Life Insurance Basics
J is named in a policy as the individual who is entitled to receive the policy proceeds upon the death of T. T is the ________ and J is the ___________.
Insured/Beneficiary
The face amount of insurance is also referred to as the:
The limit of liability
Which of the following policies would be deemed a MEC?
- 10-Pay Whole Life
-Variable Universal Life
-Single Premium Whole Life
-Universal Life
Single Premium Whole Life: Since a Single Premium Life Insurance policy clearly does not pass the 7-pay test, it will automatically be deemed a MEC.
The agent's observation and information gathered about the insurability of an applicant, from the initial personal interview through assisting the applicant to complete the application.
Field Underwriting
A generic brochure developed by the NAIC to assist prospective buyers of life insurance. Descriptions of all basic types of life insurance as well as comparative costs of each are included.
Buyer's Guide
In order for a contract to be valid, ________ __________ and must exist between the owner (applicant) and insured before the policy will be issued.
insurable interest
If the insured becomes totally disabled, the insurer will waive premiums for the duration of the disability or the end of the policy, whichever occurs first. To qualify for the waiver, the insured must be disabled for a waiting period of 3-6 months.
Waiver of Premium
Having the policy lapse with a loan outstanding in excess of ____ ________ is the only time a policy loan is taxable
Cost Basis
**DOUBLE JEOPARDY**
The regulatory support organization created and governed by the chief insurance regulators and commissioners from the 50 states, D.C., and five U.S. territories.
National Association of Insurance Commissioners (NAIC)
Information from a third party collected by the insurance company in the application for insurance and during underwriting of the policy may be subject to the jurisdiction
Fair Credit Reporting Act (FCRA)
_____ ________ may be attached to any individual life policy to provide additional insurance protection for a fixed period of time. If the need for additional coverage is temporary, a term insurance rider is more cost effective than buying another policy.
Term Riders
A rider that waives the deduction of the monthly cost of insurance and expense charges associated with a Universal Life type policy while the insured is totally disabled, usually after 6 months of continuous disability.
Waiver of Monthly Deduction (Cost of Insurance)
C paid $20,000 in premiums into a $100,000 universal life insurance policy. The accumulated cash value was $35,000 when C received a cash withdrawal of $30,000. How much of the cash withdrawal was taxable?
$10,000: The cost basis in this scenario is $20,000. Only the amount withdrawn that exceeds the cost basis is taxable. Therefore, of the $30,000 withdrawn, $10,000 is taxable.
*From flashcards*
The Insurer responsible for issuing the new policy
Replacing Insurer
A computer-generated illustration detailing the premiums (current and guaranteed) to be paid, current and guaranteed interest rates, guaranteed and non-guaranteed values, any projected dividends, and the producer/insurer’s name and address.
Policy Summary
A producer provided a conditional receipt to an applicant on May 5 at the time of an application based on a standard risk. The insurer required a routine medical exam, which was completed on May 15. The policy was issued based on a substandard risk on May 20 and the producer delivered the policy on May 22. The effective date of coverage is:
May 22: Since the policy was not issued as applied for, coverage is not effective until the producer delivers the policy on May 22 and explains the changes in coverage or increased premium due to a substandard risk. The applicant must accept the counteroffer.
A _______________ policy has a death benefit that will increase or decrease over time based on the performance of the separate account, provides a guaranteed minimum death benefit, offers a choice of subaccounts in which cash value may be allocated, and a has fixed premium.
Variable Life
True or False: Cash dividend from a participating policy in a life policy is taxable.
False: Interest paid on a death benefit settlement option
are independent sales organizations that provide service and distribute insurance policies to consumers
Insurance Agencies
****DOUBLE JEOPARDY****
This receipt provides that coverage will become effective as of either the date of application, or the date of completion of any required medical exam, whichever is later, as long as the policy would have been issued as applied for or better.
Conditional Receipt
True or False: The following can be an Insurable Interest:
The Insured, The Spouse, The Insured's Neighbor, and the Insured's Business Partner
False: Insurable interest is defined as having a relationship which would result in a financial or economic loss if the insured dies. A neighbor is not an example of a party that meets this definition.
Provides a combination of coverages on the spouse and children. Usually these riders are sold in units (packages) of protection, such as $5,000 on the main wage earner, $1,500 on the spouse, and $1,000 on each child.
Family Rider
Premiums are deductible as long as the business does not derive a ____ ______from the policy
direct benefit
**TRIPLE JEOPARDY**
Whose JOB is it to deal with the RISKS of the following Life Plans in ORDER:
-Whole Life
-Universal Life
-Variable Life
-Variable Universal Life
-Insurer
-Insurer
-Policyowner
-Policyowner
The process of selection, classification, and rating. In other words, it is the process of determining if someone is insurable, classifying the risk, and determining the rate or premium to be charged.
Underwriting (UW)