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Know This Flashcards

1
Q

Insurance is the _______

A

transfer of risk of loss. The cost of an insured’s loss is transferred over to the insurer and spread among other insureds

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2
Q

Insurable interest must _______

A

exist at the time of application. The policyowner must have insurable interest in the life of the insured

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3
Q

A buyer’s guide provides _______

A

generic information on various types of policies

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4
Q

A policy summary provides _______

A

specific information on the policy being issued.

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5
Q

Conditional receipt means _______

A

the applicant may be covered as early as the date of the application.

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6
Q

Representations are _______

A

statements believed to be true. Insured’s statements on the application are representations.

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7
Q

A life insurance producer is _______

A

the company’s field underwriter.

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8
Q

An insurance application is the key source underwriters _______

A

use for information about the applicant.

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9
Q

Insurers cannot refuse coverage solely on the basis of _______

A

adverse information on an MIB report.

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10
Q

The higher the risk, _______

A

the higher the premium

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11
Q

No premium, _______

A

No coverage

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12
Q

Term insurance provides the _______

A

greatest amount of coverage for the lowest premium. Term insurance has no cash value.

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13
Q

“Level” in level term insurance refers to _______

A

the death benefit, which does NOT change.

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14
Q

Whole life insurance provides _______

A

lifetime (permanent) protection and accumulates cash value.

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15
Q

If an insured skips a premium payment on a universal life policy, _______

A

the missing premium may be deducted from the policy’s cash value. The policy will NOT lapse.

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16
Q

In variable contracts, the policyowner _______

A

bears the investment risk (assets in a separate account).

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17
Q

Premium rates on a joint life policy are determined by _______

A

averaging the ages of both insureds.

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18
Q

Joint life = _______; survivorship life = _______

A

Joint life = first to die; survivorship life = second to die (last survivor).

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19
Q

Group insurance is written as _______

A

annually renewable term insurance. In group insurance, the master contract is for the employer, and certificates of insurance are for individual insureds.

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20
Q

Because annuities are based on _______

A

the life expectancy of an annuitant, the annuitant must be a natural person, regardless of who owns the annuity contract.

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21
Q

During the accumulation period, _______

A

funds are paid INTO the annuity. During the annuity period, funds are paid OUT to the annuitant.

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22
Q

Shorter life expectancy = _______; longer life expectancy = _______

A

Shorter life expectancy = higher benefit; longer life expectancy = lower benefit.

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23
Q

Classification of annuities:

A
  • Premium payment method: single premium vs. periodic
  • When income payments begin: immediate vs. deferred
  • How premiums are invested: fixed vs. variable
  • Disposing of proceeds: pure life, annuity certain, or life refund annuity
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24
Q

An immediate annuity is purchased with _______

A

a single premium. Income payments from a deferred annuity begin sometime after 1 year from the date of purchase.

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25
Q

The main use of annuities is to _______

A

provide retirement income.

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26
Q

Entire contract = _______

A

policy + copy of application + any riders or amendments

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27
Q

Absolute assignment is _______

A

the complete and permanent transfer of ownership rights; collateral assignment is the partial and temporary transfer of rights.

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28
Q

Common disaster clause protects _______

A

the contingent beneficiary.

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29
Q

Misstatement of age on the application will _______

A

result in adjustment of premiums or benefits.

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30
Q

Policy loans are ONLY available in _______

A

policies that have cash value (whole life).

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31
Q

Life policy provisions:

A
  1. Entire Contract
  2. Payment of Premium
  3. Reinstatement
  4. Incontestability
  5. Misstatement of Age
  6. Ownership
  7. Assignment
  8. Free Look
  9. Exclusions
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32
Q

Payment of Premium provision

A

Paid in advance: when, how often, and to whom

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33
Q

Reinstatement provision

A

3 years to reinstate a lapsed policy with proof of insurability

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34
Q

Incontestability provision

A

2 years for the company to contest misstatements of the application

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35
Q

Misstatement of Age provision

A

Death benefit is adjusted to the amount according to the right age at policy issue

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36
Q

Ownership provision

A

Policyowner has ownership rights

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37
Q

Assignment provision

A

Absolute (all rights) or collateral (partial rights)

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38
Q

Free Look provison

A

Usually 10 days to return the policy for a full refund of premium

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39
Q

Exclusions provision

A

Aviation, hazardous occupation/hobbies, and war or military service; suicide excluded for a specific period of time

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40
Q

Waiver of premium rider waives _______

A

the premium for a total disability after a waiting period.

