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Life > Other Life Topics > Flashcards

Other Life Topics Flashcards

1
Q

an amount to be paid for an insurance policy.

A

Premium

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2
Q

insurance paid to named beneficiaries when the insured person dies

A

life insurance

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3
Q

What are the three types of agent authority?

A

Express, implied and apparent

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4
Q

An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?

A

Mutual

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5
Q

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

A

Permanent insurance (usually, whole life)

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6
Q

In forming an insurance contract, when does an acceptance usually occur?

A

When the insurer approves a prepaid application

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7
Q

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

A

Premium mode

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8
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.

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9
Q

What document is required for an insurance company to transact insurance?

A

Certificate of Authority

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10
Q

What is the best way to handle incomplete insurance applications?

A

Return the application to applicant for completion

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11
Q

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

A

Only the portion in excess of the premium paid

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12
Q

A person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard?

A

Morale

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13
Q

What do individuals use to transfer their risk of loss to a larger group?

A

Insurance

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14
Q

What are the three types of hazards?

A

Physical, Moral, Morale

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15
Q

What are the strategies used by underwriters to prevent adverse selection?

A

Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate

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16
Q

What document describes the specific information about a policy

A

Policy summary

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17
Q

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

A

Monthly

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18
Q

Who owns stock companies?

A

Stockholders

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19
Q

What is included in Part 2 of a life insurance application?

A

Medical information about the prospective insured

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20
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

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21
Q

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

A

The existence of insurable interest between the applicant and the insured

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22
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

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23
Q

In insurance, when is the other usually made on a contact?

A

When the insurance application is submitted

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24
Q

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

A

Premium

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25
Q

According to the taxation rules of life insurance policies, how are cash value increases taxed?

A

Cash value growth is tax deferred

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26
Q

The reduction, decreased, or disappearance of value of the person or property insured in a policy is known for what?

A

Loss

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27
Q

Insurance is a contract that protects the insured from what?

A

Loss

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28
Q

In the agent/insurer relationship, who is considered the principal?

A

Insurer

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29
Q

Mortality tables are used by insurance companies to predict what?

A

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

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30
Q

What entities make up the Medical Information Bureau?

A

Insurers

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31
Q

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

A

Mortality, interest and expense

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32
Q

What is the name for an overfunded life insurance policy?

A

A Modified Endowment Contract (MEC)

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33
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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34
Q

What is a warranty in an insurance contract?

A

An absolutely true statement upon which the validity of the policy depends

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35
Q

An applicant conceals relevant health information on the application. The applicant presents what type of hazard?

A

Moral

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36
Q

If an applicant does not receive his or her insurance policy, who would be held responsible?

A

The agent

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37
Q

Conditions that increase the chance of a loss are known as what?

A

Hazards

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38
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

39
Q

What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy?

A

Death benefits are generally not subject to income taxes

40
Q

For the purpose of insurance, what is risk?

A

Uncertainty of loss

41
Q

The requirement that agents must account for and promptly remit all insurance funds collected is knowns as what type of agent responsibility?

A

Fiduciary

42
Q

What is the main purpose of the 7-pay test?

A

To determine if a life insurance policy is a Modified Endowment Contract

43
Q

What portion of a non-qualified annuity payment would be taxed?

A

Interest earned on principal

44
Q

According to the Law of Agency, a principal is represented by whom?

A

Agent or producer

45
Q

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

A

The employer

46
Q

Wagering on a sporting event is known as what type of risk?

A

Speculative

47
Q

an insurer meets the state’s financial requirements and is approved to transact business in the state, it is considered what type of insurer?

A

Authorized or admitted

48
Q

When must insurable interest exist in a life insurance policy?

A

At the time of application

49
Q

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

A

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

50
Q

When would a misrepresentation on an insurance application be considered fraud?

A

When it is intentional and material

51
Q

What are the three types of authority?

A

express, implied, apparent

52
Q

When a charge needs to be made on the application for insurance, which is the best method for correcting the information?

