Life and Health
To be fully insured under the OASDI retirement benefit, an employee would have to work at least how long?
40 quarters (10 years)
Buyer's Guide
A booklet that describes insurance policies and concepts, and provides general information to help an applicant make an informed decision.
An employee covered under an employee group policy will receive which written document that outlines coverage and provides evidence that group coverage is in effect?
A certificate of insurance
Which of these provides coverage only if an employee chooses to join the group?
A contributory group policy
Permanent policies build a cash value savings account and thus have what?
A death benefit and a living benefit
Coinsurance Clause
A health policy provision requiring the insured to pay part of the claim
What is a multiple indemnity rider based on?
A multiple of the death benefit
Paul has a Group Health plan at work. His employer pays the whole premium and Paul does not have to pay anything for the coverage. What is this type of plan called?
A noncontributory plan
Competent party
A person who is capable of entering into an insurance contract. Such a person must be sane, sober, and of age of majority (age 15 in most states).
What is insurance?
A risk management technique that transfers risk
What policy will require the highest premium check?
A single-pay whole life policy
If only 5% of a company's employees choose insurance coverage, this presents what type of issue?
An adverse selection issue
Who can alter an insurance policy?
An executive officer of the company
Who can make changes to an insurance policy?
An executive officer of the insurance company.
Indemnity means:
Being made whole
Who helps place a client with an insurance company and owes a fiduciary duty to the client
Broker
Underwriting does not involve what?
Carefully investing premium dollars to achieve returns
To determine the applicants financial standing an underwriter would most likely use a
Credit report
Social security provides what benefits?
Disability, survivor and retirement
The purpose of the suicide clause is to
Eliminate payment of a death benefit in some suicide situations
Jill failed to pay her premium by the normal due date because she was on vacation. Which policy provision will prevent her policy from lapsing?
Grace period provision
When comparing ordinary life with limited pay life the limited pay life policy
Has a shorter premium payment schedule
Amy accidentally provided false information on an application. Before the policy was issued, she notified the agent of the mistake. What is the agent's proper course of action?
Have Amy correct the mistake and initial the change.
What element of contract law requires that all parties be of sound mind, sober, and the age of majority to form a contract?
Legally competent parties
What do optional provisions do?
Protect the insurance company by limiting coverage, typically by inserting exclusions in the policy
PHI
Protected Health Information
An insured may borrow what under a whole life policy?
The amount of cash value minus the interest to be charged for the year
COBRA
The federal law which provides for both continuation and conversion of health policies
Under an insurance policy, a third party owner must have insurable interest at the time of
The inception of the policy
Revocable Benficiary
The owner can designate a new beneficiary at any time
Under an AD&D policy which pays the most the capital sum or the principal sum?
The principal sum
The consideration given by the insurer consists of?
The promise to pay future claims.
The uniform policy provision law provides
The right to sue within a stated time after filing a proof of loss claim
Subrogation
Transfer to the insurer of the insured rights so they can go after a 3rd party
True or false? MIB is regulated by the fair credit reporting act
True
True or false? Medical information is supplied to MIB by the member insurance companies
True
True or false? Of a 15-pay whole life policy the coverage lasts until the insured dies or reaches age 100
True
Waiver
Voluntary surrendering of a right
Common Disaster Clause
When insured and primary die at the same time, it is assumed that the primary died first
With group insurance, the Insured receives:
certificate of insurance
Irrevocable Beneficiary
one that cannot be changed without the beneficiary's consent
beneficiary
one who receives benefits
In order to qualify for AD&D coverage, the accident must directly cause death within how many days?
90
Comprehensive major medical
A combination of basic coverage and major medical coverage that features low deductibles, high maximum benefits, and coinsurance.
Base plan
An older form of health insurance that has low dollar limits of coverage
Where is insurance mostly regulated?
At the state level
admitted
Authorized to sell insurance
Risk
Chance of loss
What benefit does a temporary policy have?
Death benefit
A life policy pays the face amount when the policy
Endows
What would not be covered by an AD&D policy
Income
What does a multiple indemnity rider do?
Increases the death benefit by a specified multiple if the death occurs as the direct result of an accident.
What happens if the premiums aren't paid on a temporary policy?
It will expire at the end of the 31 day grace period
Capital sum
One half of the AD&D policy limit paid to the Insured as a result of a dismemberment.
actuary
Person who tracks underwriting
Reinstatement Clause
Prohibits the insurer from charging a reinstatement fee
A whole life policy's cash value is determined by
The cash value table contained within the policy
Under an increasing term life insurance what will increase over time?
