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Insurance > Life Insurance Basics > Flashcards

Life Insurance Basics Flashcards

1
Q

Purpose of insurance guaranty associations

A

Protect policy owners, insureds and beneficiaries from financial losses caused by insolvent insurers

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2
Q

What type of insurance creates an immediate estate?

A

Life insurance

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3
Q

Who must be a member of ins guaranty associations?

A

All insurers authorized to write insurance within a state

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4
Q

What are illustrations in a life insurance policy?

A

Presentations of nonguaranteed elements of the policy

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5
Q

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

A

Insuring your own life, life of a family member, life of business partner or someone who has financial obligation to the policyowner

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6
Q

When must insurable interest exist in a life insurance policy?

A

At the time of application

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7
Q

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

A

At the time of policy delivery

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8
Q

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

A

Higher frequency of payments equals higher overall premium

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9
Q

Who is responsible for the content of insurance ads?

A

The company

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10
Q

What are the personal uses of life insurance?

A

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

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11
Q

Who is the beneficiary on a key-person policy?

A

The employer

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12
Q

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

A

It will decrease

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13
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

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14
Q

What document describes the specific information about a policy?

A

The policy summary

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15
Q

What does liquidity mean in a life insurance policy?

A

Availability of cash value

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16
Q

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?

A

Estate conservation

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17
Q

If an applicant for LI policy and the potential insured are two diff people, what is the underwriters main concern?

A

Existence of insurable interest between the two

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18
Q

Can companies advertise the guaranty association?

A

No

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19
Q

What is included in part 2 of a LI application?

A

Medical info about the prospective insured

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20
Q

What is the purpose of guaranty association?

A

To protect policyholders against loss caused by an insolvent insurance co

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21
Q

What type of insurance creates an immediate estate?

A

Life

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22
Q

What is the purpose of key person insurance

A

Minimize the financial loss caused by the death of a key employee

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23
Q

What are mortality tables used for

A

To predict life expectancy and death rates for specific groups of individuals

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24
Q

What type of insurance offers a cash value element?

A

Permanent insurance. Usually whole life

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25
Q

Purpose of the agents report during application process

A

Personal observations about the applicant that may help during underwriting

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26
Q

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

A

It’s tax free

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27
Q

Term that describes frequency and amount of premium payment

A

Premium mode

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28
Q

3 factors that determine the premium for a particular life insurance policy?

A

Mortality, interest, expense

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29
Q

Who must have insurable interest in the insured?

A

The policyholder

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30
Q

When does coverage begin when an agent issues a conditional receipt?

A

Either the date of the application or the date of the medical exam, whichever happens last

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31
Q

When calculating the amt of insurance needed, what is the needs based approach based on?

A

Projected needs of the family after the premature death of the insured

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32
Q

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

A

Insurers current assets, liabilities, and survivors needs

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33
Q

What is insurance underwriting?

A

The process of risk selection and classification

34
Q

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

A

Risk selection

35
Q

Why are policy loans not available on term insurance?

A

There is no cash value to borrow against

36
Q

What type of insurance policy offers pure death protection?

A

Term

37
Q

When does an adjustable life policy accumulate cash value?

A

When the premiums paid are more than the cost of the policy

38
Q

On a variable policy, what does variable refer to?

A

Cash value and death benefit

39
Q

Under a 20 pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid for what time period?

A

For 20 years or until the insureds death whichever happens first

40
Q

If an insured terminates membership in a group life insurance, what type can it be converted to?

A

Whole life

41
Q

An employee wants to join group life insurance outside open enrollment what do they have to provide?

A

Evidence of insurability

42
Q

How is the premium determined in a joint life policy?

A

Based on the average age of the insureds

43
Q

What type of whole life insurance policy generates immediate cash value?

A

Single premium whole life

44
Q

What happens to the premium in an annually renewable term life policy?

A

The premium increases each renewal

45
Q

Universal life policies have 2 different interests rates, what are they?

A

Guaranteed and current

46
Q

What are the living benefits of whole life insurance?

A

loan values

47
Q

In a joint life policy, when is the death benefit paid?

A

Upon the first death

48
Q

What type of insurance is best suited to cover a mortgage?

A

Decreasing term

49
Q

Type of insurance can the policyowners skip premium payments without the policy lapsing?

A

Universal life

50
Q

What is the main advantage of converting from group life insurance to individual coverage?

A

Evidence of insurability is not required

51
Q

What policy element must decrease in decreasing term insurance?

A

Face amount

52
Q

What type of premium is charged on straight life policy?

A

Level premium for the life of the insured

53
Q

Group life insurance policies are written as what type of insurance?

A

Annually renewable term

54
Q

What does level refer to in level term insurance?

A

Face amount

55
Q

Insurable interest must exist at the time of application but not when

A

At the time of claim

56
Q

Insurable interest is based on what

A

Economics or family relationship

57
Q

An insurable interest exists if

A

Someone would benefit if another person continues to live

58
Q

Buying life insurance creates an

A

Immediate estate

59
Q

When LI is used to pay estate taxes it is known as

A

Estate conservation

60
Q

Life settlement contract is between

A

LI policyowner and third party

61
Q

Human life value approach

A

Establishes what a family would lose if main breadwinner died

62
Q

Needs based approach does not consider

A

Future earnings

63
Q

Stock redemption plan

A

Corporation agrees to buy back the stock of a deceased shareholder

64
Q

Policy that provides for business continuation in the event a partner dies is based on what

A

Cross purchase buy sell agreement

65
Q

When life insurance is purchased as an executive bonus for a corporate employee the policy belongs to who

A

The employee

66
Q

Life insurance mortality tables are based on what

A

People and time

67
Q

Who has a higher mortality rate a 60 year old man or woman

A

man

68
Q

Life insurance premiums are based on (for the insurer)

A

Mortality + company expenses - interest earned on company investments

69
Q

Agents (producers) are also known as what

A

Field underwriters

70
Q

If a producer gives an applicant a conditional receipt and the underwriter rejects the application what happens

A

There is no coverage

71
Q

Convertible term is convertible based on what

A

current or attained age of the insured

72
Q

Term insurance reentry option is contingent on

A

passing a physical

73
Q

Whole life policies show a table containing the guaranteed cash value at the end of each yr for 20 yrs - what units are shown?

A

It is show per unit - per thousand

74
Q

Straight or traditional whole life has a level premium and will provide coverage

A

until the insured dies or reaches age 100

75
Q

Limited pay whole life limits number of years payments are made

A

like 20 pay life

76
Q

Limited pay whole life limits age by which all premiums are paid

A

such as life paid up at 65

77
Q

When do limited pay whole life policies mature

A

age 100

78
Q

On a 20 pay life the cash value will equal

A

The face amount at maturity

79
Q

Adjustable whole life is suitable for

A

Someone with fluctuating income

80
Q

Adjusting the premium paid on an adjustable whole life affects the face amount

A

And vice versa

81
Q

Why is universal life diff from whole life

A

flexible premium

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