Unit 3-Basics Of Life Insurance

Question 1

What is Insurable Interest?

Answer 1

▪︎A risk of loss
-Assumed in ones self and relationships (spouse,children)
-No obvious relationship
▪︎Must be proven before policy can be purchased
▪︎ The relationship doesn’t have to exist at death

Question 2

Personal Uses of Life Insurance?

Answer 2

▪︎Survivor protection 
▪︎Mortgage payoff
▪︎Estate creation 
▪︎Estate conservation 
▪︎Liquidity 
▪︎Cash accumulation

Question 3

Determining Amount of Life Insurance Needed

Answer 3

▪︎Human life value
-Current Income
▪︎Needs approach
-Money for specific needs

Question 4

Business Uses of Life Insurance

Answer 4

▪︎Buy sell funding 
-Cross purchase 
-Entity purchase
▪︎Key person
 ▪︎Excutive bonus
 ▪︎deferred compensation

Question 5

Classes of Life Insurance Policies

Answer 5

▪︎Individual vs. Group
▪︎Term vs. Permanent 
▪︎Participating vs. Non-participating
▪︎Fixed vs. Variable 
▪︎Industrial and home service

Question 6

Premium Elements

Answer 6

▪︎Moratality
▪︎Interest
▪︎Expenses
▪︎Net premium
-Mortality minus interest
-Net single

Question 7

Gross premium

Answer 7

▪︎Net premium plus expenses

▪︎Gross annual

Question 8

Premium Mode

Answer 8

▪︎Annual, semi-annual, quarterly, monthly

-Annual is the lowest