The death benefit
Under increasing term life insurance what increases over time?
The death benefit
An agent misrepresents policy benefit levels under a policy. Which provision provides the insurance company the most protection?
The entire contract clause
What provision prevents an agent from making changes to a policy?
The entire contract clause
The primary source of moral character information is
The inspection report
A policy loan is made by
The insurance company itself
With renewable term life, the annual premium increases with each renewal for what reason?
The insured attained age has increased
After the contestable period had passed a life policy is contestable under what circumstance?
The insured fails to pay the premium
What automatically happens if an insured fails to pay the interest on a whole life policy's loan when due?
The interest due is added to the loan amount
beneficiary
The person receiving the claim payment from the insurer
Over the course of a Graded (Modified) Premium Whole Life policy:
The premium increases
What document is signed to imitate coverage if no conditional receipt is used?
The statement of continued good health
Assuming a policy meets all other eligibility requirements, how long does a policy owner have to exercise the reinstatement option for a Life policy?
Three years
True or false? AD&D policies are usually riders and may be sold with either a life or health insurance license
True
True or false? AD&D policy provides a death benefit so the insured should name a beneficiary
True
Risk is defined as
Uncertainty of financial loss
The process of selecting and classifying risks is called
Underwriting
Alexa buys a 10-Pay Whole Life policy. Assuming she pays all her premiums, how long will she be covered?
Until death or age 100
Can congress change benefit levels for social security retirement?
Yes
What is pure risk?
a risk that presents the chance of loss but no opportunity for gain
Exchanging something of value is known as?
consideration
Typically a Grace period expires after
30 days
Who established the MIB?
A group of insurance companies
warranty
A statement made on an application for insurance that the applicant guarantees to be true
AD&D
Accidental Death and Dismemberment
A limited pay while life policy provides coverage until
Age 100
Capital Sum
Amount provided for accidental dismemberment or loss of eyesight. Indemnities for loss of one member or sight of one eye are percentages of the capital sum.
Group Insurance
An insurance policy that covers multiple people
What type of loss do insurance companies try to avoid?
Catastrophic loss
True or false? An applicant has insurable interest in an ex spouse
False
True or false? An applicant has insurance interest if they are a parent in his or hers child care provider.
False
True or false? An insurance broker owes a fiduciary duty to one or more Indian employees companies
False
True or false? FCRA requires insurers to share credit report information with the applicant
False
To qualify for old age and survivors disability insurance one must
Have been employed for 40 quarters
Law of Agency
Have duty to use utmost care when representing your insurance agency
The transfer of risk is
Insurance
The conversion provision in a term policy allows the insured to
Obtain whole life insurance
Under the fair credit reporting act the insured has NO rights to
Require that the insurer provide a copy of the report to the insured
Ownership clause
Specifies owners rights
What is required for an insurable interest to exist?
The applicant must be in a position to lose something of value
The primary source of insurability information is
The application
What document becomes part of the contract and includes information about the insured?
The application
How is the settlement handled for a 20 year renewable term policy if the insured dies in year 15
The death benefit is paid to the beneficiary upon the insureds death
A life insurance applicant gives consideration to the insurer in return for?
The insurers promise to pay the claim
Which provision identifies the parties and defines the scope and limits of coverage?
The insuring clause
Assume that no conditional receipt is used. If the premium has been paid and the medical exam taken a policy's coverage becomes effective when?
The policy is physically delivered to the applicant
TPO
Treatment, Payment & Operations
Offer plus acceptance equals?
agreement
If a 30 year old will live to age 99 which of the following policies will pay a death benefit and will have cost the lowest total premium outlay
15-pay whole life
Grace period clause
31 day grace period on premium payments.
Medicare
Aid for elderly
Medicaid
Aid for poor
Under an insurance policy, either the insurer or the insured may receive disproportionate payment under the concept of
Aleatory
On a life policy application the (in)contestable clause would apply to situations involving:
An honest mistake on the application
annuity
An insurance product that pays until the insured dies
What would you recommend to a young professional who currently had a limited income and wants life long coverage
Graduated life
Aviation rider
Increases the premium for pilots but it provides coverage for deaths due to aviation accidents
Consenting to be insured by a third party owner...
Must be given in writing and normally consists of the insured signing the application
A policy that does not cover losses due to employment is known as
Nonoccupational employment
In a non contributory plan what will eligible group members need to do to enroll other than complete an application?
