insurance chapter 1-3

what does the term “level” refer to in level term insurance?

death benefit

whole life insurance policies mature when the insured reaches the age 100. If the owner of a whole life policy (the insured) dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?

the full death benefit

can a business or a corporation be an annuity?

no, must always be a natural person

what risk classification would typically qualify for lower premiums?

preferred risk

what type of report would be used to assess risk associated with an applicant’s lifestyle and character?

investigative consumer report

what type of annuity is suitable for someone who wants to select the benefits option that will pay the largest amount only for as long as the annuitant lives?

straight life

a whole that requires that the policyowner only pays premiums for a specified number of year is know as what kind of policy?

limited-pay, whole life

what are the dividend options in life insurance policies?

cash

reduced premium

accumulation at interest

paid-up addition

paid-up options

one year term

acceleration of endowment

what happens to the premium in a annually renewable term life policy?

premium increases with each renewal.

what type of life insurance policy offers pure death protection?

term

who is entitled to the cash values in a life insurance policy?

the policy owner

insurance is a contract that protects the insured form what?

loss

what is the nae of the process that insurance companies use to determine whether or not an applicant’s is insurable?

underwriting

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

limited-pay, whole life

when does an adjustable life policy accumulate cash value?

when the premiums paid are more than the cost of policy

the entities that makes up the Medical Information Bureau?

insurers

what two elements are necessary for a life insurance contract to have a legal prurpose?

insurable interest

consent

when would a misrepresentation be considered material?

when it may alter the underwriting decision

mortality tables are used by insurance companies to predict what?

life expectance and the death rates for specific groups of individuals

what type of policy provides permanent protection?

whole life

who has the right to the cash value of a life insurance policy?

policy owner

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

absolute assignment

what nonforfeiture options is automatically selected by the company if not chosen by the policyowner?

extended term

if there is no name beneficiary for the annuity benefits, to which entity will the benefits be paid?

annuitant’s estate

inflexible premium payment annuities, the term flexible refers to what?

amount of premium

under the 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premium must be paid for what time period?

for 20 years or until the insured’s death, whichever occurs first/

what are the three nonforfeiture options in life insurance policy?

cash surrender

reduced paid-up

extended term

what type of assignment is used to secure the payment of a debt with an existing life insurance policy?

collateral assignment

when would a misrepresentation on an insurance application be considered fraud?

when it is intentional and material

what are the 3 main instance when insurable interest exists in life insurance?

yourself

family

business partner

what is adverse selection?

people who are more likely to submit insurance claims are seeking insurance more often that preferred risk.

when must the policy summary for a life insurance policy be delivered to the policy owner?

at the time of policy delivery

what type of annuity requires an agent to have a securities license?

variable annuity

a short term annuity that limits the amounts paid to a specific fixed period or until a specific fix amount is liquidated?

annuity certian

what annuity settlement option provides income payments to the annuitant for the duration of the their life, and also guarantees payment for a specified number of years?

life income with period certain

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

contingent beneficiary

what type of premium is charged on a straight life policy?

a level premium for the life of the insured

an annuity purchased with multiple payment that begins income payments after one year from the moment of purchase is known as what type of annuity?

flexible premium

deferred annuity

what universal life option has a gradually increasing cash value and a level death benefit?

option A

what policy component must decrease in decreasing term insurance?

face amount

what are the two classifications of annuities according to the time when annuity payments begin?

immediate deferred

who bears the investment risk in a fixed annuity?

the insurer

when would a 20-pay whole life policy endow?

when insured reaches age 100

whose life expectancy is taken in consideration in an annuity contract?

annuitant

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

universal life

what type of life insurance policy is life paid-up of age 65?

limited-pay

whole life

what element of an adjustable life policy can be changed by the policyowner?

the amount and payment period of premium,

face amount,

period of protection

what happens to the proceeds of a life insurance policy if there is no name beneficiary?

proceed are paid to the insured estate

who controls change in premium payments, face values, and loan in a life insurance policy?

policyowner

if the annuitant dies before the annuitization period starts, what will the beneficiary receive?

amount paid into the annuity or cash-value, whichever is greater.

what type of annuity credits its interest based upon the index such as S&P 500?

equity indexed annuity

a policy states that it will pay a specified face amount if the insured dies during the 20-year premium-paying period and nothing if the death occurs after the 20-year period. What type of policy is this?

