Life Insurance Exam
Annually Renewable Term
the purest form of term insurance. The death benefit remains level, and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to the attained age, as the probability of death increases.
Application
the starting point and basic source of information used by the company in the risk selection process
mature
the time when the policy's face amount is paid out upon the death of the insured or policy endowment
deferred
withheld or postponed until a specified time or event in the future
Standard, Substandard, and Preferred
3 types of Risk Classification
Adhesion
A contract offered on a "take-it-or-leave-it" basis by an insurer, in which the insured's only option is to accept or reject the contract. Any ambiguities in the contract will be settled in favor of the insured.
Misrepresentation
A false statement or lie that can render the contract void.
National Do Not Call Registry
A national registry, managed by the Federal Trade Commission, that lists the phone numbers of consumers who prefer to limit the telemarketing calls they receive.
Qualified Plan
A retirement plan that meets the IRS guidelines for receiving favorable tax treatment.
Declined Risks
applicants who are rejected
Universal Life
gives the policyowner the flexibility to increase the amount of premium going paid into the policy and to later decrease it again
Policy maturity
in life policies, the time when the face value is paid out
Lapse
policy termination due to nonpayment of premium
accidental death insurance
An insurance policy that provides payment if the insured's death is the result of an accident.
On the date of the application
An insured submits the full premium along with a completed application, and the policy is issued 10 days later. When does the coverage begin? a. When the policy is received b. After the free-look period c. On the date of the application d. On the date the policy is issued
Consumer Report
Which of the following includes information regarding a person's credit, character, reputation, and habits?
An agent
Which of the following is considered a field underwriter? A: An agent B: An insurer C: An adjuster D: A company Underwriter
Application
Which of the following would be the main source of underwriting information used by the company in the risk selection process? a. Application b. Warranty c. MIB Report d. Attending Physician's Statement
Consumer Reports
Written and /or oral statements regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.
Insurance Policy
a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events
Agent/Producer
a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer
Applicant or proposed insured
a person applying for insurance
Estate
a person's net worth
Cash Value
a policy's savings element or living benefit
Illustration
a presentation or depiction that includes non guaranteed elements of a policy of individual or group life insurance over a period of years
suitability
a requirement to determine if an insurance product or an investment is appropriate for a particular customer
Renewable provision
allows the policy owner the right to renew the coverage at the expiration date without evidence of insurability
Broker
an insurance producer not appointed by an insurer and is deemed to represent the client
Nonforfeiture Values
benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses
Variable Life Insurance
contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance
Fixed Life Insurance
contracts that offer guaranteed minimum or fixed benefits
Liquidation of an estate
converting a person's net worth into a cash flow
Life Insurance
coverage on human lives
Increasing Term
features level premiums and a death benefit that increases each year over the duration of the policy term.
Securities
financial instruments that may trade for value (for example, stocks, bonds, options)
Policy Summary
is a written statement describing the features and elements of the policy being issued
Insurance component
is always annually renewable term insurance
Underwriting
is the risk selection and classification process
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
Level Term Insurance
provides a level amount of protection for a specified period, after which the policy expires. Level premium and level death benefit
Buyer's Guide
provides basic, generic information about life insurance policies that contains, and is limited to, language approved by the Department of Insurance
Target Premium
recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime
Minimum Premium
the amount needed to keep the policy in force for the current year
Face Amount
the amount of benefit stated in the life insurance policy
Death Benefit
the amount paid upon the death of the insured in a life insurance policy
endow
the cash value of a whole life policy has reached the contractual face amount
Insurer (principal)
the company who issues an insurance policy
Premium
the money paid to the insurance company for the insurance company
Policyowner
the person entitled to exercise the rights and privileges in the policy
Insurable Interest
the policyowner must face the possibility of losing money or something of value in the event of loss
Level Premium
the premium that does not change throughout the life of a policy
Insurable Interest
What must exist between the policyowners and the insured at the time of application
Policy delivery
If no receipt is issued at the time of application, a statement of good health is required at the time of a. application b. policy delivery c. policy renewal d. the paramedics report
Decreasing Term
A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy.
8am until 9pm
According to the telemarketing sales rules, what are the permissible calling hours for telemarketing calls? a. 7am until 9pm b. 8am until 9pm c. 10am until 10pm d. 7am until 7pm
Fair Credit Reporting Act
Act that protects privacy of background information and ensures that information supplied is accurate
Insured's best friend
All of the following may have insurable interest in the insured EXCEPT a. the spouse b. insured's children c. the employer d. Insured's best friend
Warranty
An absolutely true statement upon which the validity of the insurance policy depends.
administrator
An individual appointed by a court as a fiduciary to settle the financial affairs and estate of a deceased person.
$2,500
An individual who willfully violates the Fair Credit Reporting Act enough to constitute a general pattern or business practice will be subject to a fee of up to
acquired immunodeficiency syndrome (AIDS)
An infectious and incurable disease caused by the human immunodeficiency virus (HIV).