Nothing. enrollment is automatic
Third party ownership
Owns a policy on someone else
The insured died six months after a life policy was delivered. The insurer discovered that the application was incomplete and not signed by the applicant. The insurer will do what?
Pay the claim
The time period one must be employed before becoming eligible for group disability income or health insurance is known as the
Probationary period
Does the common disaster clause or the simultaneous death act provide better protection for owners?
The common disaster clause
The fair credit reporting act entitled the applicant to review information by:
The consumer reporting agency
What provision requires the policy to only refer to itself?
The entire contract clause
Which provision states that document slept at the insurers home office may not be referenced as part of the policy?
The entire contract clause
What happens when the grace period expires with a whole life policy
The insurance policy lapses
What does renewable term guarantee?
The insured right to renew the policy without proof of insurability
What does convertible term guarantee?
The insured right to switch to a permanent policy without proof of insurability
Who names the beneficiary?
The owner not the insured
Primary Beneficiary
The person who is named as first to receive benefits from a policy.
A policy's coverage becomes effective when?
The policy is physically delivered to the applicant, assuming the premium has been paid
What happens when the whole life policy's grace period expires?
The policy lapses
If a conditional receipt is used
The policy may become effective prior to delivery
Mortgage protection insurance
This is a type of life insurance policy that repays your mortgage if you die during the repayment term.
An insurer will not require proof of insurability in what situation?
When changing the beneficiary
A representation
a statement believed to be true to the best of one's knowledge
Jill fails to pay the premium due on her Whole Life policy. What happens immediately?
nothing
What is the standard grace period for life insurance policies
31 days
The cause of loss is called
A peril
A misrepresentation
An intentional misstatement
When must a life or health insurance applicant have insurance interest?
At the inception of the policy
Nancy is the beneficiary on Jacks life policy and their daughter Cassie is the contingent beneficiary. Nancy and Jack are involved in a serious car accident, which kills Nancy instantly. Jack is in life support for two weeks and then dies. Who gets the policy proceeds?
Cassie
provision
Clause in policy
Which policy section specifies the amount of the premium
Consideration clause
The creation of a contract requires what?
Consideration, Legal purpose and agreement
Multiple Indemnity Rider
Life insurance rider which pays an additional sum, termed the principal sum, to the beneficiary if the insured dies due to an accident.
Fair Credit Reporting Act prevents the insurer from
Obtaining a consumer investigative report without notifying the applicant
A policy that covers losses due to employment is known as
Occupational coverage
Riders
Optional provisions not included in original policy
First party ownership
Owns a policy on themselves
Aleatory
Parties receive dramatically different levels of benefits
A policy owner who wants to borrow against a whole life policy's cash value is required to:
Pay interest on the loan
Jay had a limited pay while life policy. An advantage of this policy is that it permits jag to
Pay premiums only for a predetermined time
Ms Y about material facts on her life insurance application but the insurance company did not discover the lie until she died 3 years later. What will the company do?
Pay the claim
hospital indemnity policy
Pays even if other insurance has already paid for the hospital stay
The purpose of the grace period clause is to
Prevent unintentional lapse of policy
An applicant was denied insurance based on information contained in his or her credit report the applicant may
Receive the name and address of the consumer reporting agency from the insurer
Under the fair credit reporting act the insured is entitled to
Receive the name and address of the reporting agency from the insurer
Aviation exclusion rider
Reduces premiums for pilots by excluding coverage for aviation deaths
What form of term insurance requires the insured to pass a medical exam in order to have a lower cost of renewal?
Reentry
Steve buys a $500,000 Life policy and commits suicide one month later. Assuming the policy includes a Suicide Clause, the company will:
Refund the premiums paid without interest.
What policy provision deal with activating a policy which has terminated due to nonpayment of premium
Reinstatement
Broker
Represents insured not the company
Uncertainty of loss is
Risk
Speculative Risk
Risk someone accepts in hope of a gain
The formula used to determine a premium includes what elements?
Risk, interest and expense
What factors in to calculating gross premium?
Risk, interest and expenses
Sally wants to buy life insurance covering mike. Which of the following statements are true?
Sally needs to have an insurance interest in mike and obtain mikes consent on the policy application
A company may not provide group insurance for?
Shareholders
Attained Age
The age of the insured at a determined date.
Principal Sum
The benefit dollars received from accidental death. Dismemberment is always 50% of the benefit
An Insured accidentally over-stated his age on a Life Insurance application and died 20 years later. How will the claim be handled?
The death benefit will be increased to reflect the Insured's true age.
