Life Insurance Key Terms Flashcards
term life insurance
temporary protection that lasts only for a specified period of time. if the insured dies during the specified timeframe, the policy pays the death benefit to the beneficiaries. Term policies provide the greatest amount of coverage for the lowest premiums. It is pure death protection
level term life insurance
premiums remain the same thoughout the life of the policy
increasing term policy
level premium, as do all policies, but the face amount increases every year of the policy term
face value
death benefit
decreasing term policy
level premium and a death benefit that decreases each year of the policy. Most commonly used with mortgage
whole life insurance provides permanent protection
insurance is covered for life, as long as the policy premiums are paid. Premiums and death benefits are both guaranteed, and they will remain level, as long as the policy is in force
whole life build cash value
the premium paid by the policyowner also does not change during the life of the policy or during the premium payment period
straight life
continuous premium whole life, charges a level annual premium for the lifetime of the insured and provides a level, guaranteed death benefit. it build cash value. straight life has the lowest annual premium among whole life policies.
limited pay whole life
specifies a set number of years during which the policyowner must pay premiums. After premium is paid up, the policy remains in force for the insureds lifetime. Limited pay policies have higher premiums than straight life policies because the premium payment period is condensed.
single premium whole life
one time lump sum premium payment to provide a level death benefit to the maturity of the policy. Single premium policies generate immediate cash value due to the size of the lump sum premium payment.
An insurer wants to obtain info on an applicant. What must insurer do?
Present the insured with a Disclosure authorization notice
When would a 20 pay whole life policy endow?
a limited pay whole life policy would endows for the face amount at age 100. the premium is completely paid off in 20 years.
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as
one year term optionthe dividend is utilized to purchase one year term insurance.
The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unaavailble to lower echelon employees. this plan would be funded with before tax corporate dollars, and it does not meet government approval standards. This annuity plan is subject to:
a nonqualified annuity planNonqualified plans are perfectly legal for selected employees to receive certain types of benefits. Before tax corporate dollars can be used for these plans, and they are not subject to government standards. Nonqualified plans are not tax deductible
joint life
a joint life policy would be the least expensive because the premiums are based on the average age, and the death benefit would be paid out at the first death.
A provision in a life insurance policy that provides for the early payment of some portion of the face value should the insured suffer from terminal illness is called
an accelerated benefit provisioncan be made in a lump sum or in monthly installments over a specific period of time. this provision is given without an increase in premium
If a life insurance policy develops cash value faster than a 7 pay whole life contract, it is
a modified endowment contract
which is the following provisions make a contract complete
entire contract
which of the following riders would not cause a death benefit to increase?
payor benefit rider
An adjustable life policyowner can change what?
the coverage period
For an individual who is not covered by an employer sponsored plan, IRA contributions are
tax deductible
Variable annuities
The annuitant assumes the risks on investment
After and insurance company examination, the Commissioner or the examiner appointed by the Commissioner must file a written report within
60 daysThe report relating to the examination must be filed no later than 60 days after the examination is complete
Which is NOT true about beneficiary designations
The beneficiary must have insurable interest in the insured.A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have interest in the policy holder.
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of
A Stoli policy (Stranger originated life insurance policies are usually purchased by people who have no relationship with the insured with the intention of selling them for life settlements.
Which of the following defines a peril?
cause of lossA peril is a specific cause of loss insured in a policy.
THe full premium was submitted with the app for life insurance, and the policy was issued two weeks later as requested. When does coverage become effective?
As of the application date.If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application
Which of the following best describes fixed period settlement options?
Both the principal and interest will be liquidated over a selected period of time.Under the fixed period option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. Both the principal and interest are liquidated together over the selected period of time.
Equity indexed annuities
seek higher returnsthese are not securities. They invest on a relatively aggressive basis to aim for higher returns. Like a fixed annuity, the equity indexed annuity has a guaranteed minimum interest rate. The current interest rate that is actually credited is often tied to a familiar index like the Standard and Poohs 500
Which of the following would be considered a nonqualified retirement plan?
split dollar amountExamples of nonqualified plans are individual annuities and deferred compensation plans for highly paid executives, split dollar insurance Section 162 executive bonus plans.
A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the life insurance policy?
The full death benefitWar or Military Service Clause specifically excludes or limits the insurer's liability for losses caused by war or active military service. If a life insurance policy does not have that exclusion, the benefits are paid to the beneficiary, as if the insured dies of any other cause.
Which of the following is an example of a limited-pay life policy?
Life Paid-up at age 65Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.
Which of the following is NOT true regarding a Certificate of Authority
It is issued to group insurance participants.Before insurers may transact business in a specific state, they must apply for a license or certificate or Authority from the state department of insurance and meet any financial requirements set down by the state.
