Insurance Regulations and Practices
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Death during grace period?

The face amount of the policy minus the unpaid premium.

Renewing an agent's license

When the Commissioner is satisfied that the information in the application is accurate and all requirements are met.

Why government regulates insurance?

It affects public interest.

Sharing insurance commissions

An agent is allowed to share commissions with another licensed agent or agents but with no one else.

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Is rebating legal?

Rebating of premiums by an insurance agent is prohibited.

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What is twisting?

Persuading a policyowner to replace a policy from one company with a policy from another company.

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Why charge interest on policy loans?

To replace investment income the insurer cannot earn since a loan has been granted.

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What is rebating?

Premium discrimination against policyholders

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Reasons for license revocation?

Fraudulent practices, violation of any provision of the Insurance code, or misrepresentation in the application for license

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Ethical insurance practice?

Keep all policyholders information confidential.

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What does "knocking" mean?

Making derogatory remarks about competing underwriters or companies.

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What is misrepresentation?

Misstatement of facts relating to the insurance contract.

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What's overloading in insurance?

Selling a person more insurance than what is warranted by his sources

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An agent's ALLOWED action?

Make complete comparisons of policies he sells and those offered by competing insurance companies.

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Is inducing a policy lapse allowed?

An offense in the great majority of cases.

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Suicide clause timeframe

The first 2 years.

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Non-forfeiture values

Cash surrender value, paid value, and extended term insurance.

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Basic settlement options

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

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Misstatement of age consequence

The amount of insurance is adjusted to the amount which the premium paid at the correct age would have purchased.

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Which is a settlement option?

Interest on insurance proceeds

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Continuous insurance after premium stops

Extended term insurance

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NOT from non-forfeiture values?

Dividends

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Consequence of age misstatement

Paid the amount of insurance payable to his beneficiary reduced in relation to his actual age at the time the contract was signed.

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Paid-up insurance option

Premiums cease and protection continues for a reduced amount.

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Suicide within one year: liability

The company would be liable for the payment of the premiums paid by the insured only.

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Non-forfeiture: most protection?

Extended term insurance

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Policy Reinstatement Period

Two years

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Health insurance benefits?

All of the above

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Group insurance application

An enrollment card.

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Leaving a group policy: what?

Conversion privilege.

