Life Insurance Basics Flashcards
Who is the beneficiary on a key-person life insurance policy?
The employer
Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?
No this is an illegal business practice
What are the 3 factors that determine the premium for a particular life insurance policy?
1 mortality
2 interest
3 expense
What are the personal uses of life insurance?4
1 survivor protection
2 estate creation and conservation
3 cash accumulation
4 liquidity
Who must be a member of insurance guarantee associations?
All insurers authorized to write insurance within a state
What is the term that describes the frequency and amount of the premium payment?
Premium mode
In calculating the amount of life insurance needed what is the needs approach based on?
The predicted needs of family after the premature death of the insured
If an insured changes his payment plan from monthly to annually, what happens to the total premium?
It will decrease
What is the main responsibility of a company’s underwriting unit?
Risk selection
When planning for survivor protection in life insurance, what needs to be considered?
The insured’s current assets, liabilities and survivors needs
What are illustrations in a life insurance policy?
Presentations of non guaranteed elements of the policy
Mortality tables are used by insurance companies to predict what?
Life expectancy and death rates for specific groups of individuals
What is the purpose of insurance guaranty associations?
To protect policy owners, insureds and beneficiaries from financial losses caused by insolvent insurers
At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
Either the date of application or the date of the medical exam
(Whichever occurs last)
Who must have insurable interest in the insured?
The policy owner
How does the premium mode affect the total premium paid for insurance for the year?
Higher frequency of premium payments will result in higher overall premium
What is insurance underwriting?
The process of risk selection and classification
When must the policy summary for a life insurance policy be delivered to the policy owner?
At the time of policy delivery
What term describes the fee a person pays an insurance company to receive coverage?
Premium
What are the three main instances when insurable interest exists in life insurance?
Insuring own life
Family member
Or business partner
What type of life insurance offers an applicant a cash value element?
Permanent insurance (usually whole life)
What document describes the specific information about a policy?
Policy summary
What is included in part 2 of a life insurance application?
Medical information about the prospective insured
What is the purpose of the agent’s report during the application process?
The agent’s report discussed the agent’s personal observations about the proposed insured that may help in the underwriting process
All other factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?
Monthly
What is the purpose of key person insurance?
To minimize risk of financial loss caused by death of key employee
What does liquidity mean in a life insurance policy?
Availability of cash value
If an applicant for a 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
What type of insurance creates an immediate estate?
Life insurance
Who is responsible for the contents of insurance advertisements?
The insurance company
A business is the owner and beneficiary of a key person life policy. When the business collects the policy benefit, how is it taxed?
The benefit is received tax free
When must insurable interest exist in a life insurance policy?
At the time of application
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
Attempting to determine how much insurance an individual would require based upon financial objectives is known as…
Needs approach
The medical information bureau (MIB) was created to protect…
Insurance companies from adverse selection by high risk persons
