Life Insurance Basics Flashcards
The amount paid upon the death of the insured in a life insurance policy.
Death Benefit
Equity anoubt accumulated in permanent (whole) life insurance.
Cash Value
Selling assets in order to raise capital
Liquidation
Ability to meet financial obligations (e.g. an insurance company maintains enough assets to pay claims)
Solvency
To purchase insurance, the policyowner must face the possibility of losing money or something of value in the event of loss.
Insurable interest
Must exist between the policyowner and the insured at the time of application
Insurable Interest
The purchase of life insurance creates:
An immediate Estate
Liquidity
Policy cash value can be borrowed
Survivor protection
Provides funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured’s death.
Estate Conservation
Allows you to keep the assets that are given to you.
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.
Human life value Approach (HLVA)
A business can lessen the risk of financial loss bcuz of premature death a key employee
Key person insurance
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.
Buy-sell agreement
Used in partnerships when each partner buys a policy on the other
Cross Purchase
Used when the partnership buys the policies on the partner
Entity Purchase
Used by privately owned corporations when each stockholder buys a policy on each of the others.
Stock purchase
Used when the corporation buys one policy on each shareholder
Stock redemption
Written on a single life. Rate and coverage based upon the underwriting of that individual.
Individual life insurance
Written as a master policy, issued to the sponsoring organization, co ering the lives of more than one individual member of that group.
Group life insurance
Individuals covered by group insurance receive a policy and a:
Certificate of insurance from the master policy
Temporary life insurance provided for a specific period of time. Aka: Pure life insurane
Term life insurance
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.
Permanent life insurance
Only ______ policies distribute dividends to policyowners.
Participating
______ life insurance or annuities are contracts that offer guaranteed minimum or fixed benefits that are stated in the contract.
Fixed
________ life insurance or annuities are contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance.
Variable
An attempt to persuade a person to buy an insurance policy, and can be some morally or in writing.
Solicitation
A presentation or depiction that includes non guaranteed elements of a policy of individual or group life insurance over a period of years.
Illustration
Life insurance illustration must:
Distinguished bt guaranteed and projected amounts;
Clearly state it is not part of the contract;
Identify those values that are not guaranteed as such.
Provides generic info on various types of policies.
Buyer’s guide
Provides specific info on the policy being issued.
Policy summary
Formed to protect policyowners, insureds, beneficiaries and anyone entitled to payment under an insurance policy from the incompetence and insolvency of insurers.
Guaranty associations
Insurers cannot advertise protection by the Insurance Guaranty Association. It is considered:
Unfair trade practice
The risk selection and classification process
Underwriting
A life insurance producer is the company’s
Field Underwriter
Provides the agent’s personal observations concerning the proposed insured.
Agent’s report
Both the proposed insured (applicant) and the agent must sign the:
Application
Issued whenever the agent collects premiums. Also determines when coverage will be effective.
Premium receipt
The most common type of receipt is a ______ _______, which is used only when the applicant submits a prepaid application.
Conditional receipt
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.
Conditional receipt
The key source underwriters use for information about the applicant.
Insurance Application
A statement requested from the applicant’s physician to obtain specific medical details
Attending Physician Statement
Insurers cannot refuse coverage solely on the basis of adverse info on the:
Medical Information Bureau (MIB)
When insurers plan to seek and use info from investigators they must first provide the applicant or insured with a ______ ________ ______ ________.
Written Disclosure Authorization Notice
Written Disclosure Authorization Notice must be approved by:
The head of the Department of Insurance
Discriminating in policy rates and benefits based solely on:
Age or gender
Physical or mental impairment
Blindness or partial blindness
Genetic characteristics or genetic testing
The higher the risk, the higher the
Premium
Persons who, according to a company’s underwriting standards, are entitled to insurance protection without extra rating or special restrictions. Average risks
Standard risks
Result in higher rates premiums due to health issues, lifestyle, occupation.
Substandard (High exposure) risk
Individuals who meet certain requirements and qualify for lower premiums than the standard risk.
Preferred risks
Applicants who are rejected are considered
Declined risks
When the insurer relinquishes control of the policy by mailing it to the policyowner, policy is considered:
Legally delivered
When an agent hand delivers an individual policy or annuity to the policyowner, the agent must obtain a signed:
Delivery receipt
The only allowable reason that an application may be backdated is to:
Effect a lower premium
No premium:
No coverage
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.
Replacement
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.
3 business days
All sign documents, proof applicant received the Notice Regarding Replacement and copies of proposals used for at least
3 years ( or until the next examination by the commissioner)
A source of medic info to alert insurers to adverse medical history
Medical info Bureau (MIB)
An insurer submits the full premium along with a completed application for life insurance. Once the policy is issued when does the coverage begin:
On the date of application
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:
Needs approach