Which provision states that the application if attached is pet of the contract
The entire contract clause
In a group policy situation, who receives the policy certificate?
The insured
Upon lapsation (not paying premiums on a permanent policy)...
The insured is paid the cash value savings account
How long is the policy period for whole life?
The insured lifespan or to age 100
With a convertible term policy what is required to convert to whole life?
The insured must pay a higher premium
Who names the beneficiary?
The policy owner
What changed over the course of a modified (graded) premium whole life policy?
The premium increases
What happens when a term policy is converted
The premium will increased based on the insureds new attained age
Chad owns a $100,000 life Policy with a double indemnity rider. He accidentally runs into a boat and is killed instantly. How much will the insurer pay?
$200,000
Leann's $100,000 whole life policy had an accumulated cash value of $30,000. Leann requested a maximum loan and received $27,900. Leann died precisely one year later without repaying any of the loan. How much did Leanns beneficiary receive?
$70,000
Calculating premiums
(Risk + Expesnses) - Interest = Premium
What does whole life insurance provide?
- protection for an insured entire life (or to age 100) - a cash value that accumulates over time - level and fixed premiums
How may a while life policy be paid for?
- single premium - continuous premiums - limited premiums Graded premium whole life
A whole life policy provides life insurance only to age
100
The maximum social security payment for a disability income is
100% of the PIA (Primary Insurance Amount)
What policy will provide a 30 year old with protection to age 100 and develop cash quickest
15 pay whole life
Under the common disaster provision both the insured and the benficiary are presumed to have died at the same time if the beneficiary dies within what time after the insurers death?
60
In a contributory plan, at least what percentage of eligible employees must participate in the group plan?
75%
What would be most appropriate for mortgage protection insurance?
A 30 year term decreasing policy
Blanket policy
A limited health policy covering only accidents this is a form of group coverage where the insured's are not named in the policy and do not receive a certificate of coverage for example this may be used to cover kids at a horse camp
Mandy (age 25) is interested in having life insurance in force when she dies but she doesn't want to have to pay premiums when she retires. What would you recommend?
A limited pay whole life policy
Under AD&D Insurance, what does the capital sum represent?
A lump sum, half of the face value, paid for accidental dismemberment of a primary body part.
What helps underwriters predict the likelihood of death?
A mortality table
What happens upon lapsation?
A permanent policy pays the insured the cash value savings account
Free Look Provision
A policy provision required by state law that establishes a set number of days (usually 10) for the policyowner to review a newly issued policy. The policyowner may return the policy to the insurer during this time for any reason and receive a 100% refund. Also known as refund provision, unconditional refund provision, return provision, exchange provision, or right to examine.
Cancelable
A policy which may be terminated by the Insurer at any time without a reason. Usually this is illegal.
Proof of Insurability
A statement about or evidence of a person's physical and/or mental health, personal character, occupation, living habits, etc. Used by the insurance company in assessing whether to accept the person's risk.
Annually renewable term
A term policy that has expired but may be renewed on a year by year basis, usually at a much higher premium. Also known as Renewable Term.
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.
A multiple indemnity rider is best suited for coverage of what?
Accidental death
The insurer discovers that an insured had misstated age or gender on the application. If the policy has already been delivered the insurer may
Adjust the benefits regardless of when the misstatement is discovered
If the policy owner misstates his or her age in the application the company will
Adjust the claim
An insured stated in the application that her age was 25. She was actually 35. When the life insurer discovers the discrepancy it will
Adjust the death benefit
Josh applied for a Life policy and intentionally misstated his age to save money. When Josh died five years later, the company discovers the lie. What will the insurance company do?
Adjust the death benefit to reflect what the premium actually would have purchased given Josh's true age.
Time Limit on Lawsuits Clause
After submitting the claim, the Insured must wait 60 days prior to filing any lawsuit. And any lawsuit must be filed within 3 years - this time limit is also referred to as a Statute of Limitations
To borrow against a permanent life policy's cash value the policy owner must
Agree to be charged interest on the loan balance
Free Look Clause
Allows the Insured to get a full refund by returning the policy.
What does the free look clause do?
Allows the policy owner 10 days to return the policy for a full refund with no questions asked
The federal fair credit reporting act requires the insurer to warn the insured in advance that
An inspection report will be obtained
Annually Renewable Term
An insured can extend coverage after the initial time period expires (usually on a yearly basis)
An applicant submits an application without the first premium payment this constitutes what?
An invitation
What will have a premium that increases each year?
Annually renewable term life
To protect the applicants privacy and confidentiality some information is given to the underwriter and not to the producer. What is the only item that the producer would have access to in the normal insurance transaction?
