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NC Life & Health Insurance > Life Insurance Basics > Flashcards

Life Insurance Basics Flashcards

1
Q

What is a beneficiary?

A

A person who receives benefits of an insurance policy.

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2
Q

What is a Death Benefit?

A

Amount paid upon death of insured to the beneficiary in a life insurance policy

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3
Q

Cash Value

A

Equity amount accumulated in a life insurance policy

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4
Q

Rating Classification

A

Used in deciding if application pay requires a higher or lower premium

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5
Q

Estate

A

A person’s net worth

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6
Q

Liquidation

A

Selling Assets in order to raise Capital

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7
Q

Lump-Sum

A

Payment of the entire benefit in one sum

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8
Q

Solvency

A

Ability to meet financial obligations. Example: Life insurance maintains enough assets to pay claims

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9
Q

Insurable Interest (when purchasing insurance)

A

Policy owner faces the possibility of losing money or something or value in the event of a loss *This must exist at the time of application

Again, Pure risk only. The loss and never win

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10
Q

When must insurable interest exist in a life insurance policy?

A

At the time of application

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11
Q

What are the personal uses of life insurance?

A

Survivor protection, estate creation and conservation, cash accumulation and liquidity.

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12
Q

What document must a producer provide to the insured during policy replacement?

A

Notice regarding replacement

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13
Q

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter’s main concern?

A

The existence of insurable interest between the applicant and the insured.

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14
Q

Life insurance may be used to pay estate inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?

A

Estate conservation

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15
Q

What term describes the fee a person pays an insurance company to receive coverage?

A

Premium

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16
Q

Who must have insurable interest in the insured?

A

Policyowner

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17
Q

What does “liquidity” mean in a life insurance policy?

A

Availability of cash value

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18
Q

What is the purpose of the agent’s report during the application process?

A

The agent’s report discusses the agent’s personal observations about the proposed insured that may help in the underwriting process.

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19
Q

What is policy replacement?

A

A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value.

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20
Q

What is the purpose of key person insurance?

A

To minimize the risk of financial of financial loss caused by the death of a key employee.

21
Q

A business is the owner and beneficiary of a key-person life policy. When the business collects the policy benefit, how is it taxed?

A

The benefit is received tax free.

22
Q

What are the three main instances when insurable interest exists in life insurance?

A

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 policy owner

23
Q

Who is responsible for the contents of insurance advertisements?

A

The insurance company

24
Q

Who is the beneficiary on a key-person life insurance policy?

A

The employer

25
Q

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

A

Either the date of the application or the date of the medical exam. Whichever occurs last.

26
Q

What type of policy issues certificates of insurance to the insureds?

A

Group policy

27
Q

Who is a replacing insurer?

A

The company that issues a new policy during policy replacement.

28
Q

What is insurance underwriting?

A

The process of risk selection and classification.

29
Q

What type of policy is typically issued without proof of insurability from the insured?

A

Group policy

30
Q

What type of life insurance offers an applicant a cash value element?

A

Permanent (Whole) life insurance

31
Q

If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should it be?

A

Permanent life insurance

32
Q

What is included in part two of a life insurance application?

A

Medical information about the prospective insured.

33
Q

What are illustrations in a life insurance policy?

A

Presentations of nonguaranteed elements of the policy

34
Q

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

A

Variable

35
Q

What is a blackout period for social security benefits?

A

A period of time during which the surviving spouse does not receive benefits.

36
Q

What type of insurance creates an immediate estate?

A

Life insurance

37
Q

Mortality tables are used by insurance companies to predict what?

A

Life expectancy and the death rates for specific groups of individuals.

38
Q

What is the main responsibility of a company’s underwriting unit?

A

Risk selection

39
Q

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

A

It will decrease

40
Q

What is the term that describes the frequency and the amount of the premium payment?

A

Premium mode

41
Q

All other factors being equal, which premium payment mode will require an overall higher premium: monthly or annually?

A

Monthly

42
Q

What document describes the specific information about a policy?

A

Policy summary

43
Q

When must the policy summary for a life insurance policy be delivered to the policy owner?

A

At the time of policy delivery

44
Q

When planning for survivor protection in life insurance, what needs to be considered?

A

The insured’s current assets, liabilities and survivor’s needs

45
Q

What are the three factors that determine the premium for a particular life insurance policy?

A

Mortality, interest and expense

46
Q

How does the premium mode affect the total premium paid for insurance for the year?

A

Higher frequency of premium payment will result in higher overall premium

47
Q

In calculating the amount of life insurance needed, what is the needs approach based on?

A

The predicted needs of a family after the premature death of the insured

48
Q

What type of insurance would perform the function of cash accumulation?

A

Life insurance

49
Q

What is the main purpose of the regulation on life insurance policy illustrations?

A

To help the public make educated decisions about buying life insurance

NC Life & Health Insurance (11 decks)

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