OLT Risk-Paper02

Convertible Term Life Insurance

• Mr. Vernon, at age 32, converts a 5-year term life policy bought at age 29 to a whole life plan.
• The premium rate is based on the insurance company's rate for a 29-year-old male.
• The conversion is known as original age conversion.

Group Life Insurance Policy

• A group life policy is a single insurance contract.
• It insures a number of people.
• This type of policy is called a master contract.

Double Indemnity

• Double indemnity offers an additional amount equal to the sum insured.
• It is payable when the insured's death results from an accident.

Financial Solvency of a Life Insurance Company

• The financial solvency is determined by its assets.
• These assets should be equal to or greater than policy reserves and other liabilities.

Guaranteed Insurability Rider

• The policyowner can purchase additional insurance of the same type on specific dates.
• Exercising this option does not require supplying evidence of insurability.

Policy Surrender

• A policyowner can receive a guaranteed amount from the insurance company.
• This is applicable if the policy is surrendered before maturity.
• The guaranteed amount is the cash value.

Life Insurance Contract as 'Bilateral'

• A life insurance contract is 'bilateral' because the insurer promises to pay the sum insured.
• The insured is obligated to pay the premium.

Permanent Insurance Policies

• Permanent insurance policies accumulate cash values over time.

Insurance Act: Company Appointments

• Part II of the Insurance Act mandates every insurance company to appoint a Principal Officer and an Actuary.

Insurance Company Requirements

• Insurance companies must maintain all local policies issued and still in force at their principal office.
• They must also keep local policies that have ceased to be in force within a prescribed period.

Legal Insurance Contracts

• An insurer may legally enter into contracts of insurance.
• The insurer must be authorized or licensed by the proper regulating authority.
• The insurer must be a reputable corporate body.
• The insurer must not have been barred by a court.

Transfer of Risk

• The People's Insurance Company transfers a portion of a large risk it cannot fully insure.
• This transfer of risk is called reinsurance.

Automatic Conversion

• Automatic conversion involves converting a term life policy to a permanent plan.
• The premium rate is based on the insurance company's rate for the insured at the age attained during conversion.

Financial Services Commission (FSC) Grounds for Cancellation

• The FSC will cancel the registration of an insurance company if any of the following occurs:
• If the company or its debtors request it.
• If the company hasn't conducted business in its registered class within two years of registration.
• If proceedings for its winding-up will start the next year.

Whole Life Policy Premium Changes

• An applicant for a whole life policy chooses annual premium payments.
• If the policyowner later asks to change to quarterly payments, the company will allow the change.
• The change results in a higher total premium outlay per year.

FSC Sales Representative Inspection

• When the FSC inspects a Sales Representative and finds everything in order, the rep will not be subjected to another inspection, as each sales representative is expected to be inspected once.

Insurable Interest Under the Insurance Act

• Under the Insurance Act, a person has insurable interest in their own life.
• This also extends to the life of a child or grandchild, employees, and anyone with a pecuniary interest in their life.

Annuities

• Annuities are distinguished from one another based on when benefit payments begin, how the annuity is purchased, and how long benefit payments will last.

Dividends Distribution for Participating Life Insurance

• Dividends for a typical participating ordinary life insurance policy are generally distributed at the end of each policy year.

Life Insurance Policy Ownership Transfer

• A life insurance policy where ownership rights have been transferred from one party to another is known as an assigned policy.

Third-Party Contracts

• Under third party contracts, the right to use the policy rests with the policyholder, unlike who the beneficiary is.

Child Beneficiary in Life Insurance

• When a child is named as a beneficiary, the determination is not always irrevocable.

Insurance Company's Deed of Settlement

• In terms of an insurance company, a deed of settlement includes specific instruments constituting the company.

Mortality Tables

• Mortality Tables predict the number of deaths occurring each year among given groups of people.
• Mortality tables are used to calculate life insurance premiums.

Individual Certificate in Group Life Insurance

• An individual certificate issued under a group life insurance contract is not a contract.
• The certificate merely 'certifies' the employee is insured under a master policy.

Appointment of Administrator by Court

• A court appoints an administrator for the insured.
• This happens when the insured has conflicting claims to the policy proceeds.

Policy Contract: Vested Rights

• A policy contract has vested rights.
• Under the contract, neither the insured nor creditors can change the beneficiary without the beneficiary's consent.

Appeals of Sales Representatives

• The prescribed authority to receive appeals of sales representatives who have been refused registration by the FSC is the Appeal Tribunal.

Breaches the Commission May Impose

• The Commission may summon a representative for inspection.
• This is to ensure the representative acts in conformity with the Insurance Act.
• If the representative is guilty of any breach, the commission may notify the sales representative of intention to cancel his registration

Record Keeping: Group Insurance Policy

• Record keeping under a self-administered group insurance policy is the policyholder's responsibility.

Conditions for Surrender of a Life Insurance Policy

• The policyholder should have no unpaid debt secured on the policy to surrender.
• Then the policyholder can collect the relevant surrender value.

