Life insurance basics Flashcards
A business is the owner and beneficiary of a key-person life policy. When the business collects the policy benefits, how is it taxed?
Tax free
What is the purpose of insurance associations?
To protect the policy owners, insured and beneficiaries from financial losses caused by insolvent insurers
What is insurance underwriting?
The process of risk selection and classification
What type of insurance creates an immediate estate
Life insurance
In calculating the amount of life insurance needed, what is the needs approach based on?
The predicted needs is a family after the premature death of the insured
All other factors being equal, which premium payment mode will require an overall higher premium, monthly or annually?
Monthly
What is the main responsibility of a company’s underwriting unit?
Risk selection
What are the three factors that determines the premium for a particular insurance policy?
Mortality
Interest
Expense
It’s an applicant for life insurance policy and the potential insured are two different people, what would be the underwriter’s main concern?
The existence of insurable interest between the applicant and the insured.
If the insurer changes his payment plan from monthly to annually, what Alen’s to the total premium?
It goes down
What type of report provides information about the applicant’s hobbies, habits and financial status
Investigative consumer report
What are illustration in a life insurance policy?
Presentation and non guaranteed elements of the policy
What of the purpose of an sheet report during the application process?
The agent’s report discusses the agency’s personal observations about the proposed insured that may help in the underwriting process
What term describes the free a prison pays an insurance company to receive coverage?
Premium
Life insurance may be used to pay state inheritance taxes and general estate taxes eliminating the need to sell assets from the estate. What is this called?
Estate conservation
What are the three main instances when insurable interest exists in life insurance?
Insure your own life
Life of a family member
Life of a business partner or some one who has financial obligation to the policy owner
What is included in part two of the life insurance application?
Medical information
When must insurable interest exist in a life insurance policy?
At the time of the application
Who is the beneficiary on a key-person life insurance policy?
The employer
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?
Available cash value
At what point does coverage begins when an agent issues a conditional receipt for insurance policy?
Date of application or medical exam whichever occurs last.
How does the premium mode affect the total premium paid for the year?
Higher frequency of premium payments will result in higher overall premium
What is the purpose of key person insurance?
To minimize the risk of financial loss caused by the death of a key employee
