IIAP Traditional Life Insurance Reviewer

Comprehensive practice flashcards covering life insurance fundamentals, policy provisions, non-forfeiture options, riders, underwriting principles, and professional ethics from the IIAP Traditional Life Reviewer.

What characteristic do term insurance and endowment policies have in common?

Insurance protection is limited to a specified period.

What proceeds are paid to the beneficiary if the insured dies while premiums are being waived under a waiver of premium benefit?

The face amount.

Which feature of a life insurance policy is considered a living benefit?

Cash surrender value.

What happens if an insured fails to pay the interest due on a life insurance policy loan on the policy anniversary?

The present loan is increased by the amount of the unpaid interest.

What are the basic settlement options available in a life insurance policy?

Fixed amount, fixed period, interest, and fixed period and for life.

What type of policy should be offered to a client who wants coverage up to age 65 at the minimum possible level of premiums?

A term policy.

What does the term "substandard rates" generally refer to in life insurance?

Premiums charged to persons who are considered to be in higher-than-average risk categories.

What is the maximum limit for a life insurance policy loan?

An amount where the loan plus interest will not exceed the cash value of the policy.

What is required for a policyowner to take out a policy loan if an irrevocable beneficiary has been designated?

The endorsement of the irrevocable beneficiary.

What is the fundamental economic advantage of using life insurance to meet financial losses?

Losses are spread over a large number of people.

What happens to a life insurance policy when the policyowner elects the paid-up insurance option?

Premiums cease and protection continues with a reduced amount of coverage.

Which dividend option should be selected to maximize the death benefit under a participating policy?

Paid-up additions.

Which dividend option provides the maximum cash available for emergencies under a participating policy?

Accumulated dividends.

What amount is payable to the beneficiary if the insured dies during the grace period of an unpaid policy?

The face amount of the policy minus the unpaid premiums.

What is the primary purpose of a conditional premium receipt?

To provide insurance coverage earlier than the policy delivery date if certain requirements are met.

Under an endowment policy, what is paid if the insured person survives to the end of the stated endowment period?

The face amount of the policy is paid.

What does the term "critical years" mean in life insurance programming?

The period during which the children are small and cannot provide for themselves.

What happens to premiums upon renewal of a yearly renewable term life insurance policy?

Premiums increase every time the policy is renewed.

Which policy type allows the policyholder to vary premium levels and sum insured, with cash values tied to investment performance?

Universal life.

What conditions must a disability meet for a waiver of premium rider to become effective?

The disability must be both total and permanent.

What scope of information must an applicant disclose on a life insurance application?

Every fact in his or her knowledge that is material to the insurance.

Which rider can greatly increase the total life coverage of a basic permanent policy at low cost?

A supplemental term rider.

When must insurable interest exist for a life insurance policy to be valid?

Only at the inception of the policy.

What right does the convertible feature of a term insurance policy provide?

The policy may be changed to a permanent insurance policy without evidence of insurability.

Which criteria are evaluated to determine whether an applicant represents a substandard risk?

Occupation, moral character, and family health history.

Under what circumstance are disability rider benefits excluded from payment?

For self-inflicted injuries.

What settlement option allows an endowment policyowner to provide a perpetual monthly donation to an organization?

Interest option.

What legal consideration is required to effectuate a life insurance policy?

Payment of the initial premium.

What is the fund accumulated from premium payments to meet future contract obligations called?

Policy reserve.

What happens to an unpaid policy loan upon the death of the insured?

It is deducted from the proceeds of the policy when the death claim is paid.

What document does an employee receive under an employer-employee group insurance plan?

A certificate of insurance coverage (individual policies are not issued to each employee).

How are statements made by an applicant in a life insurance application legally classified?

Representations, not warranties.

How do paid-up additions affect a participating life insurance policy?

They affect both the cash value and loan value of the policy.

What benefit is provided by a payor's benefit rider?

A waiver of premium benefit in the event of death or disability of the person paying the premiums.

What term describes the premium that increases yearly based on the insured's attained age?

Natural Premium.

What is a single premium life insurance policy?

A policy under which only one premium payment is required.

What is a policy fee?

A fixed amount added to the premium of a given policy regardless of policy size.

Who is legally disqualified from being designated as a life insurance beneficiary?

Those persons expressly prohibited by law from receiving donations.

If a father enters into a life insurance contract on the life of his child, what is the father's legal status?

Applicant-owner.

How are dividends affected if a policy loan is taken out on a participating policy?

Dividends remain unaffected.

How does an automatic premium loan (APL) provision operate?

It automatically pays overdue premiums using cash values without requiring separate action from the policyowner.

What happens to the policyholder's rights when a policy undergoes absolute assignment?

The assignee acquires all the rights and interests of the policyholder.

Who receives the death proceeds if a policy contains no named beneficiary?

The insured's estate.

What is the premium payment and coverage duration for a 20-pay life policy?

Protection lasts until age 100, while premium payments are made for 20 years.

What is the central agency that maintains confidential medical information on insurance applicants?

Medical Impairment Bureau (MIB).

What is anti-selection in life insurance underwriting?

The tendency of persons with poorer health or greater hazard exposure to apply for and maintain insurance coverage.

What is "twisting" in insurance sales?

The unethical or illegal inducement of a policyholder to lapse, forfeit, or surrender an existing policy in order to purchase a replacement policy in another company.

What is "knocking" in the life insurance profession?

The unethical practice of making derogatory remarks about competing underwriters or companies.

What does the term "loading" refer to in premium calculations?

The difference between gross and net premiums added to cover company overhead expenses, including commissions and taxes.

Within what period can a lapsed life insurance policy typically be reinstated upon evidence of insurability?

Three years.