Field Underwriter
An insurance agent who conducts an initial policy solicitation and application. (The company's front line of underwriting)
Admitted Insurer
An insurance company authorized and licensed to transact business in a particular state.
Permanent Whole Life
A life insurance policy that remains in force to age 100 or beyond. The premium is always higher than that on a term policy at issuance when the amount of coverage and underwriting factors are equal. This policy provides for living benefits for the policyowner or insured by way of its cash values. It also has many options available to the policyowner.
Insured
A person covered by an insurance policy; may or may not be the policy owner
accidental death benefits
A policy rider that states that the cause of death will be analyzed to determine if it complies with the policy description of accidental death.
Replacement
A practice of terminating an existing policy or letting it lapse, and obtaining a new one.
Adult Day Care
A program for impaired adults that attempts to meet their health, social, and functional needs in a setting away from their homes.
Investigative Consumer Report
A report similar to consumer report, but one that also provides information on the consumer's character, reputation and habits.
adjuster
A representative of an insurance company who investigates and acts on the behalf of the company to obtain agreements for the amount of the insurance claim.
a higher premium
A substandard risk compared to a standard risk would pay a. a lower premium b. a higher premium c. the same premium d. no premium
Return the application to the applicant for a signature
If an agent fails to obtain an applicant's signature on the insurance application, the agent must a. Return the application to the applicant for a signature b. Send the application to the insurer with a note explaining the absence of signature c. Sign the application for the applicant d. Sign the application as an agent, stating that all the answers have been verified
Inform the insurance company
If the agent feels that there could be misrepresentation on the part of the applicant for insurance, what must the agent do? a. Inform the insurance company b. change the applicant's answer to what the agent knows is true c. erase the answer once the applicant submits the application d, refuse the applicant
Preferred Risks
Individuals who meet certain requirements and qualify for lower premiums than the standard risk
Substandard Risks
Individuals with higher than average risk because of poorer health or hazardous occupation or hobbies. Results could be an exclusion or impairment rider or waiver attached to the policy, an extra premium charge, or the limitation of type of policy. A waiver, in this case, is the relinquishment by the insured to the right of coverage for the problem.
Term Insurance
Is a temporary protection because it only provides coverage for a specific period of time. aka pure death protection
Single Premium Whole Life
Is designed to provide a level death benefit to the insured's age 100 for a one time lump sum payment
Standard Risks
Persons who, according to a company's underwriting standards, are entitled to insurance protection without extra rating or special restrictions.
The Agent's Report
Provides the agent's personal observations concerning the proposed insured
Convertible Provision
Provides the policyowner with the right to convert the policy to a permanent insurance policy without evidence of insurability
Premium Receipt
Receipt given to the applicant by the producer or insurer, as proof of a premium payment.
Paramedical Report
Report made on a prospective insured from an abbreviated medical examination. _____________ are made by a paramedic or a registered nurse.
Considered true to the best of the applicant's knowledge
Representations are statements made by the applicant that are a. Considered true to the best of the applicant's knowledge b. Guaranteed to be true c. Found to be false after further investigation d. Immaterial to the actual acceptability of the insurance contract
Accelerated Benefits
Riders attached to life insurance policies which allow death benefits to be used to cover nursing or convalescent home expenses.
Attending Physician's Statement (APS)
Statement from a medical practitioner who treated the applicant for prior medical problem
Representations
Statements made by the applicant on the insurance application that are believed to be true, but are not guaranteed to be true.
a source of medical information to alert insurers to adverse medical history
The Medical Information Bureau is a. a government entity that reviews medical information b. an association of physicians who write insurance rules c. a directory of paramedical services and providers d. a source of medical information to alert insurers to adverse medical history
Option B (Increasing Death Benefit option)
The death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases.
Option A (Level Death Benefit option)
The death benefit remains level while the cash value gradually increases, thereby lowering the pure insurance with the insurer in the later years.
Living Benefits
The policy owner can borrow against the cash value while the policy is in effect, or can receive the cash value when the policy is surrendered.
Actual Cash Value
The required amount to pay damages or for property loss, which is calculated based on the property's current replacement value minus depreciation.
Accumulation Period
The time before an annuitant's retirement during which the annuitant is making payments or investments in an annuity.
Straight Life
This is basic whole life insurance with a level face amount and fixed premiums payable over the insured's entire life. Premium payments made until death of insured or age 100 (maturity of policy).
True
True or False Both the agent and the insured must sign the application
True
True or False If a misrepresentation is discovered to be intentional, they are considered fraud
Adjustable Life
Was developed in an effort to provide the policy owner with the best of both worlds (term and permanent coverage)
risk selection and classification
What is the main responsibility of a company's underwriting unit? a. controlling business written by new agents b. marketing and solicitation of insurance c. issuing policies d. risk selection and classification
Application or issue date
When must insurable interest exist in life insurance? a. death of the insured b. policy delivery date c. time of claim d. application or issue date
policy summary
Which of the following documents describes specific information about policy provisions and benefits? a. Buyer's Guide b. Policy illustrations c. Agent's Report d. Policy summary