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Life Insurance Basics Flashcards
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Life Insurance Basics Flashcards

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@LuminousGadolinium

Questions and Answers

Which premium payment mode will require an overall higher premium?

  • Monthly (correct)
  • Annual

    • What is policy replacement?

    A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value.

    What document describes the specific information about a policy?

    Policy Summary

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

    <p>The agent's report discusses the agent's personal observation about the proposed insured that may help in the underwriting process.</p> Signup and view all the answers

    What is the purpose of key person insurance?

    <p>To minimize the risk of financial loss caused by the death of a key employee.</p> Signup and view all the answers

    What type of policy is typically issued without proof of insurability from the insured?

    <p>Group policy</p> Signup and view all the answers

    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?

    <p>Permanent</p> Signup and view all the answers

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

    <p>Group policy</p> Signup and view all the answers

    When planning for survivor protection in life insurance, what needs to be considered?

    <p>The insured's current assets, liabilities and survivor's needs.</p> Signup and view all the answers

    A business is the owner and beneficiary of a key-person life policy. When the business collects the policy benefit, how is it taxed?

    <p>The benefit is received tax-free.</p> Signup and view all the answers

    What is included in part 2 of a life insurance application?

    <p>Medical information about the perspective insured.</p> Signup and view all the answers

    Life insurance may be used to pay state inheritance taxes and federal estate taxes, eliminating the need to sell assets from the estate. What is this called?

    <p>Estate conservation</p> Signup and view all the answers

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

    <p>Mortality, interest and expense.</p> Signup and view all the answers

    If an insured changes his payment plan from monthly to annually, what happens to the total premium?

    <p>It will decrease.</p> Signup and view all the answers

    Who is the beneficiary on a key-person life insurance policy?

    <p>The employer.</p> Signup and view all the answers

    When must insurable interest exist in a life insurance policy?

    <p>At the time of application.</p> Signup and view all the answers

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

    <p>Life insurance.</p> Signup and view all the answers

    What does 'liquidity' mean in a life insurance policy?

    <p>Availability of cash value.</p> Signup and view all the answers

    If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?

    <p>The existence of insurable interest between the applicant and the insured.</p> Signup and view all the answers

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

    <p>At the time of policy delivery.</p> Signup and view all the answers

    What is the term that describes the frequency and the amount of the premium payment?

    <p>Premium mode.</p> Signup and view all the answers

    What is the main purpose of the regulation on life insurance policy illustrations?

    <p>To help the public make educated decisions about buying life insurance.</p> Signup and view all the answers

    Who must have insurable interest in the insured?

    <p>The policy owner.</p> Signup and view all the answers

    How does the premium mode affect the total premium paid for insurance for the year?

    <p>Higher frequency of premium payments will result in higher overall premium.</p> Signup and view all the answers

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

    <p>Notice regarding replacement.</p> Signup and view all the answers

    In calculating the amount of life insurance needed, what is the needs approach based on?

    <p>The predicted needs of a family after the premature death of the insured.</p> Signup and view all the answers

    Who is a replacing insurer?

    <p>The company that issues a new policy during policy replacement.</p> Signup and view all the answers

    What are the personal uses of life insurance?

    <p>Survivor protection, estate creation and conservation, cash accumulation and liquidity.</p> Signup and view all the answers

    What type of life insurance offers an applicant a cash value element?

    <p>Permanent insurance (usually, whole life).</p> Signup and view all the answers

    An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

    <p>Variable.</p> Signup and view all the answers

    What type of insurance creates an immediate estate?

    <p>Life insurance.</p> Signup and view all the answers

    What term describes the fee a person pays an insurance company to receive coverage?

    <p>Premium.</p> Signup and view all the answers

    Who is responsible for the contents of insurance advertisements?

    <p>The insurance company.</p> Signup and view all the answers

    What are illustrations in a life insurance policy?

    <p>Presentations of non-guaranteed elements of the policy.</p> Signup and view all the answers

    What is a blackout period for social security benefits?

