Completing the Application, Underwriting, and Delivering the Policy 8% Flashcards
What is Insurance?
transfer of risk of loss from an individual or business entity to an insurance company (which in turn, spreads costs of loss to many individuals)
What would happen if there was no insurance mechanism?
cost of loss would have to be borne solely by the individual who suffered the loss
What does the term ‘insurance transactions’ include?
(by mail or other means)
1) Solicitation
2) Negotiations
3) Sale (effectuation of a contract of insurance)
4) Advising an individual concerning coverage or claims
What does the process of issuing a life insurance policy begin with?
Solicitation
What does solicitation of insurance mean?
attempt to persuade a person to buy an insurance policy, and it can be done orally or in writing
What does solicitation of insurance include?
1) providing info about available products
2) describing policy benefits
3) making recommendations about a specific type of policy
4) trying to secure a contract between the applicant and the insurance company
Advertising must be what?
accurate and not misrepresent the facts
Advertising rules apply to what?
insurance advertisements intended for:
1) presentation
2) distribution
3) dissemination
4) or other advertising used when used or made either directly or indirectly by or on behalf of the insurance company
Who is responsible for establishing and maintaining a system of control over the content, form, and method of dissemination of all advertising of its policies?
Insurance Company
Who is responsible for all it’s advertisements, regardless of who wrote, created, presented, or distributed policies being advertised?
Insurer
Specific Insurance code regulations for advertisements of life insurance policies in this state (Nevada) include, but are not limited to?
1) may not make any unfair or incomplete comparisons with other policies
2) must use language that can be understood by general public
3) Must identify the actual insurer before using trade names, insurance designation, or names of parent
4) No combination of words or symbols similar to hose of state or federal government agencies may be used if they could imply that the solicitation is connected with a government agency
5) May not contain false statements regarding claims payment, imply that claim settlements will be liberal or generous or special treatment will be provided beyond policy terms
6) Testimonials must be genuine, accurately reproduced and represent the author’s current opinion. If the person is compensated, the testimonials must include “Paid Endorsement”
What does the term Illustration mean?
a presentation or depiction that includes non-guaranteed elements of a life insurance policy over a period of years
What are the General Rules of an Illustration of a life insurance policy (the basic info on the illustration)?
1) Name of insurer
2) Name & Business address of producer or insurer’s authorized representative
3) Name, age, & sex of proposed insured, except when a composite illustration is permitted under this regulation
4) Underwriting or rating classification upon which the illustration is based
5) Generic name of policy, the company product name (if different) and form number
6) Initial Death benefit
7) Dividend option and election or application of non-guaranteed elements
8) Illustration date
9) A prominent label stating “Life Insurance Illustration”
A life insurance illustration must do the following?
1) Distinguish between guaranteed and projected amounts
2) Clearly state that an illustration is not a part of the contract
3) Identify those values that are not guaranteed as such
An agent may only use what illustrations of the insurer if what?
if it has been approved and may not change it in any way
What are the prohibited practices of an Illustration if used in sale of a life insurance policy?
1) Represent the policy as anything other than a life insurance policy
2) Describe non-guaranteed elements in a manner that could be misleading
3) Use an illustration that depicts policy’s performances as being more favorable than it really is
4) Provide an incomplete illustration
5) Claim that premium payments will not be required for each year of the policy in order to maintain the illustrated death benefits, unless it is fact
6) Use the term “vanish” or “vanishing premium” or a similar term that implies the policy becomes paid up
7) Use an illustration that is not self-supporting
If an interest rate used to determine the illustrated non-guaranteed elements is shown, it may not what?
may not be greater than the earned interest rate underlying the disciplined current scale
What are the two traditional methods of comparing costs?
1) Interest-adjusted net cost
2) Comparative interest rate
What helps consumers make educated decisions on purchasing life insurance?
industry developed specific methods and indexes that measure and compare the actual policy costs
Where are the comparisons of policy costs usually included?
in Policy Illustrations
What comparing cost method considers the ‘time value of money’ by applying an interest adjustment to yearly premiums and dividend?
Interest Adjusted Net Cost method
What is time value of money?
investment return on the insurance premium had it been invested elsewhere
What does the Interest Adjusted Net Cost method do?
each year premiums and dividends are figured, interest is taken into consideration
What are the two versions of the Interest Adjusted Net Cost method?
1) surrender cost index
2) net payment cost index
What is the Comparative Interest Rate (CIR) method?
the rate of return that must be earned on a hypothetical “side fund” in a buy-term-invest-the-difference plan, so that the value of the side fund will equal the illustrated cash surrender value of the higher-premium policy at a designated point in time
