Questions and Answers
What is a profit sharing plan?
A profit sharing plan is where the employer contributes money to an employee's retirement plan when the company shows a profit.
What provision prevents a beneficiary from changing or borrowing from planned installments in a life insurance policy?
Spendthrift provision
Which factor determines the length of time that benefits will be received under the Fixed Amount settlement option?
Size of each installment
What will be included in a policy summary?
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What would be the face amount of a new term policy if the insured cancels a $50,000 whole life policy?
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Which policy provision allows an insured to reactivate a lapsed life insurance policy?
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A tax sheltered annuity is a special tax favored retirement plan available to whom?
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What are groups formed when several related small companies join forces to create a large pool of insured individuals?
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Once a policy is surrendered for its cash value, coverage ends and the policy can be reinstated.
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What is the maximum penalty for habitual noncompliance with the Fair Credit Reporting Act?
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What effect does the Accelerated Benefit provision have on the benefits paid to the beneficiary?
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If a beneficiary wanted a guarantee that benefits would be paid for a period of 10 years, what would they select?
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What is the benefit of choosing extended term as a nonforfeiture option?
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How many days must a person comply with a request from the Commissioner if no time is specified?
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Which of the following is NOT an appropriate use of a deferred annuity?
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What happens to premiums if a father with a Payor Benefit Rider becomes disabled?
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Nonforfeiture values are required by state law to be included in the policy.
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How long does a licensed insurance producer have to notify the Commissioner of a change of address?
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What does the insuring clause state?
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How many hours must a person work for the Keogh plan to be effective?
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Are disputes regarding consumer information considered negative information according to the Fair Credit Reporting Act?
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What type of term is credit life insurance issued on when the debt is being repaid?
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What is misrepresentation in insurance?
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What is the term for how frequently a policyowner is required to pay the policy premium?
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A tax sheltered annuity is available to which groups of people?
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What happens if a policy owner fails to pay the premium after the grace period?
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What is a partnership buy-sell agreement called when each partner buys insurance on the life of the other?
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What do equity indexed annuities invest in?
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What does the other insurance provision define?
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What does credit insurance cover?
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How long does a licensed producer have to notify the Commissioner of change of address or phone?
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What does the term 'insuring clause' refer to in insurance?
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What is the relationship between the two types of assignment in insurance?
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What does survivorship mean in terms of insurance benefits?
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What type of life insurance provides temporary protection lasting for a specified period?
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What distinguishes level term life insurance?
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What is an increasing term policy?
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What is the face value of a life insurance policy?
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What describes a decreasing term policy?
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Whole life insurance provides permanent protection.
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Does a straight life policy build cash value?
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What is a limited pay whole life policy?
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What is the purpose of a single premium whole life policy?
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What must an insurer present to an applicant to obtain information?
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When does a 20 pay whole life policy endow?
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What type of retirement account allows contributions after age 70 1/2 without taxes on growth?
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What is the one-year term option in dividend options?
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What describes a nonqualified annuity plan?
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What is a joint life policy?
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What is an accelerated benefit provision?
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What defines a modified endowment contract?
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Which provision makes a contract complete?
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Which rider would not cause a death benefit to increase?
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What can an adjustable life policyowner change?
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What type of insurance company returns surplus money to policyholders?
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For an individual not covered by an employer-sponsored plan, how are IRA contributions classified?
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How long does the Commissioner have to file a report after an examination?
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In variable annuities, who assumes the investment risks?
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What is the paid-up option in life insurance?
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After an insurance company examination, how long must the report be filed?
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Which is NOT true about beneficiary designations?
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What is a Stoli policy?
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What defines a peril in insurance terms?
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When does coverage become effective if the full premium is submitted with the application?
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What best describes fixed period settlement options?
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What do equity indexed annuities seek?
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Which of the following is a nonqualified retirement plan?
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What will a beneficiary receive if a life insurance policy does not have a war clause?
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Which of the following is an example of a limited pay life policy?
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What is NOT true regarding a Certificate of Authority?
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How often must an agent complete ongoing training to sell long-term care insurance?
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Which of the following is NOT a primary way deductibles for major medical plans can be paid?