A

Complete a new application or ask the applicant to initial the correction on the original application

53
Q

What is the purpose of key person insurance?

A

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

54
Q

What is insurance underwriting?

A

The process of risk selection and classification

55
Q

What are the personal uses of life insurance?

A

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

56
Q

Whose responsibility is it determine that all the questions on an insurance application are answered?

A

The agent’s

57
Q

What type of risk is insurable?

A

Pure

58
Q

Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?

A

No, advertising of the existence of the guaranty association for the purposes of solicitation and sale of insurance policies by insurers is an illegal business practice.

59
Q

Is the death benefit of a life insurance policy taxed to the beneficiary if it’s received as a lump sum?

A

No, lump-sum benefits are received tax free.

60
Q

When would life insurance policy proceeds be included in the insured’s taxable estate?

A

When there is an incident of ownership at the time of death

61
Q

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

A

Either on the date of the application or the date of the medical exam (whichever occurs first)

62
Q

What two elements are necessary for a life insurance contract to have a legal purpose?

A

Insurable interest and consent

63
Q

What type of insurer is formed under the laws of another country?

A

Alien

64
Q

What are the four elements of an insurance contract?

A

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

65
Q

What is the term that describes the angle between the relative wind and the chord line of an airfoil?

A

Premium mode

66
Q

If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?

A

Interest only

67
Q

What is the term for the causes of loss insured against in an insurance policy?

A

Peril

68
Q

What are illustrations in a life insurance policy?

A

Presentations of non-guaranteed elements of the policy

69
Q

What type of report provides information about the applicant’s hobbies, habits and financial status?

A

Investigative consumer report

70
Q

What are the five characteristics of an ideally insurable risk

A

Loss must be 1) due to chance, 2) definite and measurable, 3) statistically predictable, 4) non catastrophic, and 5) coverage cannot be mandatory.

71
Q

Insurers are classified according to their domicile. What are the three types of insurers?

A

Domestic, foreign, and alien

72
Q

The type of insurance company organized to return any surplus money to its policyholders is known as what?

A

Mutual company

73
Q

Who must be a member of insurance guaranty associations?

A

All insurers authorized to write insurance within state

74
Q

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

A

It will decrease.

75
Q

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

A

Higher frequency of premium payments will result in higher overall premium

76
Q

When does an insurance policy go into effect?

A

When the policy is delivered and the premium is paid

77
Q

When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?

A

Adverse selection

78
Q

The insurer organized to return a profit to the stockholders is what type of insurer?

A

Stock Company

79
Q

An insurance company is domiciled in California and transacts insurance in Nevada . What is this insurer’s classification in Nevada?

A

Foreign

80
Q

What type of insurance creates an immediate estate?

A

Life insurance

81
Q

What is the main responsibility of a comapany’s underwriting unity?

A

Risk selection

82
Q

Who is responsible for the contents of insurance advertisements?

A

The insurance company

83
Q

When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?

A

Insurer

84
Q

If an agent fails to obtain the applicant’s signature on the insurance application, what must the insurer do?

A

Send the application back to the applicant for signature

85
Q

What is the purpose of insurance guaranty association?

A

To protect policy-owners, insureds and beneficiaries from financial losses caused by insolvent insurers

86
Q

Who must have insurable interest in the insured?

A

Policyowner

87
Q

In a direct rollover, how is the money transferred from one retirement plan to a new one?

A

From trustee to trustee

88
Q

What does liquidity mean in life insurance policy?

A

Availability of cash value

89
Q

A situation in which a person can only experience a loss and no gain presents what type of risk?

A

Pure Risk

90
Q

Whom does an insurance agent represent?

A

insurance company

91
Q

Why are dividends in life insurance policies not taxable?

A

Dividends are not considered income for tax purposes; they are a return of unused premium.

92
Q

An insurance company that is formed under the laws of another state is known as what type of insurer?

A

Foreign

93
Q

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

A

At the time of policy delivery

Life (6 decks)

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