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Life & Health Insurance Exam > Terms > Flashcards

Terms Flashcards

1
Q

The person or entity designated in a life insurance policy to receive the death proceeds

A

Beneficiary

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2
Q

The beneficiary second in line to receive death benefit proceeds if the primary beneficiary dies before the insured

A

Contingent (Secondary) Beneficiary

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3
Q

A measure of what it costs an insurance company to operate

A

Expense Factor (also known as Loading Charge)

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4
Q

Issues very small face amounts such as $1000 or $2000. The premiums are paid weekly and collected by debt agents. They were designed for burial coverage.

A

Industrial life insurance

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5
Q

Life insurance of commercial companies not issued on the weekly premium basis. It is made up of several types of individual life insurance such as temporary (term), permanent (whole)

A

Ordinary life insurance 

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6
Q

Insurance written for members of a group, such as a place of employment association, or a union. Coverage is provided to the members of the group under one master contract. There is no evidence of insurability required.

A

Group life insurance

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7
Q

Gives the greatest amount of coverage for a limited period of time.

A

Term life insurance

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8
Q

Has a termination date. Is the cheapest type of pure life insurance. Does not have any cash value. Always cheaper than a whole life policy with the same face value.

A

Term life insurance

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9
Q

Life insurance written to cover a need for a specified period of time at the lowest premium

A

Level term 

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10
Q

Premiums for this type of term insurance tend to be higher than annual renewable term because they are level throughout the policy period. The premiums will increase at each renewal.

A

Level term

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11
Q

Provides a fixed, low premium in exchange for coverage, which lasts a specified time.

A

Level term 

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12
Q

Life insurance that provides an annually, decreasing face amount over time with level premiums. Typically used for mortgage protection.

A

Decreasing term

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13
Q

Life insurance designed to cover the life of a debtor and pay the amount due on a loan. If the debtor dies before the loan is repaid. Can only be purchased for up to the amount of the debt or alone outstanding.

A

Credit policies 

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14
Q

Term life insurance that provides an increasing face amount, overtime based on specific amounts, or a percentage of the original face amount

A

Increasing term 

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15
Q

A provision that allows policy owners to convert their term insurance into permanent policies without showing proof of insurability

A

Convertible term

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16
Q

Term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy. Without having to prove insurability. 

A

Renewable term 

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17
Q

True or false: all term insurance has a final termination date were you can no longer renew it

A

True 

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18
Q

Term coverage that provides a level face amount that renews annually. This type of coverage is guaranteed renewable annually without proof of insurability.

A

Annual renewable term 

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19
Q

A type of life insurance products, which covers children under their parents policy.

A

Term rider 

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20
Q

Allow for additional family members to be covered under one policy by attaching everyone to a main policy.

A

Term riders

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21
Q

Provides death benefits for the entire life of the insured also provides living benefits in the form of cash values

A

Whole life insurance

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22
Q

This type of insurance matures at age 100 and normally has a level premium

A

Whole life insurance 

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23
Q

A type of whole life insurance which allows you to maintain coverage throughout your entire lifetime and spread the cost out over your entire life

A

Straight life insurance 

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24
Q

A whole life insurance policy, which covers an insured’s whole life with level premiums paid over a limited time

A

Limited pay life insurance 

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25
Q

A whole life policy where is a premium stays fixed for the first five years, and then increases in your six and stays level for the remainder of the policy

A

Modified whole life insurance 

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26
Q

A whole life insurance policy that exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract

A

Whole life - Modified Endowment Contract (MEC)

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27
Q

A policy, which pays the face amount after the first person covered on the policy dies.

A

Joint life policy

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28
Q

A policy which will only pay the death benefit upon the death of the last insured person

A

Joint life survivor/last survivor life policies 

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29
Q

A policy which provides an income for a specific period starting at the death of the insured.

A

Family income policy 

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30
Q

This policy pays a monthly income from the date of death of the insured to the end of the preselected period. The payment of the face value amount of the policy is payable at the end of such pre-selected period.

