Key Facts Life Flashcards
__________ is defined as the transfer of PURE risk to the insurance company in consideration for a premium.
Insurance
The chance of loss without any chance of gain is called ________
pure risk.
_______ risk has the possibility for gain or loss and is not insurable
Speculative
_______is defined as the chance of loss
Risk
A condition that could result in a loss is known as an _________
exposure
A __________ is something that increases the chance of loss.
hazard
The presence of a _______________ increases the chance of a loss occurring.
physical hazard
A__________ is defined as a cause of loss, such as fire
peril
To be _______________, losses must be calculable
insurable
The ______________ allows insurers to predict claims more accurately
law of large numbers
The law of large numbers applies to ___________, not to individuals. The more people in the group, the more accurate the predictions are.
groups of people
Most insurers buy reinsurance to protect themselves in the event of a
_________ loss
catastrophic
Insurance laws are _______required to be uniform from one state to another
not
A__________ insurer may pay dividends to its shareholders (stockholders), but they
may not be guaranteed
stock
A ____________ insurance company is managed by an attorney-in-fact
reciprocal
An unincorporated association of individuals who insure each other is known as a __________ insurer
reciprocal
The__________ offers insurance primarily based upon social needs, such as
flood insurance and worker’s compensation, but does not offer insurance for the purpose of preventing fraud.
government
A __________ company has their home office in another state
foreign
An insurer incorporated outside of the U.S. who sells in the U.S. is an _______
company
alien
A producer may be personally _________ when violating the producer’s contract
liable
Producers represent the____________, not the insured
insurance company
Independent producers own their own accounts and are not________
employees
insurance company
Producers have express, implied and apparent ____________
authority
The authority a producer has that is written in his or her contract is known as
_________ authority.
express
A producer’s binding authority (if any) is expressed (written down) in the
______________ with the insurer the producer represents.
producer’s contract
The authority not expressly (written) granted, but is actual authority the producer
has to transact normal business activities, is known as ________ authority
implied
The elements of a __________ may be remembered by the acronym C-O-A-L
(consideration, offer, acceptance, legal purpose and legal capacity).
legal contract
A requirement for a valid contract is ___________, or mutual agreement
offer and acceptance
Advertising the availability of insurance is ____________ considered to be an offer
not
A specific and definite proposal to enter into a contract is known as an _______
offer
The ____________ on a policy need not be equal
consideration
A policy may not be __________ due to unequal consideration.
voided
Under the _______________, something of value must be exchanged
consideration clause
Because insurance contracts are contracts of adhesion, policy ambiguities always
favor the ______________
insured
Insurance policies are considered to be unilateral contracts, in that only one party
makes an __________promise the insurer
enforceable
The principle of_____________ states the purpose of insurance is to restore the
insured to the same position as before the loss occurred
indemnity
The principle of _____ _____ ____ states that all parties to an insurance
transaction are honest
utmost good faith
A ____________ is defined as the truth to the best of one’s knowledge
representation
A ___________is defined as a sworn statement of truth, guaranteed to be true
warranty
A breach of ____________ may void a contract
warranty
____________ is defined as the failure to disclose a material fact
Concealment
When an insurer voluntarily gives up the right to obtain information that they are
entitled to, they have made a _____________
waiver
Insurable interest must exist at the time of ___________, but not necessarily at the
time of a claim
application
Insurable interest may be based on ________ or family relationships
economics
An insurable interest exists if someone would __________ if another person continues
to live.
benefit
Buying a___________ creates an immediate estate
life insurance policy
When life insurance is used to pay estate taxes it is known as estate
____________.
conservation
A life settlement contract is between the life insurance ____________ and a third
party
policyowner
The human life ___________ approach was created to establish what a family would lose in income upon the death of the sole or chief income provider.
value
The_________ approach to life insurance does not consider future earnings.
needs
Stockholders in small, privately held closed corporations often enter into __________
agreements with the corporation that are funded by life policies
buy/sell
A policy that provides for business continuation in the event that a business
partner dies is based upon a ____________ buy/sell agreement
cross-purchase
A corporation may buy a policy on a shareholder to provide for ________ _____
in the event of the shareholder’s death.
stock redemption
A stock redemption plan is an agreement whereby a corporation agrees to buy
back the stock of a ______________ _________
deceased shareholder
Examples of ___________ policy ownership include key person and partnership
insurance, as well as a policy written on the life of a spouse or minor child
third-party
Under an executive bonus, the premium paid to the employee as a bonus is
deductible by the business and the amount paid to or for the employee is
reportable as ______________ to the employee.
taxable income
When life insurance is purchased as an executive bonus for a corporate
employee, the policy belongs to ______________.
the employee
Life insurance __________ _____________ are based upon people and time
mortality tables
Life insurance ___________ are based on mortality (death) plus company expenses
minus interest earned on company investments.
premiums
Agents (producers) are also known as ___________ __________
field underwriters.
