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CFP > Insurance Ch 6 > Flashcards

Insurance Ch 6 Flashcards

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1
Q

Determines an appropriate amount of life insurance by estimating survivors’ needs that must be met following in individual’s premature death and compares those needs to the resources available.

A

Needs analysis

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2
Q

Determines an appropriate amount of life insurance based on the insured individual’s income earning ability. It is the present value of the income lost by dependents as a result of the insured’s death.

A

Human life value analysis

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3
Q

_______ insurance pays the face amount of the policy if the insured dies during the policy period. It provides protection for a definite but limited amount of time.

A

Term

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4
Q

This type of policy provides protection for one year, only, but permits the insured, to renew the policy for successive periods of one year at a higher premium each year, without having to furnish evidence of ensure ability at the time of each renewal.

A

Annual renewal term ART
Yearly renewal term YRT

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5
Q

This type of policy has the initial premium guaranteed for a period. The longer the guarantee, the higher, the _____ premium will be

A

Level term / level

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6
Q

This allows the insured to re-qualify at a new level premium (age-based) through a simplified underwriting process to continue the policy at a relatively low rate. If the insured does not qualify due to declining health, /she may keep the policy, but at a much higher premium.

A

Reentry provision

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7
Q

This type of policy has a level premium, but the amount of death benefit decreases.

A

Decreasing term

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8
Q

This type of policy is written on the lives of two or more persons, and payable upon the death of the first person to die. These can be in the form of term insurance or in some form of insurance that has cash value.

A

First to die / joint life

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9
Q

This provision guarantees the policy owner, the right to renew the policy for a limited number of years. The carrier usually imposes an age limit beyond which the renewal is not permitted.

A

Renewability

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10
Q

This provision permits the policy owner to exchange a term contract for a contract of permanent insurance within a specific timeframe, without evidence of insurability.

A

Convertibility

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11
Q

______ insurance is appropriate under the following circumstances

There is a limited time needed for protection.

When the dollar is available for coverage are limited, and it is more important to have sufficient coverage than cash value.

A

Term

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12
Q

Refers to any life insurance policy that covers the insured until death.

A

Permanent life insurance

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13
Q

Provides protection for the life of the insured. This does not describe how the premiums are paid, only to the duration of the protection.

A

Whole life insurance

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14
Q

A policy in which premiums are based on the assumption, they will be paid until the insured’s death.

A

Straight whole life insurance

Also known as ordinary life, or continuous premium whole life

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15
Q

With this type of policy premiums are limited by contract to a specified number of years. The premium will be higher than the straight whole life premium because the total cost is generally paid over a relatively shortened time period.

A

Limited pay whole life insurance

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16
Q

With this type of insurance, within limitations, the premiums cash values and level of protection can be adjusted up or down during the life of the permanent contract to meet the owner’s changing needs. The interest credited to the policy’s Cash value is paid at current interest rates.

A

Universal life insurance

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17
Q

With this type of life insurance, if the premiums paid plus the current cash value are not adequate to cover the cost of maintaining the policy, additional premiums must be paid to keep the policy enforce.

A

Universal life insurance

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18
Q

With Universal life insurance, the policyholder can make partial withdrawals from the policies Cash value. There is no requirement to repay the loan. The ___________ will be reduced by the outstanding loan balance. If the policy is not a __________ , the withdrawal amount is not taxed

A

Death benefit / modified endowment contract

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19
Q

With Universal life insurance, the death benefit is constant, generally ignoring the cash value increases (same as whole life). (also called _____ or _______ )

When the cash value exceeds certain benchmarks, the death benefit will _______, as required by the 1984 tax act.

A

Option A / Type I / increase

Level death benefits

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20
Q

With universal life insurance, as the cash value increases, the death benefit increases by the same amount. (Also called ______ or _______)

A

Option B or Type II

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21
Q

As with universal life contracts, the variable, universal life, policies, cash value, and ultimate death benefit is not guaranteed. However, unlike whole life and universal life, the insured’s cash value is invested in a ________. The General account (called the _________) is a liability of the insurance carrier.

A

Separate account/legal reserve

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22
Q

This type of policy provides many features of universal life, insurance and offers policy owner directed investment options of a variable annuity

A

Variable universal life

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23
Q

An ________ at age 100 is like a whole life policy.

A

Endowment

Regarding the test, endowment contracts are wrong or not usable answers

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24
Q

This is a contract that ensures two lives with the promise to pay only at the second death. The policies main usage is to provide liquidity to pay federal estate taxes at this death of the second spouse.

A

Second to die / survivorship life

25
Q

A ________ insurance policy will force the policyholder to pay premiums (a forced savings plan) and will provide coverage for his entire life

A

Whole life

26
Q

And determining whether a variable life policy is suitable, ______ is the most important factor.

A

Risk

27
Q

__________ (insurance) enables the policyholder to increase the death benefit. The insured is not required to furnish proof of insurability.

A

Guaranteed purchase

28
Q

This normally doubles the standard death benefit if the insured dies accidentally. This extra benefit does not affect any needs analysis calculation.

A

Accidental death/Double indemnity

29
Q

With this provision, the insured is granted option to exchange term contract for some type of permanent insurance without having to prove evidence of insurability. It is not a rider. It is a standard contract provision.

A

Conversion provision

30
Q

A rider in which the company agrees to waive all premiums due after the insured has become totally and permanently disabled. It generally requires extra premiums.

