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MI Life Insurance Exam > Life Insurance Basics > Flashcards

Life Insurance Basics Flashcards

1
Q

The amount paid upon the death of the insured in a life insurance policy.

A

Death Benefit

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2
Q

Equity anoubt accumulated in permanent (whole) life insurance.

A

Cash Value

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3
Q

Selling assets in order to raise capital

A

Liquidation

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4
Q

Ability to meet financial obligations (e.g. an insurance company maintains enough assets to pay claims)

A

Solvency

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5
Q

To purchase insurance, the policyowner must face the possibility of losing money or something of value in the event of loss.

A

Insurable interest

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6
Q

Must exist between the policyowner and the insured at the time of application

A

Insurable Interest

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7
Q

The purchase of life insurance creates:

A

An immediate Estate

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8
Q

Liquidity

A

Policy cash value can be borrowed

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9
Q

Survivor protection

A

Provides funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured’s death.

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10
Q

Estate Conservation

A

Allows you to keep the assets that are given to you.

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11
Q

Gives an estimate if what would be lost to the family in the event of premature death: using the insured’s wages, inflation, retirement years and time value of money.

A

Human life value Approach (HLVA)

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12
Q

A business can lessen the risk of financial loss bcuz of premature death a key employee

A

Key person insurance

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13
Q

Agreement is a legal contract that determines what will be done with a business in the event that an owner dies or becomes disabled. AKA: Business continuation agreement.

A

Buy-sell agreement

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14
Q

Used in partnerships when each partner buys a policy on the other

A

Cross Purchase

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15
Q

Used when the partnership buys the policies on the partner

A

Entity Purchase

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16
Q

Used by privately owned corporations when each stockholder buys a policy on each of the others.

A

Stock purchase

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17
Q

Used when the corporation buys one policy on each shareholder

A

Stock redemption

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18
Q

Written on a single life. Rate and coverage based upon the underwriting of that individual.

A

Individual life insurance

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19
Q

Written as a master policy, issued to the sponsoring organization, co ering the lives of more than one individual member of that group.

A

Group life insurance

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20
Q

Individuals covered by group insurance receive a policy and a:

A

Certificate of insurance from the master policy

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21
Q

Temporary life insurance provided for a specific period of time. Aka: Pure life insurane

A

Term life insurance

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22
Q

Refers to various forms of whole life insurance policies that remain in effect to ag 100, as long as the premium is paid. Also has the element of cash value.

A

Permanent life insurance

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23
Q

Only ______ policies distribute dividends to policyowners.

A

Participating

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24
Q

______ life insurance or annuities are contracts that offer guaranteed minimum or fixed benefits that are stated in the contract.

A

Fixed

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25
Q

________ life insurance or annuities are contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance.

A

Variable

26
Q

An attempt to persuade a person to buy an insurance policy, and can be some morally or in writing.

A

Solicitation

27
Q

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

A

Illustration

28
Q

Life insurance illustration must:

A

Distinguished bt guaranteed and projected amounts;
Clearly state it is not part of the contract;
Identify those values that are not guaranteed as such.

29
Q

Provides generic info on various types of policies.

A

Buyer’s guide

30
Q

Provides specific info on the policy being issued.

A

Policy summary

31
Q

Formed to protect policyowners, insureds, beneficiaries and anyone entitled to payment under an insurance policy from the incompetence and insolvency of insurers.

A

Guaranty associations

32
Q

Insurers cannot advertise protection by the Insurance Guaranty Association. It is considered:

A

Unfair trade practice

33
Q

The risk selection and classification process

A

Underwriting

34
Q

A life insurance producer is the company’s

A

Field Underwriter

35
Q

Provides the agent’s personal observations concerning the proposed insured.

A

Agent’s report

36
Q

Both the proposed insured (applicant) and the agent must sign the:

A

Application

37
Q

Issued whenever the agent collects premiums. Also determines when coverage will be effective.

A

Premium receipt

38
Q

The most common type of receipt is a ______ _______, which is used only when the applicant submits a prepaid application.

A

Conditional receipt

39
Q

Says that coverage will be effective either on the date of the application or the date of the medical exam; whichever occurs last as the policy is issued as applied for and insured is a standard risk.

A

Conditional receipt

40
Q

The key source underwriters use for information about the applicant.

A

Insurance Application

41
Q

A statement requested from the applicant’s physician to obtain specific medical details

A

Attending Physician Statement

42
Q

Insurers cannot refuse coverage solely on the basis of adverse info on the:

A

Medical Information Bureau (MIB)

43
Q

When insurers plan to seek and use info from investigators they must first provide the applicant or insured with a ______ ________ ______ ________.

A

Written Disclosure Authorization Notice

44
Q

Written Disclosure Authorization Notice must be approved by:

A

The head of the Department of Insurance

45
Q

Discriminating in policy rates and benefits based solely on:

A

Age or gender
Physical or mental impairment
Blindness or partial blindness
Genetic characteristics or genetic testing

46
Q

The higher the risk, the higher the

A

Premium

47
Q

Persons who, according to a company’s underwriting standards, are entitled to insurance protection without extra rating or special restrictions. Average risks

A

Standard risks

48
Q

Result in higher rates premiums due to health issues, lifestyle, occupation.

A

Substandard (High exposure) risk

49
Q

Individuals who meet certain requirements and qualify for lower premiums than the standard risk.

A

Preferred risks

50
Q

Applicants who are rejected are considered

A

Declined risks

51
Q

When the insurer relinquishes control of the policy by mailing it to the policyowner, policy is considered:

A

Legally delivered

52
Q

When an agent hand delivers an individual policy or annuity to the policyowner, the agent must obtain a signed:

A

Delivery receipt

53
Q

The only allowable reason that an application may be backdated is to:

A

Effect a lower premium

54
Q

No premium:

A

No coverage

55
Q

Any transaction in which new life insurance or a new annuity is purchased and as a result the existing life insurance or annuity has been or will be: lapsed, reissued, converted, amended or used in a financial purchase.

A

Replacement

56
Q

In Michigan the replacing insurer must notify the existing insurer of a replacement within _________ following the receipt of application or when policy is issued; whichever comes first.

A

3 business days

57
Q

All sign documents, proof applicant received the Notice Regarding Replacement and copies of proposals used for at least

A

3 years ( or until the next examination by the commissioner)

58
Q

A source of medic info to alert insurers to adverse medical history

A

Medical info Bureau (MIB)

59
Q

An insurer submits the full premium along with a completed application for life insurance. Once the policy is issued when does the coverage begin:

A

On the date of application

60
Q

The approach to determining the amount of personal life insurance that an applicant needs that considers such factors as the costs associated with death, costs of educating children, and costs of housing is called:

A

Needs approach

MI Life Insurance Exam (7 decks)

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