Life Insurance Study Set

Insurable Interest

-Must exist at the time of application -Insuring one's own life, family member, or a business partner.

Insurance

-Transfers the risk of loss from an individual to an insurer -Based on the principle of indemnity -Based on the spreading of risk (risk pooling) and the law of large numbers

Chapter 1 Quiz Questions

1. All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT: Education 2. Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as: Contracts of Adhesion 3. Which is generally true regarding insured who have been classified as preferred risks: their premiums are low 4. The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?: As of the application date 5. An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?: the date of medical exam 6. In forming an insurance contract, when does acceptance usually occur?: When an insurer's underwriter approves coverage

Study Hall Test Examples

1. Life insurance have to pay out death benefits to beneficiaries? 60 days(world)/Primerica:2 weeks 2. When must insurance interest exist? At the time of application 3. If a primary beneficiary predeceases an insured, the individual to whom the proceeds are paid are referred to as:Contingent(secondary) beneficiaries 4. All of the following are true about term insurance(temporary,no cash value,least expensive) except? Term insurance has a higher premium per 1000 when compared to whole life 5. In terms of parties to a contract,which of the following does NOT describe a competent party? The person must have at least completed secondary education 6. An insured misstates her age at the time the life insurance application is taken. This misstatement may result in? Adjustment in the amount of death benefit

Chapter 1 Quiz Questions

12. Insurance is a contract by which one seeks to protect another from: Loss 13. When would a misrepresentation on the insurance application be considered fraud?:If it is intentional and material 14. What do individuals use to transfer their risk of loss to a larger group?: Insurance 15. As a field underwriter, a producer is responsible for all of the following tasks EXCEPT: Issue the policy that is requested.

Study Hall Test Examples

12. What does "level" refer to in level term insurance? Face amount 13. Stranger-originated(example:profit off your death)life insurance(stoli:conoli(MOB boss eats)policies are in direct opposition to the principle of?insurable interest 14. The two types of assignments are?(owner of your child's policy give ownership to spouse/500k took a loan 200k dollars but up collateral assignment so the money goes back to the bank) Absolute and Collateral 15. Upon the death of the insured the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?' The beneficiary will only receive payments of the interest earned on the death benefit 16. Which of the following statements is true concerning the accidental death rider(only pays out with freak accident not your fault:usually double indemnity)it will pay double or triple the face amount(usually falls off at the age of 65 for most companies) 17. Which of the following best defines target premium(minimum that you can pay into your account)in a universal life policy(flexible premium same name:pay what you want each month)The recommended amount to keep the policy in force throughout its lifetime

Study Hall Test Examples

18. An insured purchased a 15 years level term life insurance policy with a face amount of 100,000. The policy contained an accidental death rider offering a double indemnity benefit. The insured was severely injured in an auto accident and after 10 weeks=70 days(died after 90 days then wouldn't pay out)of hospitalization died from the injuries. How much will the beneficiary receives from the policy?200,000 19. If an insurer required a medical examination of an application in connection with the application for life insurance,who is responsible for paying the cost of the examination? The insurer

Chapter 1 Quiz Questions

7. The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?: Conditional 8. Part 2 of the application for life insurance provides questions regarding all of the following except: Other insurance coverages 9. If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than: with the policy 10. An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe?: Aleatory 11. In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?: Unilateral

Study hall Test Examples

7. Whose responsibility is to make certainty that an applicant ion for insurance is filled out completely and correctly? The producer(you also know as the agent,field under writer & producer) 8. If a company has a simplified Employee Pension Plan(SEPP:1-5 employees not including the owner)what type of plan is it? A qualified plan for a small business 9. If the owner of a whole life policy who is also the insured dies at age 80,and there are no outstanding loans on the policy,what portion of the death benefit will be paid to the beneficiary? A full death benefit 10. If an annuitant(owned and operated by life insurance companies(life insurance and investment world))dies before annuitization occurs,what will the beneficiary receive? Either the amount paid into the plan or the cash value of the plan,whichever is the greater amount 11. In forming an insurance contract,when does acceptance(company looks over and approves application) usually occur? When an insurer's underwriter approves coverage

Policy Issue and Delivery

Effective date of coverage - if the premium is not paid with the application, the agent must obtain the premium and a statement of continued good health at the time of policy delivery

Underwriting

Field Underwriting (by agent) a. Application - completed and signed. b. Agent's report - agent's observations about the applicant that can assist in underwriting. c. Premiums with application and conditional receipts Company Underwriting a. Multiple sources of information: application, consumer reports, MIB b. Risk classification - 3 types of risks: standard, substandard, preferred.

Gramm-Leach-Bliley Act (GLBA)

Prohibits insurers from disclosing nonpublic personal information to nonaffiliated third parties.

Fair Credit Reporting Act

Protects consumers against circulation of inaccurate or obsolete personal financial information.

Premium Determination

a. 3 key factors for life insurance: mortality, interest, and expense b. Mode - the more frequently premium is paid, the higher the premium.

Contract Characteristics

a. Adhesion - one party prepares the contract; the other party must accept it as is. b. Aleatory - exchange of unequal amounts c. Conditional - certain conditions must be met. d. Unilateral - only one of the parties to the contract is legally bound to do anything.

Chapter 1 Terms

a. Adverse selection — insuring of risks that are more prone to losses than the average risk. b. 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. c. Applicant or proposed insured — a person applying for insurance.. c. Beneficiary — a person who receives the benefits of an insurance policy. d. Death benefit — the amount paid upon the death of the insured in a life insurance policy. e. Fraud — intentional misrepresentation or deceit with the intent to induce a person to part with something of value. f. 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. g. Insured — person covered by the insurance policy; may or may not be the policyowner. h. Insurer (principal) — the company who issues an insurance policy. i. Lapse — policy termination due to nonpayment of premium j. Life insurance — coverage on human lives k. Policyowner — the person entitled to exercise the rights and privileges in the policy. l. Premium — the money paid to the insurance company for the insurance policy.

Elements of Legal Contract

a. Agreement - offer and acceptance. b. Consideration - premiums and representations on the part of the insured; payment of claims on the part of the insurer c. Competent parties - of legal age, sound mental capacity, and not under the influence of drugs or alcohol d. Legal purpose - not against public policy

USA Patriot Act

a. Helps address social, economic, and global initiatives to fight and prevent terrorist activities. b. Anti-money laundering (AML) standards c. Suspicious Activity Report (SAR) for any transactions of $5,000 or more if they raise red flags for suspicious activity.