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Life Insurance Flashcards
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Life Insurance Flashcards

Created by
@GrandDwarf5939

Questions and Answers

Life insurance replacement regulation is designed to protect the interests of the _____

policy owner

Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?

  • Annuity (correct)
  • Whole Life
  • Universal Life
  • Term Life

    • What are the characteristics of an Adjustable Life policy?

    Adjustable premiums, adjustable premium payment period, and combination of term and whole life insurance

    The Consideration clause in a life insurance policy indicates that a policy owner's consideration consists of a completed application and ____

    <p>the initial premium</p> Signup and view all the answers

    A producer who fails to renew a license may reapply for a license w/o examination within____ year with____

    <p>1 year/ no renewal with $50 late fee</p> Signup and view all the answers

    What action can a policy owner take if an application for a bank loan requires collateral?

    <p>assign policy ownership to the bank</p> Signup and view all the answers

    An insured's inability to perform two or more activities of daily living may trigger which type of policy rider?

    <p>Long term care</p> Signup and view all the answers

    What is the consideration given by an insurer in the Consideration clause of a life policy?

    <p>Promise to pay a death benefit to a named beneficiary</p> Signup and view all the answers

    A person who is insured within a group contract will be given a:

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

    A term life insurance policy matures:

    <p>upon the insured's death during the term of the policy</p> Signup and view all the answers

    A _____ Life policy offers the owner investment in products such as money-market funds, long term bonds and equities

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

    At what point does the Life and Health Insurance Guaranty Association become involved with an insurer's affairs?

    <p>When the insurer becomes insolvent (unable to pay debt)</p> Signup and view all the answers

    An annuity that pays out a fixed amount for life starting at a future date is called:

    <p>Fixed Deferred</p> Signup and view all the answers

    What kind of receipt indicates that certain conditions must be met in order for the insurance coverage to go into effect?

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

    The Life and Health Insurance Guaranty Association is funded by:

    <p>insurance companies through assessments</p> Signup and view all the answers

    A plan is considered 'top-heavy' if more than ___ of plan assets are attributable

    <p>60%</p> Signup and view all the answers

    When can a policy owner change a revocable beneficiary?

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

    What does the insuring agreement in a Life insurance contract establish?

    <p>an insurer's basic promise</p> Signup and view all the answers

    A policy that provides an income for a specific period starting at the death of the insured is called:

    <p>Family Maintenance Policy</p> Signup and view all the answers

    What is the purpose of the U.S.A Patriot Act?

    <p>detect and deter terrorism</p> Signup and view all the answers

    Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?

    <p>Universal Life</p> Signup and view all the answers

    Which policy is characterized by a guaranteed minimum death benefit?

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

    A producer is attempting to replace an existing life insurance policy with a new one. What must this producer submit as part of the application?

    <p>a signed statement by the applicant regarding the replacement</p> Signup and view all the answers

    Characteristic of a variable annuity?

    <p>underlying equity investments</p> Signup and view all the answers

    Any policy that includes 'universal' indicates____

    <p>the policy has flexible or adjustable premiums</p> Signup and view all the answers

    Any policy that includes 'variable' indicates___

    <p>cash savings value being invested</p> Signup and view all the answers

    When was the USA Patriot Act enacted?

    <p>2001</p> Signup and view all the answers

    Which policy requires an agent to register with the National Association of Securities Dealers before selling?

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

    Which type of policy is considered to be overfunded, as stated by IRS guidelines?

    <p>Modified-Endowment Contract</p> Signup and view all the answers

    What enables a policy owner to sell a policy for more than its cash value?

    <p>Life settlement contract</p> Signup and view all the answers

    What Life Insurance rider allows an applicant to have excess life insurance coverage?

    <p>Term rider</p> Signup and view all the answers

    The automatic premium loan provision is designed to__

    <p>avoid a policy lapse</p> Signup and view all the answers

    Life insurance that covers an insured's whole life with level premiums paid over a limited time is called:

    <p>Limited Pay Life</p> Signup and view all the answers

    Which combination plan is designed to protect an insured from an unpaid mortgage balance upon premature death?

    <p>Joint life</p> Signup and view all the answers

    A producer has returned part of his commission to the insured as an inducement to purchase the insurance. This illegal action is called___

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

    The Commission of Insurance MUST give ___ days notice before holding a hearing regarding a producer's unfair practice

    <p>10</p> Signup and view all the answers

    Prior to a hearing for a suspended producer's license, the Commissioner of Insurance is required to___

    <p>give written notice to the producer</p> Signup and view all the answers

    The annuity that represents the largest possible monthly payment to an individual annuitant is:

    <p>Straight Life annuity</p> Signup and view all the answers

    What is being delivered during a policy delivery?

    <p>Insurance contract to the proposed insured</p> Signup and view all the answers

    What is the income tax withholding requirement for a profit-sharing plan?

    <p>20% is withheld for income taxes</p> Signup and view all the answers

    A Return of Premium life insurance policy is:

    <p>Whole life and increasing term</p> Signup and view all the answers

    A term life insurance policy matures:

    <p>upon the insured's death during the term of the policy</p> Signup and view all the answers

    Life insurance replacement regulation is designed to protect the interests of the:

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

    If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?

