Life Insurance Licensing Exam
If someone who was initiating an annuity was conservative
wanted stability and safety of principal, they would choose a, Fixed Annuity
If a primary beneficiary dies before the insured
who receives the death benefit?, The insured
Define warranty
A promise by the insured party that statements affecting the validity of the contract are true
What is considered in determining the amount of personal insurance using the human life value approach?
Age Medical history Occupation Sex
When does an insurance agent provide the client with a conditional receipt?
Agent collects first premium payment along with completed application and leaves the conditional receipt signed by agent
What is a domestic insurer?
An insurance company that is incorporated in this state
What is an alien insurer?
An insurer "incorporated" outside the USA
The period between which an annuity distributes the cash value as a series of payments is the
Annuitization Period
What is adverse selection?
Bad risk. These are situations that will cause an immediate claim for insurers. Insurers underwrite to avoid adverse selection to avoid immediate loss.
During the Accumulation (Pay-In) Period of an annuity there must be a designated
Beneficiary Annuitant and Owner
What life insurance policy often used by businesses is a legal contract which forces one partner to buy and the other to sell their share of the business in case one owner dies or becomes disabled?
Buy/Sell Agreement
Name 4 types of whole life policies
Continuous Premium / Straight Life Limited Payment (Pay-Up) Life Single-Premium Life Fixed Equity Indexed Life
Why would a business owner choose the use of a key person insurance? If employee dies
D/B can be used to replace the income from an employee or to train a replacement for the employee
What is a foreign insurer?
Insurer is incorporated in a U.S. territory/possession
What is the definition of a peril?
Perils are the causes of loss in the insurance contract
What are the 5 methods of handling risks?
Sharing - A reciprocal insurance exchange where no insurer is involved Transferring - The most effective way to handle risk is to transfer it so that the loss is borne by another party insurance being the most common method of transferring risk Avoidance - Eliminate exposure to a loss Reduction - Lessen the severity of a loss Retention - Deductibles / Co-Pays / Self-Insurance - The planned assumption of risk by the insured and/or policy owner.
Who owns stock companies?
Stockholders
TRUE OR FALSE - Life insurance is based on a morbidity table
TRUE OR FALSE
What is speculative Risk?
There is a chance for gain or loss
What is pure risk?
There is only the chance for loss or for things to remain the same
What is guaranteed insurability?
This rider allows the insured to increase the DB by a stated amount at certain designated ages/life events without proof of insurability
Name 5 dividend options
Cash = Lump Sum = Return of Excess Premium s= Tax Free Accumulation at Interest - the dividend is held by the insurer (generates a 1099 form - taxable interest income) Reduction of Premium (next years premium) Paid Up Additions - dividend is used to buy a single premium life policy with a small face amount Original policy - DB slowly grows Each addition is age sensitive Face amount will depend on insured's attained age One Year Term Option - dividend is used as a one-time payment to buy a term policy with a coverage period of one year
TRUE OR FALSE - Term life insurance is considered a permanent policy
FALSE
What is it called when an insurance agent acts with authority not expressed in writing?
Implied authority
Define the Aleatory contract
Law of Aleatory states that unequal consideration is exchanged between the parties (premium - vs - benefits)
When dealing with variable annuities
the producer needs a life insurance license plus an investment license by the, State
Name and describe the 3 nonforfeiture options
Cash Surrender Value - take out the value less a surrender charge Has tax consequences Any money in CV greater than Premium Paid = Taxable Income Cannot reinstate a surrendered policy Extended Term Option - CV is used as a ONE-TIME payment to buy a Term Policy Face amount of term policy is equal to face amount of original policy and it will stay in force for as long as CV allows This is the DEFAULT (or Automatic) Non-Forfeiture Option and provides the most coverage Reduced Paid-Up - CV is used to buy a single premium life policy with a smaller amount than original - this option lasts the longest
In regard to annuities whose life expectancy is taken into account?
Annuitant
