Life Insurance Overview
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Questions and Answers

When is the earliest a policy may go into effect?

  • When the application is signed and a check is given to the agent (correct)
  • When the insurer approves the application
  • After the underwriter reviews the policy
  • When the first premium is paid and the policy has been delivered
  • What kind of policy allows withdrawals or partial surrenders?

  • Term policy
  • Universal life (correct)
  • 20-pay life
  • Variable whole life
  • Who makes up the Medical Information Bureau?

  • Former insured
  • Insurers (correct)
  • Physicians and paramedics
  • Hospitals
  • When an annuity is written, whose life expectancy is taken into account?

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

    An insured purchases a policy in 2008 and died in 2013. The insurance company discovers that the insured concealed information during the application process. What can they do?

    <p>Pay the death benefit</p> Signup and view all the answers

    What is the purpose of a conditional receipt?

    <p>It is intended to provide coverage on a date earlier than the date of the issuance of the policy.</p> Signup and view all the answers

    A Return of Premium term life policy is written as what type of term coverage?

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

    A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?

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

    Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

    <p>Premiums are not tax deductible as a business expense.</p> Signup and view all the answers

    What is the advantage of reinstating a policy instead of applying for a new one?

    <p>The original age is used for premium determination</p> Signup and view all the answers

    Study Notes

    Policy Activation

    • A policy can go into effect when the application is signed and a check is provided to the agent.
    • If the premium accompanies the application and the policy is issued as applied for, coverage may begin as early as the application date.

    Universal Life Insurance

    • Universal life policies permit withdrawals or partial surrenders from the cash value.
    • This flexibility differentiates universal life from term and other fixed policies.

    Medical Information Bureau (MIB)

    • The MIB is comprised of insurers that share information on potential insured individuals.
    • Its purpose is to help insurance companies verify the information collected during the application process.

    Annuity Life Expectancy

    • The annuitant is the individual whose life expectancy is considered when drafting an annuity.
    • The annuitant generally receives payments and may also be the owner of the annuity.

    Death Benefit Claims

    • Insurers must pay the death benefit even if an insured concealed information during application, provided the policy has been in force for over two years.
    • The incontestability clause protects policyholders from denial of claims based on application statement inaccuracies.

    Conditional Receipts

    • Conditional receipts provide coverage before the policy is officially issued, depending on the applicant's insurability.
    • Coverage starts on the application date or after a medical examination, contingent upon insurability at applied rates.

    Return of Premium Term Policy

    • Return of Premium (ROP) term life is classified as increasing term insurance.
    • It provides beneficiaries with an additional death benefit equivalent to the amount of premiums paid over the policy's life.

    Automatic Premium Loan Provision

    • An automatic premium loan prevents policy lapse due to unpaid premiums by utilizing the policy's cash value.
    • This provision is often added at no extra charge and helps maintain policy coverage despite nonpayment.

    Key-Person Life Insurance Taxation

    • Premiums for key-person life insurance policies are not tax-deductible as a business expense.
    • Death benefits received by the business from the policy are typically tax-free.

    Reinstating Policies

    • Reinstating a lapsed policy utilizes the original age to determine premiums, which can be beneficial.
    • Unlike applying for a new policy, proof of insurability is not necessary during reinstatement.

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    Description

    This quiz covers essential topics in life insurance, including policy activation, universal life insurance features, and death benefit claims. Gain insights into how these elements interact and the importance of the Medical Information Bureau (MIB) in the application process.

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