Life Insurance exam Flashcards
What is the purest form of term insurance
Annually renewable term
What are the benefits of a annually renewable term insurance policy
You don’t not need to prove insurability.
What happens to the premium in an annually renewable term insurance policy
The premium will go up because it is based on the applicants current age.
What are the two types of annuities ?
Immediate and differed
In what situation would an increasing term policy be beneficial
When trying to keep up with inflation
When would a deceasing term policy be used ?
Typically when paying off a debt (maybe to a bank for example)
What are the 3 types of term insurance
Level, increasing , decreasing
What special feature di term policies have ?
They are usually renewable and convertible: renewable and convertible
Benefits in a policy that can never be lost
Non forfeiture values
What are special features offered by whole life policies that are not offered by term life ?
Cash value ,
Non forfeiture options, policy loans
What is adjustable life insurance ?
Best of both worlds. Can be term or Increase or decrease the premium or the premium-paying period;
Increase or decrease the face amount; or
Change the period of protection life.
True / false
In adjustable policy, the policy owner can convert to policy from term to whole life and vise versa.
True
In adjustable life policy , what may be required for changing the death benefit or type of premium
Proof of insurability
Give an example of when proof of Insurabilty may be needed for an adjustable life policy.
When changing the death benefit from 100k to 200k (I crease in death benefit) or when converting the premium payment
How does cash value accumulate to an adjustable term policy ?
Cash value only accumulated after the premiums paid cost more than the policy b
Flexible premium adjustable life =
Universal life
the amount needed to keep the policy in force for the current year.
Minimum premium (universal life)
Two ways insurers provide policy owners of universal life policies to pay
Minimum premium and target premium
Which payment method in universal life products ensures a policy will not lapse due to non payment
Target premium
Target premium
recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
This type of policy is interest sensitive
Universal life
In this type of policy, the owner is guaranteed a contract interest rate but may also be given a current interest rate that is not guaranteed and dependent on market conditions. a
Universal life
Two components of universal life policy
Insurance and cash value
The insurance on universal policies are ____________
Annually renewable
Level death benefit option
A
Universal life offers options a & B. True or false
True
Increasing death benefit option
B
a level, fixed premium, investment-based product.
Variable life insurance
cash value of the policy, however, is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer. The policyowner bears the investment risk in variable contracts.
Variable insurance
What stays level in variable insurance
Death benefit and premium
Who bears the risk in variable life
Policy owner
type of insurance that combines many features of the whole life with the flexible premium of universal life and the investment component of variable life, making it a securities version of the universal life insurance.
Variable universal life
Mix between whole life and variable life
Variable universal life
Agents selling variable life insurance products mus
Be registered with FINR
Be licensed by the state to sell life insurance and have a securities license
What is the difference between universal life and universal variable life
Universal life guarantees cash value
True/false :
Joint life policies are only Available as whole life
False. Can be whole life or term
Jon and Mary are a married couple who both earn the same
Amount of income. Jon and Mary want to protect themselves and their mortgage when one of them passes. They are looking for a way to supplement the income of the other without spending too much money. Which product would best fit their need ?
Joint life policy
This type of policy works well for business partners in a buy sell agreement
Joint policy
This type of policy is usually use to off set estate tax
Survivorship life
A type of whole life policy that has a different maturity date
Endowment policy
Premiums in an endowment policy tend to be ______ than regular whole life
Higher
Prevents someone from
Out living their mowyv
Annuity
contract that provides income for a specified period of years, or for life.
Annuity
Pay in period of annuity
Accumulation period
Paid out of annuity
Annuization period
What is the annuity income
Based on
Age and gender
Interest rate
Amount of premium paid or cash value accumulated
Frequency of payment
Annuity income is based on what 4 factors
Annuitants age and gender
- Interest
- Payments made in
- Frequency of payments
When would a beneficiary receive any type of payment upon death of the annuitant
If the annuitant dies during the accumulation period.
What is the purpose of an annuity
To make sure someone does not out live their money
What type of policy creates cash value the fastest ?
Endowment
Is an endowment policy a type of whole life policy or term
Whole life because it has a cash value
The sooner a policy endows the _____ premium will be
Higher
3 classifications of annuities
How they are paid into , how premiums are invest , and how premiums are paid out
What is a disadvantage if fixed annuities
Inflation
This type of annuity protects the annuitant against inflation
Variable annuity
3 main characteristics of variable annuities
- Underlying investment
- Interest rate.
- License requirement
What are differences between variable and fixed annuities
Fixed has a gaurentee income and interest rate. Fixed annuities are held in insurance general account and variables are not. The license required for a variable license is the life insurance and securities.
Fixed annuities that invest aggressively
Equity index annuity
Which is more risky - a variable annuity or equity annuity
Variable
What is a similarity between equity annuity and fixed ?
Both have guaranteed interest
True or false : annuities can be used on a tax deferred basis for educational funds
True
Characteristics of a contract
Provisions
Modify characteristics of a contract
Riders
Ways to invest / distribute money in a life insurance policy
Options
Who creates provisions ?
NAIC
What 4 things constitute an entire policy ?
Policy application , the policy, riders and amendments
How long is the free look period ?
10 days
When does the free look period begin
Once policy is delivered
Who are the 4 parties to an insurance contract
Insurer , policy owner, insured, beneficiary
Who has ownership rights on a policy ?
