Chapter 8: Insuring Your Life Flashcards
(93 cards)
1
Q
insurance that helps to replace lost income if premature death occurs.
A
life insurance
2
Q
insurance that covers medical costs.
A
health insurance
3
Q
insurance that reimburses you if your property is damaged or destroyed.
A
property insurance
4
Q
what is the primary risk that is mitigated by insurance?
A
change of economic loss
5
Q
- risk avoidance
- loss prevention and loss control
- risk assumption
- insurance
These are all methods of combating…
A
risk.
6
Q
avoiding situations that may cause loss.
A
risk avoidance
7
Q
risk avoidance is attractive when the cost of avoidance is less than the cost of handling a situation another way.
A
true
8
Q
activities that reduce the chance that loss will occur.
A
loss prevention
9
Q
activities that lessen the severity of the loss once it has occured.
A
loss control
10
Q
involves bearing the risk of loss.
A
risk assumption
11
Q
a contract between the insured and an insurance company that agrees to reimburse you for losses according to specified terms.
A
insurance
12
Q
what must the insured pay to obtain insurance?
A
insurance premium
13
Q
statistical information and loss experiences analyzed by the insurance company is referred to as…
A
actuarial data.
14
Q
process of deciding who the insurance company insures and the premium amounts charged.
A
underwriting
15
Q
occurs when a high-risk client obtains insurance coverage.
A
adverse selection
16
Q
- financial protection for dependents
- protection from creditors
- tax benefits
- savings vehicle
These are the benefits of…
A
life insurance.
17
Q
what type of people need life insurance?
A
only those who have dependents (through marriage, with kids, etc.)
18
Q
method of assessing how much insurance one needs by multiplying gross annual earnings by some selected number to arrive at the estimated coverage.
A
multiple-of-earnings method
19
Q
method of assessing how much insurance one needs by assessing total economic needs, determining financial resources, and assigning life insurance accordingly.
A
needs analysis method
20
Q
amount of money needed to maintain lifestyle, extra expenses, special needs, debt liquidation, and liquidity.
A
economic needs
21
Q
list all money sources to determine,,,
A
financial resources.
22
Q
economic needs - financial resources =
A
life insurance needed
23
Q
benefit that provides basic support to families.
A
social security survivor’s benefits
24
Q
what 2 things make it harder for an individual to obtain insurance and, if they do, it costs more?
A
- health problems
- risky behaviors/occupation
25
What are the 5 different types of insurance policies?
1. term
2. whole
3. universal
4. variable
5. group
26
policy that provides specified amount of coverage for set period, is the simplest life insurance policy, grants beneficiaries full amount after death, has 5-30 year periods, and premiums are paid on annual, semiannual, or quarterly basis.
term life insurance
27
what are the 2 types of term life insurance policies?
1. straight
2. decreasing
28
type of term life insurance that is written for a set number of years during which coverage remains the same and premium can be either on an annual renewable term policy or a level premium term policy.
straight term life insurance
29
type of term life insurance where the amount of protection decreases over the policies life and has higher premiums.
decreasing term life insurance
30
term life insurance has lower premiums, temporary coverage (that's not renewable), has a convertibility provision, and is a longer term policy.
true
31
3 types of whole life insurance policies??
1. continuous premium
2. limited payment
3. single premium (SPLI)
32
type of insurance provides permanent coverage during the individual's life, has cash value, a return on investment, and a nonforfeiture right.
whole life insurance
33
type of whole life insurance that pays a level premium annual and offers the greatest amount of permanent death protection and least savings.
continuous premium
34
type of whole life insurance where the premium is based on a specified period during which a level premium is charged
limited payment
35
type of whole life insurance that is purchased w/ 1 cash premium payment @ inception of contract for rest of life, is a tax-sheltered investment vehicle, and contains a modified endowment contract (MEC).
single premium (SPLI)
36
whole life insurance payments contribute toward building an estate, has nonforfeiture option, policy reinstatement option, and a participating policy.
true
37
a policy where dividends are paid in cash, premium reductions, dividend accumulation, and/or paid-up additions.
participation policy
38
life insurance with permanent cash value that combines death benefits and tax-sheltered accounts w/ interest which are unbundled.
universal life insurance
39
when items are identified separately in premium.
unbundling
40
life insurance that's like a mutual fund, has coverage that varies w/ profits in investment accounts provided.
variable life insurance
41
life insurance with 1 master policy where each member receives a certificate of insurance.
group life insurance
41
changing from group life insurance to individual insurance is referred to as policy...
portability.
42
1. compare costs and features of insurance policies
2. select an insurance company
3. choose an agent
These are the 3 steps involved in buying...
life insurance
43
you should decide how much and what kind of policy you want before comparing costs and interest.
true
44
insurance rates may increase over time.
true
45
you should consider a firm's reputation, financial history, commission/fees, policy provisions, investment performance, and dividend history when considering an...
insurance company.
