Dalton Quizzes Flashcards
Duties of insurance commissioners in regulating insurers?
I. To determine if an insurer meets the requirements to obtain a license
II. To conduct financial investigations of insurers operating in the state
Which of the following are the purview of the state courts?
I. To rule on the constitutionality of insurance laws
II. To render decisions on the meaning of policy terms
The policy dividends paid to the policy owner in excess of premiums paid.
is taxable income
catastrophic
adj. 灾难的；灾难性的
Dismemberment
n. 分割；肢解
non-forfeiture
不被没收
Life Income
benefits are paid as an annuity
Life annuity with period certain
—the beneficiary is paid a specified amount of money periodically for life, but the payments are guaranteed for a certain number of periods. In the event of the beneficiary’s death before the specified period ends, the payments continue to the beneficiary’s estate or to a contingent beneficiary, until the guaranteed period ends.
underwriting department
承销部门
Insurance companies have three options for protecting against adverse selection:
including accurately identifying risk factors, having a system for verifying information, and placing caps on coverage
What Is Anti-Selection?
Anti-selection is a term that is often used in conjunction with adverse selection. It is defined as an increase in the chance for a person to take out an insurance contract because they believe their health risk is higher than what the insurance company has allowed for in the premium amount.
insurability
可保性
universal life insurance plan bought by a company
employees also contribute to group life plans. An employee can choose a multiple of their salary to fit their coverage needs. Most companies limit coverage to 3xs salary with no evidence of insurability, and up to 5xs salary with evidence of insurability.
NO/without evidence of insurability
Without evidence of insurability means an insurance provider underwrote a policy, such as for life or health insurance, without verifying that the policyholder was eligible for that coverage.
Extended term insurance
Extended term insurance is life insurance is a life insurance policy where the policy holder stops paying the premiums but still has the full amount of the policy in effect for whatever term the cash value permits.
that is a non-forfeiture option
Reduced paid-up insurance
Reduced Paid-Up Insurance — a life insurance nonforfeiture benefit that provides paid-up insurance for a lesser amount than the cash value of a policy that has lapsed because of premium nonpayment
Although this is a non-forfeiture provision, the amount of insurance coverage would be reduced
Installments for a fixed period.
Fixed Period Option — a life insurance option that may be selected as a settlement under which the policy proceeds are left on deposit with the insurance company to accrue interest and are paid to the beneficiary in equal payments for a specific number of years
It has a settlement option
One-year term
Use Dividends to Purchase One-Year Term Insurance - This so-called “fifth dividend option” allows the policy owner to use the dividends to purchase one-year term insurance at net rates, usually limited to no more than the current cash value on the contract.
rendering
n. 翻译；艺术表现；透视图；抹灰底层
enforcing
vt. 强迫；强制；实施；执行；加强
Express authority
the actual authority that an insurance company gives representatives (agents)
a. Usually granted in writing by an agency agreement or contract
b. The insurance company is responsible for the acts of agents per express authority
Implied authority
—the authority that the agent is not expressly given by the principal but that an agent in similar circumstances normally possesses
a. The authority that is reasonably necessary to carry out the agent’s duties
b. If implied authority exists, an insurer will be liable for the acts of the agent even if the agent knowingly or unknowingly misleads the insured
Apparent authority
—when the insured is led to believe the agent has authority, either express or implied, where no such authority actually exists
a. The insured is unaware that the agent has exceeded expressed or implied authority, and the insurer makes no attempt to stop the agent (a notice issue)
b. Apparent authority may bind the insurer
insurable interest
可保利益
Taxable or no taxable on dividend payments?
Dividends which are less than the amount of premiums paid are considered a return of that excess premium to the payor and are therefore non-taxable. Dividends paid to the premium payor above the amount of premium paid are fully taxable as income when earned.
Survivorship (second-to-die) life insurance policies
provide death benefits when the second, or last, insured dies. Second-to-die life expectancy is greater than either individual life expectancy; therefore, premiums are lower.
a. Applicable for estate planning where spouses intend to make substantial use of the marital deduction and need a cost-effective vehicle to provide estate liquidity at death of the second spouse when federal estate taxes are expected to be substantial
b. Usually, second-to-die policies are cost effective because of combined life expectancies that reduce premiums and because of the payment of policy expenses associated with one policy rather than two
c. Premiums may increase at the death of the first insured
Accidental death and dismemberment
—a death benefit to be paid to the beneficiaries if the insured dies by accidental means; benefits are paid to the insured for loss of limb or sight
exclusions
n. 不包括的项目:如接受服务项目是由投保以前已患有的疾病或伤害引致的
to prevent the acceptance of undesirable risks and losses, they are best covered under another type of coverage or policy.