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What requirement does a $100,000 Annually Renewable Term Life policy have?
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The spouse term rider typically offers level term insurance.
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How often must agents complete ongoing training for long term care insurance?
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What will the beneficiary receive from a life insurance policy without a war clause if the insured is killed during a war?
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Which of the following is NOT true regarding a Certificate of Authority?
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What is an investor buying a life policy on an elderly person to sell for life settlement an example of?
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What defines a peril?
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What is required when the full premium is submitted with a life insurance application?
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What describes fixed period settlement options?
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What do equity indexed annuities aim for?
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Which of the following is a nonqualified retirement plan?
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What will beneficiaries receive from a life policy lacking a war clause?
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What is an example of a limited pay life policy?
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Which is NOT true regarding a Certificate of Authority?
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When must agents complete ongoing training to maintain licensing for long term care insurance?
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Which of the following methods can major medical plan deductibles be paid?
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What is required for an annually renewable term life policy?
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The spouse term rider is typically level term insurance.
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How often do agents need to take training for long-term care insurance?
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What will beneficiaries receive if the insured with a war clause dies in war?
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Which is an example of a limited-pay life policy?
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What is NOT true about a Certificate of Authority?
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What is an STOLI policy?
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What does a peril define in insurance?
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What is the effective date of coverage with a full premium submission?
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What best describes fixed period settlement options?
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What do equity indexed annuities aim for?
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Which of the following illustrates a nonqualified retirement plan?
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What will the beneficiary receive if there's no war clause when the insured dies during a war?
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Which is an example of a limited pay life policy?
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Which is NOT true regarding a Certificate of Authority?
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Study Notes
Life Insurance Key Concepts
- Term Life Insurance: Temporary protection for a specific period, pays death benefit if insured dies during that term; offers maximum coverage for lowest premiums; pure death protection.
- Level Term Life Insurance: Premiums remain consistent throughout the policy's life.
- Increasing Term Policy: Features a level premium, but the face amount increases annually.
- Face Value: Refers to the death benefit of a life insurance policy.
- Decreasing Term Policy: Consists of level premiums with a decreasing death benefit, commonly used in mortgage protection.
Whole Life Insurance Features
- Whole Life Insurance: Permanent protection as long as premiums are paid; death benefits and premiums are guaranteed.
- Cash Value Accumulation: Premiums remain unchanged through the policy life, allowing cash value growth.
- Straight Life: Continuous premium payment with a guaranteed death benefit; lowest annual premium among whole life options.
- Limited Pay Whole Life: Requires premiums for a specified number of years; remains in force for the lifetime after premium payment.
- Single Premium Whole Life: Requires one lump sum payment for a level death benefit, generating immediate cash value.
Special Provisions and Options
- Disclosure Authorization Notice: Required when an insurer seeks information from an applicant.
- One Year Term Option: Policyowner uses dividends to purchase a term policy for one year.
- Nonqualified Annuity Plan: Offered selectively to certain employees, funded with before-tax corporate dollars, not government-regulated.
- Accelerated Benefit Provision: Allows early payment of part of the face value due to terminal illness, paid without a premium increase.
Annuities and Benefits
- Variable Annuities: Risks are assumed by the annuitant; investment performance varies.
- Paid-Up Option: Dividends accumulated at interest and combined with cash value to pay off policy early.
- Income Benefit Rider: Provides monthly income during a disability period while waiving policy premiums.
Retirement and Tax Considerations
- ROTH IRA: Allows tax-free growth without taxes on contributions after age 70½ for non-covered individuals.
- Tax Deductibility of Premiums: Premiums paid on group term life insurance plans for employees are deductible.
Beneficiary Designations and Rights
- Beneficiary Designations: Beneficiaries do not need insurable interest in the insured; rights vary based on designation (revocable vs. irrevocable).
- Owner's Rights: Include the ability to change beneficiaries, choose options, and receive proceeds.
- Spendthrift Provision: Prevents beneficiaries from changing payment terms, borrowing, or assigning benefits.
Policy Mechanics and Regulations
- Commencement of Coverage: Effective date coincides with the application date if full premium is submitted.
- Fixed Period Settlement Options: Payments liquidate both principal and interest over a selected period.