20-year level term

how long will a life annuity with a 15 year period certain pay?

for the life of the annuitant unless they die in the first 15 years, then payment will only last 15 years.

in an annuity, the accumulated money is converted into a stream of income during which phase?

annuitization period

allow the partial withdrawal or surrender of the policy cash value?

universal lifei

if the annuity dies during the accumulation period, who will receive the annuity benefits?

beneficiary

an individual has just borrowed $10,000 on a 5 year note from is bank. The note is due in installment. What type of life insurance policy would be best suited to this situation?

decreasing term

how soon can income payments begin in an immediate annuity?

no later than 1 year from the time of annuity purchase

under the option B in a universal life policy, what happens to the death benefit?

it increases each year by amount of the cash value increases

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

graced period

an applicant for life insurance misstated her age on the policy application. How will this affect the death benefits?

it will be adjusted to amount the insured could obtain for her correct age.

what life policy rider allows the company to forgo collecting the premium if the insured becomes disable?

waiver of premium

what are policy dividends?

return of unused premiums

under what nonforfeiture option does the company pay the policy’s surrender value and have no further obligations to the policyowner?

cash surrender

in annually renewable term policy, what is the annual premium based upon?

insured’s attained age

an individual has a contract that will provide him with a certain amount of income for the rest of his life. However, this is not a life insurance policy. What type of contract does this person have?

annuity

what type of annuity can be purchased with a single premium?

immediate annuity

what type of whole life insurance policy only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured’s age 100?

single premium

whole life

what is the difference between a single premium and a flexible premium payment option in a deferred annuity?

the number of payments that purchase the annuity

during partial withdrawal from a universal life policy, what portion, if any, will be taxed?

interest earned on the with drawn cash value

what is the purpose of establishing the target premium for a universal life policy?

to prevent the policy from lasping

with a single premium deferred annuity, which will the annuity payments become available?

no sooner that 1 year after the annuity purchase

with the reduction of premium dividend option, how is the dividend used?

applied to the next year’s premium (reduces next year’s premium)

what dividend option is automatically selected by the company is not chosen by the policyowner?

paid-up additons

what is the purpose of settlement options in life insurance policy?

determine how death benefit will be paid to the beneficiary

an insurer has discovered a representation on a life insurance policy application regarding the insured age. The insured is 10 years older than he stated on the application. What will the insured do regarding the death benefits?

pay a reduced death benefit

what type of whole life insurance policy generates immediate cash value?

single premium, whole life

if an individual wants both protection and savings from their insurance and willing to pay premium until retirement at age 65, what would be the right policy for the individual?

limited pay whole life

what is the main reason for purchasing an annuity?

provide income the annuitant cannot outlive

what nonforfeiture option provides coverage for the longest period of time?

reduced paid-up

what is the name of a life insurance policy rider that provides coverage on the insured’s family member?

other-insured rider

why are policy loans in available on term insurance?

there is no cash value to borrow against

what type of life insurance offers an applicant of cash value element?

permanent insurance (usually whole life)

how soon can income payments begin in an immediate annuity?

no later than 1 year from the time of purchase

whole life policies provides protection until the insured reach what age?

age 100

the death protection component of a universal life policy is expressed as what type of coverage?

annually renewable term

if a settlement option is not chosen by the policyowner or the beneficiary, what option will be used by the insured?

lump-sum payment

what is the purpose of the Automatic Premium Loan provision?

prevent the unintentional lapse of a policy because of a nonpayment of premium.

who receives income payments from an annuity?

annuitant

if an annuity provides a set amount of income for two or more person with the income ceasing upon the first death, what type of annuity is that?

joint life annuity

what happens to the cash value when a whole life insurance policy matures?

cash value is paid to the policyowner

what are the two phases of an annuity?

accumulation and annuitization (pay-in and pay-out)

what type of life insurance is best suited to cover a mortgage?

decreasing term

how is the premium determined in a joint life insurance policy?

the premium is based on the average age of insurds?

what are the death benefit options in universal life policy?

option A

option B

what annuity options does the annuitant select the time period for benefits, and the insurer determines how much each payment will be?

installments for a fixed period

what type of insurance would perform the function of cash accumulation?

whole life insurance

what term is used to describe methods of payments of the death benefits the beneficiary upon the insured’s death?

settlement option

what is the purpose of a free-look period?

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

when can an insured company use suicide as a defense against paying a death claim?

committed within a specified period after policy is purchased (usually 2 years)