Application
Collateral assignment
Assignment of part of the proceeds of an insurance policy to a bank as collateral to settle the loan balance that may exist at the insured's death.
Physical exam and autopsy clause
At its own expense, the Insurer has the right to conduct as many physical exams upon the Insured as are reasonable. The Insurer may perform one autopsy unless prohibited by state law.
The purpose of having the insurer name a beneficiary in a life insurance policy is to
Avoid probate
A STOLI (IOLI) is used to:
Avoid the insurable interest requirement
Why is the premium higher when an insured converts from convertible term to whole life?
Because Whole Life costs more than Term Life and the new premium is based on the Insured's age at the time of conversion.
The simultaneous death act applies to the simultaneous death of the insured and the
Beneficiary
Permanent policies
Build a cash value savings account and have both a death benefit and a living benefit
whole life insurance
Builds cash that can be accessed by the owner during the insureds life
If Koris life insurance policy specified that her beneficiaries are her children this is an example of what type of beneficiary designation
Class
An Insured used her life insurance policy as security for a bank loan. She was required to sign ownership of the policy temporarily to the Creditor. This is known as a:
Collateral assignment
An insurance policy will lead to the payment of a claim only if the insured pays the premium and notifies the insurer of the loss. This relates to the contract conception of?
Conditional
Characteristics of Insurance Contracts
Conditional, unilateral, contracts of adhesion, aleatory
Which policy section specified the policy's coverage limits?
Consideration Clause
What permits a term policy to be changed to a permanent policy without proof of insurability?
Conversion provision
Which term policy will be the most expensive?
Convertible and renewable
What permits me to buy whole life?
Convertible term
What provide a death benefit that may be changed to whole life without proof of insurability?
Convertible term
Why is age 100 significant in a Whole Life policy?
Coverage ceases at age 100.
What happens to a whole life policy when the insured reaches age 100
Coverage terminates
If an applicant is not offered a policy after the underwriting process he or she is referred to as a?
Declined risk
If there is an outstanding policy loan at the time of the insured death the insurer will
Decrease the death benefit payment
Insurance increases or decreases risk?
Decreases risk
Jared forgot to pay his March 1st life insurance premium and then died in March 18th. What will the insurance company do?
Deduct the past due premium and interest from the death benefit and pay the remainder to the beneficiary.
Under social security a worker that is fully insured would be eligible for what benefits?
Disability, survivor and retirement
Life insurance premiums remain level and fixed for what time?
During the policy period (unless it's a graded premium whole life policy)
Life insurance protects against
Dying too soon
What does the ownership clause do?
Establishes the owners rights under the policy
At the end of the policy term a term life policy will
Expire
When a term life policy ends and the insured is still living the policy
Expires
The amount that the beneficiary will receive if the insured dies is called the
Face value
What is decreasing with a decreasing term life policy
Face value
FCRA
Fair Credit Reporting Act regulates the collection and use of consumer credit information
True or false family groups are eligible for group life or health insurance
False
True or false? In insurance an insured pays a premium to transfer all risk to the insurance company?
False
True or false? Social security Retirement benefits will be reduced if the worker has retirement income from a company-sponsored retirement plan.
False
True or false? The agent represents the clients?
False
True or false? Terms life's death benefit is always level
False - it usually is but not always
True or false? An applicants MIB report may show the amount of insurance for which the applicant previously applied
False false
FTC
Federal Trade Commission. Protects consumers from misleading and fraudulent advertising. Reviews advertising claims. Can order a company to change their ad
Under what circumstances can a policy owner exercise the free look provision
For any reason as long as it is within the specified time period.
Foreign insurers
Formed in one state but can sell insurance in other states
Domestic insurers
Formed in our state but can sell in other states
What would be a good policy for a new college graduate who expects her income to increase significantly over the next few years and will have student loans paid off soon
Graduated (modified) premium life
What policy may have a level premium for 3-5 years followed by an increase
Graduated life, also known as modified life
What policies do not contain a free look clause?
Group
Hazardous occupation clause
Hazardous jobs and hobbies may be excluded
HIPAA
Health Insurance Portability and Accountability Act protects consumer health information
Four years ago, Eva purchased a whole life policy when she was a librarian. She had recently changed careers and is now a professional wrestler. Does that change her existing coverage?
