Chapter 1 Flashcards
Types of Insurance Transactions
Solicitation
Negotiations
Sale
Advising an individual concerning coverage or claims
What is Illustration?
A presentation or depiction that includes non guaranteed elements of a life insurance policy over a period of years.
What is interest-adjusted net cost method?
It considers time value of money by applying an interest adjustment to yearly premiums and dividends.
What are the 2 versions of interest-adjusted method?
Surrender cost index and Net payment cost index
What is Comparative Interest Rate method?
The rate of return that must be earned on a “side fund” in a buy term invest the difference plan so that the value of the side fund will be equal to the surrender value of the higher premium policy
Whats needed for insurance contracts to be legally binding?
Agreement - offer and acceptance
Consideration
Competent Parties
Legal Purpose
Contract of adhesion
Prepared by the insurer and accepted or rejected by the insured.
Aleatory Contract
There is an exchange of unequal amounts or values. The premium paid is small in relation to the amount that will be paid in the event of a loss.
Unilateral Contract
Only one of the parties is legally bound to do anything.
Conditional Contract
Requires that certain conditions must be met by the policy owner and the company in order for the contract to be executed and before each party fulfills its obligations.
An absolutely true statement upon which the validity of the insurance policy depends
Warranty
Statements believed to be true to the best of one’s knowledge, but they are not guaranteed to be true.
Representations
Untrue statements on the application
Misrepresentations
Statement that, if discovered, would alter the underwriting decision of the insurance company
Material Misrepresentations
Provides the agent’s personal observations concerning the proposed insured.
Agent’s report
