Exam FX Life Flash Cards

Risk Selection

What is the main responsibility of a company’s underwriting unit?

Exclusions

Certain risks or perils that are not covered by the policy and for which no benefits are payable, including war or military service, aviation, hazardous hobbies, or self-inflicted injuries.

Primary Policy

An insurance policy which pays first the full benefit as specified before the insured may submit a claim to a secondary or excess plan

Applicant’s medical history

What is included in pt. 2 of a life application

Notice Regarding Replacement

What document does a producer provide to the insured during policy replacement?

It provides agent’s observations about applicant

What is the purpose of the agent’s report during the application process?

The exchange (termination) of one policy to purchase another

What is policy replacement

Option A- Level death benefit, death benefit doesn’t go up until case value increases.

Option B- Increases slowly death benefit increases over time, cash value grows slowly.

What are the death benefit options in universal life policies?

A period of time during which the surviving spouse does not receive benefits

What is a blackout period for Social Security benefits?

The insured’s attained age

In annually renewable term policies, what is the annual premium based upon?

Limited- Pay Whole Life

A whole life policy that requires that the policy owner only pays premiums for a specified number of years is known as what kind of policy?

When the insured reaches age 100

When would a 20-year pay whole life policy endow?

Proceeds

Amount payable by a policy, usually in reference to the face amount of a life policy payable at death of the insured

Evidence of Insurability

When the amount of insurance is increased in an adjustable life policy, what will the insurer require from the insured?

Premium amount and payment period, face amount, period of protection

What elements of an adjustable life policy can be changed by the policyowner

The premium remains level

In term policies, what happens to the premium throughout the term of the policy?

Dividend Options

Choices available to the policy owner regarding distribution of policy dividends

Cash Value (Loan Values)

What are the living benefits of whole life insurance?

The later of the date of application or of medical exam

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

Insuring one’s own life, the life of a family member, or the life of a business partner

What are the three main instances when insurable interest exists in life insurance?

The Fair Credit Reporting Act

What law protects consumers from the circulation of inaccurate or obsolete information?

Law of Large Numbers

What law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated?

Domestic Insurer

An insurance company formed under the laws of the state in which it transact insurance

Pure Risk

A situation in which a person can only experience a loss and no gain presents what type of risk?

Survivor protection, estate creation/conservation, cash accumulation and liquidity

What are the personal uses of life insurance

The Insurance Company

Whom does an insurance agent represent?

Insurable interest and consent

What two elements are necessary for a life insurance contract to have a legal purpose?

Express, implied, and apparent

• Express is written

• Implied is not written into the contract, but assumed.

• Apparent is the assumption of authority based on the actions, word, or deeds of the principal

What are the three types of agent authority?

At the time of application

When must insurable interest exist in a life insurance policy?

Underwriting

What is the name of the process that insurance companies use to determine whether an applicant is insurable?

Perils

What is the term for the causes of loss insured against in an insurance policy?

Complete a new application

When a change needs to be made on the application for insurance, what is the best method for correcting the info

Return the application to the applicant to complete

What is the best way to handle incomplete insurance applications?

Group policy

What type of policy issues certificates of insurance to the insureds?

Permanent

If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should it be?

Policy Summary

What document describes the specific information about a policy?

Loss must be

1. Due to chance

2. Definite and measurable

3. Statistically predictable

4. Not catastrophic, and

5. Coverage cannot be mandatory

What are the 5 characteristics of an ideally insurable risk?

Hazards

Conditions that increase the chance of a loss are known as what?

Agreement, consideration, competent parties, and legal purpose

What are the four elements of an insurance contract?

Insurers

What entities make up the Medical Information Bureau? (MIB)

When the application is submitted

In insurance, when is the offer usually made on a contract?

Absolute Assignment

A permanent and irrevocable transfer of all policy rights of ownership by the policyowner to a third party

Any authorized insurer within a state

Who must be a member of a state Insurance Guaranty Association?

Universal Life

In what type of life insurance policies can the policyowner skip premium payments without the policy lapsing?

Credit Insurance

• In credit life insurance, the creditor is the beneficiary for the amount of benefit equal to the outstanding balance of the loan

  • The creditor is the policyowner and the beneficiary, the debtor is the insured

Coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor

Creditor

Lends money

Debtor

Owes money

To protect policyowners, insureds, and beneficiaries from financial losses caused by insolvent insurers

What is the purpose of Insurance Guaranty Associations?

Single- Premium Whole Life

What type of whole life policy requires one lump-sum premium at its issue and, in addition to providing insurance protection for the life of the insured, endows at the insured’s age 100?

Face Amount

What does “level” refer to in level term insurance?