A

Family maintenance policy 

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31
Q

Combines whole life and term life into a single plan

A

Adjustable life policy 

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32
Q

As financial needs and objectives change, the policy owner can make adjustments to the premium and/or face amount of this type of insurance policy

A

Adjustable life policy 

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33
Q

Incorporates, flexible premiums, and and adjustable death benefit

A

Universal life insurance policy 

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34
Q

A customer who wants a policy that gives them the most options, and the most control would be looking for this type of policy

A

Universal life policy 

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35
Q

Requires a producer to have proper FINRA and NATIONAL ASSOCIATION OF SECURITIES DEALERS (NASD) securities registration 

A

Variable life insurance policies 

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36
Q

A policy that usually has a fixed level premium, but the cash value in death benefits can fluctuate according to the performance of its underlying investment portfolio

A

Variable life policy 

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37
Q

 Known as interest, sensitive policies

A

Variable life insurance policies

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38
Q

Investment account grows through mutual funds, stocks, and bonds.

A

Variable life insurance policies

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39
Q

Gives policy owners the best of both of Variable Life and Universal Life

A

Variable universal whole life (VUL)

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40
Q

If a policy owner was looking for a policy that allowed them to control how much, and when premium was due, what investment accounts for used for funding, and where the returns from those investment accounts went, they would be looking for this type of policy

A

Variable Universal Whole Life Policy 

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41
Q

Combines most of the features, benefits, and security of traditional life insurance, with the potential of earned interest based on the upward movement of an equity index

A

Equity Index Universal Life Insurance

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42
Q

This plan allows policyholders to link accumulation values to an outside equity index

A

Equity, indexed universal life insurance 

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43
Q

These policies are characterized by a guaranteed minimum interest rate, tax deferral of interest, accumulations, and policy loan access

A

Equity index universal life insurance 

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44
Q

 When an investor purchases a policy on the life of someone else to profit upon that persons death

A

Investor (or stranger) originated life insurance policy S(I)OLI

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45
Q

The equity amount or “savings” accumulation in a whole life policy

A

Cash value 

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46
Q

A contract providing for payment of the face amount at the end of a fixed., At a specified age of the insured, or at the insurance death before the end of the stated period

A

Endowment policy 

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47
Q

A contract that promises to pay at the insurance death the face amount of the policy plus a sum equal to the policies cash value

A

Face amount plus cash value policy 

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48
Q

An insurance written on the lives of children, who are within a specified age limits, and generally under parental control

A

Juvenile insurance 

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49
Q

This insurance typically does not require a medical exam and tends to be more expensive than medically under written policies

A

Non-medical life insurance

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50
Q

A suggested a premium used in universal life policies

A

Target premium 

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51
Q

Accident, health property, and casualty insurance contracts are all contracts of

A

Indemnity 

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52
Q

A principle of actuarial science that states that the higher the number of risks insured in the same pool, the more predictable losses become

A

Law of large numbers 

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53
Q

Some thing that can cause financial loss

A

Peril

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54
Q

Individually lists perils that they cover

A

Specified or named perils 

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55
Q

Insurance policies do not name the perils they cover, but instead begin by saying that cover all direct causes of loss

A

Special or open peril 

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56
Q

An unintentional decrease in the value of an asset due to a peril

A

Loss 

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57
Q

Results when a person or property is damaged, destroyed, or killed by apparel without any intervening cause

A

Direct loss 

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58
Q

And indirect loss is also known as

A

Consequential loss 

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59
Q

Any event that causes a loss

A

Occurrence 

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60
Q

A condition or situation that creates or increases a chance of loss. Examples include physical, moral, and moral.

A

Hazard 

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61
Q

Physical or tangible conditions, existing in a manner that makes a lot more likely to occur

A

Physical hazards 

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62
Q

Make the lost more likely to occur due to the dishonest or villainess character of the insured

A

Moral hazards 

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63
Q

A hazard created based as a result of the personal or subjective thought process of the insured 

A

Morale hazard 

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64
Q

Defined as a potential for loss. There are two types, speculative and pure. 

A

Risk 

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65
Q

These risks are considered to have an average potential for loss

A

Standard risks

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66
Q

These risks are considered to be a poor risk for the insurance company and have a higher potential for a loss

A

Substandard risks

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67
Q

Also known as loss, sharing, spreads risk by sharing the possibility of loss over a large number of people

A

Risk pooling 

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68
Q

Sound and competent underwriting may reduce the chance of what?