Term Life And Endowment Life

• Term Life and Endowment Life Insurance policies provide insurance coverage only for a period specified in the policy.

Risk Appraisal

• Risk appraisal means evaluating the insurability of a proposed insured in life insurance.

Terms

• When an insurance company carries on an Ordinary Long Term Insurance business, the agreement with each sales representative includes the commissions payable and company rules.

Insurable Interest Requirement

• Two ways the insurable interest requirement may be met in life insurance:
• The risk of economic loss as a result of death
• Economic loss must be evident at the time of death.

Right to Make Amendments

• The policyowner has the right to make amendments to the insurance policy after it has been issued.

Changed Postal Address

• Under Part IV of the Insurance Act, a sales representative must inform the Principal Officer of their company after a change in a postal address.

Group Life Insurance: Non-Contributory Plans

• An employer-employee group life insurance plan is non-contributory when premiums are paid entirely by the employer without employee contribution.

Cash Payment Option

• Mr. Smith has a $10,000 twenty-payment life policy with a $3,000 cash surrender value.
• There's a $500 unpaid policy loan including interest.
• If he elects the cash payment option to terminate the policy, he will receive $2,500.

Prospect Sees Sales Representative

• When a prospect asks to see proof of authorization, for any sale of life insurance, representitives should present their certificate of registration.

Entitlement

• Ken Smith dies in a motor vehicle accident and has an insurance policy.
• The policy had a face amount of $20,000, a cash surrender value of $5,000, a policy loan plus interest of $2,500, and dividends of $500.
• The policy includes a double indemnity accident rider.
• Mr. Smith's beneficiary is entitled to $38,000.

Substandard Rates

• In life insurance, "substandard rates" generally refers to premiums charged to persons considered a higher than average risk.

Policyowner Naming New Beneficiary

• Under certain circumstances a policyowner may be able to name a new beneficiary even if the original one is an irrevocable is obtaining the written consent of the irrevocable beneficiary to the change of beneficiary.

Insurance ACT

• In terms of the Insurance Act of 2001 relating to the person licensed to sell insurance, the Commission recognizes Sales Representative, agent, and life underwriter.

Net Premium for Life Insurance

• Mortality and interest factors are considered when calculating the net premium for life insurance.

Brokerage Business

• A registered sales representative may carry on business as a broker if they also register as a broker.

Net Amount at Risk

• The net amount at risk in an insurance policy tends to decrease as the policy reserve increases.

Providing Protection

• Policyowners get protection against economic loss through insurance.
• Insurance enables the policy owner to share the loss with others exposed to a similar risk.

Sales Representative Agreement Violations

• A sales representative who makes an agreement on premium payments different from the stipulated contract is never permitted to do so under any circumstances.

Under the Insurance Act

• Under the Insurance Act of 2001, the FSC is empowered to deny registration as a sales representative to an applicant who is currently an undischarged bankrupt.

Contracts on Life Insurance

• Where a life insurance contract is void for lacking insurable interest, all premiums will be returned by the insurance company.
• The company needs to prove that it was not aware of the lack of insurable interest from a false statement by the insured person, or the person whose life is insured.
• This action is true, according to the Insurance Act (2001)

Life Insurance Policy

• An amount refunded to the owner of a participating life insurance policy is known as dividends.
• Dividends are provided when the company has operated with favorable mortality, interest, and expense experience.

'Void ab initio'

• The term 'void ab initio' is used to describe a contract which was never enforceable by law.

Subject to the Insurance Act

• Subject to the Insurance Act (2001) if at the time a contract of life insurance is made insured person has no insurable interest in the life of the person whose life is insured under the contract, the contract is void and applies to life insurance generally

Insurance With a Added Child

• The life insurance contract made with a minor, in the absence of a special law is: valid

Under The Commission

• Cancellation of a sales representative's registration may be effected by the Commission if information requested has not been submitted, without a reasonable excuse in: 90 days

Covering in Different Nature

• Collectively, the provisions that are supplemental to the basic coverage, and offer additional coverage or coverage of a different nature in a life insurance policy are known as: Riders

Different Policy

• Under an accident policy, 'bodily injury' Includes nervous shock and is not limited to fractures of bones, bruising or organic injury

According to II

• According to Part II of the Insurance Act which states that the registration certificate(s) must be displayed.
• The registration certificate(s) must be displayed in a section to which the public has access

Proper Representative

• The proper person to whom a report on the misconduct by another sales representative should be made is the Financial Services Commission.

Insurer

• An insurer who discovers a material misrepresentation on an application within the contestable period, may decide to rescind or void the contract,

Grace Period

• If an insured dies during the grace period, the company will pay the death benefit, but may deduct the unpaid premium.

