AZ Life Insurance Flashcards
(98 cards)
1
Q
Pure risk
A
There is only chance for loss, no gain<br></br>
2
Q
Peril
A
The cause of loss
3
Q
Hazard
A
A condition that increases the chance of peril occuring
4
Q
Speculative Risk
A
Possibility of either loss or gain (noninsurable)
5
Q
Loss
A
An unplanned economic reduction
6
Q
Moral Hazard
A
engaging in high risk activities<br></br>-dui convictions<br></br>-excessive alcohol consumption
7
Q
Morale hazard
A
A state of mind that creates an indifference to chance of loss<br></br>-disreard of ones body<br></br>-reckless driving/ accidents
8
Q
Physical Hazard
A
physical conditions that increase loss<br></br>-working in a dangerous enviroment<br></br>-chronic disease
9
Q
risk avoidance
A
-not interacting with hazards that many result in risk
10
Q
Risk reduction
A
the acceptance of risk and dealing with loss through personal finance
11
Q
Risk sharing
A
people with common risks who group toether to cover expenses if one person experiences such loss
12
Q
risk transfer
A
-transfering the loss to a third party (base for most insurance)
13
Q
law of large numbers
A
-a method of prediciting the future losses with great accurancy based on the greater the number of incidents the more expected incidents in the future
14
Q
Stock insurance companies
A
owned by stockholders<br></br>-may be publicly traded <br></br>-pay dividended to stockholders
15
Q
Domestic Insurance Company
A
the home office is its state of incorportation and agents work in the same state
16
Q
Agent/ Producer Duties
A
-use full disclosure pertaining to any important information to both the insurer and the insurance provider<br></br>-avoid conflict of interests<br></br>-act on behalf of the client<br></br>-avoid replacing an existing policy unless the new one is found to be better for the client<br></br>
17
Q
Policy Summary
A
explains the features, benefits and conditions of the type of insurance being offered
18
Q
E&O
A
insurance producers can obtain insurance coverage that protects them from liability as a result of their business conduction<br></br>-overs injuries and damages tht occur due to professional services
19
Q
5 steps of a legal contract
A
-offer: applicant makes an offer to the insurance company through signed applicantion and premium<br></br>-acceptance: insurance company reviews the application and either accepts or declines the offer made <br></br>-consideration: what each party gives to demonstrate its commitment to the agreement<br></br>-competent parties: to be enforcable both parties must be deemed legally competent<br></br>-legal purpose: it must serve a legal purpose
20
Q
Warranty
A
a statement that is present as absolute truth<br></br>-prmoises made by the insurer that they can be relied on for claims
21
Q
representation
A
-a statement that is believed to be true to the applicants knowledge<br></br>-cannot be challenged if found to be untrue unless applicant is found to have lied about knowing
22
Q
Business rule
A
each business must have at least one licensedinsurance porudcer for every line of authority for which the business transacts
23
Q
How long does the insurer have to notify the claimant that the claim is accepted or denied?
A
-15 days
24
Q
Insurable Interest
A
an insurance policyowners financial interest in the person or property being insured<br></br>-themself, spouses, parents, adopted children
25
Term Life Insurance
provides temporary coverage and does not build cash value
-time limit can be till a specific age or for a certain amount of time and only pays benefit is insured dies during this time
-if renewed the prem goes up
-time limit can be till a specific age or for a certain amount of time and only pays benefit is insured dies during this time
-if renewed the prem goes up
26
Permanent Life Insurance
provides coverage for the insureds whole life and builds a cash value
-premium is level, same rate forever
-premium is level, same rate forever
27
Participating policies
generate policy dividends that are distributed to policy owners
28
Permanent fixed life insurance
insurance for the policyowners whole life based on interest rates that guarantee the policy's cash value and death benefits
29
Permanent variable life insurance
insurance for the policyowners whole life based on nonguaranteed investments that limit the policys guarantees
30
What happens if you withdrawl from the cash value of a permanent life policy
The death benefit is reduced by the withdrawl amount or the outstanding loan balance at the time of the insureds death
31
Business Overhead insurance vs. Business Disability insurance
Business Overhead Expenses (BOE) covers ongoing expenses during a disabiliy
Business Disability Insurance pays the salary of the disabled person while physically unable to work
Business Disability Insurance pays the salary of the disabled person while physically unable to work
32
SS PIA
Social Security, Primary Insurance Amount, the monthly benefit you'd recieve if you retire at your full retirement age
33
Credit Disability Policy
A type of policy that covers loan payments if the borrower becomes disabled and is unable to work.
