factors that affect the chance of loss.
Commingling
Illegally mixing deposits or monies, collected from a client, with one's personal or business account. Taking money out too soon or putting it into escrow too late (10 banking days).
General agents (GAs) or managing general agents (MGAs)
Individuals that hire, train, and supervise other agents within a specific geographical area.
Underwriting
Insurers make an extensive evaluation of information related to a particular risk
Legal Purpose
Is NOT a common characteristic of an insurance contract
Absolute agent
Is NOT a type of insurance agent But captive, General and independent are ALL agents !
Stock Insurer
Is a business formed as a public or private corporation and owned by its stock holders or share holders
Estoppel
Is a legal doctrine that prevents a party from denying an action if it had been accepted previously
Apparent Authority
Is authority that other believe the agent has. Like Edward Jones via Andrew Muska
Implied Authority
Is not written in the agency contract but it is assumed to be granted to an agent in accordance with general business practices
Stock Insurance Company
Is owned by individuals who buy shares but are not entitled to receive policy dividends
Underwriting
Is the process of evaluating a risk to determine if it is acceptable based on established insurance company guidelines.
Adverse Selection
Is the tendency for higher risk individuals to get and keep insurance more than individuals who represent an average level of risk
Offer to buy
It doesn't happen until the first premium is paid and if it doesn't get paid it gets delayed
CLOAC
Legal purpose- risk transfer doesn't violate law
Which of the following factors is NOT prohibited from use in order to classify a risk?
MARITAL STATUS
The applicant may wanna back date there application due to
Making them a different age then they are now
CANHAM
Measurable- it must be possible to estimate the loss as a dollar amount. Insurance covers the financial loss of unexpected death or medical bills from sickness.
Representation
Misrepresentation= genuinely guessing that you're correct Material misrepresentation- big deal, fraud, not okay
Expenses synonymous -LOADING
NOT CORRECT- buy-sell agreements aren't only funded with annuities
CANHAM
Non catastrophic- insurance can not insure events that cause widespread losses to large numbers of insureds at the same time. That is why the peril of war is excluded from most policies because the risk is to large for the insurance company to pay
CLOAC
Offer-insured submits application and first months premium to insurer
Medical Information Bureau (MIB)
Organized and supported by private hospitals, and a non profit insurance trade association that maintains underwriting information on applicantst
The agent provides habits, character and relationship status with the insured is known as a PRODUCERS REPORT!
PRODUCERS REPORT
ERISA
Protect the interests of participants in employee benefit and health plans
This is not suspicious
Receiving receipts of cash payments in excess of 5k
STARR
Reduction- risk reduction may refer to lessening the chance that a loss will occur or to lessening the extent if a loss that does occur. For example wearing seatbelts reduces the severity of car accidents.
Premium Payment Mode
Reflects how frequently premiums come due
STARR
Retention- risk retention means the individual will pay for the loss if it occurs. Without health insurance a person will have to pay the bill if they need hospitialization.
independent insurance agent
Sell the insurance products of several companies and work for themselves or other agents independent agents own the expirations of the policies they sell meaning the agent may place that business with another insurer upon renewal if it is in the best interest of the client to do so. These agents represented the insured client.
STARR
Sharing- in risk sharing two or more individuals agree to pay a portion of any loss incurred by any member in the group. Stock holders in a corporation share the risk of profit or loss
What's the difference between individual and group life insurance
THE COST OF GROUP LIFE INSURANCE IS GENERALLY LOWER THAN INDIVIDUAL INSURANCE
STOLI
That **** shit insurance agents do to old people and take advantage of their life insurance
AGC Publishing applied for key-person life insurance on its chief executive officer. Which of the following parties must sign the application?
The CEO, another officer of AGC, and the agent handling the application
THIS IS NOT CORRECT
The MIB is organized and supported by private hospitals
Suitability considerations
The agent has a responsibility to make purchase recommendations that are appropriate or suitable in light of a clients particular needs, objectives and circumstances.
Producer Report
The agent's report allows the agent to communicate with the underwriter and provide information about the applicant known by the agent that may assist in the underwriting process.
Which of the following individuals does not need to sign the application form?
The beneficiary does NOT need to sign the application form but the insured, the producer/agent, the applicant if not insure must all sign !
Indemnity
The contract is intended to restore the insured to the financial state he or she enjoyed prior to the occurrence of a loss no more no less
What's correct about this compensation plan?
The employee agrees to forgo part of his current income until a specified period typically retirement and may use life insurance as the funding vehicle for the plan
Facultative
The reinsurer considers each risk before allowing the transfer to be made from the ceding company.
STARR
Transfer- transfer of risk is what happens with insurance. The insurer agrees to pay if an individual or business has a loss. The individual or business has a cost in the form of a premium payment. However in contrast to the loss which is large and uncertain the premium is a much smaller certabity.
Agent and policy deliver
When delivering a policy it can only be delivered to the policy owner, sometimes it can be mailed but most of the times it's the producers job to deliver the policy personally and usually get a signed receipt saying they did so
Aleatory Contract
a contract where the values exchanged may not be equal but depend on an uncertain event
Preferred risks
represent excellent health a risk that is low below average and therefore favorable to the company as a healthy lifestyle/insured client
Exclusive or Captive Agents
represent only one company. These agents are sometimes referred to as career agents working from career agencies. Most often, these captive or career agents are compensated by commissions.
