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Flashcards in 2 Exam Cards Deck (34)
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1
Q

What are the three main instances insurable interest exists in life insurance?

A

Insuring:

  1. Your own life
  2. family member’s life
  3. Business Parter’s or someone who has a financial obligation to the policy owner
2
Q

Life Insurance may be used to pay state inheritance taxes and federal estate taxes to eliminate the need to sell assets from the estate. What is this called?

A

Estate Conservation

3
Q

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

A

Permanent insurance (usually, whole life)

4
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 a higher overall premium (more premium by month>year)

5
Q

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

A

Mortality
Interest
Expense

6
Q

All other factors beings equal, which premium payment mode will require an overall higher premium? Monthly or Annual

A

Monthly

7
Q

What is insurance underwriting

A

the process of risk selection and classification.

8
Q

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

A

Premium

9
Q

Who is responsible for the contents of the insurance advertisements

A

Insurance Company

10
Q

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

A

Date of application or
Date of Medical Exam
(whichever occurs last)

11
Q

What does liquidity mean in a life insurance policy?

A

availability of cash value

12
Q

In calculating the amount of life insurance needed, what is the Needs Approach based on? (Definition not examples)

A

The predicted needs of a family after the premature death of the insured.

(considering debt, income, Social Security blackout, expenses)

13
Q

List Examples of the Needs Approach

A

family needs (considering debt, income, Social Security blackout, expenses)

14
Q

A business is the owner, beneficiary (and applicant/premium payer) of a key-person life policy. When the business collects the policy benefit, how is it taxed?

A

The benefit is received tax-free.

15
Q

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

A

The employer

16
Q

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

A
  1. Insured current assets

2. Liabilities and Survivor’s needs

17
Q

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

A

Medical Information about the prospective insured

Medical background, medical visits in recent years, causes of death in deceased relatives, etc

18
Q

What is included in Part 1 of a life insurance application

A

General Information (age, birthdate, occupation, gender, address, etc)

19
Q

What is the main responsibility of a company’s underwriting unit?

A
Risk selection
(Standard, substandard, Preferred)
20
Q

What is the purpose of the agent’s report during the application process?

A

to discuss the agent’s personal observation about the proposed insured that may help in the underwriting process.

21
Q

What are illustrations in a life insurance policy

A

The presentations of non guaranteed elements of the policy

22
Q

What document describes the specific information about a policy

A

Policy Summary

23
Q

Can insurance companies 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 insurance policies by insurance companies is an illegal business practice.

24
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

25
Q

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

A

At the time of policy delivery (They get information on what they are going to be paying for)

26
Q

Who must be a member of insurance guaranty associations

A

All insurance companies authorized to write insurance within a state.

27
Q

What term describes the frequency and the amount of premium payment

A

Premium mode or Premium Payment Mode

mode=frequency policy owner pays

28
Q

What types of insurance creates an immediate estate

A

Life Insurance

29
Q

What are the personal uses of life insurance:

A
  1. Survivor Protection
  2. Estate Creation (immidiate estate) and Estate Conservation
  3. Cash accumulation and liquidity
30
Q

Who must have insurable interest in the insured?

A

The policy owner

31
Q

Mortality tables are used by insurance companies to predict what?

A

Life expectancy and the death rates for specific groups of individuals

32
Q

When must insurable interest exist in a life insurance policy?

A

At the time of application

33
Q

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter’s main concern?

A

existence of insurable interest between the applicant and the insured

34
Q

What is the purpose of insurance guaranty associations?

A

To protect policy owners, the insured, and beneficiaries from financial losses caused by insolvent insurance companies