Once an agent has met the requirements to sell long-term care insurance, how often must he or she complete the 4 hours of ongoing training
every 2 yearsevery agent who sells, solicits, or negotiates long term care insurance in Minneosta must be licensed as an insurance producer for life and disability and complete a one time training course and the ongoing training every 24 months
Which of the following is NOT among the primary ways deductibles for major medical plans can be paid?
en embedded deductible. Deductibles for a major medical plans can be paid in one of the following primary ways: a FLAT dollar deductible, a PER CAUSE deductible, and a MAXIMUM annual deductible FM PC
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. It is required that his policy
Required a premium increase each year
Which is true about the spouse term rider
The rider is usually level term insurance
The life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy
the full death benefit
Which of the following is an example of a limited pay life policy?
Life paid up at Age 65Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the period that is limited, not the maturity.
Which of the following is NOT true regarding a Certificate of Authority?
It is issued to group insurance participantsBefore insurers may transact business in a specific state, they must apply for a license or Certificate of Authority
An investor busy a life policy on an elderly person in order to sell it for a life settlement. This is an example of
A STOLI PolicyStranger Oriented Life Insurance policies are usually purchased by people who have no relationship with the insured with intention of selling them for life settlements
What defines a peril
cause of lossA peril is a specific cause of loss
The full premium was submitted with the application for the life insurance, and the policy was issued two weeks later as requested. When does coverage become effective?
as of the application dateif the full premium was submitted with the application and the policy was issued as requested, the policy effective date would generally coincide with the date of application.
Which explains the policy owner rights to change beneficiaries, choose options and receive proceeds of a policy?
Owner's rights
Which option is being utilized when insurer acculumates dividents at interest and then uses the accumulated dividends plus interest, and the policy cash value to pay up the policy early
paid up optionthis is different from paid up additions, in which the insured can use dividends to buy additional policies that increase the face amount of the original policy
IN which of the following instances would the premium be tax dedcutible
Premiums paid on a 30,000 ife insurance group term life insuranc eplan for an employee
Which nonforfeiturue option has the highest amount of insurance protection
extended coverageThe extended term nonforfeitfture option has the same face amount as the original policy but for a shorter period of time
Should the Commissioner request information from a certificate holder, licensee, or other person under the jurisdiction of the commissioner. If no time specified they must comply
in 30 days.state law provides that if a time is not specified, the person shall comply with the request within 30 days and shall provide all documents ot material to the Commerissionar has qr
What kind of insurance covers the life of a debtor in connection with a credit transaction
credit insuranceCredit life insurance covers the life of a debtor in connection with a specific loan or other credit transaction
Z falls from the roof of his house while fixing it and damanages his spinal column enough to render him disabled for a year. His insurance policy carries a Disabililty Income Benefit Rider. Which of the following benefits will Z receive?
Monthly premium waiver and monthly incomeThe Disability Income Benefit rider waives the policy premiums, just like the Waiver of Premium rider. Unlike the Waiver of Premium rider, it allows the insurer to receive a weekly or monthly income during the disability period.
IN a Commerical General Liability policy, which of the following forms covers losses that occur, start or are discovered during the policy period, regardless of when the date is actually reported by the insurer?
OccurrenceA clims made form provides coverage that occurs after a retroactive date and when a claim is made during the policy period. An occurrence form covers losses that start or are discovered during the policy period, regardless of when the date is actually reported and filed by the insured
What are the two components of the universal policy?
insurance and cash accountA universal policy has two components: an insurance component and a cash account The insurance component of a universal life policy is always annually renewable term insurance. The cash account accumulates on a tax deferred basis each year and earns either the guaranteed contract rate or the
Which of the following statements best describes the effect the Accerlerated Benefit provision would have on the benefits paid to the beneficiary?
It will decrease the benefits paid to the beneficiary
All of the following are considered Social Security Benefits EXCEPT
groupSocial security provides 3 types of benefits: Retirement, Disability and Survivors
Insurance policies ensure that after a loss proceeds will go to the
beneficiarythe beneficiary is the person who receives the benefits from the insurance policy
Under an extended term nonforfeiture option, the cash value is converted to
the same face amount as in the whole life policyUnder this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy
An employee has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called?
Profit sharing planA profit sharing plan is one where the employer will contribute monies into an employee's retirement plan when the company shows a profit. The others are all qualitfied plans, but company profit isn't an issue with them (401K, tax-sheltered annuity, HR 10 plan)
When a life insurance policy stipulates that the beneficiary will receive payment sin specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments
spendthrift provisionWhen a life insurance policy contains a spendthrift provision, all rights of the beneficiary to change time of payment or amount of installments, surrender cash, borrow against, or assign for any purpose, are withdrawn and those parts of the policy that may give the beneficiary such rights are void.
