Life Insurance3
........ insurable interest must exist in a life insurance policy
"At the time of the application" is when interest must exist.
Immediate
(Example) A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it?
Issue the policy anyway and pay the face value to the beneficiary.
(Example) When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will...
"Illustration" in a life insurance policy refers to
A presentation of non-guaranteed elements of a policy
Failure to pay off a loan, tax delinquencies, late payments
According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer:
Differentiate between guaranteed and projected amounts, only be used as approved, must identify nonguaranteed values
All of the following are requirements for life insurance illustrations..
Maximum penalty for habitual willful noncompliance is $2,500
An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to....
Conditional Contract
An insurance contract that requires both the insured and the insurer meet certain conditions in order for the contract to be enforceable is...
Universal Life- allows to have an applicant withdraw a limited amount.
An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraws a portion of the policy's cash value. There is a limit for a withdrawal and the insurer charges a fee. What type of policy does the insured most likely have?
Inspection report
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)
It is level term insurance
Best description of annually renewable term insurance...
Aleatory Contract (Example)
Exchange of unequal values
Changes to an application may involve drawing a line through the first answer, record the correct answer, and have the applicant initial the change, one may note on the application the reason for the change, and if all else fails one may destroy the application and complete a new one.
If a change needs to be made to the application for insurance, the agent may do all of the following....
Return the application to the applicant for a signature
If an agent fails to obtain an applicant's signature on the application, the agent must...
Annuitization Period
In an annuity, the accumulated money is converted into a stream of income during what time period?
Applicants present physical condition, present occupation, and past medical history.
In classifying a risk, the Home Office underwriting department will look at all of the following..
Certificate of Authority
In order for an insurer to legally transact insurance, it must obtain what?
Purpose of a conditional receipt
It is intended to provide coverage on a date earlier than the age of the issuance of the policy
Domestic insurer
Licensed in the state where the individual resides.
Alien insurer
Licensed, however, is outside of the U.S.
Foreign insurer
Licensed, however, not in the state the indivisible resides.
A policy summary
Must be delivered along with the policy and will provide the producer's name & address, the insurance company's home office address, the generic name of the policy issued, and premium, cash value, surrender value & death benefit figures for specific policy years.
As a field underwriter, a producer is responsible for all of the following tasks..
Obtain appropriate signatures on the application for insurance, help prevent adverse selection, and solicit business that will fall within the insurer's underwriting guidelines.
"Not taxable" since the IRS treats them as a return of a portion of the premium paid.
On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are
Unilateral Contract
One-sided: only one party makes an enforceable promise
The Federal Fair Credit Reporting Act
Regulates consumer reports
Single Premium Whole Life
Requires the entire premium to be paid in one limp sum at the policy's inception.
Best detail of underwriting process for life insurance
Selection, classification, and rating of risks
Consideration
Something of value exchanged between the insurer and the insurer is considered....
Insurable interest
Stranger-originated life insurance (STOLI) policies are in direct opposition to the principle of...
Rated
Synonym for a substandard risk classification
Admitted insurer
Synonym for authorized insurer
Performance or the policy portfolio
The cash value of a variable life policy is not guaranteed and fluctuates with the_________________ in which the premiums have been invested by the insurer.
Annually Renewable Term
The death protection component of Universal Life Insurance is always....
Offer & Acceptance, consideration, competent parties, and legal purpose
The four essential elements of all legal contracts:
Level fixed
Variable life insurance is based on what kind of premium?
When the insured reaches age 100. "A limited-pay whole life policy, just like straight-life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years."
When would a 20-pay whole life policy endow?
Face Amount
Which policy component decreases in decreasing term insurance?
Equity Indexed Annuity and Fixed Annuities
While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate
Annually Renewable Term
Purest form of term insurance; death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
How is it determined whether an insurer is allowed I write business in a state?
The insurer's domicile of location of incorporation will determine whether a company is domestic, foreign, or alien
When the income payments begin
The main difference between immediate and deferred annuities is...
Face amount
What does "level" refer to in level term insurance?
When the application is given to a prospective insured.
What is not a consideration in a policy?
Debtor in Creditor
What relationship is not an example of insurable interest?
Contract of Adhesion
When a persons only options for a contract are on a take it or leave it basis; prepared only by the insurer.
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage and issues a policy
Conditional
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is..
Substandard Risk
Will result in having to pay the highest premium due to health, history, habits, etc.
When the application is signed and a check is given to the agent.