46
a firm's ability to pay future claims by policyholders.
claims paying ability
47
when choosing an insurance agent, obtain recommendations from professionals, consider their education level and designations, and notice how they answer questions.
true
48
1. Beneficiary clause
2. settlement options
3. policy loans
4. premium payments
5. grace period
6. nonforfeiture options
7. policy reinstatement
8. change of policy
These are the 8 key features of...
life insurance policies.
49
clause that ensures that beneficiary receives death benefits.
beneficiary clause
50
what are the 2 types of beneficiaries?
1. primary
2. contingent
ALSO
irrevocable beneficiary
51
settlement options determine how proceeds are paid out.
true
52
1. lump sum
2. interest-only
3. fixed period
4. fixed amount
5. life income
These are the 5 types of...
settlement options.
53
settlement option where entire death benefit is paid out in single amount.
lump sum
54
settlement option where taxable interest only is received for a specific period until the principal is needed.
interest-only
55
settlement option where the face amount and interest is paid out over a fixed period.
fixed period
56
settlement option where fixed payments are made out until the proceeds run out.
fixed amount
57
settlement option that guarantees to pay beneficiary a certain amount for the rest of their life.
life income
58
feature of life insurance that's an advance made by the firm to policyholder against whole life policy.
policy loans
59
policy loans are secured by the cash value of the policy, require interest payments, and may be subject to tax penalties.
true
60
life insurance feature that is involves annual, semiannual, quarterly, or monthly payments that are due in advance of due date.
premium payments
61
feature of life insurance that allows holder to retain protection for a short time after missing the payment date.
grace period
62
feature of life insurance that pays the cash value insurance policyholder the policy's cash value when the policy is terminated before maturity date.
nonforfeiture options
63
what are the 2 nonforfeiture options?
1. paid-up insurance
2. extended term insurance
64
nonforfeiture option where cash value is used to buy a new, single premium policy w/ lower face value.
paid-up insurance
65
nonforfeiture option that uses accumulated cash value to buy a term life policy for the same face value as the lapsed policy and a coverage period is determined by the amount of term protection that the single premium payment buys at the insured's current age.
extended term insurance
66
feature of life insurance that allows you to revive the original contract within 3-5 years.
policy reinstatement
67
feature of life insurance that allows one to change your policy without a penalty.
change of policy
68
an optional feature of life insurance that increases the face amount of the policy if the insured dies in an accident.
multiple indemnity clause
69
an optional feature of life insurance that contains a waiver-of-premium and a disability income portion.
disability clause
70
a payment of premiums if the insured becomes totally disabled before 60 years old.
waiver-of-premium
71
$5-10 per every $1,000 of face value of policy paid monthly.
disability income portion
72
an optional feature of life insurance that allows holder to purchase additional coverage at stipulated intervals without insurability evidence.
guaranteed purchase option (GPO)
73
an optional feature of life insurance that voids the contract if suicide is committed within 2 years.
suicide clause
74
what are the 3 life insurance policy exclusions?
1. aviation
2. war
3. hazardous occupation/hobby
75
an optional feature of life insurance whereby the holder is entitled to receive policy dividends reflecting changes in the company's anticipated mortality experience, investment earnings, and operating expenses.
participating policy
76
an optional feature of life insurance that allows the insured to receive a percentage of death benefits prior to death in case of diagnosed terminal illness or expense treatment.
living benefits (accelerated benefits)
77
an optional feature of life insurance that allows terminally ill holder to receive a percentage of death benefits for immediate use through a 3rd party investor.
viatical settlement
78
a hypothetical representation of a policy's performance that reflects that the company relies on presenting results to a prospective client.
life insurance policy illustration
79
what are the 2 parts of a life insurance policy illustration?
1. guaranteed illustration
2. current illustration
80
part of a life insurance policy illustration that must disclose the worst case scenario.
guaranteed illustration
81
part of a life insurance policy illustration that is based on credit rates and current mortality charges in effect.
current illustration
82
1. policy description, terms, and features
2. underwriting discussion
3. column definitions and key terms
4. disclaimer
5. signature page
These are additional sections of a...
life insurance policy illustration.
83
Marily died w/ $200,000 life insurance policy. Her husband, Jack, is the primary beneficiary and their children, Mimi (24) and Ann (30), are the contingent beneficiaries. If all 3 survive Marily, how are the proceeds distrbuted?
$200,000 to Jack
84
A grace period permits a policyholder to retain full death protection even though the premium hasn't been paid for how many days?
31
85
what insurance policy provides coverage for a set period?
term life insurance
86
Henry must make set premium payments on his insurance policy until he dies, and if he cancels his policy, he will receive the cash value. What plan does Henry have?
continuous whole life policy
87
term life insurance is characterized by lower what than other types of insurance?
premiums
88
the process used by insurers to decide who can be insured and to determine applicable rates that will be charges for premiums.
underwriting
89
the death benefits of variable life insurance policy may go down because of poor investment returns.
true
90
you should purchase insurance from a company that has been in business for at least...
25 years.
91
employers often provide group life insurance as a fringe benefit for their full-time employees.
true
92
you can learn about the financial strength of an insurance company by checking Standard & Poor's rating system.
true
