Chapter 6 Flashcards
What is an Accelerated Benefit (Option) Rider?
This rider allows the insured to receive a portion of the death benefit prior to death if the insured has a terminal illness that’s certified by a physician and is expected to die within one to two years.
Who is a Beneficiary?
This is the person (or entity) who’s designated in a life insurance policy to receive the death proceeds.
What is Cash Value in life insurance?
This is the equity or savings element of whole life insurance policies.
What does Class Designation refer to?
This is a beneficiary group designation (e.g., all of a person’s children), opposed to specifying one or more beneficiaries by name.
What is the Common Disaster Provision?
This provision ensures that death benefits will be paid to the contingent beneficiary if both the insured and the primary beneficiary die within a short period of time of one another.
What is a Contingent (Secondary) Beneficiary?
This is the beneficiary who’s second in line to receive death benefit proceeds if the primary beneficiary dies before the insured.
What is Earned Premium?
This is the amount of premium that’s paid by the policy owner for policy coverage or insurance protection up to a specific point.
What is the Expense Factor?
Also referred to as the loading charge, this is a measure of what it costs an insurance company to continue to operate.
What does Excess Interest mean in life insurance?
This provision means that the cash value will increase faster than the guaranteed rate if the insurer earns a greater return than the guaranteed rate.
What is the Fixed Amount Installment Option?
This option pays a fixed death benefit in specified installment amounts until the principal and interest are exhausted.
What is Fixed/Level Premium?
This concept averages what the total single premium would be for a policy over periodic payments.
What does Fixed Period or Period Certain Option refer to?
This payment option pays the death benefit proceeds in equal installments over a set number of years.
What is Graded Premium?
This premium funding option is characterized by a lower premium in the early years of the contract, with premiums increasing annually for an introductory period.
What is Gross (Annual) Premium?
An insurer’s gross premium consists of the net premium for insurance PLUS commissions, operating and miscellaneous expenses, and dividends.
What is the Interest Factor?
This is the calculation for determining the amount of interest an insurance company can expect to earn from investing insurance premiums.
What is the Interest Only Option?
This is a death settlement option in which the insurance company holds the death benefit for a period and pays only the interest that’s earned to the named beneficiary.
What is an Irrevocable Beneficiary?
This is a beneficiary that cannot be changed by the policy owner without the written consent of the beneficiary.
What is the Joint and Survivor Option?
This is a settlement option which guarantees that benefits will be paid on a life-long basis to two or more people.
What is the Life Income Option?
This is a death benefit settlement option which provides the beneficiary with an income that she cannot outlive.
What is a Life Settlement?
This is an agreement in which a policy owner sells or transfers ownership in all or part of a life insurance policy to a third party for compensation that’s less than the expected death benefit of the policy.
What is the Lump-Sum Option?
This is a death settlement option in which the death benefit is paid in a single payment, minus any outstanding policy loan balances and overdue premiums.
What is Modified Premium?
This is a premium funding option which is characterized by an initial premium that’s lower than it should be during an introductory period.
What is Morbidity Rate?
This rate demonstrates the incidence and extent of disability that may be expected from a given group of people.
What is Mortality Rate?
This rate is the measure of the number of deaths in some population, scaled to the size of that population, per unit time.
What is the Net Payment Cost Index?
This is a formula that’s used to determine the actual cost of a policy for a policy owner.
What is Net (Single) Premium?
This is a premium calculation that’s used to calculate an insurer’s policy reserves factoring in interest and mortality.
What does Per Capita mean?
This form evenly distributes benefits among all named living beneficiaries.
What does Per Stirpes mean?
This form evenly distributes benefits among an insured’s beneficiaries according to the family line, branch, or root.
What is Premium Mode?
This is the frequency in which a policy owner elects to pay premiums.
Who is a Primary Beneficiary?
This is the first beneficiary in line to receive benefit proceeds upon the death of an insured.
What are Policy Proceeds?
This is the amount actually paid as a death, surrender, or maturity benefit.
What are Reserves in insurance?
This is the money an insurer sets aside to pay future claims.
What is a Revocable Beneficiary?
This is a beneficiary that the policy owner may change at any time without notifying or getting permission from the beneficiary.
What are Settlement Options?
These are optional modes of settlement that are provided by most life insurance policies.
What is Single Premium Funding?
This is a policy funding option in which the policy owner pays a single premium that provides protection for life as a paid-up policy.
What is a Spendthrift Clause?
This clause prevents creditors from obtaining any portion of policy proceeds upon an insured’s death.
What is the Surrender Cost Index?
This is a cost comparison calculation formula which is used to determine the average cost-per-thousand for a policy that’s surrendered for its cash value.
What is a Tertiary Beneficiary?
This is the third beneficiary in line to receive death benefit proceeds.
What is the Underwriting Department?
This is the department within an insurance company that’s responsible for reviewing applications, approving or declining applications, and assigning risk classifications.
What is Unearned Premium?
This includes the premium that has been paid by a policy owner for insurance coverage which has not yet been provided.
What is the Uniform Simultaneous Death Act?
This act states that if the insured and the primary beneficiary die in a common accident at approximately the same time, the law will assume that the primary died first.
What is a Viatical Settlement?
This settlement involves a person with a terminal illness selling his existing life insurance policy to a third party for a percentage of the death benefit.
Who is a Viatical (Viatee)?
This is the new third-party owner in a viatical settlement.
Who is a Viator?
This is the original policy owner in a viatical settlement.
