Chapter 2 Life Basics

Question 1

What part of the application contains general questions about the applicant
IE: Sex/Gender, marital status, residence, date of birth, occupation, and past/present life insurance

Answer 1

Part I

Question 2

What part of the application contains questions pertaining to medical background, past, and present health, any medical visits, hospitalizations, or surgeries in recent years, medical status of immediate family members, including their ages and causes of death

Answer 2

Part II

Question 3

_____ ________ _______ is the process of selection, classification and rating, and determining if someone is insurable.

Answer 3

Home office underwriting

Question 4

A life insurance policy specifically intended for the death benefit to be used to cover estate taxes

Answer 4

Estate Conservation

Question 5

______ policies are the only policies that may pay dividends to policyowners.

Answer 5

Participating

Question 6

_____ loading is a cost area that can vary from company to company based on its operations and efficiency. These factors are used by all insurers.

Answer 6

Expense

Question 7

When an insured decides to change her mode of premium payment from annually to monthly, the total premium due would:

Answer 7

Increase- to offset the lost interest earnings and increased administration costs.

Question 8

Insured’s age on the policy issue date

Answer 8

Issue (Original) Age

Question 9

Insured’s age at any point in time, typically used at renewal or conversion

Answer 9

Attained Age

Question 10

____ ______ ______ is any type of life insurance that is not group, industrial, or government insurance.

Answer 10

Ordinary Life Insurance

Question 11

The primary purpose of ____ _____ ____ is to collect adverse medical information about an applicants health and act as an information exchange.

Answer 11

Medical Information Bureau (MIB)

Question 12

Individuals who have the same health, habits, sex/gender, and occupational characteristics as those reflected in the mortality table. Individuals in this category have an average life expectancy

Answer 12

Standard Risks

Question 13

Individuals who meet certain requirements and qualify for lower premiums because of ideal health, height, weight. Individuals in this category have a longer than average life expectancy

Answer 13

Preferred Risks

Question 14

Individuals who are not acceptable at standard rates because of poor health, bad habits or occupational hazards. Individuals in this policy are issued rated policies that are known as surcharges

Answer 14

Substandard Risks (Higher Risk Exposure)

Question 15

Initially only the premium would be refunded in case of death. The death benefit increases over time with the full face amount eventually payable. Generally used with Senior Life insurance plans to provide minimal benefits without a medical examination

Answer 15

Graded (Lien) Plan

Question 16

Rates an insured at older than actual age

Answer 16

Rated-Up Age

Question 17

Constant dollar amount added to the standard rate per $1000 of coverage.
IE: Student Pilot

Answer 17

Flat Rate

Question 18

A surcharge is calculated using a table showing past claims history of individuals with similar impairments

Answer 18

Tabular Rate

Question 19

What is the equation for how premium is calculated for Life Insurance?

Answer 19

Mortality-Interest+Expenses=Total Premium paid to the insurer

Question 20

Reflects frequency of payment

Answer 20

Mode

Question 21

When are premium payments made?

Answer 21

Monthly, Quarterly, Semiannually, or Annually

Question 22

Additional Charges (expenses) are added to the net premium rate to enable an insurer to meet all costs under the contract 
Mortality-Interest+Expenses= \_\_\_\_\_\_\_\_\_

Answer 22

Gross premium

Question 23

Takes into account interest and mortality

Mortality-Interest=___________

Answer 23

Net Premium

Question 24

An insurance planned normally owned by an employer, creditor or association, under which coverage is provided for the employees, debtors, or members

Answer 24

Group

Question 25

Any type of life insurance that is not a group, industrial, or government insurance. This is the larger portion of the life insurance policies in force today

Answer 25

Ordinary Life Insurance

Question 26

Also known as debit life insurance and makes up only about .03% of the life insurance today

Answer 26

Industrial (Home Service)

Question 27

A life insurance policy that remains in force to age 100 or beyond. Premium is always higher than that on a term policy. This policy provides for living benefits for the policyowner/insured by the way of its cash values

Answer 27

Permanent

Question 28

Lowest of initial premium outlay and designed for someone with a large insurance need but with limited cash flow. Often referred to as temporary coverage. Does not build cash value. Typically used to cover mortgages, short term obligations, or for younger couples with one or more children

Answer 28

Term

Question 29

Class of policy marketed by a mutually owned company. A dividend may be paid to the policyowner when they are declared by the board of directors

Answer 29

Participating

Question 30

Policy marketed by a stock insurer. Do not have to be a stockholder to be a policyholder

Answer 30

Non-Participating

Question 31

Provides more flexibility in terms of premiums, investment objectives and other policy benefits.
IE: Universal and Variable Universal Life policies

Answer 31

Flexible

Question 32

A _____ ______ is used for a policy requested when the applicant’s age, medical history or amount of coverage does not require a medical examination for underwriting. Health questions on the application are asked by the producer and are the only medical information required.

Answer 32

Nonmedical Application