Which of the following determines the length of time that benefits will be received under the Fixed Amount settlement option?
Size of each installmentThe size of each installment determines the length of time that benefits are received under the Fixed Amount settlement option.
Which of the following will be included in a policy summary
Premium amounts and surrender values
An insured owns a 50,000 whole life policy. At age 47, the insured decides to cancel his poicy and exercise the extended term option for cash value, which is currently 200,000. What would be the face amount of the new term policy?
50,000the face of the term policy would be the same as the face amount provided under the whole life policy
An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability. which policy provision allow this?
reinstatement provision
a tax sheltered annuity is a special tax favored retirement plan available to
certain groups of employees onlya tax sheltered annuity is a special tax favored retirement plan available only to certain groups of employees (nonprofit, education, other 501c3 organizations, including all employees in public education.)
groups formed when several similary related small companies join forces to create a large pool of people insurance will accept as a group
multiple employer trustformed when several similary or related small companies join forces to create a large pool of people that insures a group. The MET purchases a single benefit plan that covers the employees of each of the companies involved.
When a policy is surrended for its cash value
coverage ends and the policy cannot be reinstatedOnce the cash surrender option is selected, the coverage is terminated, and the policy cannot be reinstated.
What is the maximum penalty for habitual noncompliance with the Fair Credit Reporting Act?
2500An individual, who willfully violates this ACt enough to constitute a general pattern or business practice, will be subject to a penalty up to 2500
Which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary
it will decrease the benefits paid
If a beneficiary wanted a guarantee that benefits paid from principal and interst would be paid for a period of 10 years before being exhausted, what would a beneficiary select?
fixed period.the beneficiary would determine how long benefits would be paid. The insurer would determine how much would be paid in each installment.
What is the benefit of choosing extended term as a nonforfeiture option?
It has the highest amount of insurance protectionUnder this option the insurer uses the policy cash value to convert to term insuirance for the same face value amount as the former permanent plsn
Should the Commissioner request information from a certificate holder, licensee, or other person under the jurisdiction of the Commissioner...If no time specified, they must comply within
30 daysState law provides that if a time is not specified, the person shall comply with the request within 30 days and shall provide all documents over to the Commissioner has requests
Which of the following will NOT be an appropriate use of a deferred annuity?
creating an estateDeferred annuities grow tax deferred, and are best suitable for accumulating retirement income or funds for children's college education.
A father owns a life insurance policy on his 15 year old daughter. The policy contains the optional Payor Benefit Rider. If father becomes disabled, what will happen to preimuyms?
the insured's premiums will be waived until she is 21.
Which of the following is TRUE about a nonforfieture values
they are required by state law to be included int he policy. Nonforfeiture values are required by state law to be included in the policy, and cannot be altered by the pollicyowner. A table showing the nonf for the next 20 years must be included.
the provision stating the insured duty duty to pay death benefits upon the death of the insured and to whom the benefits will be paid
insuring clause
A person must work how many hours for the Keogh plan to be effective?
1000 hours a year
According to the Fair Credit reporting act
Disputes regarding comsumer information would not be considered negative information
Credit life insurance is issued on a decreasing term when the debt to the creditor is being repaid on an
installment basis
Misrepresentations is
issuring, publishing or circulating any illustration of sales information that is false, misleading or deceptive to policy benefits or terms. This includes oral statements
what is the term for how frequently a policeowner is required to pay the policy premium
mode is the manner or frequency that the policyowner pays the policy premium
A tax sheltered annuity
is a special tax favored retirement plan available only to certain groups of people (educational, religious, public education)
A policy owner fails to pay the premium on his whole life after the grace period passes but the policy remains in force. THis is due to the
automatic premium loanadded to contracts with a cash value at no additional charge. this is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of a premium
A partnership buy sell agreement where each partner purchases insurance on the life of each other is called a
cross purchase planeach partner is owner, payor and beneficiary
Equity indexed annuities
invest on an aggressive basis in order to yield higher results. they have guaranteed minimum interest rates they are less riskier than variable annuities
other insurance provision
defines how each policy will pay
credit insurance
covers the life of a debtor
A licensed producer has
10 days to notify commissioner of change of address, change of phone, etc.
insuring clause
contains the company's promise to pay
mutual insurance company
dividend checks
the two types of assignment
absolute and collateral
survivorship
surviving beneficiary will continue receiveing 2/3 of the beenfi paid when both were alive
the employer
receives a master plan, and the employees receive certificate of insurance, NOT individual policies