Act

• The Act states that an actuary should make an investigation of the financial position of a company which carries on long term business at least once: Every three years

Facultative Model Meaning

• Facultative Method refers to: a type of reinsurance arrangement

Insurance with Company

• An insurance company charges rates which do not increase with the insured's age throughout the life of the policy. The pricing system used is the: Level-premium system

Meaning

• Under a joint whole life policy entails insurance on the Lives of two people, with the death benefit payable at the death of the first of the insured

Straight Life Annuity

• Straight Life Annuity is a specified sum payable at regular intervals during the lifetime of a person.

Life Insurance Statements

• In life insurance, statements made which are substantially true but not literally true are called: Representations

Requirement

• If a policyowner wanted to change his existing policy to another which has a higher premium but the same face value, the company would require the policyowner to: Pay the difference in back premiums with interest.

Beneficiary

• On September 6, a policyowner asked an insurance company to change the beneficiary designation on his contract from estate to a named person.
• He sent it by mail on September 7 but he died on September 12, the day before the insurance company received the request.
• Under the recording method of altering a policy contract, the company is under no obligation to pay the proceeds since the policyowner died before the request was received.

Fixed Amount

• Under the Fixed Amount Settlement Option: The policyowner may specify the amount of each instalment and the length of time he/she wishes to receive the installments

Provision

• A provision of a life insurance policy that any premium not paid by the end of the grace period be automatically paid by a policy loan if there is sufficient cash value is: Automatic Premium Loan

Consequent

• Consequent on unethical sales practices, the insurance sales representative may influence the policyholder into not buying insurance from a particular sales representative or company. The policyowner is then put at a possible disadvantage; Twisting

A Company

• A company may be wound up on a petition of Its creditors

Insurance Term

• After a loss, guaranteed restoration of an insured to the same financial position that he was immediately before, is termed: Indemnity

Sales

• The sales representative log book should reveal that i. The name and address of each client iv. Money collected (if any) V. Type of insurance solicited

Paid-Up

• In paid-up additional insurance each annual dividend is used a single premium to purchase insurance of the same type as the policy in force and the additional coverage may mature later than that under the basic policy

Non-Forfeiture Benefits

• Examples of non-forfeiture benefits are reduced paid-up policy, extended term and surrender for cash

Child Definitions

• Under the Insurance Act 2001, 'child' means An adopted child, A step-child, and Legitimate child wholly maintained by the insured person

Policy Riders

• Examples of policy riders are disability waiver of premium , extended term, guaranteed insurability rider and supplemental term

Group Life Coverage

• Principles associated with group life coverage areindividuals entering the group must be covered without proof of insurability. And any group of persons with a strong need for insurance may be covered under a master contract, the employer is required to pay at least the major portion of the premiumand parties to a group contract include the insured, the policyowner and the insurer

Annuity Contract

• An annuity contract that provides for the payment of income during the lives - of two persons with the full amount of the annuity payable to the last survivor - for his/her remaining lifetime is known as straight life annuity is: False

Bonus

• Reversionary bonus is allotted to participating policies and used to purchase additions payable at the end of the endowment period or on the death of the policyholder : True

Appeal Tribunal

• The Appeal Tribunal should constitute the Chairman and two other members appointed by the Minister in accordance with the Insurance Act. This statement is : True

Clause

• The Misstatement of Age clause must be included in an insurance contract : False

Authorized

• A registered sales representative may carry on business as a broker if the Minister in charge of insurance gives permission. This statement is ; : False

Instalments

• In a sense, the fixed-amount option is essentially the same as the fixed- period option.
• Both use the insurance proceeds and guaranteed interest to provide instalments over a period is False

Criterion

• A waiting period for disability resulting from sickness is a criterion for a group short-term disability plan. This statement is True

Premium

• If the insured dies during the grace period, the company will pay the death benefit but may deduct the unpaid premium is True

Accounts of the Instalment

• A life contingency is taken into account when the company calculates the amount of the instalment payable under the interest mode of settlement..
• This statement is: True

Insurability

• A policyowner does not have to supply evidence of insurability if he exercises the option of a guaranteed insurability rider : True

Court Procedures

• A 'court' would appoint an administrator if the deceased person was insured under a life insurance policy for which there are conflicting claims to the policy proceeds True

Financial Services

• The Financial Services Commission can shorten or extend the financial year is : False

Policy Provisions

• ‘Policy Provisions’ are the same as ‘Endorsement Clauses’ False

Spendthrift and Trust

• Spendthrift Trust Provision - Is required to be included in all insurance policy contracts is NOT TRUE regarding spendthrift trust provisions.

A Limitation

• A limitation with the use of the Disability Waiver of Premium is - That it may be added to very few life insurance policies.

Collateral Assignment

• Under a collateral assignment - The policyowner transfers ownership rights under the policy permanently and irrevocably.

and Death + Disability Waiver

• Parental Death and Disability Waiver- Is a rider attached to policies on the lives of minors

An annuity

• An annuity is suitable for persons who need income for a temporary period

Registration

• Insurance companies may be registered to sell all classes of insurance business under the Act.