Her life policy will not be affected
Premium Mode
How frequently the insured will pay the premium
Indemnification
Insurance companies want to restore what you lost not give you more than that
Misstatement of Age or gender clause
Insurer will adjust benefits according to what would have been paid with the correct information
Which section of the life policy may provide that the policy will not pay claim due to military action, foreign travel, or suicide?
Insuring agreement
What beneficiary choice restricts the policy owners flexibility?
Irrevocable
Teak has two primary beneficiaries, X and Y. X died and then Teka died. Who gets the death benefit?
It all goes to Y
If an applicant for life insurance wishes to waive the free look clause whag should be done?
It is not possible to save a required provision
Evan buys a 20 year term policy on his 38th birthday. At age 52 he dies of a sudden heart attack. What happens to evans policy?
It matures
What happens when a policy lags the face amount?
It matures
What happens to the premium over the course of a decreasing term policy?
It remains level and fixed
What happens to the premium over the life of an increasing term policy?
It remains level and fixedb
If the premiums aren't paid on a permanent policy what happens?
It will lapse at the end of a 31 day grace period
Janet was issued a Life Insurance policy six years ago. Under which of the following situations is Janet's policy "contestable?"
Janet ceases to pay premiums
MIB
Management Information Base
Another name used for decreasing term insurance is
Mortgage protection insurance
What is another term for decreasing term
Mortgage protection insurance
What type of insurance company is owned by its policy holders?
Mutual company
A policy owner who has a convertible term policy wishes to convert to whole life. Will proof of insurability be required?
No
Can a policy owner increase the face value of a life insurance policy?
No
Can you deny a policy due to sex/gender?
No
Do insurance companies insure speculative risk?
No
Does a beneficiary need to sign the application?
No
Does an AD&D policy cover loss of hearing?
No
Does the incontestable clause apply to statements in the application regarding age and gender?
No
To reinstate a policy does the policy owner have to pay a reinstatement fee?
No
Do AD&D policies cover sickness?
No only accidents
Do AD&D policies cover sickness?
No they only cover accidents
So temporary policies have a living benefit?
No they only have a death benefit
Contract of adhesion
Non-negotiable contract
What term policy costs the least?
Nonrenewable and nonconvertible
If, after the contestable period has passed, an insurance company discovers that a Life Insurance policy owner committed fraud at the time of application, what will happen?
Nothing. Once the contestable period has passed, the policy is incontestable, even for fraud.
An applicant is rejected for life insurance due to a prior medical condition. The producer May not do what?
Notify MIB that the applicant was rejected
Under the fair credit reporting act the producer must inform the client of the rights regarding consumer investigative reports at the time
Of application
OASDI
Old-Age, Survivors, and Disability Insurance
unilateral
Only the insurer has made a legally enforceable promise
A temporary policy matures when?
Only when the insured dies
If a physical exam reveals a serious medical conditions the information may be reported to the applicants...
Physician
Renewable term usually provides for renewal at what time?
Policy expiration
Who has the right to assign a policy?
Policy owner
Who has the right to change a beneficiary designation
Policy owner
mortality table
Predicts age which particular group is likely to die
Morbidity Table
Predicts how likely a group is to get sick/injured
Level and fixed premiums
Premiums are set in stone when the policy is purchased
TCPA
Prevents insurance companies from calling people on the national do not call list
The purpose of life insurance replacement regulations is to
Protect the insured against loss of benefits
Permanent Protection
Provides protection for the insured entire life
Term life is temporary and provides what?
Pure death protection only
Term life insurance
Remains in effect for a specific amount of time
Which provision in a term policy provides for continued term insurance coverage?
Renewability provision
Agent/Producer
Representative of the insurance company
A wealthy elderly woman wants to purchase a life insurance policy to protect her estate from the governments death tax. She will most likely purchase:
Single premium whole life
What is whole life insurance that is funded with one lump sum called?
Single premium whole life
What does the insuring clause do?
Spells out the basic agreement between the insurer and the insured
NAIC
State regulators who provide uniformity in insurance laws
Consideration clause
States that the insured considers the premium and the statements made in the application
What does the incontestable clause do?
States that the insurer has two years to discover false statements in the application or the policy become incontestable.
Insuring clause
States the maximum amounts the company will pay
Adam purchases a life policy at age 50 and lives to be 100. Which policy type will require the highest total premium outlay?
Straight life
What will protect a 30 year old to age 100 with the lowest annual premium?
Straight life
What would have the lowest premium in the first year for a 40 year old?
Straight life
What policy will have the lowest annual premium for a 40 year old applicant?