-coverage last usually 12-24 months
-benefits period can range from a few years to the full lifetime of the policy
-coverage last usually 12-24 months
-benefits period can range from a few years to the full lifetime of the policy
34
Human Life Value
a method used to determine the amount of life insurance needed by calculating the present value of an indivduals future earnings
-income
-expenses
-retirement age
-dependents
-employee benefits
-income
-expenses
-retirement age
-dependents
-employee benefits
35
Annuity Death Benefits
provides a payout designated for beneficiary upon the annuity owners death
-payment can be a lump sum or a payment stream over time
-treated as taxable income
-payment can be a lump sum or a payment stream over time
-treated as taxable income
36
Plan A, B, C Medicare
A: Covers inpatient hospital care, skilled nursing facilities, some home health care
B: Covers outpatient medical care like doctor visits, X-rays, and lab tests
C: An alternative way to recieve your Part A and B benefits through private insurance plans
B: Covers outpatient medical care like doctor visits, X-rays, and lab tests
C: An alternative way to recieve your Part A and B benefits through private insurance plans
37
Universal Life Insurance Early Withdrawl
If the withdrawl exceeds the amount of premiums paid you may incur a surrender charge of about 10%
-deducted from the cash value if taken out before a certain time
-deducted from the cash value if taken out before a certain time
38
Stop Loss
A market order placed with brokers to sell a security when it reaches a certain price.
The range is typically between 2%-10%
The range is typically between 2%-10%
39
SIMPLE Plans
Savings Incentive Match Plan for Employees
-simplified retirement plan for tax-advantage allowing both employee and employers to contribute to the IRA or 401k
-designed for small businesses with less than 100
-tax deductable for employers not employees but not subject to federal income tax withholding
-simplified retirement plan for tax-advantage allowing both employee and employers to contribute to the IRA or 401k
-designed for small businesses with less than 100
-tax deductable for employers not employees but not subject to federal income tax withholding
40
What is the value of an insurance policy in an estate plan?
-provides liquidity to pay estate taxes, debts and funeral expenses so nothing is sold
-they don't need to be incorporated into the estate plan but should be considered for financial reasons
-they don't need to be incorporated into the estate plan but should be considered for financial reasons
41
Early Withdrawl on Roth Ira
before age 59.5 or 5 year old account can be subjected to a 10% penalty and income tax
42
HMOs
Health Maintenance Organization, a plan that provides healthcare services for a monthly or annual fee.
Focuses on preventative care, uses a network of doctors, hospitals
43
Jumping Juvenile Policy
Policy for a child that at age 21 jumps to 5x the original policy face amount
44
Standard Life Insurance Dividend Options
-paid in cash
-reduced/pay premiums
purchase paid-up additions
-accumulate interest
45
Disability Income Insurance Policy Waiver of Premium Rider
-ensures that the life insurance policy remains in force even if you become disabled and cannot pay the premiums
46
How is increasing term life insurance normally sold?
-it is added on as a rider attached to a permanent life insurance policy
47
Life with Term Certain Settlement Option
-payout structured as a life with term certain settlement option, meaning they get the policy amount as income for their lifetime meaning the interest earned becomes taxable income
48
What is the penalty for withdrawing from my retirement account early?
A 10% tax is put on an early withdraws on an annuity until age 59.5
49
Who regulates variable insurance products?
Regulated by both state and federal governments such as the Federal Securities and Exchange Commission
50
What is the grace period for an insurance policy?
1 month or 30 days
51
Relation of Earning Provision
regulates the amount of disability payment per month to equal or average monthly income, whichever is greater
52
Interest only life insurance settlement
the insurance company holds the death benefit but pays the beneficiary the interest in payments.
53
What is a reduced paid-up nonforfeiture option?
Allows a whole life policyowner to stop paying premiums and maintain a reduced death benefit.
-Made using the cash value from another policy to purchase the new paid-up policy
-cash value remains
54
Adjustable life insurance
A permanent life policy that allows for you to change the schedule and amount of premiums and adjust your coverage amount
55
Maximum benefits period on disability income?
Short Term: no more than 2 years
Long term: several years to a lifetime
56
Factors for Whole Life Insurance
Factors affecting premiums: Age, gender, health, occupation and lifestyle
57
Variable Annuity
A nonguaranteed retirement income where the end benefit is based on how well the investments perform
-only pay taxes when withdrawing but cash accumulates tax free
58
Fixed Annuity
A guaranteed retirement income that has a fixed interest rate so the money accumulates over time to the projected end benefit
-taxed at withdrawal
59
Paid up additions policy dividend option
The ability to use your policy dividends to purchase more paid-up life insurance to increase coverage
60
An insurer is required to give notice of its information practices to applicants and policyholders every:
Year
61
Automatic Premium Loan
A provision in a life insurance policy that allows the insurer to automatically borrow money from the policy's cash value to cover unpaid premiums, ensuring the policy remains in force even if the policyholder misses a payment.
62
What part of employer-paid group life insurance-if any-is tax exempt for employees?
