Insurance Regs 10%

Question 1

Democratization of Credit

Answer 1

A bank should be willing to lend money if the borrower could show good character and the earning power to repay their debt

Question 2

Creditor

Answer 2

Lender

Usually the beneficiary in credit insurance programs

Question 3

Debtor

Answer 3

Person requesting to borrow money or lease from the creditor

The policy holder and person insured in credit insurance policies

Question 4

Credit Insurance

Answer 4

Protects the lender from the borrowers inability to repay their loan.

Guarantees the repayment of a lenders loan and can generate a commission for the producer

Question 5

Closed End Credit Transaction

Answer 5

When a borrower borrows a certain amount of money for a specified period of time.

Examples:
Car loans
Personal Loans
Mortgages

Question 6

Open Ended Credit Transactions

Answer 6

A loan in which the amount of the credit extended can be increased at any time.

Has a cap or upper limit

Examples:
Home Equity Lines of Credit (HELOC)
Credit Cards

Question 7

Proof of Insurance

Answer 7

Certificate of insurance that must be delivered to the insured debtor within 30 days of incurring the debt

Question 8

Credit Life

Answer 8

Pays off the total unpaid indebtedness that is due to the creditor and no more

Term must not extend more than 15 days beyond maturity date of loan

Question 9

Joint Credit Life

Answer 9

Coverage for two individuals on one loan and pays off the balance after the first death

Question 10

Group Credit Life Eligibility

Answer 10

Under 70 yrs old and they must sign a waiver of good health.

Question 11

Post Claim Underwriting

Answer 11

Determining that an individual does not meet underwriting requirements after the receipt of a claim and voiding or denying coverage on that basis.

Illegal in Micigan

Question 12

Gross Indebtedness

Answer 12

> Total remaining principal, insurance premiums, and scheduled interest charges on a loan.
The total remaining financial obligation

Question 13

Net Payoff

Answer 13

insurance will payoff the net indebtedness of the loan which is the total owed at that given time.

Does not payoff delinquent payments or late fees

Question 14

Single Premium Mode

Answer 14

The premium for insurance coverage is added to the principal of the loan that is being financed

Question 15

Monthly Outstanding Balance

Answer 15

Used on revolving, open-ended credit where the premium for insurance is collected monthly based on the outstanding balance at the end of that month

Question 16

Term insurance

Answer 16

Gives an insured temporary death protection for a period of time

Question 17

Decreasing term Insurance

Answer 17

Insurance used to payoff loans where the principal balance will decrease over time, ie, a mortgage.

The premium, payment amount, stays the same, but the benefit, amount of coverage, decreases
aka
Mortgage Cancellation Insurance

Question 18

Level Term Insurance

Answer 18

The premium and the benefit amount stays the same over the life of the policy

Question 19

Joint Credit Life

Answer 19

Covers the life of more than one debtor with a single policy

Question 20

Truncated Life

Answer 20

Policy that provides protection for less than the term of indebtedness

Question 21

Suicide Provision

Answer 21

Death benefits not payable due to suicide for the first two years

Question 22

Disability Income Insurance

Answer 22

Pays a designated monthly amount to the beneficiary (creditor) if the borrower becomes disable due to accident or sickness and is unable to pay on their loan

Question 23

Own Occupation

Answer 23

Definition used in Disability insurance when a person is unable to perform the duties of his or her trade.

A surgeon who loses the usage of his hand

Question 24

Any occupation

Answer 24

Definition used in Disability insurance when a person is not able to perform the duties of any occupation which they have the skill and know how to perform

a mechanic who loses his hand can still work in sales but cannot do either if he cannot walk

Question 25

Permanent and total Disability

Answer 25

If a borrower is considered permanently and totally disabled then the insurance company will pay off the total due on their credit product minus and late fees or delinquent charges incurred prior to the insured becoming disabled

Question 26

Elimination Period (EP)

Answer 26

A waiting period between the time when an individual is first considered disabled to the time when the insurance company begins to draft benefit payments on their behalf. Just like when you get in an auto accident you have a deductible, the elimination period is a time deductible for the insurance company. It stops frivolous short term claims. If the insured satisfies the ep and goes on disability then back to work and is off on a second disability, the ep starts over again

Question 27

Probationary Period

Answer 27

Period of time between when an insured individual first gets their insurance policy and when they are able to use their new insurance to receive benefits. Only one Probationary Period must be satisfied per insurance policy

Question 28

Disability Payments

Answer 28

Closed end Loans- the required monthly payment Open ended Loans- The minimum payment due

Question 29

Critical Period Disability Coverage

Answer 29

Coverage offered for the life of the loan but with benefits limited to a specified number of monthly payments or the remaining periods if less

Question 30

Truncated Disability Coverage

Answer 30

Coverage offered during a portion of the term of the loan. Benefits are paid only if the disability occurs during the term of coverage. Monthly benefits payments continue only until the end of the term of insurance

Question 31

Disability Exclusions

Answer 31

- Pre Existing Conditions - Self-Inflected Injury - Pregnancy - Aviation for Aviation Students, Military and private Aircraft Pilots - War and Acts of War

Question 32

Credit Property Insurance

Answer 32

Cancels the debt owed purchased on an insured's credit if the property is destroyed by specific perils like an accident, theft, flood, or earthquake

Question 33

Guaranteed Automobile Protection (GAP)

Answer 33

"Debt Cancellation Policy" provides funds in the event that a borrower suffers a total loss of a vehicle where the loan balance is more than the amount of insurance coverage

Question 34

Mortgage Guaranty Insurance ( PMI)

Answer 34

Provides Indemnification to the lender in case a borrower fails to make mortgage payments on their loan.

Question 35

Fair Credit Reporting Act

Answer 35

A federal law which regulates confidential, fair and accurate reporting of consumer information