Life and Health Insurance
Separate accounts
A domestic insurer issuing variable contracts must establish one or more
Level term
A policy will pay the death benefit 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?
Increasing
A return of premium life policy is written as what type of term coverage
Pure Risk
A situation in which a person can only lose or have no change represents
Premiums are determined by the age, sex and occupation of each individual certificate holder
All of the following are characteristics of group life insurance EXCEPT
Premiums
All of the following are examples of risk retention EXCEPT
The Guaranty association
All of the following entities regulate variable life policies EXCEPT
Lower premiums than a person who receives a standard risk
An applicant who receives a preferred risk classification qualifies for
$100,000
An individual purchased a $100,000 Joint life policy on himself and his wife. 8 years later he died in an automobile accident. How much will his wife receive from the policy?
Authorized insurer
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an
Inspection report
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a
Term
Children's riders attached to whole life policies are usually issued as what type of insurance?
Juvenile life is classified as any life insurance purchased by a minor
Concerning Juvenile Life insurance, which of the following statements is INCORRECT
Speculative Risk
Events in which a person has both the chance of winning or losing are classified as
Something that increases the risk of loss
Hazard is best defined as:
upon the last death
In a survivorship life policy, when does the insurer pay the death benefit
The type of investment
In an adjustable life policy all of the following can be changed by the policy owner EXCEPT
It will likely be higher because the applicant is a substandard risk
In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium
Loss
Insurance is a contract by which one seeks to protect another from
Risk
Insurance is the transfer of
Viator
It is the viatical settlement brokers job to represent the
War or military service
Name of clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military
As of the application date
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?
100
The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?
Lower
The premium of a survivorship life policy compared with that of a joint life policy would be
Pure risk and speculative
The risk of loss may be classified as
Adverse Selection
The tendency of risks with higher probability of loss to purchase and maintain insurance more often than the risks who present lower probability.
Absolute and collateral
The two types of assignments are
Increasing term
The type of term insurance that provides increasing death benefits as the insured ages is called
Material Misrepresentation
Untrue statements on the application unintentionally made by insureds that, if discovered, would alter the underwriting decision of the insurance company, are called
Signed waiver of premium
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT
Cash values can be borrowed at any time
What does "liquidity refer to in an insurance policy?
Principal
What is the term for the entity that an agent represents regarding contractual agreements with third parties?
Transfer
When an individual purchases insurance, what risk management technique is he or she practicing?
Coverage until death of age 100
Which characteristics makes whole life permanent protection?
Indemnity
Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost
Someone who gives money as consideration for a life insurance policy
Which of the following best describes a "viatical settlement purchase"
Net premium plus expenses
Which of the following best describes gross annual premium?
Riders
Which of the following describes attachments made to the policies that either add or modify coverage?
The loss must be catastrophic
Which of the following is NOT a characteristic of an insurable risk?
Workers compensatin
Which of the following is NOT an example of a business use of Life Insurance?
It transfers rights of ownership from the owner to another person
Which of the following is TRUE about a policy assignment?
The trust that a client places in the producer in regard to handling premiums
Which of the following is an example of a producer's fiduciary duty
To create an estate
Which of the following is the best reason to purchase life insurance rather than an annuity?
Universal Life-Option A
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Stock
Which of the following types of insurers is owned by stockholders?
The expense of a vacation for surviving family members
Which of the following would NOT fall into the category of costs associated with death?
Medical information
Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives?
Contigent beneficiary
a beneficiary who has second claim to the policy proceeds after the death of the insured (usually after death of the primary beneficiary)
primary beneficiary
a beneficiary who has the first claim to the policy proceeds after the death of the insured
To qualify for small group life insurance
a group must be formed for a purpose other than attaining life insurance
Minor
a person under legal age
Estate
a person's net worth
Cash Value
a policy's savings element or living benefit
Solvency
ability to meet financial obligations (an insurance company maintains enough assets to pay claims)
Viatical settlements
allow someone living with a life-threatening condition to sell their existing life insurance policy and use the proceeds when they are most needed, before their death
Trust
an arragement in which funds or property are held by a person or corp for the benefits of another person
Policy loans
are ONLY available in policies that have cash value (whole life)
Dividends
are a return of excess premiums; therefore, not taxable when paid to the policyowner
Premium rates on a joint life policy
are determined by averaging the ages of both insured
Settlement options
are triggered by the insured's death or age 100
Nonforfeiture values
benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses
Variable life insurance products
contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance
Life insurance
coverage on human lives
Cash Value
equity amount accumulated in permanent life insurance
Joint life=
first to die
Term insurance
has no cash value
The policy will NOT lapse
if an insured skips a premium payment on a universal life policy, the missing premium may be deducted from the policy's cash value
"level"
in level term insurance referes to the death benefit, which does NOT change
Collateral assignment
involves a transfer of partial rights to another person
Absolute arrangement
involves transferring all rights of ownership to another person or entity
Gross annual premium
is net premium plus expenses
Extended term
is the automatic nonforfeiture option: same face amount, shorter term of coverage
Group insurance
is written as annually renewable term insurance
NAIC
national association of insurance commissioners an org composed of insurance commissioners from all 50 states, formed to resolve insurance regulatory issues
Childrens term rider:
one premium for ALL children
Lump-sum
payment of the entire benefit in one sum
If NO beneficiary is named
policy proceeds to go to the insured's estate
Entire contract=
policy+copy of application + any rider or ammendments
Illustrations
presentation or depiction of nonguaranteed elements of a life insurance policy
The common disaster clause
protects the contingent beneficiary
Whole life insurance
provides lifetime protection and accumulates cash value
Term insurance
provides the greatest amount of coverage for the lowest premium
Survivorship life=
second to die
Liquidation
selling assets in order to raise capital
Purchase of Life insurance: Policy owner pays premium to insurance company, Insurance company issues policy to policyowner, Beneficiary receives benefit upon insured's death
steps of life insurance
Death benefit
the amount paid upon the death of the insured in a life insurance policy
Joint lifew policies
the death benefit is paid upon the first death only
Principal amount
the face value of the policy; the original amount invested before the earnings
Attained age
the insured's age at the time the policy is renewed or replaced
In group insurance,
the master contract is for the employer, and certificates of insurance are for individual insureds
Lapse
the policy termination due to nonpayment of premium
In variable contracts
the policyowner bears the investment risk
Level premium
the premium that does not change throughout the life of a policy
Under life-income settlement option
the recepient cannot outlive the benefit payments
Endow
to have the cash value of a whole life policy reach the contractual face amount
Assignment
transfer of rights of policy ownership
The waiver of premium rider
waives the premium for a total disability after a waiting period
Misstatement of age on the application
will result in adjustment of premiums or benefits
Deferred
withheld or postponed until a specified time or event in the future
