Podcast
Questions and Answers
For how long are all of the premiums necessary under a 20-pay life policy paid?
For how long are all of the premiums necessary under a 20-pay life policy paid?
20 years or until death, whichever occurs first
What does a man discover about his $100,000 Annually Renewable Term Life policy?
What does a man discover about his $100,000 Annually Renewable Term Life policy?
Both Universal Life and Variable Universal Life have a?
Both Universal Life and Variable Universal Life have a?
What would the premium be like in a survivorship life policy compared to a joint life policy?
What would the premium be like in a survivorship life policy compared to a joint life policy?
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What policy is classified as a traditional level premium contract?
What policy is classified as a traditional level premium contract?
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The ownership provision entitles the policyowner to do all of the following EXCEPT?
The ownership provision entitles the policyowner to do all of the following EXCEPT?
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What rider adjusts the face amount based on a specific index, such as the Consumer Price Index?
What rider adjusts the face amount based on a specific index, such as the Consumer Price Index?
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Under which nonforfeiture option does the company pay the surrender value and have no further obligations?
Under which nonforfeiture option does the company pay the surrender value and have no further obligations?
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Which statement is true about the premium on the children's rider in a life insurance policy?
Which statement is true about the premium on the children's rider in a life insurance policy?
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When is the automatic premium loan provision activated?
When is the automatic premium loan provision activated?
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Which explains the policyowner's rights to change beneficiaries and receive proceeds?
Which explains the policyowner's rights to change beneficiaries and receive proceeds?
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What will the insurance producer say about naming two beneficiaries?
What will the insurance producer say about naming two beneficiaries?
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What will the company do if an insured misrepresents their age?
What will the company do if an insured misrepresents their age?
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What benefits will an insured with a disability income death benefit rider receive?
What benefits will an insured with a disability income death benefit rider receive?
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What provision states that the policy and application form the contract?
What provision states that the policy and application form the contract?
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How does withdrawing a portion of the accelerated benefits affect death benefits?
How does withdrawing a portion of the accelerated benefits affect death benefits?
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When does the 10-day free-look period begin?
When does the 10-day free-look period begin?
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What limits the amount a policyowner may borrow from a whole life insurance policy?
What limits the amount a policyowner may borrow from a whole life insurance policy?
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What term describes an insured receiving an annual life insurance dividend check?
What term describes an insured receiving an annual life insurance dividend check?
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What amount would a beneficiary receive if the insured had an accidental death rider?
What amount would a beneficiary receive if the insured had an accidental death rider?
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Whose life expectancy is taken into account when an annuity is written?
Whose life expectancy is taken into account when an annuity is written?
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Which statement is true regarding a comparison between annuities and life insurance?
Which statement is true regarding a comparison between annuities and life insurance?
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Annuities can be used to fund which of the following?
Annuities can be used to fund which of the following?
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What is a feature of a single premium immediate annuity?
What is a feature of a single premium immediate annuity?
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Which factor most directly affects the purchasing power of death benefits paid on a fixed annuity?
Which factor most directly affects the purchasing power of death benefits paid on a fixed annuity?
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Which statement is NOT true regarding the annuitant?
Which statement is NOT true regarding the annuitant?
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When a fixed annuity owner pays a monthly annuity premium, where is the money placed?
When a fixed annuity owner pays a monthly annuity premium, where is the money placed?
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What would a beneficiary receive if the annuitant dies 5 years into a 20 year period certain?
What would a beneficiary receive if the annuitant dies 5 years into a 20 year period certain?
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What type of life annuity guarantees payment for a minimum number of years?
What type of life annuity guarantees payment for a minimum number of years?
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Which type of annuity is purchased with multiple payments and benefits are paid more than one year after purchase?
Which type of annuity is purchased with multiple payments and benefits are paid more than one year after purchase?
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Which of the following will NOT be an appropriate use of a deferred annuity?
Which of the following will NOT be an appropriate use of a deferred annuity?