Straight whole life
FICA
Takes money from American paychecks to pay for social security
Adverse Selection
Tendency for high risk people to be more likely to apply for insurance than low risk people
What type of insurance is used to pay mortgage debt if the owner dies?
Term
Convertible Term
Term insurance that specifically permits "conversion" of the policy into permanent protection without proof of insurability.
What policy provides a death benefit but no living benefit?
Term life
Mr. T applies for life insurance but does not make an initial premium payment. Coverage will be effective when?
The Insurer delivers the policy and the applicant pays the premium.
An Insured accidentally over-stated his age on a Life Insurance application and died six weeks later of a rare disease. How will the claim be handled?
The death benefit will be increased to reflect the Insured's true age.
Policy owner
The one covered by the policy
A contingent beneficiary will receive the death benefit only if
The primary beneficiary dies before the insured
Scott buys a 10 year term policy in his 29th birthday. What happens on Scott's 49th birthday if he doesn't renew or convert the policy?
The term policy expires
Assignment
The transfer of a policy to another party
What is required for a worker to be eligible for disability benefits under social security?
The worker must have fully insured status
A business insured it's key executive. This is an example of?
Third party ownership
What are some reason people purchase life insurance?
To protect an estate/family or to create an estate
True or false in a noncontributory plan all eligible employees are automatically covered
True
True or false? An insurance broker owes a fiduciary duty's to the client
True
True or false? An insurance provider owes a fiduciary duty to an insurance company
True
True or false? FCRA allows consumers to dispute information within their credit report
True
True or false? FCRA governs the consumer reporting agencies that assemble information about consumers
True
True or false? FCRA requires insurers to notify an applicant if a consumer investigative report will be used
True
True or false? Life insurance premiums always remain level and fixed during the policy period.
True
True or false? With social security benefits the amount will vary depending on whether the worker retires early or late?
True
The incontestable clause limits the time that an insurance company can deny a life insurance claim on the basis of statements made in the application to
Two years
When does a term life policy mature?
Upon the insured death within the policy term
When does a whole life policy mature?
Upon the insureds death it when the insured reaches age 100
When does a permanent policy mature?
When the insured dies or reaches a specific age
The free look period begins at what time?
When the policy is delivered
When does the grace period begin?
When the policy owner misses a premium payment
What policy provides both insurance coverage and a savings benefit?
Whole life
Molly is injured is a work-related accident. Molly is considering filing a negligence lawsuit against her employer
Work comp is Mollys sole remedy - she cannot win a lawsuit against the employer
Can you deny a policy for age/occupation/health?
Yes
Do AD&D policies cover loss of vision?
Yes
Is the beneficiary presumed to be revocable?
Yes
Reentry Term
a term insurance policy in which renewal premiums are based on select (lower) mortality rates if the insured can periodically demonstrate acceptable evidence of insurability
Cora wants to transfer ownership rights in her whole life policy to her brother mark. What would allow such a transfer?
assignment provision
If an insured temporarily conveys some of the rights of the policy ownership to a lender to help secure a loan what is this called?
collateral assignment
Business Overhead Expense Policy
covers business expenses such as rent and utilities
Social Security
federal program of disability and retirement benefits that covers most working people
Premium mode refers to the:
frequency of the premium payment
Free Look Clause
giving Insureds at least 10 days after delivery of the policy to review the policy and terminate coverage.
Insurable interest requirement
insurable interest exists if the applicant would suffer financially if the Insured were to die or become ill
Spendthrift Trust
is a trust that protects the settler's assets from being spent recklessly by the beneficiary and the beneficiaries' creditors.
Increasing Term
is term life insurance that provides an increasing face amount over time based on specific amounts or a percentage of the original face amount.
Estoppel
once a right has been waived, it cannot be reinserted and used against the insured
The law of large numbers allows insurers to
predict losses accurately
Level term
premiums and death benefits stay the same for the life of the policy
Simultaneous Death Act
states that if the insured and the primary beneficiary die at approximately the same time for a common accident with no clear evidence as to who died first, the Uniform Simultaneous Death Act law will assume that the primary died first, this allows the death benefit proceeds to be paid to the contingent beneficiaries.
Entire Contract Clause
states that the life insurance policy and attached application constitute the entire contract between the parties
Entire Contract Provision
states the insurance policy itself, any riders and endorsements/amendments, and the application comprises the entire contract between all parties
cash value
the amount received after giving up a life insurance policy
Contestable Clause
• after the first 2 years, • an honest mistake is incontestable by the Insurer; • fraud is incontestable by Life Insurers and Group Health Insurers; but • fraud remains contestable forever by Individual Health Insurers
Jeanine has a group health plan at work. Her employer pays half of the premium each month and deducts the other half from Jeanine's paycheck. What type of plan is this called?