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

    Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called:

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

    What type of insurance offers permanent life coverage with premiums that are payable for life?

    <p>Whole Life</p> Signup and view all the answers

    Aleatory

    <p>an agreement whereby the parties involved do not have to perform a particular action until a specific, triggering event occurs.</p> Signup and view all the answers

    Contract of adhesion

    <p>a contract (also known as a contract of adhesion) between two parties, where the terms and conditions are drafted by the party with superior bargaining power (typically a business) and the other party</p> Signup and view all the answers

    What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?

    <p>Convertible Term</p> Signup and view all the answers

    Credit life insurance is typically issued with which of the following types of coverage?

    <p>Decreasing Term</p> Signup and view all the answers

    Which policy requires an agent to register with the National Association of Securities Dealer before selling?

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

    What kind of premium does a Whole Life policy have?

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

    Who makes the legally enforceable promises in a unilateral insurance policy?

    <p>Insurance company</p> Signup and view all the answers

    What kind of policy is a Return of Premium Life?

    <p>Whole life and increasing term</p> Signup and view all the answers

    How long is the Suicide clause period?

    <p>1-2 years</p> Signup and view all the answers

    A producer must notify the Commissioner of Insurance within___days of an address change.

    <p>30</p> Signup and view all the answers

    What provision keeps a Whole Life policy in force if a required premium payment is not made and there is sufficient cash value?

    <p>Automatic policy loan</p> Signup and view all the answers

    Traditional individual retirement annuity (IRA) distributions must start by:

    <p>April 1st of the year following the year the participant attains age 70 1/2</p> Signup and view all the answers

    When must insurable interest be present in order for a life insurance policy to be valid?

    <p>when the application is made</p> Signup and view all the answers

    How long does an individual have to 'rollover' funds from an IRA or qualified plan?

    <p>60 days</p> Signup and view all the answers

    An arrangement where an employer and employee share in the cost of purchasing a life insurance policy on an employee:

    <p>Split-dollar plan</p> Signup and view all the answers

    Which policy is characterized by a guaranteed minimum death benefit?

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

    Study Notes

    Life Insurance Overview

    • Life insurance replacement regulation safeguards the interests of policy owners.
    • An annuity is ideal for retired individuals seeking to invest a lump sum.
    • Adjustable Life policies feature adjustable premiums, payment periods, and a mix of term and whole life insurance.

    Key Policy Features

    • The Consideration clause includes the completed application and the initial premium from the policy owner.
    • A producer can reapply for a license without examination within one year, accompanied by a $50 late fee if the license lapses.
    • Policy ownership can be assigned to a bank if collateral is needed for a loan.

    Riders and Policies

    • Long Term Care riders activate if an insured cannot perform two or more activities of daily living.
    • Insurer's consideration in a life policy involves the promise to pay a death benefit to a named beneficiary.
    • Individuals insured under a group contract receive a certificate.

    Types of Insurance

    • A term life insurance policy matures only upon the insured's death during the contract period.
    • Variable Life policies allow investment in products like money-market funds, bonds, and equities.
    • Fixed Deferred annuities pay a fixed amount for life starting at a chosen future date.
    • The Life and Health Insurance Guaranty Association intervenes when an insurer is insolvent.
    • Universal Life policies feature monthly mortality charges with self-directed investment options.
    • Variable Life policies come with a guaranteed minimum death benefit.

    Policy Changes and Conditions

    • A producer must submit a signed statement regarding the replacement when shifting from an existing policy to a new one.
    • Characteristics of a variable annuity are defined by underlying equity investments.
    • Any policy labeled "universal" indicates flexible or adjustable premiums.

    Tax and Planning

    • The USA Patriot Act aims to detect and deter terrorism, enacted in 2001.
    • A return of premium life insurance policy encompasses whole life and increasing term options.
    • 20% is withheld for income taxes from profit-sharing plan distributions.

    Contracts and Provisions

    • Aleatory contracts hinge on specific triggering events for actions to take place.
    • Contracts of adhesion are drafted by one party with more power, leaving the other party with little negotiation.
    • Convertible Term policies provide temporary coverage that can later be adjusted to permanent without proof of insurability.

    Other Considerations

    • Credit life insurance typically uses decreasing term coverage.
    • Whole Life policies have level premiums, and insurance promises are legally enforced by the insurance company.
    • The suicide clause generally spans 1-2 years.

    Compliance and Regulations

    • Producers must notify the Commissioner of Insurance within 30 days of any address change.
    • An automatic policy loan keeps a Whole Life policy active if premium payments are missed and a cash value exists.
    • IRA distributions must commence by April 1 following the year the participant reaches age 70½.

    Timelines and Requirements

    • Insurable interest must exist at the application time for a life insurance policy to be valid.
    • Funds can be rolled over from an IRA or qualified plan within 60 days.
    • Split-dollar plans involve shared costs between employers and employees for life insurance policies.

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    Test your knowledge with these life insurance flashcards covering key concepts including replacement regulations, annuities, and adjustable life policies. Perfect for students or professionals looking to enhance their understanding of life insurance products.

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