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41
Q

Accelerated benefit = _______

A

early payment of part of death benefit to the insured from the insurer for qualifying medical expenses.

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42
Q

Types of riders and their available riders:

A
  1. Disability Riders:
    - Waiver of Premium
    - Waiver of Cost of Insurance
    - Payor Benefit
    - Accelerated Death Benefit
  2. Riders Affecting
    Death Benefit:
    - Accelerated Death Benefit
    - Accidental Death or AD&D
    - Guaranteed Insurability
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43
Q

Nonforfeiture options are triggered by _______

A

policy surrender or lapse.

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44
Q

Extended term is the _______

A

automatic nonforfeiture option: same face amount, shorter term of coverage.

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45
Q

Dividends are a _______

A

return of excess premiums; therefore, not taxable when paid to the policyowner.

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46
Q

Settlement options are triggered by _______

A

the insured’s death or age 100.

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47
Q

Under life-income (straight life) settlement option, _______

A

the recipient cannot outlive the benefit payments.

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48
Q

Option types and their available options:

A
  1. Nonforfeiture Options
    - Reduced Paid-up
    - Extended Term (automatic)
    - Cash surrender value
  2. Dividend Options
    - Cash payment
    - Reduction of Premium
    - Accumulation at Interest
    - Paid-up Additions (automatic)
    - Paid-up Insurance
    - One-year Term
  3. Settlement Options
    - Cash payment (automatic)
    - Life Income
    - Interest Only
    - Fixed Period
    - Fixed Amount
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49
Q

Waiver of Cost of Insurance

A

in Universal Life policies: waives the cost of insurance in the event of the insured’s disability

50
Q

Disability income

A

waives the premium and pays monthly income. Amount paid is based on a percentage of the face amount.

51
Q

Insuring clause:

A
  1. Parties to the contract
  2. Premium to be paid
  3. Length of coverage
  4. Amount of death benefit
52
Q

Grace period

A

The period of time after the premium due date that the policyowner has to pay the premium before the policy lapses

53
Q

Incontestability does NOT apply to _______

A

nonpayment of premiums or misstatements of age, gender or identity

54
Q

If the insurer finds a misstatement of age later on after the insured passed away, the beneficiary _______

A

gets a lower death benefit payout

55
Q

The purpose of reinstatement is to _______

A

restore a lapsed policy

56
Q

The advantage of reinstatement is to _______

A

retain all the values established at issue age

57
Q

Requirements for reinstatement:

A
  1. Apply within the maximum time limit
  2. Pay all back premiums plus interest
  3. Provide proof of insurability
  4. Repay outstanding loans plus interest
58
Q

Automatic premium loans (APL)

A
  1. Prevents unintentional lapse
  2. Automatically taken from cash value at the end of the grace period
  3. Will be deducted from death benefit if not repaid
  4. Insurer honors immediately
59
Q

Partial surrender or withdrawal

A
  1. Only on universal life policies
  2. May be a charge
  3. Limits on withdrawal amount
  4. Interest may be taxable
60
Q

Payor benefit

A

Similar to waiver of premium if the payor (parent or guardian) becomes disabled for atleast 6 months. Used in juvenile policies.

61
Q

Accidentally death rider

A
  1. Pays multiple of the face amount
  2. Death must occur within 90 days of an accident
  3. Principal sum (face amount) for accidental death
  4. Capital sum (% of face amount) for dismemberment
62
Q

Guaranteed Insurability

A
  1. No evidence of insurability
  2. Additional premium required
  3. Purchase additional coverage at specified future dates or events
    - marriage
    - birth of child
    - specified years (e.g., every 3 or 5 years
63
Q

Cash payment dividend options

A
  1. Available in participating policies
  2. Not guaranteed
  3. Return of excess premiums: not taxable
64
Q

Settlement options (CLIFF)

A
  1. Cash payment (automatic)
  2. Life Income
  3. Interest Only
  4. Fixed-period installments
  5. Fixed-amount installments
65
Q

Nonforfeiture Options (REC)

A
  1. Reduced Paid-up
  2. Extended Term (automatic)
  3. Cash surrender value
66
Q

Dividend Options (CRAPPO)

A
  1. Cash payment
  2. Reduction of Premium
  3. Accumulation at interest
  4. Paid-up Additions (automatic)
  5. Paid-up Insurance
  6. One-year term
67
Q

The Department of Insurance does NOT _______

A

set premium rates or establish fines and penalties (those are defined by law)

68
Q

A domicile refers to _______

A

the location where an insurer is incorporated, not necessarily where the insurer conducts business.

