2 Exam Cards Flashcards
What are the three main instances insurable interest exists in life insurance?
Insuring:
- Your own life
- family member’s life
- Business Parter’s or someone who has a financial obligation to the policy owner
Life Insurance may be used to pay state inheritance taxes and federal estate taxes to eliminate the need to sell assets from the estate. What is this called?
Estate Conservation
What type of life insurance offers an applicant a cash value element?
Permanent insurance (usually, whole life)
How does the premium mode affect the total premium paid for insurance for the year?
Higher frequency of premium payments will result in a higher overall premium (more premium by month>year)
What three factors determine the premium for a particular life insurance policy?
Mortality
Interest
Expense
All other factors beings equal, which premium payment mode will require an overall higher premium? Monthly or Annual
Monthly
What is insurance underwriting
the process of risk selection and classification.
What term describes the fee a person pays an insurance company to receive coverage
Premium
Who is responsible for the contents of the insurance advertisements
Insurance Company
At what point does coverage begin when an agent issues a conditional receipt for an life insurance policy?
Date of application or
Date of Medical Exam
(whichever occurs last)
What does liquidity mean in a life insurance policy?
availability of cash value
In calculating the amount of life insurance needed, what is the Needs Approach based on? (Definition not examples)
The predicted needs of a family after the premature death of the insured.
(considering debt, income, Social Security blackout, expenses)
List Examples of the Needs Approach
family needs (considering debt, income, Social Security blackout, expenses)
A business is the owner, beneficiary (and applicant/premium payer) of a key-person life policy. When the business collects the policy benefit, how is it taxed?
The benefit is received tax-free.
Who is the beneficiary on a key-person life insurance policy?
The employer
When planning for survivor protection in life insurance, what needs to be considered?
- Insured current assets
2. Liabilities and Survivor’s needs
What is included in Part 2 of a life insurance application?
Medical Information about the prospective insured
Medical background, medical visits in recent years, causes of death in deceased relatives, etc
What is included in Part 1 of a life insurance application
General Information (age, birthdate, occupation, gender, address, etc)
What is the main responsibility of a company’s underwriting unit?
Risk selection (Standard, substandard, Preferred)
What is the purpose of the agent’s report during the application process?
to discuss the agent’s personal observation about the proposed insured that may help in the underwriting process.
What are illustrations in a life insurance policy
The presentations of non guaranteed elements of the policy
What document describes the specific information about a policy
Policy Summary
Can insurance companies advertise the existence of the guaranty association during solicitation and sale of insurance policies?
No. Advertising of the existence of the guaranty association for the purposes of solicitation and sale insurance policies by insurance companies is an illegal business practice.
What is the purpose of key person insurance
to minimize the risk of financial loss caused by the death of a key employee
When must the policy summary for an insurance policy be delivered to the policy owner?
At the time of policy delivery (They get information on what they are going to be paying for)
Who must be a member of insurance guaranty associations
All insurance companies authorized to write insurance within a state.
What term describes the frequency and the amount of premium payment
Premium mode or Premium Payment Mode
mode=frequency policy owner pays
What types of insurance creates an immediate estate
Life Insurance
What are the personal uses of life insurance:
- Survivor Protection
- Estate Creation (immidiate estate) and Estate Conservation
- Cash accumulation and liquidity
Who must have insurable interest in the insured?
The policy owner
Mortality tables are used by insurance companies to predict what?
Life expectancy and the death rates for specific groups of individuals
When must insurable interest exist in a life insurance policy?
At the time of application
If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter’s main concern?
existence of insurable interest between the applicant and the insured
What is the purpose of insurance guaranty associations?
To protect policy owners, the insured, and beneficiaries from financial losses caused by insolvent insurance companies
