NYS Insurance Licensing Exam

Pure Death protection

(Term/temporary protection) if the insured dies during this term, the beneficiary receives the pay out; if policy is cancelled/expires prior to insured death, there is nothing payable at the end; NO cash value; maximum age that coverage is not offered is 80

insurance policy

a contact b/w insured and insurance company that agrees to pay the insured in the event of unforseen events caused by specific events

agency contract

a contract that is held between insurer and an agent/producer containing the expressed authority given to the agent/producer, and the duties/responsibilities to the principal, any agent in violation of the agency contract may be held personally liable to the insurer

perils

are CAUSES of the loss that are covered in insurance policies

Continuous Premium ( Straight Life) Whole Life Insurance

basic whole life policy in which policyowner pays premium until the insured's death or age 100. has the lowest annual premium

Adjustable Life

best of both worlds ( perm. and term coverage). Can assume either form; insured usually determines how much coverage is needed and the affordable amount of premium. THen insurer will determine type of insurance needed to meet insured needs. As needs change the policyowner may make changes; cash value only develops when premiums are more than the cost of policy

hazards

broken into 2 subtypes (physical, moral, morale); conditions that increase the probability of the insured to experience a loss

Whole life insurance

build in cash value in which the policy owner can borrow against. cash value does not accumulate until third year in policy. policyowner pays a level premium over the life of the contract. At age 100, benefit is paid to policy/owner or insured or if person dies before beneficiary receives benefit

Limited Payment Whole Life insurance

designed so premiums for coverage will be completely paid up well before the age of 100 (eg- 20-pay or LP-65 where its completely paid up at age 20 or 65). For people who don't want to pay premiums after a certain age however willing to pay for slightly higher premiums

Single Premium whole life (SPWL)

designed to provide a level death benefit to the insured age 100 for a one time lump sum payment. This policy is completely paid-up after one premium and it generates immediate cash; usually requires a minimum premium

3 basic types of Term Coverage

determined by how the face amount or death benefit changes throughout coverage (Level, Increasing, Decreasing) however, premiums usually stay constant the only thing that changes is the death benefit

Increasing Term

features level premiums and a death benefit that increases each year over the duration of the policy term. The amount of the increase in the death benefit is usually expressed as a specific amount or percentage of the original amount. Often used by insurance companies to fund certain riders that provide A REFUND OF PREMIUMS OR A GRADUAL INCREASE IN TOTAL COVERAGE

Return of Premium Term-ROP

form of increasing insurance policy that pays an additional death benefit equal to the premiums paid to the beneficiary. It's paid if the death occurs within a specific time or if the insured outlives the policy.

Permanent insurance

general term used to refer to various forms of life insurance that build in cash value and stay in effect until age 100 or the life of the insured as long as the premium is paid; most common is whole life

morale

hazard derived from complacent (If broken the insurance will fix it ) state of mind

physical hazard

hazards arising from material, structural, and operational features

moral hazard

hazards to applicants that may lie or provide fraudulent information to insurance companies

loss

is defined as the reduction , decrease, or disappearance of value of property or person insured in the policy caused by a name peril

pure risk

is the the certainty that loss or no change will occur with no financial gain to be sought only this type of risk is insurable

risk

is the uncertainty or chance of loss occurring only two types of risks exist which are speculative and pure and only one is insurable

agent

legal representative of a an insurance company that acts for another person or entity known as the principal with regard to contractual arrangements

Riders

modify provision that already exist and to increase or decrease policy benefits and premiums

Decreasing Term Policy

policy that features a level premium and a death benefit that decreases each year over the duration of the policy. Primarily used when the amount of the needed protection is time sensitive or decreases in time (eg---to insure the payment of a mortgage or other debts if the insured dies prematurely b/c amount of coverage decreases as outstanding bal. dec. each year; usually not RENEWABLE

Level Premium Term

provides a level death benefit and a level premium during policy term

Convertible Term

provision provides the policy owner with the right to convert the to a permanent insurance policy without PROOF OF INSURABILITY. The premium will be based on the insured's attained age at time of conversion

beneficiary

receives benefits from the insurance

Level Term Insurance

refers to most common type of temporary protection in which death benefit does not change throughout duration of policy

provisions

stipulte the rights and obligations of an insurance contract and are fairly universal from one policy to the next

3 types of Whole life insurance

straight, limited pay, and single premium

death benefit

the amount paid when a claim is issued against policy of insurance

Annually Renewal Term -ART

the purest form of term insurance, in which death benefit remains level and the policy may be guaranteed to be renewable each year without proof of insurability, but the premium increases annually according to attained age , as the probability of death increases

insurance transfers

the risk of an loss for an individual or business to an insurance company which spreads out the costs to many individuals

speculative

the type that may either lead to loss or gain. example gambling. these are NOT insurable

exposure

the unit of measure used to determine the premiums for insurance coverage

Modified Whole Life

type of whole life insurance that charges a lower premiums (similar to term rates) in the first few policy years, eg 3-5 years and then a higher premium for the remainder of the insureds life. The higher subsequent premium is higher than a straight life premium would be for the same age and amount of coverage. For individuals that are just starting out with low fin. means but will eventually grow in future