When is the earliest a policy may go into effect?
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?
When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable statement of Good Health
If it is intentional and material
When would a misrepresentation on the insurance application be considered fraud?
If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about
Whether an insurable interest exists between the individuals
Timeframe for filing relevant Suspicious Activity Reports
Within 30 days of INITIAL DISCOVERY
3 days
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained?
Mutual Insurance Company
________________ are owned and controlled by their policyholders. Any surplus money is returned to the policyholders as dividends.
Dividends
A participating insurance policy will pay _________ to the owner based upon actual mortality cost, interest earned and costs.
Limited Pay Whole Life premiums
All paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.
Death Benefit
Amount paid upon the death of the insured in a life insurance policy
Mutual Policy (Example)
An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check fin from the insurer. From what type of insurer did the insured purchase the policy?
Buyer's guide purpose
To allow the consume to compare the costs of different policies
Limited pay while life
(Example) your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
Within __ days of requesting an investigative consumer report an insurer must notify the consumer in writing that the report will be obtained?
3 days
Buyer's Guide
A generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process.
A single payment or periodic payments
Annuities are characterized by how they can be paid for which is:
If an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered to be..
Authorized
Legal purpose, offer & acceptance, and consideration
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements...
The period of time during which accumulated money is converted into income payments.
Best description of what an annuity period is:
Flexible premium
Both Universal Life and Variable Life have a...
Straight life Policies
Charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration
Standard risk
Considered to be the average risk; representative of the majority of people in their age and with similar lifestyles
Prior insurance, credit history, and habits
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information of the applicant...
Be interpreted as if the insurer waived its right to have an answer on the application.
If an insurer issued a policy based on the application that had unanswered questions it would...
Premium amounts and surrender values
Included in a policy summary
When a large face amount is requested by an applicant it is protocol to do this..
Insurers commonly require HIV testing; the insurer must abide by a variety of rules created by its respective state.
Standard, substandard, and preferred
The 3 risk classifications used by underwriters for life insurance
Gradually increases each year by the amount that the cash value increases.
Under Option B the death benefit includes the annual increase in cash value so that the death benefit...
Respond to the consumer's complaint.
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must...
Level, Increasing, & Decreasing
What are the three basic types of term coverage available, based on how the face amount (death benefit) changes during the policy term:
Coverage until death or age 100.
What characteristic makes whole life permanent protection?
The earliest a policy may go into effect?
When the application is signed and a check is given to the agent
The policyowner is entitled to policy loans.
Whole life policies offer level premium based on the issue age, guaranteed, level death benefit, cash value that is scheduled to equal the face amount at the insured's age 100, and living benefits, which include policy loans.
Contracts of Adhesion
Contracts that are prepared by one party and submitted to the other party on a take it or leave it basis are classified as?
Family health history, alcohol/tobacco consumption, and recent surgeries
Part 2 of the application for life insurance provides questions regarding all of the following..
Loss
Insurance is a contract by which one seeks to protect another from...
Have lower premiums
Insureds who have been classified as preferred risk will...
Who makes up the Medical Information Bureau?
Insurers (this is so the insurers can compare the info that have collected on the individual)
Stock
Insurers who are owned by stockholders who have the usual rights of ownership, including the right of voting?
Major difference between stock company and a mutual company..
Ownership is the difference between these two companies. Mutual-policyholders; Stock-stockholders
A prospective insurer receives a conditional receipt, but dies before the policy is issued. The insurer will...
Pay the policy proceeds only if it would have issued the policy
Policyowner
Person entitled to exercise the rights and priveleges in the policy
Universal life
Policy which allows the partial withdrawal, or surrender, of the policy cash value
When an agent collects the initial premium from the applicant, the agent should issue the applicant a...
Premium receipt
The applications
Primary source of insurance underwriting
Insurance companies from adverse selection by high risk persons
The Medical Information Bureau (MIB) was created to protect...?
The policy contains sufficient cash value to cover the cost of insurance
The policyowner of a Universal Life Policy may skip paying the premium and the policy will not lapse as long as...
The death benefit can be increased by providing evidence of insurability.
The policyowner of an adjustable life policy wants to increase the death benefit. What is the result of this?
The Application
An Insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?
Annuity owner
The "owner" is the person who purchases the contract and has all of the rights such as naming the beneficiary and surrendering the annuity. The owner, however, does not have to be the one who receives the benefits; it could be the annuitant or the beneficiary.
