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Life and Health > CH 2 Life Insurance Basics > Flashcards

CH 2 Life Insurance Basics Flashcards

1
Q

Who is the beneficiary on a key person life insurance policy?

A

The employer

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2
Q

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriters main concern?

A

The existence of insurable interest between the applicant and the insured

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3
Q

What type of life insurance offers an applicant a cash value elements?

A

Permanent insurance (usually, whole life)

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4
Q

Who is responsible for the contents of insurance advertisements?

A

The insurance company

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5
Q

When must the policy summary for a life insurance policy be delivered to the policy owner?

A

At the time of policy delivery

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6
Q

When must insurable interest exist in a life insurance policy?

A

At the time of application

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7
Q

A business is the owner and beneficiary of a key person life policy. When the business collects the policy benefit, how is it taxed?

A

The benefit is received tax free

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8
Q

What are the personal uses of life insurance?

A
  • Survivor protection
  • Estate creation and conservation
  • Cash accumulation and liquidity
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9
Q

All other factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?

A

Monthly

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10
Q

What are the three factors that determine the premium for a particular life insurance policy?

A

1) Mortality
2) Interest
3) Expense

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11
Q

When planning for survivor protection in life insurance, what needs to be considered?

A

The insureds current assets, liabilities and survivors needs

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12
Q

At what point does coverage begin with an agent issues a conditional receipt for a life insurance policy?

A

Either on the date of the application or the date of the medical exam (whichever occurs last)

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13
Q

Who must have insurable interest in the insured?

A

The policy owner

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14
Q

What does liquidity mean in a life insurance policy?

A

Availability of cash value

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15
Q

What type of insurance creates an immediate estate?

A

Life insurance

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16
Q

In calculating the amount of life insurance needed, what is the needs approach based on?

A

The predicted needs of the family after the premature death of the insured

17
Q

Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?

A

Estate conservation

18
Q

What is the purpose of the agents report during the application process?

A

The agents report discusses the agents personal observations about the proposed insured that may help in the underwriting process

19
Q

What are illustrations in a life insurance policy?

A

Presentations of nonguaranteed elements of the policy

20
Q

What document describes specific information about a policy?

A

Policy summary

21
Q

What is the term that describes the frequency and the amount of the premium payment?

A

Premium mode

22
Q

What are the three main instances when insurable interest exists in life insurance?

A

Ensuring your own life, the life of a family member, or the life of a business partner or someone who has a financial obligation to the policy owner

23
Q

What is the purpose of insurance guaranty Associations?

A

To protect policy owners, insureds and beneficiaries from financial losses caused by insolvent insurers

24
Q

What is included in part two of the life insurance application?

A

Medical information about the perspective insured

25
Q

What term describes the fee a person pays an insurance company to receive coverage?

A

Premium

26
Q

Mortality tables are used by insurance companies to predict what?

A

Life expectancy and the death rates for specific groups of individuals

27
Q

What is the main responsibility of a companies underwriting unit?

A

Risk selection

28
Q

Who must be a member of insurance guaranty Associations?

A

All insurers authorized to write insurance within a state

29
Q

What is the purpose of key person insurance?

A

To minimize the risk of financial loss caused by the death of the key employee

30
Q

Can insurers advertise the existence of the guarantee association during solicitation and sale of insurance policies?

A

No, advertising of the existence of guarantee association for the purposes of solicitation and sale of insurance policies by insurers is an illegal business practice

31
Q

How does the premium mode affect the total premium paid for insurance for the year?

A

Higher frequency of premium payments will result in higher overall premium

32
Q

What is insurance underwriting?

A

The process of risk selection and classification

33
Q

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

A

It will decrease

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