Life Insurance Basics Flashcards
Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?
No, advertising of the existence of the guaranty association for the purposes of solicitation and sale of insurance policies by insurers is an illegal business practice.
What type of report provides information about the applicant’s hobbies, habits and financial status?
Investigative consumer report.
What is the main responsibility of a company’s underwriting unit?
Risk selection.
What is the term that describes the frequency and the amount of the premium payment?
Premium mode.
When planning for survivor protection in life insurance, what needs to be considered?
The insured’s current assets, liabilities and survivor’s needs.
When must the policy summary for a life insurance policy be delivered to the Policyowner?
At the time of policy delivery.
What type of life insurance offers an applicant a cash value element?
Permanent insurance (usually, whole life).
Who is the beneficiary on a key-person life insurance policy?
The employer.
If an applicant for a life insurance policy and the potential insured are two different people, what would be there underwriter’s main concern?
The existence of insurable interest between the applicant and the insured.
What are the three main instances when insurance interest exists in life insurance?
Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the Policyowner.
In and insured changes his payment plan from monthly to annually, what happens to the total premium?
It will decrease.
What are the three factors that determine the premium for a particular life insurance policy?
Mortality, interest and expense.
What type of insurance creates an immediate estate?
Life insurance
A business is the owner and beneficiary of a key-person life policy. When the business collects the policy benefit, how is it taxed?
The benefit is received tax free.
All other factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?
Monthly.
Who is responsible for the contents of insurance advertisements?
The insurance company.
Mortality tables are used by insurance companies to predict what?
Life expectancy and the death rates for specific groups of individuals.
What are the personal uses of life insurance?
Survivor protection, estate creation and conservation, cash accumulation and liquidity.
What does liquidity mean in a life insurance policy?
Availability of cash value.
What is the purpose of key person insurance?
To minimize the risk of financial loss caused by the death of a key employee.
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
It will decrease.
Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the state. What is this called?
Estate conservation.
In calculating the amount of life insurance needed, what is the needs approach based on?
The predicted needs of a family after the premature death of the insured.
What is included in part 2 of a life insurance application?
Medical information about the prospective insured.
What is insurance underwriting?
The process of risk selection and classification.
What type of life insurance offers an applicant a cash value element?
Permanent insurance (usually, whole life).
Who must have insurable interest in the insured?
The policyowner.
When must insurable interest exist in a life insurance policy?
At the time of application.
What document describes the specific information about a policy?
Policy summary.
What term describes the fee a person pays an insurance company to receive coverage?
Premium.
What are illustrations in a life insurance policy?
Presentations of non-guaranteed elements of the policy.
What is the purpose of insurance guaranty associations?
To protect policy owners, insureds and beneficiaries from financial losses caused by insolvent insurers.
What is the purpose of the agents report during the application process?
The agents report discusses the agents personal observations about the proposed insured that may help in the underwriting process.
Who must be a member of insurance guaranty association?
All insurers authorized to write insurance within a state.
How does the premium mode affect the total premium paid for insurance for the year?
Higher frequency of premium payments will result in higher overall premium.
At what point does coverage begin when an agent issued a conditional receipt for a life insurance policy?
Either on the date of the application or the date of the medical exam (whichever occurs last).
