Life Insurance Basics Flashcards
Insurable interest must exist when?
At the time of application
The _____ must have Insurable interest in the life of the _______.
Policy owner, insured
Insurable interest is or is not required of beneficiaries?
Is not
Allows the policy owner to borrow against the cash value of their policy
Liquidity
Calculated by looking at insureds wages, inflation, the amount of years to retirement, and the time value of money
HLVA - Human Life Value Approach
Based on predicted need of the family following an insureds death
Needs Approach
Which approach looks at income, debts, expenses, investments, etc to base life insurance values on.
Needs approach
Time during which a surviving spouse and/or children do not receive social security survivor benefits.
Social security blackout
SS Blackout period starts when the youngest child turns __ and ends when the qualifying spouse qualifies for _________ benefits, as early as age __
16, retirement, 60
Can a business take a tax deduction on premium paid for key employee insurance.
No
Are key employee benefits taxable.
No
Buy-sell agreement is also known as
Business continuation agreement
Buy-sell agreement when used in partnerships when each partner buys a policy on the other;
Cross purchase
Buy-sell used when the partnership buys the policies on the partners;
Entity purchase
Buy-sell used by privately owned corporations when each stockholder buys a policy on each of the others; and
Stock purchase
Buy-sell when the corporation buys one policy on each shareholder.
Shareholder
Where the employer gives a wage increase to an employee to cover a life insurance premium. This is considered a irs ______________ plan because it is not subject to plan limits issued by the irs. Since the employer treats the premium as a bonus it is ______ ______ and paid benefits are —— to the employee
Executive bonuses, nom-qualified, tax deductible, taxable
Every applicant of life insurance must be given a _____ ______ at or no later than the time of application.
Disclosure statement
Insurers must provide a ____________ to all prospective policy applicants prior to accepting their initial premium.
Buyers guide
If the policy contains an unconditional refund provision of at least __ days (free-look period), a buyer’s guide can be delivered with the policy
10
a written statement describing the features and elements of the policy being issued
Policy summary
A ___________ provides generic information on various types of policies. A __________ provides specific information on the policy being issued.
Buyers guide, policy summary
the process in which an insurance company determines whether or not a particular applicant is insurable, and if so, what premium to charge.
Underwriting
The _______ is the companies field underwrite.
agent
the agent’s personal observations concerning the proposed insured.
Does or does not become part of entire contract?
The agents report - does not
If a question on an app is left unanswered The insurer will or won’t have the right to deny coverage based on any information that the unanswered question might have contained.
Won’t
Whenever the agent collects premiums, the agent must issue a _____
Premium receipt
receipt that says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for.
Conditional
Conditional receipt means the applicant may be covered as early as when?
Date of application
______ is the key source underwriters use for information about the applicant.
Insurance application
Insurers ______ refuse coverage solely on the basis of adverse information on an MIB report.
Cannot
What - what = net premium
Mortality - interest
The one year cost for mortality plus the cost of operating the company (expense loading)
Gross premium
Higher payment frequency equals _______
Higher premiums, to account for administrative costs and interest
Using life insurance proceeds to cover estate taxes
Estate conservation
A policy summary is sometimes called an ———-
Illustration
What type of report provides information about the applicant’s hobbies, habits and financial status?
Investigative consumer report
Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?
Estate conservation
At what point does coverage begin when an agent issues 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
What are the three factors that determine the premium for a particular life insurance policy?
Mortality, interest and expense
Presentations of nonguaranteed elements of the policy
Illustrations
Survivor protection, estate creation and conservation, cash accumulation and liquidity are all examples of..
What are the personal uses of life insurance?
If initial premium is not paid at time of application the agent will collect premium when, and the applicant will most likely need to fill out what?
At time of policy delivery; a statement of good health
Agents may backdate policies up to __ months in order to obtain a better premium for an insured.
6
T/F: there is no limitation on the number of key employee plans in force at any one time.
True
The ___________ is the owner, payor, and beneficiary of a key employee policy.
Employer
The __________ is the insured in a key employee policy.
Employee
T/F: key person coverage may be funded by any type of life insurance.
True
When an individual policy or annuity is delivered by hand to the policy owner, a ____________ must be signed.
Delivery receipt
Provides specific info about the issued policy, insurers info, and generic info that allows for comparison of costs on different policies.
Buyers guide
Attempting to determine how much insurance a family would require based upon their financial objectives is known as
Needs approach
