Life Insurance Basics

A valid insurable interest may exist between the policyowner and the insured when the policy is insuring:

1. policyowners life 2. The life of a family member 3. The life of a business partner, key employee someone with financial obligation

What is the maximum fine for violating the commissioner's cease and desist order

10,000

_____ paid to a policyowners of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid

Dividends

Basic components of the application process

Part one is general information, part two is medical information

Annually renewable term insurance

a form of level term insurance that offers the most insurance at the lowest cost

Buy-sell agreement

a legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled

minor

a person under legal age

Estate

a person's net worth

solvency

ability to meet financial obligations

In a variable universal life policy, the death benefit is ______

adjustable

Both the _____ and the _____ _____ must sign the application

agent; proposed insured

Executive bonuses

an arrangement where the employer offers to give the employee a wage increase in the amount of the premium on a new life insurance policy on the employee

Insurable interest must exist between the policyowner and the insured ____ ____ _____ __ _______

at the time of application

Needs approach

based on the predicted needs of a family after the premature death of the insured

Determining the amount of personal life insurance

based on their ability to pay the premium, serve their needs, and protect their survivors

Changes in the application

correcting of the information and having the applicant initial; or complete a new application

life insurance

coverage on human lives

Conditional receipt means that the applicant may be _____ as early as the ___ of the application

covered; date

Types of buy-sell agreements

cross purchase, entity purchase, stock purchase, and stock redemption

Cash value

equity amount accumulated in permanent life insurance

A life insurance producer in the company's ____ _____

field underwriter

Human life value approach

gives the insured an estimate of what would be lost to the family in the event of the premature death of the insured

Provided there is a sufficient cash value in the policy, the automatic loan provision is activated at the end of the ______ _____

grace period

What are the 2 basic approached when determining life insurance coverage

human life value approach and needs approach

There is no _______ ______ for group life insurance

individual underwriting

The policyowner must have ____ _____ in the life of the insuredq

insurable interest

Conditional receipt

is used only when the applicant submits a prepaid application

An insurance application is the ____ ____ underwriters use for information about the applicant

key source

A _____ has an insurable interest in the life of a debtor

lender

Key person life insurance

life insurance that protects the company against the loss of a key employee

If the company acknowledges receipt of the premium with a conditional receipt, the policy is in effect on the date of the application or the date of the _____ (whichever is later)

medical

lump-sum

payment of the entire benefit in one sum

Illustrations

presentation or depiction of nonguaranteed elements of a life insurance policy

agent (producer's) report

provides the agent's personal observations concerning the proposed insured

Survivor protection

providing funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death

liquidation

selling assets in order to raise capital

Insuring clause

states that the insurer agrees to provide life insurance for the named insured which will be paid to a designated beneficiary when proof of loss is received by the insurer

Adverse selection

tendency of individuals with higher probability of loss to purchase insurance more often than those who present a lower risk

Death benefit

the amount paid upon the death of the insured in a life insurance policy

Paid-up option

the insurer can accumulate dividends at interest and then use them in addition to interest and policy's cash value to pay the policy earlier planned

insurable interest

the possibility of losing money or something of value in the event of a loss

Underwriting

the risk selection and classification process

Premium receipt

the type of receipt issued will determine when coverage will be effective

Cross purchase

used in partnerships when each partner busy a policy on the other

unconditional receipt

used most often with property and casualty insurance

Stock purchase

used privately owned corporations when each stockholder buys a policy on each others

Stock redemption

used when the corporation busy one policy on each share holder

Entity purchase

used when the partnership busy the policies on partners