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Life Insurance Flashcards

1
Q

What is Whole Life (WL) insurance?

A

Permanent insurance with level premiums, a guaranteed death benefit, and cash value that grows tax-deferred.

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2
Q

What happens at the endowment point of a Whole Life policy?

A

The death benefit equals the cash value, typically at age 115.

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3
Q

What is Term Life insurance?

A

Temporary life insurance with no cash value. It only pays a death benefit if the insured dies within the term.

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4
Q

Name the types of Term Life insurance.

A
  • Level
  • Decreasing
  • Renewable
  • Convertible
  • Increasing
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5
Q

What is Universal Life (UL) insurance?

A

Flexible premium insurance with cash value growth based on interest rates. Offers Option A (level death benefit) and Option B (increasing death benefit).

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6
Q

What are annuities designed for?

A

To provide income for life or a specified period, funded through single or flexible premiums.

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7
Q

What is the difference between Immediate and Deferred annuities?

A

Immediate annuities start payments right away; deferred annuities accumulate funds and start payments later.

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8
Q

What is the main risk with Variable Life insurance?

A

The policyholder bears the investment risk as cash value depends on market performance.

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9
Q

What is a Waiver of Premium rider?

A

Waives premiums if the insured becomes totally disabled, after a waiting period.

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10
Q

What is an Accidental Death Benefit (ADB) rider?

A

Pays an additional death benefit if the insured dies in an accident.

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11
Q

What does a Guaranteed Insurability Option (GIO) allow?

A

The policyholder can purchase additional coverage without proving insurability.

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12
Q

What is a Long-Term Care (LTC) rider?

A

Provides benefits for nursing care expenses, reducing the death benefit.

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13
Q

What is a Term Rider?

A

Adds temporary term coverage to a permanent life insurance policy.

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14
Q

What is the Entire Contract clause?

A

States the policy and application together form the complete contract.

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15
Q

What is the Free Look period?

A

The time during which the policyholder can return a policy for a full refund (usually 10–30 days).

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16
Q

What is the Consideration clause?

A

Specifies the insured’s premium payment and the insurer’s promise to pay benefits.

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17
Q

What are common policy exclusions?

A
  • Suicide (within 2 years)
  • War
  • Non-commercial aviation
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18
Q

What does the Conditional Receipt do?

A

Provides temporary coverage if the applicant meets underwriting requirements.

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19
Q

What is preferred risk in underwriting?

A

A lower-risk individual eligible for reduced premiums.

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20
Q

What must an agent do during policy delivery?

A

Explain policy features and collect any unpaid premiums.

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21
Q

Who regulates the Illinois insurance industry?

A

The Illinois Insurance Director.

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22
Q

What is rebating?

A

Offering incentives to buy insurance, which is illegal in Illinois.

23
Q

What is the purpose of the Life and Health Guaranty Association?

A

To protect policyholders if an insurer becomes insolvent, within coverage limits.

24
Q

What is a Viatical Settlement?

A

Selling a life insurance policy for cash before death, often for terminal illness.

25
What must be provided during a policy replacement?
A 'Notice Regarding Replacement' signed by the agent and applicant.
26
What is the Grace Period provision?
Allows 30-31 extra days to pay a premium without losing coverage.
27
What does the Free Look provision provide?
A period (usually 10-30 days) for the policyholder to cancel and receive a full refund.
28
What is Cash Surrender?
Exchange the policy for its cash value, ending coverage.
29
What is Reduced Paid-Up Insurance?
Use cash value to buy a smaller amount of permanent insurance without further premiums.
30
What is Extended Term Insurance?
Use cash value to buy term insurance for the same death benefit.
31
Are life insurance death benefits taxable?
No, they are generally tax-free to beneficiaries.
32
Are premiums for individual life insurance tax-deductible?
No, premiums are not tax-deductible.
33
How are annuity withdrawals taxed?
Gains are taxed as income; principal is tax-free.
34
What is the Payor Benefit rider?
Waives premiums on a juvenile policy if the payor becomes disabled or dies.
35
What does the Long-Term Care (LTC) rider cover?
Provides benefits for nursing home or assisted living expenses, reducing the death benefit.
36
What is a Modified Endowment Contract?
A policy that fails the 7-pay test, making loans and withdrawals fully taxable.
37
What is the 7-pay test?
Ensures premiums paid in the first 7 years don’t exceed limits set by IRS guidelines.
38
What is a Contributory Group Plan?
Employees and employers share premium costs; 75% employee participation required.
39
What is a Non-Contributory Group Plan?
The employer pays all premiums, requiring 100% employee participation.
40
What is Key Person Insurance?
Protects a business against financial loss due to the death of a crucial employee or partner.
41
What is a Buy-Sell Agreement?
A contract ensuring business ownership transfers to surviving owners upon a partner's death.
42
What is Equity-Indexed Life Insurance?
Whole life insurance with cash value growth tied to a stock market index, offering principal protection.
43
What is Decreasing Term Insurance?
A term policy with a death benefit that reduces over time, often used for mortgages.
44
What is Twisting?
Misleading a policyholder to replace an existing policy with one that may not benefit them.
45
What is Misrepresentation?
Providing false or misleading statements about a policy, which is illegal.
46
What is the Medical Information Bureau (MIB)?
A database insurers use to verify applicants' medical and insurance histories.
47
What is an Inspection Report?
A report on an applicant’s lifestyle, finances, and occupation, often used in underwriting.
48
What is a Unilateral Contract?
A contract where only one party (the insurer) is legally bound to perform.
49
What is a Conditional Contract?
A contract where performance depends on certain conditions being met (e.g., premium payment).
50
What is a Contingent Beneficiary?
The person entitled to receive proceeds if the primary beneficiary predeceases the insured.
51
What is an Irrevocable Beneficiary?
A beneficiary who cannot be removed without their written consent.
52
What is Insuring Clause?
The section of the policy that defines the insurer’s promise to pay benefits.
53
What is the Face Amount?
The stated amount of death benefit in a life insurance policy.
54
What is Constructive Delivery?
Indirect delivery of a policy to the policyholder, such as via mail.

Life Insurance (1 decks)

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