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Which product requires a securities license?
Which product requires a securities license?
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Which statement is NOT true regarding installments for a fixed period?
Which statement is NOT true regarding installments for a fixed period?
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What type of annuity can be purchased with a single premium for immediate payments?
What type of annuity can be purchased with a single premium for immediate payments?
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Which of the following are NOT fundable by annuities?
Which of the following are NOT fundable by annuities?
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From what type of insurer did the insured purchase the policy?
From what type of insurer did the insured purchase the policy?
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Annuities provide death benefits.
Annuities provide death benefits.
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Which method of dealing with risk does this scenario describe?
Which method of dealing with risk does this scenario describe?
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Which of the following is TRUE of a qualified plan? (Select all that apply)
Which of the following is TRUE of a qualified plan? (Select all that apply)
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In insurance, an offer is usually made when?
In insurance, an offer is usually made when?
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What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?
What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?
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Death benefits payable to a beneficiary under a life insurance policy are generally:
Death benefits payable to a beneficiary under a life insurance policy are generally:
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The causes of loss insured against in an insurance policy are known as?
The causes of loss insured against in an insurance policy are known as?
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What is the main purpose of the Seven-pay test?
What is the main purpose of the Seven-pay test?
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What documentation grants express authority to an agent?
What documentation grants express authority to an agent?
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If a company has a simplified employee pension plan, what type of plan is it?
If a company has a simplified employee pension plan, what type of plan is it?
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Which of the following best describes an insurance company that has been formed under the laws of this state?
Which of the following best describes an insurance company that has been formed under the laws of this state?
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If taken as a lump sum, life insurance proceeds to beneficiaries are passed:
If taken as a lump sum, life insurance proceeds to beneficiaries are passed:
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Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance?
Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance?
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In insurance transactions, fiduciary responsibility means?
In insurance transactions, fiduciary responsibility means?
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When must an IRA be completely distributed when a beneficiary is not named?
When must an IRA be completely distributed when a beneficiary is not named?
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In life insurance policies, cash value increases:
In life insurance policies, cash value increases:
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The authority granted to an agent through the agent's contract is referred to as?
The authority granted to an agent through the agent's contract is referred to as?
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According to agency law, the producer always represents the:
According to agency law, the producer always represents the:
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Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
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What is it called when Louisiana extends the licensing privileges to a prospective producer of another state?
What is it called when Louisiana extends the licensing privileges to a prospective producer of another state?
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Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?
Which of the following insurers are owned by stockholders who have the usual rights of ownership, including the right of voting?
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Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
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How many days does a producer have to change an unapproved trade name before facing a fine?
How many days does a producer have to change an unapproved trade name before facing a fine?
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When could an insurance company discard the file on an advertisement used for 4 years?
When could an insurance company discard the file on an advertisement used for 4 years?
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When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?
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Insurers are required to keep copies of all summaries, notices, and statements used in sales transactions for at least:
Insurers are required to keep copies of all summaries, notices, and statements used in sales transactions for at least:
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Which of the following would qualify as a competent party in an insurance contract?
Which of the following would qualify as a competent party in an insurance contract?
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An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
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If a company wants to appoint a producer, which entity must it notify?
If a company wants to appoint a producer, which entity must it notify?
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Which of the following is a primary source of information used for insurance underwriting?
Which of the following is a primary source of information used for insurance underwriting?
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Which of the following best describes the practice of using intimidation to corner a large portion of the insurance market?
Which of the following best describes the practice of using intimidation to corner a large portion of the insurance market?
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Which of the following is the best reason to purchase life insurance rather than annuities?
Which of the following is the best reason to purchase life insurance rather than annuities?
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Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?
Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information?
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Before ABC Insurance Company can begin transacting business in Louisiana, it must obtain:
Before ABC Insurance Company can begin transacting business in Louisiana, it must obtain:
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A producer is helping a married couple determine the financial needs of their children in the event of one or both should die prematurely. This is a personal use of life insurance known as?