69
Q

Insurance applicants must be notified in _______

A

writing whenever insurers request investigative consumer reports.

70
Q

Department of Insurance Regulations:

A
  • 5 years; Examination of authorized insurers
  • 10 days; Notice of hearing
  • 30 days; Issue the conclusion of a hearing
71
Q

Licensing and Appointment Requirements:

A
  • 18; Age to apply for license
  • 24 months; Producer licensing period
  • 12 months; For producer to reinstate a lapsed license without retaking an examination
  • 15 days; Insurer must file a notice of producer appointment
  • 30 days; To notify Commissioner of termination of producer appointment
  • 10 days; To deliver a suspended, revoked or terminated license to the Commissioner
  • 10 days; To return a license to the Commissioner if state residency is terminated
  • 180 days; Temporary license period
72
Q

Miscellaneous Producer Regulations:

A
  • 24 hours; CE required biennially for producers
  • 3 hours; CE hours required in ethics
  • 6 hours; CE hours that can be carried over to the next licensing period
  • 12 months; CE extension may be granted by the Commissioner
  • 3 years; Maintain business records
  • 30 days; To report a change of address or legal name to the Commissioner
  • 25%; Maximum allowed commissions from controlled business in a 12-month period
73
Q

Important Dollar Amounts:

A
  • $500; Fine for noncompliance with CE requirements
  • $1,000; Maximum fine per violation of the Insurance Code
  • $100-$1,000; Fine for violation of cease and desist order
  • $5,000; Fine for continuing to act as a producer after losing license
  • $500; Fine for acting as a producer without obtaining license
  • $100; Maximum value of inducement before being considered a rebate
74
Q

Insurers cannot advertise protection by _______

A

the Insurance Guaranty Association.

75
Q

Credit life insurance cannot pay out more _______

A

than the balance of the debt.

76
Q

The premium mode is _______

A

the manner or frequency that the policyowner pays the policy premium.

77
Q

Premiums charged for a _______ are lower during the preliminary period and then increase each year until leveling off after the preliminary period. The premium rates are actually equivalent to a standard whole life policy.

A

graded premium whole life policy

78
Q

Mutual companies are owned by _______, while stock companies are owned by _______.

A

policyholders

stockholders

79
Q

All insurers (domestic, foreign, or alien) must obtain a _______ before transacting insurance within a given state.

A

certificate of authority

80
Q

Each insurance producer (except for title producers) must complete at least 24 hours of continuing education _______ (every _______). Three of those hours must be in ethics education.

A

biennially

2 years

81
Q

The Commissioner is _______ at the same time and _______ as other state officials.

A

elected

election

82
Q

Each _______ is responsible for the conduct of insurance within that state.

A

state

83
Q

Credit life, accident and sickness insurance must be evidenced by an individual policy or a group certificate delivered to the debtor no later than _______ after the insurance term begins.

A

30 days

84
Q

A _______ is not required for investigation of claims by an insurer which has relocated in another state as specified in O.5. 606 &
1101.

A

Certificate of Authority

85
Q

A _______ will pay dividends to the owner based upon actual mortality cost, interest earned and costs.

A

participating insurance policy

86
Q

_______ may or may not have a minimum death benefit, unlike _______ which guarantees a minimum death benefit.

A

Variable universal life insurance

variable whole life insurance

87
Q

When the reduced option is written as “joint and 2/3 survivor,” the surviving beneficiary _______

A

receives 2/3 of what was received when both beneficiaries were alive.

88
Q

The triple indemnity accidental death rider obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. The death must be accidental and not contributed to by any other factors and must occur within 90 days of the accident. In this case, since the insured contributed to his own death, the triple indemnity rider is _______, but the beneficiary will still receive the policy’s death benefit.