- Certificate of Authority: Required for insurers to operate in a state; not issued to group participants.
Special Policies and Situations
- STOLI Policy: Life policies purchased by investors with no relationship to the insured for future sale.
- Extended Term Nonforfeiture Option: Converts cash value to term insurance at the same face amount as the whole life policy.
- Profit Sharing Plan: Contributions from employers based on company profits.
Claim Procedures and Finally
- Insurance Coverage: For individuals with no war clause, beneficiaries receive the full death benefit during wartime.
- Policy Summary: Includes important details like premium amounts and surrender values.
- Reactivation of Lapsed Policy: Allowed with timely proof of insurability under specific policy provisions.### Reinstatement Provision
- Allows policyholders to restore a lapsed policy under certain conditions, but may not apply after a cash surrender.
Tax Sheltered Annuity
- A retirement plan that offers tax advantages exclusively to specific groups like nonprofit and educational employees.
Multiple Employer Trust (MET)
- A collaborative agreement among similar small companies that enables them to provide a collective insurance benefit plan for their employees.
Cash Surrender Option
- Termination of the policy occurs when cash value is taken; coverage cannot be reinstated afterward.
Fair Credit Reporting Act Penalty
- Maximum penalty for habitual noncompliance can reach $2,500 for intentional violations.
Accelerated Benefit Provision
- Reduces the total benefits available to beneficiaries when early payout is taken.
Fixed Period Benefits
- Allows beneficiaries to select a guaranteed payout period, with the insurer determining installment amounts.
Extended Term Nonforfeiture Option
- Provides the highest insurance protection by converting cash value into term insurance equivalent to the original policy’s face value.
Compliance with Commissioner Requests
- Individuals must respond to information requests from the Commissioner within 30 days if no time frame is specified.
Deferred Anuity Use
- Best utilized for accumulating retirement income or education funds; not suitable for estate creation.
Payor Benefit Rider
- Waives premiums for the insured child until age 21 if the policyholder becomes disabled.
Nonforfeiture Values
- Required by state law to be included in life insurance policies, with a mandatory disclosure table for the next 20 years.
Notification for Address Change
- Licensed insurance producers must inform the Commissioner within 10 days of a change in address.
Insuring Clause
- Details the insurer's obligation to pay death benefits and specifies the recipient of these benefits.
Keogh Plan Requirements
- An individual must work at least 1,000 hours per year for the plan to be effective.
Fair Credit Reporting Act on Disputes
- Disputes involving consumer information are not classified as negative information under the act.
Credit Life Insurance Structure
- Issued as decreasing term insurance to align repayment with the debt owed to creditors on an installment basis.
Misrepresentation in Insurance
- Involves any false, misleading, or deceptive information regarding policy benefits or terms, which can include oral statements.
Premium Payment Frequency
- "Mode" refers to how often a policyholder must make premium payments.
Automatic Premium Loan
- Prevents unintended policy lapse due to premium nonpayment by automatically borrowing from the policy's cash value.
Cross Purchase Plan
- A buy-sell agreement where partners purchase insurance on each other's lives, serving as owner, payor, and beneficiary.
Equity Indexed Annuities
- Offer higher returns with guaranteed minimum interest rates, carrying less risk than variable annuities.
Other Insurance Provision
- Details the payment hierarchy among multiple insurance policies in effect.
Credit Insurance
- Designed to cover the life of an individual debtor to ensure repayment of debt obligations.
Change Notification Period
- Licensed producers are required to notify the Commissioner of changes in contact information within 10 days.
Insuring Clause Reiterated
- Contains the insurer's promise to pay benefits under the terms of the policy.
Mutual Insurance Company
- Provides dividend checks to its policyholders as a return on surplus.
Types of Insurance Assignment
- Two categories exist: absolute assignment, which transfers full benefits, and collateral assignment, which secures loans against the policy.
Survivorship Benefits
- Allow a surviving beneficiary to receive two-thirds of the benefits paid while both beneficiaries were alive.
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Test your knowledge of life insurance terms and concepts with these flashcards. Learn about various types of policies, such as term life insurance and level term life insurance. This quiz is perfect for anyone interested in understanding how life insurance works.