Cloned from: Life Insurance



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What type of risk is insurable?
Pure risk; because loss must be financial and uncertain. (no financial gain can occur)
What causes loss?
Peril, such as fire, accident, or flooding
What causes Peril?
Hazard which increases the likelihood of loss. (ex. smoking)
What predicts the appropriate number of deaths that should occur withing a similar group of people within a given period of time?
The law of large numbers
Why do people buy life insurance?
Survivor protection, estate creation, and cash accumulation.
What must the policy owner have in order to purchase life insurance?
Must have insurable interest in the insured at the time of application but not at the time of the insured's death
What types of information is gathered to calculate insurance needs based on the needs approach?
Categories are Debt. Mortgage, income expenses and educations funds.

The Emergency fund: is listed under other lump sum needs. that is used for immediate costs associated with death like travel and lodging expenses for family members coming from a distance.
Who shares in the profits of a mutual company?
Policyholders share in profits.
What is adverse selection?
Sick people are more likely to want to buy insurance but the insurer is less likely to want to insure them.
What are the business uses of life insurance?
Buy-sell funding, Key Person and Executive Bonus.
What is reinsurance?
To spread a risk that is too large for one insurance company, the insurance companies may insurer each other for parts of the risk. Usually for risks that are over their coverage.
What are 3 types of incorporation?
Domestic (in state), foreign (outside the state), and Alien (outside the US)
A company admitted to do business in a state is called?
Authorized
What is the authority granted by the agent's contract?
Expressed
What is the authority that is not expressly granted but which the agent is assumed to have in order to transact business?
Implied
What is the assumed authority due to appearance created by the principle?
Apparent (business cards, brochures, etc.)
In contract, what does the insured offer for consideration?
Premiums and health representations on the application.
In a contract, what does the insurer offer for consideration?
The promise to pay in the event of a loss.
Parties to a contract are required to be?
Competent, of legal age, sane and sober
When one party, the insurance company, makes any legally enforceable promises, this is called?
unilateral contract
When both parties are trusted to reveal relevant facts, they are acting in?
Utmost Good Faith
What is a warranty?
The literal or absolute truth.
Statements made by applicants that are true to the best of their knowledge is called?
Representations
False statements given to the insurer with the intent to defraud is called?
misrepresentations
When applicant fails to disclose known material fact he or she is guilty of?
Concealment
Deliberately concealing or misrepresenting material truth on an application is called?
Fraud
A person in a position of financial trust is called?
Fiduciary
The giving up of a right or privilege is called?
Waiver
A legal right that was previously given up cannot be legally enforced. This is called?
Estoppel (the loss of defense)
Whose signature is required on an application?
The agent (producer), the applicant, and wthe policy owner, if different.

How can you make changes to an application?
Based on each insurer's guidelines. Never white out an application. in some cases applicant can initial changes or complete new applications.
What organization receives and maintains medical information from insurance companies, and allows companies to compare information they have collected on potential insured?
MIB (Medical Information Bureau)
A report that requires notifications to the consumer and includes reviews of credit, employment records and public sources is called?
Consumer Report
What is the Fair Credit Reporting Act?
Federal legislation that protects consumer's rights to be notified regarding credit history investigation, and allows consumers the right to obtain reasons for the denials, but not to receive an actual copy of the report
Insurers may not unfairly discriminate against?
Race or national origin
Recognized areas of insurable interest are?
Own life, family members, business partners, key employees
How can life insurance create an immediate estate?
The death benefit received when the insured dies, creates the immediate estate.
What is the main purpose of a viatical settlement?
Provide terminally ill persons with percentages of their policy's proceeds prior to death.
What are insureds called for viatical settlements?
Viators
What factors determine premium amount?
Mortality, expenses, and interest
What is Net Single Premium?
Premium without the cost of operating the business .

Mortality - Interest = Net Premium
What is Gross Annual Premium?
Premium including the cost of operating the business.

Mortality - Interest + expenses = Gross Premium
What are premiums modes?
Frequency of payments. Policy's premium is based on annual rates. ( monthly, quarterly, semi-annual, and annual)
What is a policy summary?
Written statement that describes the features and elements of the policy
What is a buyer's guide?
Generic information about a policy that allows consumers to compare premiums, cash value, and dividends
What is considered an unfair trade practice regarding the Life and Disability Insurance Guaranty Fund?
Using the fund as a sales and solicitation tool.
What would reissuing a policy with a reduced cash value be considered?
Replacement
When should a notice of replacement be given?
At time of application
Term Life
Pure protection, lasts for specific term, most insurance for least premium.
Level Premium Term
Coverage stays the same for the specified period. It pays a benefit if the insured dies.
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