Chapter 2 - Life Insurance 101 Flashcards
Policyowner
The only person who can request and sign for any changes to an insurance contract
Third-Party Ownsership
Insurer is the 1st party, the insured/applicant is the 2nd party. When the insured is not the owner, the policyowner is the 3rd party.
Death benefit
Face amount. The amount of coverage payable on the policy.
Always. ALWAYS income tax free. Because premiums were paid with after tax money.
Death benefit (interest)
Any interest received on face value is income taxable.
Death benefit (premiums)
Premiums paid are not tax deductible because they’re paid with after-tax dollars
Cash value
Money accumulated with permanent (not term) types of insurance. Policy owner may take loan.
Survivor protection
First time buyers. To protect their dependents.
Who needs to ensure that applicant fills out the application completely and to the best of his knowledge?
Producer’s responsibility
Who needs to sign the application?
Both producer and applicant. If insured is a minor, then policyowner signs.
What if a change needs to be made to the application (like a mistake)?
Applicant/insured needs to initial the change
What prevents an application from going into effect?
Payment! If no premium is collected, application will be considered a trial application and policy will not go into effect until payment is received at time of delivery
Conditional receipt
Conditions for temporary coverage. Coverage will begin the date of application or the date of the medical exam. Whichever happens last
Conditional receipt - non-medical application
Coverage begins the date the application is completed because no medical exam is required
Binding receipt
Unconditional. Coverage begins immediately and lasts until the applicant is either approved or rejected by the insurer.
Underwriting phase - application - part 1
Name, social security, marital status, date of birth
