Term
| How is an insurance company able to protect such a large number of people who could potentially suffer a loss? |
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Definition
| It transfer the financial responsibility associated with a potential of a loss (risk) to many individuals. |
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Term
| What is the difference between a stock company and a mutual company? |
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Definition
Stock Companies:
Owned by stockholders
Share in profit and losses
Typically non-participating
Mutual Companies:
Owned by policy holders
Receive dividends
Participating |
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Term
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Definition
| The risk selection process |
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Term
| Describe the differences between Part 1 & Part 2 of the application. |
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Definition
Part 1:
General questions about the applicant
Identifies the type of policy and amount of coverage
Inquires as to any existing policies and if they will be replaced.
Includes information about the beneficiary
Part 2:
Medical history of self and family
Current medical information |
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Term
| What is the purpose of the agent's report? |
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Definition
| Informs the insuring company of the agent's personal observations concerning the proposed insured. |
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Term
| Who is required to sign the application? |
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Definition
Agent
Proposed insured
Policy owner (3rd party policies) |
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Term
| What does representation mean and how does it differ from a warranty? |
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Definition
| Representation are statements believed to be true to the best of one's knowledge. They are not guaranteed to be true. Warranties are statements that are guaranteed to be true. |
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Term
| If the insured intentionally answer any questions on the application for insurance untruthfully, and the information is material to the insurance, what type of statements are these? Can they void a contract? |
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Definition
| Applicant statements are generally considered to be representations except in the case of fraud. Applicant statements are then considered to be warranties and the policy can be voided. |
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Term
| When does an insurance policy go into force if there is premium with the application? If there is no premium with the application? |
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Definition
| A policy is enforced when the premium is paid. If the premium was paid at the time of the application, the policy will have covered the individual from the time of the application if approved. If no premium was collected, the policy will only cover the individual from the time of approval and payment of premium. |
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Term
| At what point does coverage begin with a conditional receipt? |
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Definition
| Once the application is approved, the insured is covered from the time of application. |
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Term
| What two statements must be submitted with each application by the producer to the replacing insurer? |
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Definition
Notice Regarding Replacement
Printed communications used for presentation |
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Term
| What are the four steps a producer must follow when replacing a policy? |
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Definition
1. Present to the applicant a Notice Regarding Replacement that is signed by both the application and the producer.
2. Obtain a list of all existing policies to be replaced with policy numbers and issuing companies.
3. Leave the applicant with the printed communications used for presentation.
4. Submit to the replacing insurance company the application and copy of the notice. |
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Term
| When do insurers usually require an HIV test? |
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Definition
| For policies of $50,000 or more. |
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Term
| Name 3 instances in which insurable interest exists. |
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Definition
On one's own life
On the life of a family member
On the life of someone with which there exists a business relationship (key employee, business partner, someone with financial obligation to the policy owner) |
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Term
| What is an attending physician's statement and when is it required? |
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Definition
| A statement from a medical practitioner who treated the applicant for a prior medical problem and is required when there are high amounts of coverage or is there are additional questions concerning the prospective insured's health. |
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Term
| How can an insurance company use the information it obtains from the Medical Information Bureau? |
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Definition
| Only as an aid in helping insurers know what areas of impairment they might need to investigate further. |
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Term
| What is the purpose of the Fair Credit Reporting Act? |
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Definition
| Established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant, and properly used. It also protects consumers against the circulation of inaccurate or obsolete information. |
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Term
| What is the difference between a consumer report and an investigative consumer report? |
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Definition
Consumer reports:
Written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.
Investigative consumer reports:
Provides information on the consumer's character, reputation, and habits. Information is obtained through as investigation and interviews with associates, friends, and neighbors of the consumer. |
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Term
| How does a substandard risk policy differ from a standard risk? |
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Definition
| Applicants considered to be substandard risk are not acceptable at standard rates because of physical condition, personal or family history of disease, occupation, or dangerous habits. These policies have higher premiums. |
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Term
| Which risk classification typically qualifies for lower premiums? |
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Definition
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Term
| When is a policy considered delivered? |
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Definition
| Once the policy is delivered to the applicant either through the mail or in person. |
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Term
| What are illustrations in life insurance policies? |
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Definition
| A presentation or depiction that includes non-guaranteed elements of a policy of individual or group life insurance over a period of years. |
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Term
| If a policy offers pure death protection, what does this mean? What does this reveal about the value of the policy? |
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Definition
| Pure death benefit is the benefit that is paid upon the death of the covered individual. The premiums are used to cover the expense and are not applied to any cash value. There are no cash values in a pure death protection policy. |
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Term
| Many policies are both renewable and convertible. What is the difference between these two provisions? |
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Definition
Renewable:
Allow the policy owner the right to renew the coverage at the expiration date without evidence of insurability.
Convertible:
Provides the policy owner with the right to convert the policy to a permanent insurance policy without evidence of insurability. |
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Term
| With annually renewable term insurance, what happens to the premium as one's age increases? |
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Definition
| The premium will increase each year with the age of the insured. |
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Term
| How does continuous premium straight life differ from 20-year limited pay life? |
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Definition
| With a continuous premium straight life policy, the premium is due for the entire life of the policy. With a 20-year limited pay life, the premiums are only due for the first 20 years of the policy. |
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Term
| Does the death benefit of an Adjustable Life policy automatically increase with inflation? |
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Definition
| It does not automatically increase but may be increased at the request of the policy owner. |
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Term
| What are the death benefit options in universal life policies? |
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Definition
Option A:
Level Death Benefit Option
The death benefit remains level with the cash value gradually increases.
Option B:
Increasing Death Benefit Option
The death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. |
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Term
| What are the similarities and differences between variable life and traditional whole life policies? |
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Definition
Similarities:
Both are fixed premium policies
Traditional whole life policies have a guarantee of principal and interest
Differences:
Variable life policies include an investment account
Variable life policies do not have guarantees of principal and interest |
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Term
| With Variable Universal Life, to what does the term variable refer? |
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Definition
| Variable Universal Life is a combination of a universal life policy and a variable life policy in which part of the premium is used to invest in the stock market. |
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Term
| How does the premium for Join Life compare to the premium on two policies covering the same two individuals for the same death benefit. |
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Definition
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