A producer is helping a married couple determine the financial needs of their children in the event of one or both should die prematurely. This is a personal use of life insurance known as?
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A producer agent must do all of the following when delivering a new policy to the insured EXCEPT?
A producer agent must do all of the following when delivering a new policy to the insured EXCEPT?
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How long is a temporary license valid?
How long is a temporary license valid?
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If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about?
If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about?
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A temporary license may be issued without examination to all of the following EXCEPT:
A temporary license may be issued without examination to all of the following EXCEPT:
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When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by?
When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by?
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Which applies if an agent knows an applicant is cashing in an old policy to purchase new insurance?
Which applies if an agent knows an applicant is cashing in an old policy to purchase new insurance?
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The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called?
The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called?
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If authorized to write life and property and casualty insurance, how many hours of continuing education must producers complete every 2 years?
If authorized to write life and property and casualty insurance, how many hours of continuing education must producers complete every 2 years?
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What is the main justification for the existence of the State Insurance Department?
What is the main justification for the existence of the State Insurance Department?
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Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?
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Which of the following is NOT required for a producer to tell a prospect?
Which of the following is NOT required for a producer to tell a prospect?
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Any payment to a producer from an insurer that is contingent on the sale of an insurance policy is called a:
Any payment to a producer from an insurer that is contingent on the sale of an insurance policy is called a:
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Which type of assignment would be used for a loan?
Which type of assignment would be used for a loan?
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Which of the following statements concerning buy-sell agreements is true?
Which of the following statements concerning buy-sell agreements is true?
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Who may complete a paramedical report?
Who may complete a paramedical report?
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If a policyowner returns a policy 7 days after delivery, what will the insurer do?
If a policyowner returns a policy 7 days after delivery, what will the insurer do?
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The term 'illustrations' in a life insurance policy refers to?
The term 'illustrations' in a life insurance policy refers to?
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If an insured dies during the grace period, the insurer will pay:
If an insured dies during the grace period, the insurer will pay:
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Which of the following is NOT a requirement of the reinstatement provision?
Which of the following is NOT a requirement of the reinstatement provision?
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Which is generally true regarding insureds who have been classified as preferred risks?
Which is generally true regarding insureds who have been classified as preferred risks?
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If an insured dies 3 years after the policy was issued and understated his age on the application, what will the insurer do?
If an insured dies 3 years after the policy was issued and understated his age on the application, what will the insurer do?
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All of the following are requirements for life insurance illustrations EXCEPT?
All of the following are requirements for life insurance illustrations EXCEPT?
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What is the name of the first beneficiary listed in a policy?
What is the name of the first beneficiary listed in a policy?
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Partners in a business enter into a buy-sell agreement to purchase life insurance. What type of insurance policy may be used to fund this agreement?
Partners in a business enter into a buy-sell agreement to purchase life insurance. What type of insurance policy may be used to fund this agreement?
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An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured and matures at the insured's age 100 is called?
An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured and matures at the insured's age 100 is called?
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Twin brothers are starting a new business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?
Twin brothers are starting a new business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?
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An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?
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Which of the following are generally NOT considered when underwriting group insurance?
Which of the following are generally NOT considered when underwriting group insurance?
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What are the 2 components of a universal policy?
What are the 2 components of a universal policy?
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An adjustable life policy owner can change which of the following features?
An adjustable life policy owner can change which of the following features?
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Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid?
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid?
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Study Notes
Life Insurance Fundamentals
- Mutual Insurers: Provide dividends based on excess funds; if no funds are available, dividends are not paid.
- Risk Management Strategies: Risk reduction involves lifestyle changes to lessen health problem likelihood.
- Offer in Insurance: Made by an applicant through their application; acceptance occurs once the insurer approves it.
- Perils: Defined as the causes of loss covered by an insurance policy.
Insurance Authority and Classifications
- Agent Authority: Express authority is granted through a contract with the principal, specifying agents' powers.