A

Adverse selection (the tendency for poorer than average risks to seek out insurance) 

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69
Q

Treatment of risk includes implementing the 5 following strategies

A
  • Risk avoidance
  • Risk reduction
  • Risk retention
  • Risk transfer
  • Risk sharing
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70
Q

Risk can be transferred or passed from one party to another through what?

A

An Insurance contract 

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71
Q

The spreading of risk from one insurer to one or more other insurers 

A

Reinsurance 

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72
Q

Involves taking actions to eliminate damage or loss

A

Loss prevention 

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73
Q

Companies that sell more than one line of insurance are known as what?

A

Multi-line insurers

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74
Q

Typically issues non-participating insurance policies

A

A stock insurance company 

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75
Q

These policies do not allow policyholders to participate in board, elections or dividends, and instead a.m. to increase profit for the shareholders

A

Nonparticipating 

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76
Q

Referred to as PARTICIPATING companies, because the policy owners participate in dividends

A

Mutual companies 

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77
Q

Allow policyholders to participate in the company by electing the board of directors and receiving dividends from the divisible surplus

A

Participating policies 

78
Q

The amount of earnings paid to policy owners as dividends after the insurance company sets aside funds required to cover reserves, operating expenses, and general business purposes

A

The divisible surplus

79
Q

Operates on the basis of loss sharing by group members

A

Pure assessment mutual company

80
Q

Only has to be licensed in one state, but may ensure members in any state

A

A risk retention group/risk purchasing group

81
Q

A type of insurer organized on the basis of ownership by their policy holders

A

Reciprocal insurers

82
Q

This is not an insurer, but rather a syndicate of individuals and companies that individually underwrite insurance

A

Lloyd’s of London

83
Q

The company transferring the risk is called the what?

A

Ceding company

84
Q

The company, assuming the risk of the primary insurer

A

Reinsurer

85
Q

In a reinsurance agreement the insurance company that transfers it’s a loss exposure to another insurer is called the what?

A

Primary insurer

86
Q

The most common insurance contract between two insurance companies is called what?

A

Treaty reinsurance

87
Q

An insurer established and owned by a parent firm for the purpose of ensuring the parent firms loss exposure is known as what?

A

A Captive insurer

88
Q

Refer to the nontraditional insurance market

A

Surplus lines

89
Q

Insurance characterized by relatively small face amounts with premiums paid weekly

A

Industrial insurance

90
Q

A person who establishes a self funded plan to cover potential losses

A

A self insurer

91
Q

Divisions responsible for renewing applications, conducting investigations to gain additional information about applicants, assigning risk classifications, and approving or declining an application

A

The marketing or sales divisions

92
Q

The department responsible for processing, investigating, and pen, claims for losses incurred by insureds

A

The claims department 

93
Q

Typically the department completing the application

A

The sales department 

94
Q

The department responsible for reviewing applications, contacting investigations to get an additional information about applicants, assigning risk classification, and approving or declining an application

A

The underwriting department 

95
Q

The department that calculates policy rates, reserves, and dividends, and makes the other applicable statistical studies and reports focusing on morbidity and mortality tables

A

The actuarial department 

96
Q

True or false: in any dispute between the insured or beneficiary and the insurer, the agent who solicits an insurance application represents the insurer and not the insured or the beneficiary

A

True

97
Q

Branches of major stuck in mutual insurance companies that are contracted to represent an insurer in a specific area

A

Career agencies 

98
Q

This case, in which the US Supreme Court decided, involved one states attempt to regulate insurance company, domicile in another state 

A

1868 Dash Paul v. Virginia 

99
Q

In this case, the Supreme Court ruled that the insurance industry is subject to a series of federal laws, many of which conflicted with existing state laws. As such, insurance is a form of interstate commerce to be regulated by the federal government.

A

1944 – United States v. Southeastern Underwriters Association (SEUA)

100
Q

This law made it clear that the states continued regulation of insurance was in the public’s best interest. However, it also made possible the application of federal antitrust laws to the extent that [the insurance business] is not regulated by state law.

A

1945 – The McCarran–Ferguson Act

101
Q

True or False: In 1958 with the Supreme Court held that The McCarran-Ferguson Act disallowed such supervision by the FTC, the federal agency. Additional attempts have been made by the FTC to force further federal control, but not have been successful.