If a producer gives an applicant a conditional receipt and the underwriter rejects
the application, there is no _____________
coverage
Conditional or binding receipts are used in life and health____________. Binders are
used in property and casualty ___________
insurance
A _____________ is not given to an applicant unless the initial premium has
been paid
conditional receipt
Applicants may \_\_\_\_\_\_\_\_\_\_\_ a life insurance application for up to a specified number of months (usually 6 months) in order to obtain a lower premium.
backdate
An incomplete application is usually returned. However, should the underwriter
approve it, coverage begins and the company has ____________ its ability to contest a
claim.
waived
The earliest that coverage could start would be the day of __________, assuming
the applicant paid the first premium, had no conditions to fulfill, and had not lied
on the application
application
Coverage can NEVER begin unless the ___________ has been paid
premium
The HIV consent form states that the results of an HIV test will only be shared
with ______________, such as the underwriter
certain individuals
Life insurers may discriminate based upon ____________ (age and health) of
the applicant
physical hazards
The company ____________ determines the final rating classification, not the
producer
underwriter
A preferred risk is likely to receive a _______ discount.
premium
A _____________ is one with an average life span. Most applicants are standard
risks
standard risk
A ____________ is one issued to a substandard risk with dangerous hobbies or
health problems
rated policy
An increasing term policy’s limits increase each year. An increasing term policy is
sometimes called a ____________ policy
return-of-premium
Term insurance is renewable without a _______________, up to a certain age
physical examination
Term insurance may be converted to whole life, but not the reverse. Conversion is
based on the insured’s current ______.
age
Convertible term is convertible based upon the current or ____________ of the
insured.
attained age
On term life insurance, the re-entry option is contingent upon the insured passing
a _______________
physical exam
In a level term policy, the ____________ and the amount of coverage are level
throughout the term
premium
On an annual renewable level term policy, the premium will __________ every year,
although the face amount will remain the same
increase
The face amount of a __________ protection life insurance policy will decrease at
the same rate as the ___________ balance declines.
mortgage
It is the ____________ that decreases on a decreasing term policy, not the
premium.
face amount
______________ is the type of life insurance provided in mortgage redemption
insurance
Decreasing term
_______________ policies must contain a table showing their guaranteed cash value at the end of each year (anniversary date) for the first 20 years. It is shown per unit
(per thousand).
Whole life
Whole life benefits are bundled (packaged).____________ life benefits are transparent
(stand-alone)
Universal
Whole life and limited pay life both reach maturity at the same age________
100
In a traditional ____________ premiums are due until the insured dies or reaches
age 100. Conversely, in a limited pay policy, the premiums are paid for a shorter
period of time.
whole life policy
Straight or traditional whole life has a level ___________ and will provide coverage
until the insured dies or reaches age 100
premium
Whole life insurance will pay the ____________upon death or age 100, whichever
comes first
face amount
_____________ whole life insurance has limits that pertain either to the number of
years payments must be made, such as 20 pay-life, or the age by which all
premiums must be paid, such as life paid-up at 65.
Limited pay
Limited pay whole life policies, though paid up earlier, do not mature until the
insured reaches __________
age 100
On a 20-pay life, the cash value will equal the __________ at maturity.
face amount
A___________ may buy a policy that is paid up for life.
single premium
A___________ policy has an immediate cash value
single premium
An adjustable ___________policy may be suitable for someone with fluctuating
income
whole life
Adjusting the ___________ paid on an adjustable whole life policy will affect the face
amount, and vice versa.
premium
Universal life insurance is different from whole life because it has a ___________ that
is flexible
premium
Universal life insurance policies permit their owners to take partial _____________.
surrenders
Taking a ____________ on a universal life policy allows the policy owner to
withdraw some of the cash value without paying tax on the interest
partial surrender
Universal life insurance is also known as ___________ whole life.
interest sensitive
