Life Insurance Basics Study Guide from Exam Fx
What information is gathered in Parts 1&2 of the application
Part 1 of the application includes the general question about the applicant, including name, age, address, birth date, gender, income, marital status, and occupation. Part 2 includes medical information about prospective insured
How does a substandard risk policy differ from a standard risk?
Substandard risk applicant are not acceptable at standars rates because of physical condition, personal or family history of disease, occupation, or dangerous habits. These policies could be issued with the premium rated-up (higher than the standard risk)
Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of his/her death is part of what type of protection?
Survivor Protection
What is Survivor Protection for?
The Death of the primary wage-earner will usually stop the flow of income to family -The death of non-earning spouse who cares for minor children can also cause great financial hardship for the survivor.
What is the purpose of the agents's report?
The agent (producer) report is used by the agent to discuss his or her personal observations concerning the proposed insured.
Who issues a policy covering the insured?
The insurer
Who is responsible for all written and distributed Insurance advertisements?
The insurer whose policies are advertised is responsible for all its advertisements, regardless of who wrote, created, presented, or distributed
When does an insurance policy go effect?
The policy will go into effect when the first premium is paid and the policy has been delivered
What is insurable interest?
To purchase insurance, the policy owner must face the possibility of losing money or something value in the event of loss. -once a life insurance policy has been issued, the insurer must pay the policy benefit, whether or not an insurable interest exist.
Estate Creation is especially important for who?
Young families that are getting started and have not yet had time to accumulate assets.
What does insurance solicitation mean?
an attempt to persuade a person to buy an insurance policy, and it can be done verbally or in writing.
Liquidity means ?
that the cash accumulation features some life insurance policies provide it to the policyowner which mean the policy cash value can be borrowed against at any time and used for immediate needs
Who pays premiums to the insurer
the policy owner of the insurance contract.
What is the purpose of key person insurance?
to minimize the risk of a financial loss because of the premature death of a key employee that has specialized knowledge skillso r business contacts
Insurance proceeds paid in a lump-sum may be used for any of the following expenses: (Determining Lump-Sum Need
-Cost Associated with Death (Post Mortem) -Debt Cancellation (as an alternative to Estate Liquidation) -Emergency Reserve Funds -Education Funds -Retirement Fund (any source of retirement income) -Bequests ( leaving funds to the insureds church , school,or charity)
What are the Needs of Approach?
-Determining Lump-Sum Needs -Planning for Income Needs
What are the Determining Amount of Personal Life Insurance?
-Human Life Value Approach -Need Approach
A valid insurable interest may exist between the policyowner and the insured when the policy is insuring any of the following?
-Policy owner's own life -the life of a family member (a spouse or a close blood relative -The life of a business partner, key employee, or someone who has financial obligation to the policy owner (such as debtor to it creditor).
What are some common personal uses of life insurance?
-Survivor Protection -Estate creation and Conservation -Liquidity
What is Life Insurance
-To protect against financial loss associated with an insured's death and pays a death benefit to beneficiaries upon the death of the insured. - In the event of the insured's death, the insurer pays the death benefit in the beneficiary.
Some of the factors considered by needs of are?
-the amount of debt (including mortgage), -Investments -Other outgoing expenses
What information does Buyer's Guide Provide?
Basic information about life insurance policies and comparison of policy cost
Who is required to sign an application for life insurance?
Both the agent and the proposed insured (usually the applicant) must sign the application
Planning for survivor protection requires?
Careful examination of current assets and liabilities as well as determining what survivor's needs may be.
A person may create an estate through what?
Earnings -Savings -Investments All these method disciplined action and significant period of time.
When an insured purchase a life insurance policy, he or she will have a what?
Estate of at least that amount the moments the first premium is paid. There is no other legal method by which an immediate estate can be created at such a small cost.
What is 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, It calculates an individual's life value by looking at the insureds's wages, inflation, the number of years to retirement and the time value of money
When would an insured be required to sign a statement of good health?
If the initial premium is not paid with application, the agent may need to obtain the statement of good health at policy delivery
The purchase of life insurance creates an?
Immediate Estate
Life insurance proceeds may be use to pay for what?
Inheritance taxes Federal Estate Taxes so that it is not necessary for the beneficiaries to sell off the assets
How can insurance company use the information it obtains from the MIB?
It can use MIB information to conduct further investigation into an applicants current insurability
In life Insurance policy, when must insurable interest exist?
between the policy owner and the insured at the time of application (or the time of policy issue) but not at the time of loss
Life insurance may be purchase by?
individuals or businesses
What is the needs approach to determining amounts of life insurance based upon?
is based on the predicted needs of family after premature death of the insured.
What is underwriting?
is the risk selection and classification process