A

True

1958 - FTC Intervention

102
Q

True or False: The Supreme Court ruled that federal securities laws applied to insurers that issued variable annuities, and thus, required these insurers to conform to both SEC and state regulation. The SEC regulates variable life insurance.

A

True

1959 - SEC Intervention

103
Q

The act which requires fair and accurate reporting of information about consumers, including applications for insurance. Insurers must inform applicants about any investigations that are being made upon completion of the application.

A

1970 – Fair Credit Reporting Act

104
Q

It is a criminal offense for an individual who has been convicted of a felony involving dishonesty or breach of trust to willfully, engage or participate in any capacity in the business of insurance, without first obtaining a “letter of written consent to engage in the business of insurance” from the regulating insurance department of the individual state of residence. Where is this code referenced?

A

1994 – United States Code (USC) Sections 1033 and 1034. According to 18 U.S.C.1033 & 1034.

105
Q

What was the name of the act passed by Congress in 1999 which repealed the Glass Steagall Act. Under this new legislation, commercial banks, investment banks, retail brokerages, and insurance companies can now enter each others lines of business?

A

1999 – Financial Services Modernization Act

106
Q

The act which amends the bank, secrecy act (BSA) was adopted in response to the September 11, 2001, terrorist attacks. This act is intended to strengthen US measures to prevent, detect, and deter Terrace and their funding. The act also aims to prosecute, international money, laundering, and the financing of terrorism. These efforts include anti-money laundering (AML) tools that impact the banking, financial, and investment communities

A

The Patriot Act

2001 – Uniting and Strengthening America, by Providing Appropriate Tools, Required to Intercept and Obstruct Terrorism Act

107
Q

The do not call registry allows consumers to include their phone numbers on the list to which telemarketers cannot make solicitation calls

A

2003 – Do Not Call Implementation Act

108
Q

The act which represents one of the most significant regulatory overhauls and expansions of health insurance coverage in US history

A

2010 – Patient Protection and Affordable Care Act (PPACA)

Also:
Affordable Care Act (ACA)

109
Q

A person who acts for another person, or entity, known as the principal with regard to contractual arrangement with third parties

A

An agent

110
Q

The authority a principal deliberately gives to its agent

A

Express authority

111
Q

The unwritten authority that is not expressly granted, but which the agent is assumed to have, in order to transact the business of the principal.

A

Implied authority

112
Q

The appearance or assumption of authority, based on the principles, actions, words, or deeds.

A

Apparent authority

113
Q

A company whose primary purpose is to determine the financial strength of the industries insurers

A

Rating service

114
Q

The accounting measurement of an insurer’s future obligations to its policyholders

A

Reserves

115
Q

Indicates a Company’s ability to make unpredictable payouts to policy holders

A

Liquidity 

116
Q

Three factors that influence the gross premiums charged for life insurance

A
  1. Mortality
  2. Interest
  3. Expenses
117
Q

Which factor has the greatest effect on premium calculations or rate making?

A

The Mortality Factor

118
Q

A reflection of an insurer’s return on their investment

A

The interest factor

119
Q

A premium that makes provision for mortality, cost and interest. It is influenced by the assumed interest rate, the proposed insured‘s gender, the benefits to be provided, and the mortality rate.

A

Net single Premium

Mortality cost - Interest = Net single Premium

120
Q

The premium charged by an insurer that is comprised of or influenced by mortality, interest, and expenses. It is the actual premium paid by the policy owner for life insurance coverage.

A

Gross premium

Net premium + Insurer expenses, = Gross premium

121
Q

The tendency of a disproportionate number of poor risks to seek or buy insurance or maintain existing insurance in force (i.e. the selection against the insurance company.)

A

Adverse selection

122
Q

The date halfway between a birthdays when the applicants age changes to the next higher age. With some insurers, the age is based upon the applicants age at his nearest birthday. And others, it is based upon the age of his last birthday.

A

Age change

123
Q

The statement of information given when a person applies for life, health, or disability insurance. The underwriter uses this information as a basis in determining whether the applicant qualifies for acceptance under the companies guidelines.

A

Application

124
Q

These are used when the application or medical examiners report reveals conditions or situations, past or present, about which more information is desired

A

Attending Physician Statement (APS)

125
Q

The practice of making the effective date of a policy earlier than the application date

A

Backdating 

126
Q

Backdating is not allowed in what type of contract?