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Study Notes

  • The amount payable to a beneficiary if the insured dies during the grace period of an unpaid life insurance policy is typically the face amount of the policy minus the unpaid premium.
  • An insurance agent's license renewal requires the Commissioner's satisfaction that the application information is accurate and all requirements are fulfilled.
  • The insurance industry is under government regulations due to its impact on public interest.
  • An agent is permitted to share commissions with another licensed agent or agents, but with no one else.
  • The rebating of premiums by an insurance agent is prohibited.
  • Twisting involves persuading a policy owner to surrender or lapse a policy in one company and replacing it with a policy from another company.
  • Interest is charged on policy loans to replace investment income if the insurer cannot earn because a loan has been granted.
  • Rebating includes premium discrimination against policyholders.
  • Agent licenses can be revoked for fraudulent practices, violations of insurance code provisions, and misrepresentation on the license application, or any combination of these.
  • Ethical practices and procedures include keeping all policyholders' information confidential.
  • The term "knocking" refers to making derogatory remarks about competing underwriters or companies.
  • Obtaining or attempting to obtain a license by fraud or misrepresentation is not an unethical practice in the solicitation and procurement of insurance.
  • Twisting as the replacement of a policy in one company with another policy in another company.
  • A misstatement of facts by either party in writing or orally, preliminary and in reference to making the insurance contract is misrepresentation.
  • Overloading is selling a person more insurance than what is warranted by his sources.
  • An agent is prohibited from all of the following except making complete comparisons of policies he sells and those offered by competing insurance companies.
  • Inducing an insured to lapse or forfeit their insurance is an offense in the great majority of cases.
  • The suicide clause is in effect for the first 2 years.
  • Non-forfeiture values in a permanent policy include cash surrender value, paid value, and extended term insurance.
  • Basic settlement options include fixed amount, fixed period, interest, fixed period, and for life.
  • If there is a misstatement of age the amount of insurance is adjusted to the amount which the premium paid at the correct age would have purchased.
  • Interest on insurance proceeds is a settlement option.
  • Extended term insurance maintains full insurance coverage for a specified period if premiums are discontinued in a permanent life insurance policy.
  • Dividends is not derived from the non-forfeiture values
  • Company paid the amount of insurance payable to his beneficiary reduced in relation to his actual age at the time the contract was signed in the case of Mr. Dela Cruz who was 34 instead of 30 on a policy
  • Premiums stop and protection continues for a reduced amount when the policyowner elects the paid-up insurance option.
  • If a policyowner commits suicide within one year, the company would be liable for the payment of the premiums paid by the insured only.
  • The non-forfeiture option offering the largest amount of protection is extended term insurance.
  • A policy that has lapsed can be reinstated subject to normal conditions of proof of insurability within three years.
  • Benefits payable under health insurance policies cover accidental death and dismemberment, expense reimbursement, and disability income benefits.
  • Employees in employer-employee groups fill out an enrollment card instead of a personal application for insurance.
  • An employee's group coverage can be changed to an individual policy using the conversion.
  • To be legal and binding, parties to the contract must be legally competent.
  • An insurance contract does not take effect unless payment of the first premium is made to the insurer or its authorized agent.
  • Practicable beneficiaries include someone who owes you money
  • Under the law pertaining to life insurance, any person with insurable interest can be named irrevocable beneficiary.
  • Income tax is levied on the interest earnings of the proceeds when life insurance policy proceeds are left with the company to earn interest.
  • A person has an insurable interest on the life of is his child or grandchild, any person upon whom he is wholly or in part dependent on, or from whom he is receiving support or education, any person in whom he has pecuniary interest, all of the above
  • Anybody can be designated a beneficiary expect those expressly prohibited by law to receive donations.
  • The common practice of most life insurers is that the life insurance goes into force when the agent gives a binding receipt.
  • A common-law spouse cannot be designated a beneficiary if his/her legal partner is still living and the previous marriage has not been legally dissolved.
  • Policy reserves are future obligations on the part of the Insurance Company.
  • Automatic premium loan is one of the following provisions in a permanent life insurance policy may lapse for non- payment of premium.
  • A policyholder may obtain money from the insurance company and still remain insured by taking a policy loan.
  • The insurance company will pay the face amount adjusted for misstatement of age when you bought an insurance policy on your wife's life was aged stated wrong and she later died.
  • The beneficiary will be the insured's estate
  • If a policyowner whose wife is the irrevocable beneficiary wishes to cash in his policy, he must have the wife's consent.
  • If a policy with the accidental death rider becomes paid up the accidental death rider ceases.
  • An annuity plan is a purchase of income.
  • The person who purchases the annuity plan is called the annuitant.
  • Statements made on the applications are warranties is an incorrect statement regarding a life insurance application.
  • Prior to granting a license, the IC requires proof of all of the above: a clean record of employment, a reasonable educational background and a prospective agent's character and reputation.
  • The IC has the power to adjudicate insurance claims against insurance companies for any single claim not exceeding P5,000,000.00
  • For life insurance coverage to be valid, insurable interest must exist only at the inception of the policy.
  • A sale is considered completed if payment of the first premium has to be made by the applicant in full or in part, as specified. One of the acceptable methods of settlement is by cash or check in part, with a note for the balance.
  • An automatic premium loan differs from the other policy loans in that an automatic premium loan goes into effect requiring no separate action from the policyowner.
  • The typical grace period provision in a life insurance policy obliges the life insurance company to allow the policyowner a three-month extension beyond the due date to make the late premium payment without penalty.
  • When a policy is assigned absolutely the assignee acquires all the rights and interests of the original policyholder.
  • If a policyowner does not pay a premium on the due date, the policy will immediately continue in full force for a period of grace.
  • If a loan is taken on a participating policy, dividends for that policy while there is a loan against the policy will be unaffected.

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Description

Overview of key insurance regulations and practices. Topics include beneficiary payouts during grace periods, agent licensing, government oversight, commission sharing, and prohibited practices like rebating and twisting. Also covers policy loans and license revocation.

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