Aleatory
adj. 碰运气的；侥幸的；偶然的
Variable life—
Its the premium is fixed, but the face amount may vary with no guarantee of cash value
- ) The insured can choose from a wide variety of investment options
- ) The death benefit may go up in value but cannot fall below a guaranteed minimum amount (face value) and consists of two parts: the minimum and the excess amount created by favorable investment returns
- ) Insurance and securities licenses are required to sell variable life insurance
- ) Variable life insurance is suitable only for clients with a higher risk tolerance
- ) Sold with a prospectus
A client has asked you, as her planner, to review her life policies. The variable life insurance contract that she owns may be characterized as a/an:
I. Unilateral contract.
II. Aleatory contract.
III. Conditional contract.
IV. Personal contract of adhesion.
A)I, II and III only.
B)I and III only.
C)II and IV only.
D)I, II, III and IV.
Rationale
The correct answer is “D.” All choices accurately describe the variable life contract.
business overhead expense disability policy
pays the insured’s business overhead expenses if the insured becomes disabled. The policy is designed for small businesses that rely on one or two persons.
COMPREHENSIVE PERSONAL LIABILITY COVERAGE –It may be part of a standard ISO homeowners policy or a stand-alone policy.
- Personal liability insurance provides coverage for the insured’s legal obligation resulting from bodily injury or property damage
- Personal liability insurance also provides payment for reasonable medical expenses for the injured party 3. Personal liability is included in Section II of the homeowners policy with a minimum limit of $100,000. 4. In most policies, the definition of insured includes the following:
a. You and residents of your household who are relatives
b. A person under 21 who is in the care of a relative
c. A person who has your permission to operate watercraft or tend to animals that belong to you
d. Any person engaged in your employment or using a vehicle on an insured location - Exclusions
a. No coverage for bodily injury or property damage if the act that created the injury or damage was intentional
b. Liability that is a result of business owned or conducted by the insured is not covered by liability insurance
c. Liability arising from a rental operation conducted by the insured is not covered; however, there are exceptions for occasional rental of residence, rental of part of the premises for residence, or rental of part of the residence as an office
d. Professional liability is excluded
ISO
homeowners forms portfolio, the HO 3 insures the described owner-occupied dwelling, private structures in connection with the dwelling, unscheduled personal property on and away from the premises, and loss of use. Personal liability coverage and medical payments coverage are also provided by this policy.
Private medical insurance does not pay for custodial nursing home stays, except possibly in a convalescent situation.
(The clarification on why Option “III” above is incorrect ) in that a comprehensive major medical policy would pay for treatments for the arthritis, but not for the custodial care which is required because Fred cannot perform the functions of daily living (i.e., dressing, feeding, bathing, etc.)
The particular type of disability insurance that is renewable is:
I. Non-cancelable.
II. Guaranteed Renewable.
III. Cancelable.
A)I only.
B)II only.
C)I and II only.
D)II and III only.
Rationale
The correct answer is “C.” Cancelable policies are not renewable. These are one-time temporary policies, not seen very often anymore and best avoided.
Modified Endowment Contract (MEC)
- once all the earnings are withdrawn and tax and penalty paid on them, the basis is not taxed, nor is there a penalty.
- even loans from a MEC are taxable and the penalty is applied.
- Once a contract is a MEC, it remains so even after a 1035 Exchange for a different policy.
- Any withdrawals are made on a LIFO basis.
Which of the following represents the LEAST favorable means of securing long-term care coverage?
A)Continuing Care Retirement Communities.
B)Disability Income Policy Rider.
C)Association Arrangements.
D)Life Insurance Policy Rider.
The correct answer is “D.” Continuing Care Retirement communities are structured specifically for Long-Term Care (LTC) coverage, as are the individual policies. Association arrangements are also LTC specific. These three all provide excellent means to obtain LTC coverage. The disability income policy rider takes a coverage that can no longer be carried after age 65 and converts it to useful LTC coverage, another excellent plan. The least favorable is to have diminished coverage that one will most definitely need at some point - life insurance.
surrender
v. 投降；屈服；放弃
n. 投降；屈服；放弃
Tracy Cardinale was named by her sister, Lisa, as irrevocable beneficiary of Lisa’s life insurance policy. After this was set up, Lisa wanted to borrow from the policy’s cash value. What right does Lisa have to the cash value? Consider carefully the supporting rationale in selecting your answer.