A

Disability waiver provision

31
Q

With this type of life insurance rider, if the death of the insured is caused by an accident, an additional sum equal to the face value of the policy will be paid.

A

Accidental death benefit

32
Q

With this type of life insurance rider, the insured, may purchase additional amounts of insurance at stated intervals, without providing evidence of insurability.

A

Guaranteed insurability

33
Q

Dividend options, participating policies

Dividends paid to the policy owner in cash generally not taxable

A

Cash option

34
Q

Dividend options, participating policies

The insurance company simply subtract the amount of the dividend from the premium due and sends a premium notice for the remainder .

A

Reduction of premiums

35
Q

Dividend options, participating policies

Dividends remain with the insurance company in an interest bearing account interest paid on the dividends is taxable, although the dividend itself typically is not taxable. Dividends are added to the death proceeds or, if the policy is surrendered, to the Cash value.

A

Accumulated with interest

36
Q

Dividend options, participating policies,

each dividend is used to purchase, on an attained age basis, a small amount of additional, fully paid up whole life insurance. The additions are added to policy face value to determine the death benefit. The cash value of the paid up additions whole life insurance is added to the guaranteed cash value of the basic policy to calculate the surrender value.

A

Purchase paid up additions

37
Q

Dividend options, participating policies

All or a portion of the dividend is used to buy one year term insurance equal to the policies based cash value, not the cash value of the paid up additions.

A

One year term insurance/5th dividend

38
Q

Nonforfeiture Options

The policy may be surrendered at any time for its cash value less any policy indebtedness plus accumulated dividends. Protection terminates

A

Cash option

39
Q

Contract, provisions, no additional premium

If this is elected, and if the policyholder for whole life, policies doesn’t pay the premium during the grace period , The company will automatically pay the premium and charge it against the cash value of the policy and the death benefit.

A

Automatic premium loan

40
Q

An additional time ,normally 31 days, to pay the premium

A

Grace period

41
Q

Gives the owner of a lapsed policy, the right to reacquire coverage under certain conditions (proof of insurability and payment of premiums in arrears plus interest)

A

Reinstatement clause

42
Q

The benefits under the policy will be adjusted to that which the premium paid would have purchased at the correct age

A

Misstatement of age clause

43
Q

The grace period, the automatic, premium loan provision, and even the misstatement of age clause are all designed to keep the policy ______.

A

In force.

44
Q

The insurer will not contest the policy after it has been enforced for specific period, usually two years. Important exceptions are the following:

no insurable interest at the inception of the policy.

Intent to murder

A healthier person impersonated the applicant in the medical examination

A

Incontestable clause

45
Q

If the insured commits suicide during the first two years of the policy, the insurer will only be liable for ________.

A

A return of the premium.

Suicide clause

46
Q

Disability waiver of premium

With ______ , the company agrees to waive all premiums due after the policy owner has become totally permanently disabled. The cash value is credited as if the policy owner had paid the premium.

A

Whole life policies

47
Q

With __________, there are normally two choices for a disability waiver:

One. The company just waves the charges for mortality and administration expenses, but does not include an increment to the policies cash value.

  1. The company waves the full premium that the client would normally pay.
A

Universal and variable life policies

48
Q

The insured may purchase additional insurance, regardless of insurability at three-year intervals, and up to a specified maximum age

A

Guaranteed purchase option/guaranteed insurability option

49
Q

 nonforfeiture Options

The face amount of the policy will be reduced the paid up insurance. Death benefit will be the amount. The cash value would purchase as a net, single premium. No additional premium is due.

A

Reduced paid up insurance

50
Q

Non-forfeiture Options

The policy may be continued enforce for as long as the Cash value will permit. No additional premiums are due. If the insured outlives the term, the policy stops. At the end of the term, the cash value is zero.

A

Paid up term insurance / extended term

51
Q

Settlement Options

Owner or beneficiary takes lump sum

A

Cash option

52
Q

Settlement Options

The proceeds are retained temporarily by the insurer, and only interest is paid. This option gives the owner or beneficiary time to consider other settlement options or to take a lump sum later.

A

Interest option

53
Q

Settlement Options

The proceeds plus interest are paid out over a specific interval, up to 30 years.

A

Installments for a fixed period

54
Q

Settlement Options

The proceeds are paid out in a fixed amount per month for as long as the proceeds plus interest will last

A

Installments of a fixed amount

55
Q

Settlement Options

The installment options may operate as _______. The clause denies the beneficiary, the right to assign his or her interest in the policy proceeds. Creditors of the beneficiary cannot get to the death proceeds left with the insurance company.

A

Spendthrift Options

56
Q

Settlement Options

The same options for life insurance distributions are available under the annuity settlement options : pure life, or single life, period certain, joint and survivor, and refund

A

Life income, Options

57
Q

If an insurance company has ____ of its 12 financial ratios outside the usual ranges, it is put on the NAIC watchlist.

A

4

58
Q

_______ settlements entail the sale of the policy for less than a full face value. Such sales typically occur when the insured is terminally or chronically ill.

A

Viatical

59
Q

This writer pays a portion of the policies, death benefit of the contract early if the insured is medically certified to be terminally ill. After 1996, a terminally, ill or chronically ill individual may exclude from income amounts received from this rider.

A

Accelerated benefit rider

CFP (26 decks)

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