A contributory plan
An applicant submits an application with the first premium payment. The company issued a rated policy along with a bill for the difference in premium. The company's response is an example of what?
A counteroffer
John and Carol are a married couple in their early twenties. John has worked full time at the local factory for 3 years. It is his first job. John is killed in a tragic golfing accident. Carol is eligible for which of the following:
A single lump sum survivor benefit of 255$
An applicant submits a premium with the application. The purpose of having the producer deliver the policy to the applicant is to?
Accept an offer
An applicant submits an application with the first premium payment. The company delivers the policy. This constitutes what?
Acceptance
The inability of an insured to negotiate any changes in the policy language relates to the concept of?
Adhesion
If the policy owner misstates her age on the application the company will
Adjust the benefits paid
The insured has a valid health claim but has lied about age in the application. Under the misstatement of age provision in the health policy, the insurer may
Adjust the claim
The section of the application providing the producers evaluation of the applicant is known as the
Agents Report
A conditional receipt accomplishes what?
Allows retroactive coverage in some situations
Ms. L applies for life insurance but does not make an initial premium payment. Her actions constitute?
An invitation to negotiate for the purchase of life insurance
What premium mode will result in the least total dollar outlay over the life of the policy?
Annual
The premium mode which results on the greatest cost savings over the life of the policy is
Annual premium
Assume that an application doesn't include a premium payment. Which contract element is missing?
Consideration
The producer tells the insured that the premium is due each year on June 1st. The insured may confirm this by reading which section of the policy?
Consideration clause
The 10 day free look provision is initiated by the
Delivery receipt
What document triggers the 10-day free look period?
Delivery receipt
Q submitted a life insurance application for her young daughter who has a history of heart problems. Q neglected to mention the heart problems in the application. The daughter died of the heart condition 18 months after the policy was delivered. The Insurer will probably:
Deny the claim
True or False? If the premium has been paid state law requires that the policy be mailed rather than being personally delivered
False
True or false? A conditional receipt accomplishes guarantee that the permanent policy will be issued
False
True or false? In no contributory plans each employee must be given the right to select individual benefit levels
False
What will an agent likely do when a conditional receipt is not used?
Have the client sign a statement of continued good health at the time of policy delivery
An agent is asked to sell a life insurance policy with a minor as the insured. The agent should...
Have the minors parent or guardian sign the application
The creation of a contract requires what elements?
Legally competent parties, consideration, offer, acceptance and agreement.
Molly changes her premium mode so that she makes her premium payments more frequently. Will this make her insurance more or less expensive each year?
More expensive
An applicant submits an application with the first premium payment. This constitutes an?
Offer
A hospital indemnity policy's elimination period is applied
Once per each hospital stay
Unilateral means
Only one party to the contract makes a legally enforceable promise.
Underwriting involves what?
Predicting future losses and placing an applicant in the appropriate rate group
Jeanine forgot to fill in a few answers on her application. The agent and the underwriters fail to notice and issue the policy. What is the likely outcome?
The insurance company is bound by its contract and the policy is enforceable
What is the primary reason the agent physically delivers the policy to the insured?
To explain the policy terms and answer any questions
True or False? If a conditional receipt is used, the policy may become effective prior to delivery.
True
True or false regarding an association buying group insurance? The group cannot be formed for the purpose of buying insurance
True
True or false? An applicant has insurance interest in each other if they are business partners
True
True or false? Proof of insurability will not be required and the insurer will use community rating
True
The fact that only one party in an insurance policy makes a promise is related to which contract law concept?
Unilateral
The fact that the insurer makes a promise but the insured does not make a promise relates to the concept of?
Unilateral
Mr. Z submits an application with premium to his life insurance producer. The producer gives Mr. Z a conditional receipt . Prior to the time Mr. Z takes a medical examination, he is considered to be?
Uninsured
Abe's insurer issued a policy even though his application was incomplete and unsigned. The insurer cannot cancel the policy because of which legal concept?
Waiver or Estoppel
If an insurer issued a rated policy when will coverage become effective?
When delivered to the applicant and the applicant pays the additional premium
A statement of continued good health is used in what situation?
When the policy is delivered and no conditional receipt was issued
A married couple purchases life insurance on each other. Several years later they divorce. The policy premiums were kept current. Will the policies pay upon death?
Yes the divorce does not impact the insurable interest requirement