    <p>A period of time during which the surviving spouse does not receive benefits.</p> Signup and view all the answers

    Mortality tables are used by insurance companies to predict what?

    <p>Life expectancy and the death rates for specific groups of individuals.</p> Signup and view all the answers

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

    <p>Risk selection.</p> Signup and view all the answers

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

    <p>Either on the date of application or the date of the medical exam (whichever occurs last).</p> Signup and view all the answers

    What is insurance underwriting?

    <p>The process of risk selection and classification.</p> Signup and view all the answers

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

    <p>Insuring your own life, the life of a family member, or the life of a business partner or someone who has a financial obligation to the policy owner.</p> Signup and view all the answers

    Study Notes

    Life Insurance Basics

    • Monthly premium payments lead to a higher overall premium compared to annual payments.
    • Policy replacement involves issuing a new policy while terminating or reissuing an existing one with reduced cash value.
    • A Policy Summary document provides specific information about an insurance policy.
    • The agent's report offers personal observations about the proposed insured to assist in underwriting.
    • Key person insurance aims to mitigate financial loss due to the death of an essential employee.
    • Group policies are typically issued without requiring proof of insurability from the insured.
    • Permanent life insurance provides lifetime protection against premature death.
    • Group policies issue certificates of insurance to members insured under the policy.
    • Survivor protection planning must consider the insured’s assets, liabilities, and survivors’ needs.
    • Key-person life policy benefits are received tax-free by the employer as the owner and beneficiary.
    • Part 2 of a life insurance application contains medical information about the prospective insured.
    • Estate conservation utilizes life insurance to cover state inheritance and federal estate taxes, preventing asset liquidation.
    • Premium determination factors include mortality, interest, and expenses.
    • Switching from monthly to annual payment plans decreases the total premium.
    • The beneficiary of a key-person life insurance policy is the employer.
    • Insurable interest must exist at the time of application in life insurance policies.
    • Life insurance serves as a vehicle for cash accumulation.
    • Liquidity refers to the availability of cash value in a life insurance policy.
    • If the applicant and the insured are different individuals, underwriters must assess insurable interest between them.
    • The policy summary must be delivered to the policy owner when the policy is delivered.
    • Premium mode describes the frequency and amount of premium payments.
    • Regulations for life insurance policy illustrations help consumers make informed purchasing decisions.
    • The policy owner must have insurable interest in the insured person.
    • More frequent premium payments typically lead to higher total annual premiums.
    • During policy replacement, producers must provide a Notice Regarding Replacement to the insured.
    • The needs approach considers the family’s predicted needs following the insured's premature death when calculating necessary insurance coverage.
    • The replacing insurer is the company that issues a new policy when a replacement occurs.
    • Personal uses of life insurance include survivor protection, estate creation, conservation, cash accumulation, and liquidity.
    • Permanent insurance, like whole life, offers a cash value component to the insured.
    • A variable life insurance policy may show significant fluctuations in cash value from month to month.
    • Life insurance creates an immediate estate for beneficiaries upon the insured's death.
    • Premium is the fee paid to the insurance company for coverage.
    • Insurance companies are responsible for the content of any advertisements they produce.
    • Illustrations in policies depict non-guaranteed elements related to life insurance.
    • The blackout period for social security benefits refers to when a surviving spouse temporarily receives no benefits.
    • Mortality tables help predict life expectancy and death rates for various demographic groups.
    • The underwriting unit's main responsibility is to engage in risk selection for insurance policies.
    • Coverage begins upon the later date between the application submission and the completion of a medical exam if a conditional receipt is issued.
    • Insurance underwriting is the process of risk assessment and classification.
    • Insurable interest exists in three primary scenarios: for one's own life, a family member's life, or a business partner/financial obligation relationship.

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    Test your knowledge of key concepts in life insurance with these flashcards. Each card presents a question or term that is crucial to understanding life insurance and its workings. Ideal for individuals preparing for insurance exams or wanting to reinforce their knowledge.

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