- Domestic Insurers: Defined as companies doing business in the state where they are incorporated.
- Underwriter Considerations: Factors like medical history, sex, and age affect insurance premium rates; race should not be considered due to discrimination laws.
Fiduciary Responsibility and Insurance Contracts
- Fiduciary Responsibility: Agents manage insurer funds in a trust capacity.
- Characteristics of Contracts: Adhesion contracts are unilaterally prepared by insurers, allowing the insured minimal negotiation power.
Insurance Types and Concepts
- Stock Companies: Owned by stockholders who hold ownership rights, including voting.
- Aleatory Contracts: Require a small premium for significant risk coverage.
- Legal Consideration: In life insurance, it includes the premium payment and application representations.
Insurable Interest and Competent Parties
- Insurable Interest: Essential at the policy's issuance; particularly important in relationships like spousal and parental.
- Competent Parties: Both parties must be of legal age and mentally competent; past felony convictions do not disqualify individuals.
Claims and Underwriting
- Consideration Principle: Essential for binding contracts; insurers must honor claims when premiums are paid and terms adhered to.
- Primary Underwriting Source: The application provides most of the pertinent underwriting information.
Life Insurance Needs and Financial Planning
- Purpose of Life Insurance: Primarily to create an estate that offers financial security upon the insured's death.
- Survivorship Protection: Life insurance can ensure adequate funds for dependents in the insured's absence.
Policy Delivery and Regulations
- Policy Delivery Requirements: Agents must explain policy features, collect premiums, and clarify any discrepancies in ratings.
- Illustrations in Policies: Serve as presentations of non-guaranteed elements and cannot be altered by agents.
Insurance Types Explained
- Buy-Sell Agreements: Usually funded by life insurance policies; provide financial means for surviving partners or owners.
- Paramedical Reports: Completed by registered nurses or paramedics; critical for assessments in life insurance applications.
Policy Structures and Features
- Universal Life Policies: Feature both insurance protection and an investment cash account.
- Joint Life Policies: Cost-effective for insuring two lives but only pay out upon the first death.
- Decreasing Term Insurance: Best suited for decreasing debts, as the benefit decreases with the amount owed.
Insurance Premium and Coverage
- Premium Structures: Generally lower for preferred risks; premiums adjust annually based on the insured's age, particularly for term policies.
- Survivorship Life Policies: Offer lower premiums compared to joint life, as benefits are paid upon the last insured's death.
Policy Variants and Coverage Details
- Single Premium Whole Life: Requires one-time premium payment, ensuring coverage until maturity at age 100.
- Annually Renewable Term Life: Increases premiums with the insured's age at each renewal.
- Flexible Premiums: Found in universal and variable universal life policies allowing modifications based on the policyowner's decisions.### Life Insurance and Riders
- Death benefit for joint life policies is delayed until the last death, resulting in lower premiums compared to traditional policies.
- A straight whole life policy is deemed a traditional level premium contract.
- Ownership provisions grant policyowners rights to assign the policy, receive loans, and designate beneficiaries, but do not allow setting premium rates.
- A cost of living rider adjusts the face amount of a policy based on the Consumer Price Index.
- Cash surrender is a nonforfeiture option where the insurer pays the surrender value and has no further obligations to the policyowner.
Premium and Coverage Details
- The premium on a children's rider remains constant regardless of the number of children added.
- An automatic premium loan provision is triggered at the end of the grace period if there is sufficient cash value.
- The owner’s rights allow for changes to beneficiaries and policy options, as outlined in the policy.
Benefit Distribution and Claims
- In a scenario involving misrepresentation of age, the insurer pays a reduced death benefit if the actual age is discovered after a claim.
- A disability income death benefit rider waives premiums and provides monthly income during the disability period.
- The entire contract provision includes the policy and application, defining it as the complete agreement between policyowner and insurer.
Annuities and Their Features
- Accelerated benefits from a terminal illness reduce the death benefit payable.