The first $50,000 is covered
63
Spending Down in Medicaid
the difference of their income and their state's Medicaid income limit on health care expenses
64
Flexible Spending Account
A tax-advantaged savings account that lets you set aside pre-tax money to pay for qualified health care expenses
65
Medicare Supplement Policy
Known as a Medigap policy, is health insurance sold by private companies to help cover the "gaps" in coverage of Original Medicare (Part A and Part B). These policies help pay for some of the out-of-pocket costs, such as deductibles and coinsurance, that Original Medicare doesn't cover.
66
Group Health Care Eligibility
67
HSA
A Health Savings Account (HSA) is a tax-advantaged account that allows individuals to save for qualified medical expenses. It works with a High Deductible Health Plan (HDHP) and offers tax benefits for contributions, growth, and withdrawals for qualified expenses.
68
Deferred Annuities
You set a future date to start payments. Deferred annuities grow over time and can provide guaranteed income. Annuities are tax deferred—you don't owe income tax until you receive payouts
69
Illegal Occupation Provision
Generally excludes coverage for losses or injuries that result from or occur while the insured is engaged in illegal activities
70
Section 125 Cafeteria Plan
Lets employees set aside insurance premiums and other funds on a pretax basis
71
Section 1035 Exchange
A legal way to swap one insurance policy, annuity, endowment or long-term care product of like kind without triggering tax on any investment gains associated with the original contract
72
Medical Expense Policies
Insurers against and covers the cost of care and services given for illness, sickness, accidents and illness
73
Corridor Deductible
a type of deductible that bridges the gap between a primary insurance plan and an additional coverage layer. It acts as a secondary deductible that kicks in after the primary plan has exhausted its coverage, but before additional coverage from other sources
74
Medicaid Qualification Requirements
-disability or age
-asset limitations
-income limitations
75
Medicare supplement plan of an insurance company that offers the policy's benefits through a network of doctors, hospitals, and health-care service providers called?
Medicare SELECT plan
76
What defines a pre-existing condition for group health insurance purposes?
A pre-existing condition is a health condition that the insured was diagnosed with or treated for within the six months before enrolling in the plan
77
Who can NOT deduct the cost of qualified long-term care insurance premiums, subject to the age-based limits
Participants in a group health plan whose employer pays the premium
78
The need to control increasing health-care costs led to the development of?
Managed Care Plans
79
Coinsurance
Also knowns as the co-payment provision states that the insured must pay 20 percent of the expense. The policy pays the remainder
80
A tax-qualified long-term care insurance policy gives certain tax advantages to policyholders, who can deduct premiums as a medical expense and:
receive limited benefits tax free
81
Free Look period for an LTC policy
30 days
82
What qualified plans is available only to non-profit organizations?
A 403b retirement plan
83
A health insurance policy that bases the claim payment on an amount specified in the contract is called a:
Valued contract?
84
Any provider coverage without regard to a network of providers is typical of what type of plan?
85
Abby receives $15,000 of benefits this year from her employer's managed care plan. Which statement is correct about the taxation of these benefits?
Benefits are not taxable income, benefits from a group plan are not taxable
86
Stacey wants to purchase a life insurance policy with a lower premium in the early years that increases in several steps until leveling off after about 10 years and remaining level for life thereafter. Which policy would best suit Stacey's needs?
87
John buys a $1 million life insurance policy. He dies two years later and the insurer pays the $1 million benefit. Even though the premiums never came close to the benefit amount, the insurer pays the full benefit because the insurance policy is type of contract?
A valued contract
88
Taxation of a flexible spending account in a group health plan
contributions are made on a pre-taxed basis
89
Taxation on benefits this year from her employer's managed care plan
Benefits are not taxable income, benefits from a group plan are not taxable
90
Disability income insurance benefits that an employee receives from a policy for which the employer pays the premium are taxed to the employee as
Ordinary Income
91
What is the amount returned if the insured has a return of premium option
The amount of the premium returned is based on whether the insured used the policy's benefits and if so, to what extent
92
A health insurance policy that bases the claim payment on an amount specified in the contract is called a
Valued Conract
93
Any provider coverage without regard to a network of providers is typical of what type of plan?
Traditional Indemnity Policy
94
What are the included parts of a worksite plan?
weight management programs
on-site exercise facilities
routine vaccinations
95
N * (N - 1)
is used to determine the number of life insurance policies needed to fund a cross-purchase buy-sell agreement. N is the number of owners.
96
Probationary Period
Begins when a disability income policy is issued and during which illness-related disabilities are not covered
97
Keogh (HR-10 (qualified plan)
A qualified retirement plan designed for unincorporated businesses (sole-proprietorship and partnerships)
98
Difference between a life settlement and a viatical settlement
To effect a viatical settlement, the policyowner must be diagnosed with a terminal illness
A life settlement does not require the diagnosis of a terminal illness for transfer to occur.