An agent who resides and is licensed in another state, but who is authorized to transact insurance in this state

Who is considered a nonresident agent?

Group’s purpose, sized, financial strength, and turnover

What are the characteristics of the group that underwriters will consider before issuing a group life policy?

The agent

What type of licensee represents the insurance company?

Authorized or admitted

If an insurer meets the state’s financial requirements and is approved to transact business in the state, it is considered what type of insurer?

Person authorized to sell, solicit and negotiate insurance contracts

Who is an insurance agent?

Mortality, interest, and expense

What are the three factors that determine the premium for a particular life insurance policy?

For continuation of business if a licensed producer dies or becomes disabled

For what reason can temporary license be issued?

Deductible

A specific amount of covered expenses that the insured must pay out of pocket (a specified dollar amount) before any costs will be paid by the insurer

Face Amount

The amount of benefit stated in the life insurance policy?

The Insurance Company

Who is responsible for the contents of insurance advertisements?

The insurer who is being examined

Who is responsible for the costs associated with the examination of insurers?

Death Benefit

The policy proceeds to be paid upon the death of the insured in a life insurance policy

To prevent a producer or insurer from further violating laws for transacting insurance

What is the purpose of a cease and desist order?

The Department of Insurance (Commissioner/ Director/ Superintendent)

Who must be notified of a producer’s change of address?

Misrepresentation

What illegal act does a producer commit when the producer represents a policy in a more favorable light than the policy really is?

Rebatting

A producer offers a client free tickets to a sporting event in exchange for the purchase of an insurance policy. What is the producer guilty of?

The proceeds are paid to the insured’s estate

What happens to the proceeds of a life insurance policy if there is no named beneficiary?

Policyowner

Who controls changes in premium payments, face values, and loans in a life insurance policy?

Revocable

What type of beneficiary can be changed at any point by the policyowner

To allow the insured to return the policy with a full refund

What is the purpose of a free-look period?

Absolute Assignment

Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party?

Grace period

What provision in a life insurance policy extends coverage beyond the premium due date?

Term

What type of life insurance policy offers pure death protection

Incontestability

What life insurance policy provision prevents an insurer from disputing or denying a claim due to misstatements on the application after a certain period of time?

Fiduciary

The requirement that agents must account for and promptly remit all insurance funds collected is known as what type of agent responsibility?

The contingent beneficiary

Who does the common disaster clause protect?

There is no cash value to borrow against

Why are policy loans not available on term insurance?

Interest earned on the withdrawn cash value

During partial withdrawal from a universal life policy, which portion, if any, will be taxed?

Prevent unintentional lapse of policy due to nonpayment of premium

What is the purpose of the Automatic Premium Loan provision

A promise to pay policy benefits

What is consideration on the part of the insurer?

Only producers licensed for the type of insurance transaction

Who may share in the commissions from the sale of an insurance policy?

Reinstatement

What provision allows the policyowner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability?

Decreasing Term

What type of life insurance is best suited to cover a mortgage

Cash Value and Face Amount

In variable universal life (VUL) insurance, to what policy component does the term variable refer?

Primary Beneficiary

What beneficiary designation has the first claim to the death benefit of a life insurance policy?

Contingent Beneficiary

What type of beneficiary is next in line after the primary beneficiary?

Representations

Statements on application made by an applicant for a life insurance policy are known as what?

Upon the first death

In a joint life policy, when is the death benefit paid?

No evidence of insurability

What is the main advantage of converting from group life insurance to individual coverage?

Qualified Plan

A retirement plan that meets the IRS guidelines for receiving favorable tax treatment

Rebating

Any inducement offered in the sale of an insurance product that is not specified in the policy. Rebating is illegal in most states.

Reinsurance

Agreement between insurance companies under which one accepts all or part of the risk of loss of the other

The continuation in full force and effect of a policy that is about to expire

Renewal

Representation

A statement made by the applicant on the insurance application that is believed to be true

Rider

A written modification attached to a policy that increases or decreases coverage and premiums

Risk

The uncertainty of loss that exists whenever more than one outcome is possible, the chance of loss. Only pure risks are insurable (those that offer a chance of loss without any chance for gain)

Service Plan

An insurance plan in which benefits are provided to subscribers in the form of services instead of monetary benefits

Settlement Options

Methods used to pay the death benefits to a beneficiary upon the insured’s death

Solvency

An insurer’s ability to meet its financial obligations to policyowners, insureds, and beneficiaries

Standard Nonforfeiture Law

A law adopted by most states that provides that any cash value accumulation must be made available to the policyowner whenever the policy lapses. The policyowner must be given the choice of three nonforfeiture options: cash surrender, reduced paid-up, or the extended term.