A)Lisa can borrow the cash value, but she may NOT surrender the policy because of Tracy’s interest in the policy.
B)Tracy must allow Lisa to borrow from the cash value because she is the owner of the policy and as such has a right to do so.
C)Lisa may borrow from the cash value because Tracy has only a contingent interest in the policy.
D)Lisa can only borrow from the cash value with Tracy’s written approval because she has a conditionally vested interest in the policy.
Rationale
The correct answer is “D.” Even though Lisa is the owner of the policy, she can be denied permission to borrow from the cash value since Tracy (the irrevocable beneficiary) has a vested interest in the policy.
incontestable
adj. 无可争辩的；毋庸置疑的
Conditional receipt
Note that while the conditional receipt sets forth certain terms of temporary life insurance coverage, it will not be issued without a completed application and payment of an initial premium.
Non-forfeiture rights of policyholders guarantee that there will be a:
Cash value
Non-forfeiture rights (or provisions) arrange an orderly legal structure to assure monies paid on an insurance policy are not simply absorbed by the company without recourse in the event that an insured decides to terminate coverage.
Non-forfeiture rights
非没收权利
which of the following statements is correct concerning the tax consequences of paying the death benefit to the designated beneficiary?
Life insurance contracts, even a modified endowment contract, acts as a life policy in that there are no income taxes levied on the proceeds to the beneficiary, while the proceeds must be included in the estate value of the decedent for calculation of the gross estate.
borrow money from a life insurance policy with irrevocable beneficial?
irrevocable beneficiaries have all of the rights of the policy owner. In this case, the insured must secure permission from the irrevocable beneficiary with regard to any activity or dispositive change in the policy.
tax implication on the proceeds of insurance policy owner by a third party?
Because John owns the policy on Mary’s life, when Mary dies and the proceeds go to Ester, their daughter, as beneficiary, they are considered a gift from the policy owner (John) to his daughter. Had Mary owned the policy on her life, the proceeds would have passed to her daughter tax-free.
adjuster
n. 调整者；调停者；调节器；理赔人
arbiter
n. 仲裁人；主宰者
When a property claim has been submitted, the adjuster is called in to do which of the following:
I. Assist the insured in the preparing the proof-of-loss statement.
II. Determine whether there was a loss covered by the policy.
III. Classify the loss as standard, substandard, or ineligible.
IV. Choose the arbitrator who will determine the amount of loss.
A)I and II only.
B)I and III only.
C)I and IV only.
D)II and III only.
Rationale
The correct answer is “A.” Options “I” and “II” are roles of an adjuster. Option “III” is incorrect because the classification is the underwriter’s job. Option “IV” is incorrect because the adjuster determines the amount of loss. An arbiter would enter into the situation only if the two sides cannot agree.
Six years ago, Sonny Gates purchased a building for $400,000. Its current replacement cost is $800,000. The building is covered for fire-related perils by Commercial Carriers Insurance Company to $400,000, with an 80% coinsurance provision and a $2,000 straight deductible. Last week, a fire broke out in the building, causing $600,000 of covered damage. What amount will Commercial Carriers Insurance Company pay for this loss? A)$298,000 B)$373,000 C)$598,000 D)$600,000
Rationale
The correct answer is “B.”
(Face value ÷ co-insurance) x Loss - Deductible
[400,000 ÷ (.80 x 800,000)] x 600,000 - 2,000
[(400,000 ÷ 640,000) x 600,000] - 2,000
(.6250 x 600,000) - 2,000
375,000 - 2,000
373,000
When a person is deemed to need skilled care, intermediate care, or custodial care, what is being established relative to a long-term care policy?
A)Whether the patient really needs long-term care, or if some other way can be found to meet the patient’s needs.
B)Where the care required is classified in the Medicare DRG table.
C)Whether the care must be delivered by a hospital or nursing home.
D)The identification of the “level of care” required.
Rationale
The correct answer is “D.” Options “A,” “B” and “C” simply describe the various levels of care one could receive through an LTC policy.
bundle
n. 捆；束；包；大笔钱
v. 捆；把 … 扎成一捆；匆忙地走
unbundle
vt. 对(不同产品、劳务)作分类交易
vi. ( 将一揽子交易中各部分)分类定价
The policy where there is an unbundled premium and the client selects the investments is known as: A)Universal life. B)Variable life. C)Variable universal life. D)Adjustable whole life.
