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Life Insurance > Unit 3 > Flashcards

Unit 3 Flashcards

1
Q

The characteristics of an insurance contract and are fairly universal from one policy to the next.

A

Provisions

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2
Q

Additions to a policy to modify provisions that already exist.

A

Riders

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3
Q

offers insurers and insureds ways to invest or distribute a sum of money available in a life policy

A

Options

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4
Q

A person’s essential activities that include bathing, dressing, eating, transferring, toileting, continence

A

Activities of daily living (ADLs)

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5
Q

Transfer of rights of policy ownership

A

Assignment

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6
Q

A beneficiary who has second claim to the policy proceeds after the death of insured (usually after the death of the primary beneficiary)

A

Contingent beneficiary

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7
Q

National Association of Insurance Commissioners, an organization composed of insurance commissioners from all 50 states, the District of Columbia and the 5 U.S. territories, formed to resolve insurance regulatory issues.

A

NAIC

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8
Q

A beneficiary who has the first claim to the policy proceeds after the death of the insured.

A

Primary beneficiary

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9
Q

The face value of the policy; the original amount invested before the earnings

A

Principal amount

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10
Q

An arrangement in which funds or property are held by a person or corporation for the benefits of another person (trust beneficiary)

A

Trust

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11
Q

The entire contract provision stipulates that the policy and a copy of the application, along with any riders or amendments, constitute the entire contract.

A

The entire contract provision stipulates that the policy and a copy of the application, along with any riders or amendments, constitute the entire contract.

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12
Q

Entire contract = policy + copy of application+ any riders or amendments

A

Entire contract = policy + copy of application+ any riders or amendments

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13
Q

Sets forth the basic agreement between the insurer and the insured.

A

Insuring Clause

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14
Q

Provision allows the policyowner 10 days from the receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium.

A

Free Look

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15
Q

The free look period starts when the policyowner receives the policy (policy delivery), not when the insurer issues the policy.

A

The free look period starts when the policyowner receives the policy (policy delivery), not when the insurer issues the policy.

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16
Q

The parties to the insurance contract are the insurer, the policyowner, the insured, and the beneficiary.

A

The parties to the insurance contract are the insurer, the policyowner, the insured, and the beneficiary.

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17
Q

Who has Owner’s Rights under the policy

A

Policyowner

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18
Q

The policy owner has the responsibility of paying the policy premiums, and is also the person who must have an insurable interest in the insured at the time of application for the insurance.

A

The policy owner has the responsibility of paying the policy premiums, and is also the person who must have an insurable interest in the insured at the time of application for the insurance.

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19
Q

The policyowner of a life insurance policy has the right to transfer partial or complete ownership of the policy to another person without the consent of the insurer.

A

The policyowner of a life insurance policy has the right to transfer partial or complete ownership of the policy to another person without the consent of the insurer.

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20
Q

Transfer of the life insurance policy does not change the insured or amount of coverage; it only changes who has the policy ownership rights.

A

Transfer of the life insurance policy does not change the insured or amount of coverage; it only changes who has the policy ownership rights.

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21
Q

Transfer rights of ownership the policyowner must advise the insurer in writing of the assignment.

A

Transfer rights of ownership the policyowner must advise the insurer in writing of the assignment.

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22
Q

Involves transferring all rights of ownership to another person or entity. This is a permanent and to transfer of all the policy rights. The new policyowner does not need to have an insurable interest in the insure.

A

Absolute Assignment

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23
Q

Involves a transfer of partial right to another person. It is usually done in order to secure a loan or some other transaction. A partial and temporary assignment of some of the policy rights.

A

Collateral Assignment

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24
Q

Absolute assignment is the complete and permanent transfer of ownership rights

A

Absolute assignment is the complete and permanent transfer of ownership rights

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25
Q

Collateral assignment is the partial and temporary transfer of rights

A

Collateral assignment is the partial and temporary transfer of rights

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26
Q

The person or interest to which the policy proceeds will be paid upon the death of the insured. May be a person, class of persons, the insured’s estate, or an institution or other entity such as a foundation, charity, corporation or trustee of a trust.