The policy owner
What is an assignment
When a policy owner gives up rights and assigns the policy a new owner
What are the two types of assignments
- Absolute assignment 2. Collateral assignment
This type of policy assignment is usually temporary
Collateral
In a absolute assignment , does the new policy owner have to have insurable interest in the insured
No
Does a beneficiary need to be named to make a policy valid ?
No
What are the different types of riders
- Disability riders
- Accelerated living benefits
- Riders covering additional insured
- Riders affecting death benefit amount
What are the 4 disability riders and describe them
- waiver or premium. This rider allows the premiums of a policy to be waived if the insured becomes disabled. There is a waiting period of 6 months.
- Waiver of cost of insurance. This is specific to universities life policies it does not waive premiums needed to accumulate cash values.
- Waiver of premium with income. This waived premium on a policy and provides an income for the insured if they become disabled.
- Payor benefit. Usually found on juvenile policies which states if the parent dies or becomes disabled , the premiums will be waived until the age of 21.
This is a type of policy rider which the insurer will not charge additional premium for
Living needs rider (under accelerated living benefits rider)
This rider provides coverage for one or more persons other than the insured
Other insured rider
Other insured rider is also known as
Family rider
What is a spouse rider
When the insured adds their spouse as someone to be covered in a policy. It is for a limited amount of time (usually until 65)
What is children term rider
Temporary insurance on children until a certain age. Usually convertible without showing evidence of insurability
How is a children rider charged to the policy ownwr
One premium. Does not increase or decrease with addition of children.
This type of rider incorporates the spouse term rider and children term rider
Family rider. Level term insurance.
Are there riders which provide coverage for non family members ?
Yes
What are riders that affect the death benefit ? 3 of them
- Accidental death
- Accidental death and dismemberment
(Ad&d) - Guaranteed insurability
Within what time period must and insured die as a result of an accidental death in order for the accidental death rider to pay out ?
90 days
Until what age is the accidental death rider valid ?
65
How much does the accidental death rider usually pay out ?
2 or 3 times the face amount
This rider pays out the face amount for death or a capital sum for dismemberment
Ad&d rider
When can the full face amount be paid out in dismemberment
When the insured loses 2 arms or 2 legs
A rider which allows an insurer to purchase insurance at future dates without evidence of insurability
Guaranteed insurability
Is an additional premium charged for gaurenteed insurabmilty
Yes
When does guaranteed insurability rider usually expire
Age 40
This rider is based on increasing term insurance
It provides that if the insured dies before a certain age they are entitled to the face amount and premiums paid
return of premium rider
When does return of premium rider option expire
Age 60
This type of rider is usually attached to a whole life policy and gives higher protection at a reduced cost
Term rider
This rider addresses inflation by increasing insurance without evidence of insurability based on CPI
Cost of living rider
What are the 3 categories of policy options
Non forefeitire
Dividends and settlement options
What are the 3 nonforgeitjre options
Cash surrender, reduced paid up insurance and extended term
When the insured trades policy for cash value
No forfeiture option “cash value surrender”
Is cash value surrender taxed ?
Any amount recieved more than premiums paid is taxable
Can someone who receives the cash value non forefiture option reinstate
No
A non forfeiture options which allows the insured to purchase a permant policy that builds its own cash value with a reduced face amount
Reduced paid up option
Using the cash value to convert to term insurance with the same face amount is what no forfeiture option
Extended term
How long does extended term policy usually go for
Whatever the cash value pays
Which no nforfeitjre option will be automatically chosen if the policy owner does no pick
Extended term
Are dividends taxable ?
No
What are the 6 dividend options
- Cash
- Reduced premium
3 accumulation at interest - Paid up additions
- Paid up option
- One year term insurance
This is a type of settlement option which is also known as straight life
Life income option
What is the life income option
Offers income to the beneficiary for their life.
If the beneficiary of life income option does before the total amount is paid , what happens
It is forfeited to the insurer
The more guarantees in life income
Option means the installments are ______
Smaller
Provides income for recipient for a guaranteed number of years and lifetime
Lifetime with period certain
This option is temporary option
Interest only option
This option allows the recipient to receive payments for a certain number of years. Payments will continue to a beneficiary even after recipients death
Fixed period
What is the difference Xd between life income with period certain and fixed period
Life income with period certain stops payments after recipients death where fixed period continued payments to a beneficiary. It does not however provide income for life
This options pays a specific amount
Fixed amount
Who appoints the commissioner of banking and insurance
The govenor
The commissioner has many responsibilities and obligations. What is something they can’t do
he Commissioner may not have ownership of, interest in, or any transactions in any capacity with any financial institution or insurance company licensed or regulated by the Department, except in the strict performance of the Commissioner’s duties.
Who approves policies and forms ?
The commissioner
Who supervises insurance business
The commissioner
Who deals with licensing
Commissioner
Who enforced insurance laws and penalties for violations
The commissioner
Who conducts investigations examinations and hearings
Commissioner
What is the penalty for unfair trade practice
Up to 1,000 dollars
Willfully violating u fair trade laws will result in what fine
$5,000 per charge
Violating a Seis and disist order will result in what fine
A fine up to 5,000 dollars
Violation of insurance law or regulation is penalty or
Up to 5k first offense and up to 10k for subsequent
What just a surplus lines agent have
Be resident of New Jersey
Hold properly and casualty license