- A single premium immediate annuity provides income payments starting within a year, funded by a one-time premium.
- Fixed annuity payments are based on the general account of the insurance company, which guarantees a minimum interest rate.
Retirement Plans and Taxes
- Annuities are commonly used to fund retirement plans, accumulating funds over time.
- Qualified plans offer tax benefits for both employers and employees and are regulated by the IRS.
- Traditional IRA distributions are subject to income tax but do not incur penalties if left in the tax-deferred account.
Taxation of Life Insurance Proceeds
- Life insurance death benefits are generally not subject to federal income tax when received in a lump sum.
- The Seven-pay test determines if a policy is a modified endowment contract (MEC) based on premium contributions over the first seven years.
Simplified Employee Pension (SEP)
- A Simplified Employee Pension is a qualified plan suited for small businesses, allowing for higher contribution limits compared to traditional IRAs.### Tax Return Due Date
- The deceased owner's first tax return is due on December 31 of the year containing the 5th anniversary of their death.
- If the owner dies before distributions begin, the entire interest must be fully distributed by the same due date unless a beneficiary is named.
Life Insurance Cash Value Growth
- Cash values in life insurance policies grow tax-deferred.
- Income tax applies only if the policy is completely or partially surrendered and the cash value exceeds the premiums paid.
Agency Law Representation
- Under agency law, producers legally represent the insurance company they are contracted with.
Reciprocity in Licensing
- Reciprocity allows states to extend licensing privileges to producers from other states with similar privileges granted to their own producers.
Unapproved Trade Name Compliance
- Producers have 10 days to cease the use of an unapproved trade name after notification by the Commissioner, or face fines up to $5,000.
Advertisement Record Keeping
- Louisiana insurance companies must retain advertisement files for a minimum of 4 years or until the next examination, whichever is longer.
Record Retention for Insurance Transactions
- Insurers must keep copies of summaries, notices, and statements from sales transactions for at least 5 years or until the conclusion of the next examination.
Producer Appointment Notification
- Companies looking to appoint a producer must notify the Commissioner and have 30 days for their decision on the producer's fit to transact insurance.
Intimidation Practices
- Intimidation strategies in insurance practices are illegal if they aim to restrict trade or create monopolies.
Consumer Protection Legislation
- The Fair Credit Reporting Act protects consumers from the dissemination of inaccurate or outdated personal and financial information.
Conducting Business in Louisiana
- To begin operations in Louisiana, insurance companies must secure a certificate of authority from the state's insurance department.
Temporary License Validity
- A temporary license is valid for 180 days.
Temporary License Issuance Exceptions
- Temporary licenses cannot be issued to the spouse of a retired producer for conducting business.
Replacement Rule in Insurance
- The replacement rule requires a replacement form when a new policy is issued to replace or modify existing insurance.
Continuing Education Requirements
- Louisiana producers must complete 24 hours of continuing education every two years, irrespective of licensing lines.
Purpose of State Insurance Department
- The primary function of the state insurance department is consumer protection.
Producer Compensation
- Commissions are payments to producers contingent upon the sale of insurance policies or contracts.
Assignment Types
- A collateral assignment is typically used for loans.
Policy Return and Refund
- If a policy is returned within 7 days of delivery, the insurer must refund the full premium paid.
Death During Grace Period
- If an insured dies during the grace period, the insurer pays the face amount minus any premium due.
Reinstatement Provision Requirements
- The reinstatement provision does not require repayment of premiums at current attained age.
Impact of Age Misstatement
- If an insured who understated their age dies three years post-issue, the insurer will adjust the death benefit accordingly.
Beneficiary Classification
- The first beneficiary listed in a policy is referred to as the primary beneficiary.
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Test your knowledge of life insurance principles with our Primerica Life Insurance Exam flashcards. This quiz focuses on different types of insurers and their operations regarding dividends and tax implications. Perfect for anyone preparing for insurance licensing or assessments.