A

Beneficiary

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27
Q

By the head, evenly distributes benefits among the living named beneficiaries.

A

Per Capita

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28
Q

by the bloodline, distributes the benefits of a beneficiary who died before the insured to that beneficiary’s heirs.

A

Per Stirpes

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29
Q

If none of the beneficiaries is alive at the time of the insured’s death, or if no beneficiary has been named, the insured’s estate will automatically receive the proceeds of a life insurance policy.

A

If NO beneficiary is named, policy proceeds go to the insured’s estate.

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30
Q

Commonly established for minors, or to create a scholarship fund.

A

Trust

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31
Q

Has the first claim to the policy proceeds following the death of the insured.

A

Primary beneficiary

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32
Q

Has second claim in the event that the primary beneficiary dies before the insured.

A

Contingent Beneficiary

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33
Q

The policy owner, without the consent or knowledge of the beneficiary, may change a revocable designation at any time.

A

The policy owner, without the consent or knowledge of the beneficiary, may change a revocable designation at any time.

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34
Q

An irrevocable designation may not be changed without the written consent of the beneficiary.

A

An irrevocable designation may not be changed without the written consent of the beneficiary.

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35
Q

Irrevocable beneficiaries have a vested interest in the policy; therefore, the policyowner may not exercise certain rights without the consent of the beneficiary.

A

Irrevocable beneficiaries have a vested interest in the policy; therefore, the policyowner may not exercise certain rights without the consent of the beneficiary.

36
Q

While changing the beneficiary through the recording or filing method, the policy owner completes a form with the change and submits it to the insurance company.

A

While changing the beneficiary through the recording or filing method, the policy owner completes a form with the change and submits it to the insurance company.

37
Q

The policyowner is required to send the request for change with the contract to the home office of the insurer. The home office will have to approve and make the change.

A

Endorsement Method

38
Q

If the insured and the primary beneficiary died in the same accident and there is no sufficient evidence to show who died first, the policy proceeds are to be distributed as if the primary beneficiary died first

A

Uniform Simultaneous Death Law

39
Q

Provides that if the insured and the primary beneficiary died in a common disaster (even if the beneficiary outlived the insured by a specified number of days), it is presumed that the primary beneficiary died first, so the proceeds will be paid to either the contingent beneficiary or to the insurer’s estate, if no contingent beneficiary is designated.

A

Common Disaster Clause

40
Q

Common disaster clause protects the contingent beneficiary

A

Common disaster clause protects the contingent beneficiary

41
Q

The manner or frequency that the policyowner pays the policy premium.

A

Premium mode

42
Q

If the insured dies during a period of time for which the premium has been paid, the insurer must refund any unearned premium along with the policy proceeds.

A

If the insured dies during a period of time for which the premium has been paid, the insurer must refund any unearned premium along with the policy proceeds.

43
Q

A policy may be terminated because of nonpayment of premiums.

A

Lapsed policy

44
Q

The premium remains the same throughout the duration of the contract.

A

Level premium

45
Q

Policies allow the policyowner to increase or decrease the premium during the policy period.

A

Flexible premium

46
Q

The ratio of the number of deaths in a specific population over a certain amount of time versus the number of living people in that population.

A

Mortality

47
Q

Indicate the number of individuals within a specified group of individuals starting at a certain age, who are expected to be alive at a succeeding age.

A

Mortality tables

48
Q

Mortality - Interest = Net Premium
Net Premium + Expense = Gross Premium
Mortality - Interest + Expense = Gross Premium

A

Mortality - Interest = Net Premium
Net Premium + Expense = Gross Premium
Mortality - Interest + Expense = Gross Premium

49
Q

The period of time after the premium due date that the policyowner has to pay the premium before the policy lapses (usually 30 or 31 days, or one month)

A

Grace Period

50
Q

Misstatement of age on the application with result in adjustment of premiums or benefits.

A

Misstatement of age on the application with result in adjustment of premiums or benefits.

51
Q

prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years, even if there has been a material misstatement of facts or concealment of a material fact.

