Insurance Concepts: Mutual, Life, and Risk Management
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110 Terms
Why are dividends from mutual insurers not taxed?
They are considered a return of premium
Who owns a stock insurer?
Shareholders
Who owns a mutual insurer?
Policyholders
What is term insurance primarily used for?
Temporary protection
What is decreasing term insurance commonly used for?
Mortgage protection
What will a nonparticipating life policy do?
Not pay dividends
What will a participating life policy do?
Pay dividends
What does the Fair Credit Reporting Act protect?
Consumer rights in credit reporting
Who regulates insurer claim settlement practices?
State Insurance Departments
Which of the following is pure risk?
Home robbery
What is the law that makes predictions more accurate with large numbers?
Law of Large Numbers
What is the immediate cause of loss called?
Peril
What is a condition increasing the chance of loss called?
Hazard
What is it called when people with higher risk buy insurance more often?
Adverse selection
What is exchanged as consideration in an insurance contract?
Premium and application
What is a contract with unequal value exchange called?
Aleatory
What is authority given to an agent in writing called?
Express authority
When must insurable interest in life insurance exist?
At the time of application
What is intentional withholding of material facts called?
Concealment
What are actions that create the appearance of authority called?
Apparent authority
What are modified whole life premiums?
Lower first then higher later
What is a policy that hedges with an index called?
Equity indexed whole life
What will whole life cash value eventually do?
Equal the face amount
What is a policy paid up after a set number of years called?
Limited pay life
What is a policy with flexible premiums and investment choices?
Variable universal life
What is a policy covering two lives and paying on first death?
Joint life
What is a policy paid with one single premium?
Single premium whole life
What is a universal life cash withdrawal called?
Partial surrender
What does a children's term rider provide?
Convertible coverage
What is a rider that covers spouse and children called?
Family term rider
What is a joint policy paying on first death?
First to die
What is a policy tied to stock index with fixed and variable features?
Equity index whole life
Which policy has no cash value?
Term life
What makes a policy become a MEC?
If it fails the seven pay test
What are withdrawals under a MEC?
Taxable
What is a policy with guaranteed interest plus market potential?
Universal life
What is a policy without cash value?
Term life
What is the right to renew term without proof?
Renewable provision
What does a spouse term rider provide?
Term coverage for spouse
What is the rider that waives premiums at disability?
Waiver of premium
What is a rider paying extra for accidental death?
Accidental death rider
What provision allows late premium without lapse?
Grace period
What does reinstatement require?
Past premiums with interest
What does misstatement of age adjust?
Death benefit
What does the entire contract consist of?
Policy and application
What does free look allow?
Full premium refund
What waives premiums if the payor dies?
Payor benefit rider
What makes policy loans possible?
Cash value
What does incontestability prevent?
Contest after 2 years
What does the spendthrift clause protect proceeds from?
Creditors
What is the settlement option paying interest only?
Interest only
What is the settlement option paying for life?
Life income
What does estate conservation help avoid?
Forced asset liquidation
What does key person insurance protect?
The business
What funds buy-sell agreements?
Life insurance
What are annuities designed to do?
Liquidate an estate
What is an annuity paying for life only?
Life income
What is an annuity paying for a set period?
Period certain annuity
Who bears the investment risk in a variable annuity?
The annuitant
Who bears the investment risk in a fixed annuity?
The insurer
What is the accumulation period?
Growing money phase
What is the IRS early withdrawal penalty?
10%
What are the conditions for Roth IRA tax-free withdrawals?
Age 59.5 and 5 year rule
When are traditional IRA earnings taxed?
Upon distribution
How long must a rollover be completed?
60 days
What is required for full insured Social Security status?
40 quarters
Who does the Social Security blackout affect?
Widows without dependent children
What does Social Security disability require?
Inability for 12 months
What does underwriting protect against?
Adverse selection
What are statements on application?
Representations
Where does medical history come from?
MIB
What does group underwriting focus on?
The group as a whole
What do group participants receive?
Certificate of insurance
What do contributory plans require?
75 percent participation
What do noncontributory plans require the employer to pay?
100 percent
When must group conversion be requested?
Within 31 days
What do replacement rules protect?
The policyowner
What is twisting?
Misrepresentation to replace insurance
What is rebating?
Returning part of premium as inducement
What is defamation in insurance?
False statements about an insurer
What is an example of illegal inducement?
Paying applicant premiums
What can violation of cease and desist result in?
Civil fines
Where is a foreign insurer domiciled?
Another state
Where is an alien insurer domiciled?
Another country
When must producer address changes be reported?
30 days
How long can license lapse be reinstated?
Within 90 days
When must pre-licensing education be completed?
Within 12 months
What is credit life insurance a form of?
Decreasing term
What is a group formed for reasons other than insurance?
Association group
How long must replacement records be kept?
5 years
What does free look allow the policyowner to do?
Return policy for refund
What does the incontestability clause prevent?
Contest after 2 years
What does the misstatement of age clause adjust?
Death benefit
What does reinstatement normally require?
Proof of insurability
When does the accelerated benefit rider pay?
When the insured is terminally ill
What does AD&D pay for?
Accidental loss of life or limb
What does the cost of living rider increase?
Death benefit
What does the family term rider cover?
Spouse and children
What does the guaranteed insurability rider allow?
Purchase without proof of insurability
What does universal life consist of?
Death protection and cash value