Rationale
The correct answer is “C.” Universal policies provide for unbundled premiums. Variable allows policy owners to select investments. Variable Universal Life (VUL) allows for both.
non-forfeiture options
A nonforfeiture (sometimes hyphenated) clause is an insurance policy clause stipulating that an insured party can receive full or partial benefits or a partial refund of premiums after a lapse due to non-payment. Standard life insurance and long-term care insurance may have nonforfeiture clauses.
Of the following policy options and provisions, which are dividend options available to policyholders of a participating whole life insurance policy?
I. Reduced paid-up insurance.
II. Paid-up additions.
III. Accumulate at interest.
IV. Extended term.
A)I only.
B)I and II only.
C)III and IV only.
D)II and III only.
Rationale
The correct answer is “D.” Only Options “II” and “III” are dividend options. The others are non-forfeiture options.
Insurance for personal fine arts and antiques
Fine arts and antiques are generally insured on a homeowners policy with an endorsement known as a “personal articles floater” which is a form of Inland Marine insurance. This coverage is provided on an appraised value.
可保利益
insurable interest
An HO-3 policy (Special form "open perils") is also known as an "all risks policy". It covers all losses except those specifically named as exclusions in the policy. If there are NO endorsements, which one of the following perils is excluded? A)Flood. B)Fire. C)Collapse. D)Weight of ice.
Rationale
The correct answer is “A.” Flood is excluded from homeowners. Remember, water damage done by water coming from the sky down (as in rain) is covered, but water coming from the ground up (as in flood) is not covered. It should be noted that personal property/contents are covered on a named perils basis in an unendorsed HO-3 policy.
HEALTH MAINTENANCE ORGANIZATIONS (HMOs)
- An HMO is an organization that provides a broad range of health services to a group of subscribers for a fixed periodic payment
- An HMO provides both the financing and delivery of health care
- Operation of an HMO consists of comprehensive health care provided by contracted physicians and medical facilities for a prenegotiated payment
- A preferred provider organization (PPO) is similar to an HMO, except it allows members to receive care outside the network of PPO providers; however, the insured will generally face higher deductibles and/or higher coinsurance
- Health care providers are employees of HMOs, whereas the PPOs contract directly with the health care providers for a reduced price in exchange for increased patient volume and timely payment of fees
The group model of the HMO:
A)Is a corporation and medical staff members including doctors, nurses and clerical staff are employees of the HMO.
B)Is a type of HMO organization that is made up of physicians who have their own office locations.
C)Is an arrangement that is sometimes known as the network model.
D)Has no gatekeeper within the structure of this model.
Rationale
The correct answer is “C.” The group model of the HMO is an arrangement that is sometimes known as the network model.
Option “A” describes a staff model.
Option “B” describes an IPA. The IPA allows the greatest flexibility among HMO coverages.
Option “D” is incorrect as ALL HMOs employ gatekeepers.
leasehold interest coverage
Covers favorable terms in a lease agreement should a fire render a building uninhabitable.
contingent extra expense insurance
Covers expenses caused by the occurrence of a loss to a covered peril which the insured does not own.
extra expense insurance
Covers any extra expenses incurred to continued operation.
Business interruption insurance:
Covers indemnity for businesses during the period where they are rebuilding and restoring after covered losses have forced a halt of business as usual.
cognitive impairment
认知障碍
SETTLEMENT OPTIONS (UPON INSURED’S DEATH)
- Lump-sum—the death benefit is paid in full
- Interest only—the principal (death benefit) of the policy remains invested with the insurance company to be paid at a later date; however, the interest earned on the principal is paid to the designated beneficiary (interest earned is taxable in the year earned)
- Fixed-period installments—the proceeds (principal and interest) are paid over a specified period or term
- Fixed-amount installments—the proceeds are paid at a set dollar amount per month until all of the principal and interest are exhausted
- Life income—benefits are paid as an annuity
a. Single-life annuity—the beneficiary receives a specified amount of money periodically until the beneficiary dies, at which time annuity payments cease (this provides the highest periodic payment)
b. Life annuity with period certain—the beneficiary is paid a specified amount of money periodically for life, but the payments are guaranteed for a certain number of periods. In the event of the beneficiary’s death before the specified period ends, the payments continue to the beneficiary’s estate or to a contingent beneficiary, until the guaranteed period ends.
c. Life annuity with refund—the beneficiary is paid income periodically for life. If the death benefit has not been recovered at the time of the beneficiary’s death, the total amount of payments received does not equal or exceed the basis of the annuity. The remainder up to the basis of the annuity is paid to the contingent beneficiary either in installments or in a lump sum.