A

Incontestability Clause

52
Q

Allows the policy owner to elect to have a new policy issued prior to the expiration of an existing policy.

A

Conversion privilege

53
Q

Allows the policyowner to change the policy form, usually at a higher premium rate. Proof of insurability is not required

A

Change of plan Provision

54
Q

The difference between the interest rate guaranteed by the insurance contract and the actual interest rate paid on the proceeds by the insurance company.

A

Excess Interest

55
Q

Found only in policies that contain cash value.

A

Policy Loan

56
Q

Policy loans are only available in policies that have cash value (whole life)

A

Policy loans are only available in policies that have cash value (whole life)

57
Q

Set percentage per year, and will not change during the policy period

A

Fixed Interest Rate

58
Q

Fluctuates based on changes in an underlying interest rate index (such as Published Monthly Average), and must be calculated at regular intervals

A

Variable Interest Rate

59
Q

The types of risks the policy will not cover.

A

Exclusions

60
Q

Policyowner has ownership rights

A

Ownership

61
Q

Absolute or collateral

A

Assignment

62
Q

Policy (with riders and amendments) + copy of the application

A

Entire Contract

63
Q

10 days to return the policy for a full refund of premium

A

Right to Examine/Free Look

64
Q

Paid in advance

A

Payment of Premium

65
Q

Must be in writing and signed by the insurers executive officer

A

Policy Modifications

66
Q

30/31 days after premium is due to prevent policy lapsing

A

Grace Period

67
Q

Specified number of years to reinstate a lapsed policy with proof of insurability

A

Reinstatement

68
Q

2 years for the company to contest misstatements of the application

A

Incontestability

69
Q

Death benefit is adjusted to the amount according to the right age or gender at policy issue

A

Misstatement of Age or Gender

70
Q

Aviation, hazardous occupation/hobbies, and war or military service. Suicide is excluded with a specified time period.

A

Exclusions

71
Q

Written modifications attached to a policy that provide benefits not found in the original policy.

A

Riders

72
Q

Waives the premium for the policy if the insured becomes totally disabled.

A

Waiver of premium

73
Q

Waiver of premium rider waives the premium for a total disability after a waiting period.

A

Waiver of premium rider waives the premium for a total disability after a waiting period.

74
Q

Rider coves just the spouse of the insured

A

Spouse Term Rider

75
Q

Allows children of the insured to be added to coverage for a limited period of time for a specified amount.

A

Children’s Term Rider

76
Q

Pays some multiple of the face amount if death is the result of an accident as defined in the policy.

A

Accidental death rider

77
Q

Pays the principal (face amount) for accidental death, and pays a percentage of that amount, or a capital sum, for accidental dismemberment.

A

Accidental Death and Dismemberment Rider (AD&D)

78
Q

The insured to purchase additional coverage at specified future dates (usually every 3 years) or events (such as marriage or birth of a child) without evidence of insurability, for an additional premium.

A

Guaranteed insurability rider

79
Q

addresses the inflation factor by automatically increasing the amount of insurance without evidence of insurability from the insured.

A

Cost of living

80
Q

Allow the early payment of a portion of the death benefit if the insured has any of the following conditions:

A

Accelerated death benefits

81
Q

Disability Riders

A 
Waiver of Premium
Waiver of Monthly Deduction
Payor Benefit
Disability Income
Accelerated (Living) Benefit
82
Q

Riders Covering Additional Insured

A

Spouse
Children
Family
Nonfamily

83
Q

Riders Affecting Death Benefit

A 
Accelerated Death Benefit
Accidental Death or AD&D
Guaranteed Insurability
Return of Premium
Term Riders
84
Q

Choices available to the insure/owner for distribution of insurance proceeds either to the insure or the insured’s beneficiary, instead of an immediate cash lump-sum payment

A

Settlement option

85
Q

Nonforfeiture options are triggered by policy surrender or lapse.

A

Nonforfeiture options are triggered by policy surrender or lapse.

86
Q

The automatic nonforfeiture option: same face amount, shorter term of coverage.

A

Extended term

Life Insurance (3 decks)

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