A

void

89
Q

Guaranteed insurability is a rider that is _______

A

included at the time of application (or can be added at a later date) which allows the insured to increase the amount of insurance without proving evidence of insurability.

90
Q

An insurance agent is one who is licensed to sell, solicit, or negotiate insurance, and is also identified by the term “_______.”

A

insurance producer

91
Q

The replacing insurer must maintain copies of the notice, statement, and notification to the replaced insurer for at least _______.

A

3 years

92
Q

When settling claims, _______ can come into play.

A

negotiation

93
Q

Because the cash value in an _______ has to build up faster since the funds are intended to be used while the insured is alive, the premium for an _______ is considerably more expensive than an ordinary straight life policy.

A

endowment

94
Q

Upon receiving an inquiry from the Commissioner concerning a claim or problem involving premiums, a producer, adjuster, administrator, representative or insurer must provide the Commissioner with an adequate response within _______.

A

20 calendar days

95
Q

The maximum rate of interest allowed on policy loans is _______

A

8% per annum.

96
Q

Convertible term insurance gives the _______

A

policyowner the right to convert the policy to a permanent insurance policy without evidence of insurability.

97
Q

The duties of the Commissioner include filing a report with the Governor _______.

A

annually

98
Q

A variable universal life insurance policy _______

A

combines a flexible premium with an investment component that allows for potentially great returns.

99
Q

If a recipient chooses not to receive notes and documents through electronic mail, the effectiveness, validity or enforceability of the documents _______

A

will not change.

100
Q

Annual premiums are the only modes of payment that do not result in _______

A

service fee, so the overall payment will be lower.

101
Q

If the loan and interest are not repaid and the insured dies, then it will be _______

A

subtracted from the death benefit.

102
Q

If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of _______. In this case, the applicant will most likely need to fill out a _______

A

policy delivery

Statement of Good Health.

103
Q

Though producers and agents are considered to be “field underwriters,” the final responsibility for risk selection lies with the company’s _______.

A

underwriters

104
Q

Any unanswered questions need to be answered before the policy is issued. If a policy is issued with questions left unanswered, the contract will be interpreted as if the insurer _______

A

waived its right to have an answer for the question, and will not be able to deny coverage later because of unanswered questions.

105
Q

The Commissioner must give notice for a hearing at least _______

A

10 days in advance.

106
Q

Fraternal insurers operate on the basis of _______, but they may also _______. Reciprocal insurers are also associations that provide insurance for their members, but they are formed only for the purpose of _______

A

a lodge or charitable organization

sell formal insurance plans for the benefit of their members

providing insurance.

107
Q

An Equity Indexed Annuity will grow based upon _______

A

performance of a recognized index.

108
Q

Insurable interest must exist at the time of the _______

A

application, but not necessarily at the time of a claim.

109
Q

A rated policy is one issued to _______

A

a substandard risk.

110
Q

Marital status is not an _______

A

allowable underwriting factor in life insurance.

111
Q

Straight whole life policies have a level _______

A

guaranteed face amount and a level premium for the life of the insured.

112
Q

A material misrepresentation is a statement that, if discovered, _______

A

would alter the underwriting decision of the insurance company.

113
Q

Variable Whole Life insurance is a _______

A

level fixed premium investment-based product.

114
Q

Renewing late requires the applicant to pay _______

A

double the licensing fee (O.S.
1425)

115
Q

All individual or group certificates of credit life or health must also include the _______

A

effective date and termination date of the policy.

116
Q

The term “illustration” means a _______

A

presentation or depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years.

117
Q

Credit life insurance is a special type of coverage written to insure the life of _______

A

the debtor and pay off the balance of a loan in the event of the death of the debtor.

118
Q

Survivorship life pays on the _______

A

last death rather than upon the first death.

119
Q

In joint life policies, the death benefit is paid upon _______

A

the first death only.

120
Q

If an insured continually uses the automatic premium loan option to pay the policy premium, _______

A

the policy will terminate when the cash value is reduced to nothing.

121
Q

Universal Life policies allow for policyholders to withdraw a limited portion of the policy’s cash value. Each withdrawal, however, is usually charged, and the _______

A

amount and frequency of withdrawals are usually limited.

122
Q

An underwriter may obtain information on an applicant’s hobbies, financial status, and habits by ordering a(n) _______

A

inspection report

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