d. Joint and survivor annuity—provides payment to two payees; at the death of the first payee, the payment may or may not be decreased to the second payee but will cease on the death of the second payee
Loan provision
a. The insured may obtain a loan from the insurance company up to the cash surrender value using the policy’s cash value as collateral b. The automatic premium loan provision (APL) provides for the premium to be automatically charged against the cash value if the premium is not paid by the insured on the due date 1.) Outstanding loans reduce the death benefit payable at the time of death
Dividend provision
a. Dividends paid on participating policies represent the favorable difference between premiums paid and the actual cost of the policy based on the insurance company’s mortality experience b. Dividends may be: 1.) paid in cash, 2.) used to reduce premiums, 3.) left with the insurance company to accumulate interest, 4.) used to purchase additional paid-up insurance, or 5.) used to purchase one-year term insurance c. Dividends are not taxable income until the amount received in dividends exceeds the policy’s cost basis, which is usually the amount of premium paid less any distributions
Nonforfeiture provision
a. When a policyowner discontinues premium payments in a cash value policy, the policy-owner is entitled to either the cash value or surrender value, if less
1. ) The standard nonforfeiture provision requires the cash surrender value to be made available in cash to the policy-owner. However, the insurance company may delay payment for up to six months after surrender of the policy.
2. ) At the time of surrender, excess cash received over the net paid premiums (basis) is considered income and is taxable to the policy-owner in the year received b. A policy-owner may elect to receive a reduced amount of paid-up insurance equivalent to what the cash value could purchase as a net single premium. The face amount of the policy will be based on the net single premium and the assumptions of the insurance company regarding mortality and other expenses.
c. Paid-up term insurance
1. ) This policy will have the same face amount as the original policy
2. ) The period of the term insurance is determined by the net single premium the cash value can purchase according to the assumptions of the insurance company regarding mortality and other expenses
A supplier of your company experiences fire damage at their plant. They cannot provide an essential part to you for a number of weeks. This, of course, delays your operation. You are covered by a very extensive insurance. For this reason, you would go to collect from your: A)Contingent business interruption. B)Extra expense insurance. C)Business interruption. D)Lease hold interest coverage.
Rationale
The correct answer is “A.” You would go to collect from your contingent business interruption insurance because it is a business which you do not own that has a direct effect on your own business.
Contingent business interruption
is a form of small business insurance that provides financial assistance when the loss of a primary supplier, partner, or customer affects your ability to do business.
Which of the following statements concerning the choice of an entity versus a cross-purchase partnership buy-sell agreement funded with insurance is FALSE?
A)The use of existing insurance to fund the agreement causes a transfer-for-value problem if an entity agreement is selected, but does NOT cause this problem if a cross-purchase approach is used.
B)A cross purchase should be selected if the surviving partners expect to sell their interests during their lifetimes.
C)An entity approach may solve the affordability problem if one partner is significantly older than the other.
D)An entity agreement becomes more desirable as the number of partners included in the agreement increases.
Rationale
The correct answer is “A.” The use of existing insurance does not cause a transfer-for-value situation in both entity and cross-purchase situations because the entity is presumed the same as the individual in a partnership.
(B) is a true statement because when surviving owners expect to sell their business interest during lifetime, they will prefer a cross-purchase agreement to allow them to increase their cost basis in the business upon the death of one of the owners.
(C) is correct because the if we have owners significantly older than other owners then the young owners will have to pay a lot more in premiums to insure the older owners’ lives in a cross-purchase agreement. (D) is correct because the number of policies needed in a cross purchase is N * (N-1).
The policy which insures an individual when "the insured is unable to perform the duties pertaining to any gainful occupation for which they are suited by education, experience, or training" best describes what definition of disability? A)Any Occupation. B)Modified Any Occupation. C)Split Definition. D)Loss of Income
Rationale
The correct answer is “B.” Option “A” - Any occupation would say you are employable even in the severest disabilities. Option “C” - Split definition uses own occupation to begin with and moves toward modified any occupation. This allows for training in a new field. Option “D” - Loss of income avoids having to define disability.
Life insurance is an aleatory contract. This means that:
A)Life insurance is designed to make one whole.
B)Those who need this contract most will try to buy it.
C)Only one party is legally obligated to perform.
D)One party pays more than the other party.
Rationale
The correct answer is “D.” Option “A” is indemnity. Option “B” is adverse selection. Option “C” is a unilateral contract.
Direct recognition programs
are best described as follows: Any amount of cash that is removed from the policy is reflected in a decrease in the amount of dividends and interest paid on that policy.
viatication
Viatication becomes an important issue if the insured were suffering from a terminal illness.
—-purchasing insurance policies for cash from terminally ill policy holders.