A

Variable contracts

127
Q

State laws usually limit the time to which policies can be backdated to how long?

A

6 months

128
Q

Binding receipts are also known as what?

A

Unconditional receipts

129
Q

True or false: Binding receipts are one of the types of receipts given by an insurance company upon the completion of an insurance application if the initial premium is collected with the application

A

True

130
Q

A pamphlet that describes an compares various forms of life and health insurance

A

Buyers guide

131
Q

A form customarily required to be signed by the agent, and given to the perspective owner at the time a new application is completed

A

Conditional receipt

132
Q

A detailed background investigation that may include an interview with coworkers, friends, and neighbors about the applicant’s character, reputation, lifestyle, etc.

A

Consumer report

133
Q

A summary of an insurance applicants credit history

A

Credit report

134
Q

An individual whose application for coverage was rejected by an insurance company

A

Declined risk

135
Q

A federal law passed in 1970 that provides an insurer with the right to receive additional information with regard to applicants for insurance coverage

A

Fair credit reporting act

136
Q

The financial or emotional relationship between two or more parties justifying one owning a life insurance policy on the other

A

Insurable interest

137
Q

An applicant who represents the likelihood of risk lower than that of the standard applicant

A

Preferred risk

138
Q

The person whose life is requesting to be insured. Typically, but I always, this is also the applicant.

A

Proposed insured

139
Q

The basis for an additional charge to the standard premium, because the person insured is classified as a higher than average risk

A

Rated policy (Rating up)

140
Q

A legal activity where a producer convinces a prospective client to lapse or surrender a Life or health policy and purchase a new one

A

Replacement

141
Q

The underwriting category into which risk is placed, depending upon the applicants susceptibility to injury, death, or illness

A

Risk classification

142
Q

An applicant who cannot qualify for a standard policy it, but may secure one with a writer, waving the payment for a loss involved in certain existing health impairments

A

Special class

143
Q

A person who, according to accompanies underwriting standards, is considered an average risk an insurable at standard rates

A

Standard risk

144
Q

An applicant his physical condition does not me at the usual minimum standards

A

Substandard risk (impaired risk)

145
Q

A person who identifies, examines, and classifies the degree of risk, represented by a proposed insured in order to determine whether or not coverage should be provided and, if so, at what rate

A

Underwriter

146
Q

The analysis of information obtained from various sources pertaining to an applicant for insurance, and the determination of whether or not, the insurance should be issued as requested, offered at a higher premium, or declined.

A

Underwriting

147
Q

A statement that is absolutely and literally true

A

Warranty

148
Q

Characteristics that contribute to a preferred risk rating include

A

Not smoking, weighing within an ideal range, and not drinking

149
Q

The three essential parts to a typical life insurance application

A
  1. General applicant information
  2. Medical and health history
  3. The agents report or statement
150
Q

Policies that are issued to cover a group who may be exposed to the same risks, but the individuals within the group are continually changing. (For example, an airline or bus company would use this to cover its passengers.)

A

Blanket health policies

151
Q

A document issued by an insurance company/broker that is used to verify the existence of insurance coverage under specific conditions granted to listed individuals.

A

Certificate of insurance

152
Q

With group insurance, the group (typically employer) is the policy owner and maintains a master policy. The insureds (typically employees) receive this instead of a policy

A

Certificate of insurance

153
Q

A group insurance plan issued to an employer, under which both the employer and employee is contribute to the cost of the plan. Generally 70% of the eligible employees must be insured in most states.

A

Contributory plan

154
Q

Allows the policy owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage.

A

Conversion privilege

155
Q

Designed to help the insured pay off a loan in the event they are disabled due to an accident or sickness, or in the event they die.

A

Credit policies

156
Q

Generally written for groups too small to qualify for regular group. Coverage may be called wholesale insurance when the policy is life insurance.

A

Franchise insurance

157
Q

Policy issued to the employer under a group plan; contains all the insuring clauses defining employee benefits.

A

Master policy

158
Q

An employee benefit plan under which the employer bares the full cost of the employees benefits; in most states, the plan must cover 100% of eligible employees. The employees do not contribute to the cost of the plan.

A

Non-contributory plan

159
Q

The percentage of policies an insurer has in forest after a specified period of time

A

Persistency

160
Q

Coverage provided for full-time members of the armed services.

A

Servicemember’s group life insurance (SGLI)

161
Q

A component of the service members group life insurance program, which provides coverage for spouses and children of service members insured under SGLI

A

Family service members group life insurance coverage (FSGLI)

162
Q

Provides for the conversion of service members group, life insurance coverage to a renewable term policy of insurance protection after a service members separation from the service

A

Veterans group life insurance, and federal (VGLI)

163
Q

Provides group term, life insurance for all other federal employees or civil service workers

A

Federal employees group life insurance (FEGLI)

164
Q

A retirement plan for certain employees of public schools, employees of specific, tax, exempt organizations, and certain ministers

A

403(B) plan

165
Q

The period in which the premiums an annuitant pays into annuities are credited as accumulation units.

A

The accumulation period

166
Q

Units which make up the value of contributions made by the annuitant, less a deduction for expenses

A

Accumulation units

167
Q

One to whom an annuity is payable or a person upon the continuance of whose life further payment depends

A

Annuitant

168
Q

Units that are the converted accumulation units once variable annuity benefits are to be paid out to the annuitant.

A

Annuity units

169
Q

An option that provides that, upon the death of the annuitant before payments totaling the purchase price have been made, the excess of the amount paid by the purchaser over the total annuity payments received will be paid in a one sum to designated beneficiaries

A

Cash refund option

170
Q

This provides for postponement of the payment of an annuity, until after a specified period, or until the annuitant attains a specified age

A

Deferred annuity

171
Q

A fixed deferred annuity that offers the traditional guaranteed minimum interest rate and an excess interest feature that is based on the performance of an external equities market index

A

Equity indexed annuity

172
Q

A fraction used to determine the amount of annual annuity, income exempt from federal income tax.

A

Exclusion ratio

173
Q

The total contribution or investment in the annuity divided by the expected ratio

A

Exclusion ratio

174
Q

Provides a guaranteed rate of return

A

Fixed annuity

175
Q

Provides for payment of an annuity benefit at one payment interval from the date of purchase

A

Immediate annuity

176
Q

An option which provides for payment of the annuity to two people if either person dies the same income payments continue to the survivor for life

A

Joint life and survivor option

177
Q

An annuity income option that guarantees a definite minimum period of payments, i.e. 10 years

A

Period certain annuity.

178
Q

Designed to pay the annuitant, an income for life, but guarantees a definite minimum period of payments.

A

Life with Period Certain Annuity

179
Q

Describes an annuity owner, making multiple premium payments to accumulate principle typically after the initial premium these payments are flexible with frequency and amount

A

Periodic payment annuity (Flexible Premium)

180
Q

Another name for flexible premium

A

Periodic payment annuity

181
Q

The original sum of money paid into an annuity through premiums

A

Principal

182
Q

An annuity for which the entire premium is paid in one sum at the beginning of the contract period.

A

Single premium annuity

183
Q

An annuity income option that pays a guaranteed income for the annuitants lifetime after which time payments stop

A

Straight life annuity

184
Q

Annuities which shift the investment risk from the insurer to the contract owner

A

Variable annuity

185
Q

True or false: an annuity certain guarantees payments will be made for at least a certain period of time. A refund annuity guarantees the entire principle will be depleted.

A

True

186
Q

True or false: before annuitization, the nonforfeiture value of an annuity equals all premiums paid, plus interest, minus any withdrawals and surrender charges. If the annuitant dies before the annuity period start date, and the beneficiary receives the premiums paid plus interest earned.

A

True

187
Q

An insurance product that offers the annuitant with tax deferred growth

A

Annuity

188
Q

True or false: in addition to TSA’s, and IRAs, annuities are an acceptable funding mechanism for other qualified plans, including pensions, and 401(k) plans

A

True

189
Q

True or false: while partial with drawls from a life insurance policy or text on a “first in first out basis,” while partial withdrawals from annuities are taxed on a “last in first out basis”

A

True

190
Q

The annuity that represents the largest possible monthly payment to an individual annuitant is a(n):

A

Straight life annuity

191
Q

How does an indexed annuity differ from a fixed annuity?

A

Indexed annuity owners may receive credited interest tied to the fluctuations of the linked index

Life & Health Insurance Exam (2 decks)

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