Set 3

Front 1

risk

Back 1

uncertainty or chance of a loss ocuring

Front 2

pure risk

Back 2

situations that can only result in a loss or no change.

Front 3

speculative risk

Back 3

posibility of a gain

Front 4

exposure

Back 4

unit of measure used to determine rates charged for insurance coverage. (age, medical history, occupation, sex)

Front 5

Hazard

Back 5

conditions or situations that increase the probability of an insured loss occuring

Front 6

physical hazards

Back 6

individual charecteristics that increase the chance of a loss (icy road)

Front 7

moral hazards

Back 7

tendancies towards increased risk, (alcoholism, lie on application)

Front 8

morale hazards

Back 8

state of mind that causes indeferance to loss, (carelessness).

Front 9

Peril

Back 9

causes of loss (death of holder)

Front 10

loss

Back 10

reduction, decrease, or disapearance of value of the person or property insured. Insurance provides a means to transfer loss.

Front 11

methods of handling risk

Back 11

Avoidance
Retention
Sharing
Reduction
Transfer

Front 12

methods of handling risk:
Avoidance

Back 12

stay away from the rsik

Front 13

methods of handling risk:
Retention

Back 13

Retain risk, Deductable

Front 14

methods of handling risk:
sharing

Back 14

group, subscriber

Front 15

methods of handling risk:
Reduction

Back 15

reduce your risk, medical exam

Front 16

methods of handling risk:
transfer

Back 16

transfer risk, buy insurance

Front 17

Elements of Insurable Pure Risk

Back 17

The loss must be:
due to chance, definate and measuable, predictable, cannot be catastrophic, loss expose must be large, insurance must not be mandatory

Front 18

Adverse Selection:

Back 18

insuring of risk of poeple that are more prone to a loss than the average risk.

Front 19

insurers protection from adverse selection:

Back 19

restriction of coverage
acceptance at a higher rate
refusal to accept risk.

Front 20

law of large numbers

Back 20

the larger the number of similar exposure units considered, the more closely the losses reported will equal the underlying probability of loss.

Front 21

Reinsurance:

Back 21

one insurance company agrees to indemify another for part or all of its liabilities from insurance policies it has issued

Front 22

faculative reinsurance:

Back 22

reinsurance bought on a specific policy

Front 23

types of insurers:

Back 23

stock companies
mutual companies
fraternal benefit societies
reciprocals
lloyd's associations
risk retention groups

Front 24

types of insurers:
stock companies

Back 24

owned by stock holders, ran by elected officers, profits are either kept in company or payed out to stock holders(taxable)

Front 25

types of insurers:
mutual companies

Back 25

owned by policy holders, ran by appointed board of trustees, dividend paid to policy holders (not taxable), participating.

Front 26

types of insurers:
fraternal benefit society

Back 26

mutual company but must be a member of of an affiliated lodge

Front 27

types of insurers:
recipricals

Back 27

sharing groups, subscribers

Front 28

types of insurers::
lloyds association

Back 28

not insurance, property insures risk analysis

Front 29

types of insurers:
risk retention group

Back 29

use own assets to insure themselves

Front 30

private vs. government insureers

Back 30

private receive funds through premiums, govn. receives funds from tax dollars

Front 31

admitted Insurers

Back 31

legal to operate, certificate of authority

Front 32

domestic insurer

Back 32

incorporated in this state

Front 33

foreign insurer

Back 33

incorporated in a nother state

Front 34

alien insurer

Back 34

incorporated outside the United States

Front 35

Marketing (distribution) systems

Back 35

Independent Agency
Exclusive Agency
General Agency
Managerial
Direct response marketing

Front 36

Insurer as principle

Back 36

the acts of the agent are the acts of the insurer

Front 37

express authority

Back 37

included in contract

Front 38

implied authority

Back 38

not expressed in the contract but rather assumed in order to conduct business

Front 39

apparant authority

Back 39

actions, words, or deeds

Front 40

elements of a legal contract:

Back 40

offer and acceptance
consideration
competent parties
legal purpose

Front 41

elements of a legal contract:
offer and acceptance

Back 41

application is written and first months premium is collected

Front 42

elements of a legal contract:
consideration

Back 42

something of value that each party gives to the offer

Front 43

elements of a legal contract:
competant parties

Back 43

legal age (18), mentaly competant, not under the influence of drugs

Front 44

elements of a legal contract:
legal purpose

Back 44

can not be against public policy

Front 45

Distinct Characteristics of an Insurance Contract:

Back 45

Contract of Adhesion
Aleatory Contract
Personal Contract
Unilateral Contract
Conditional Contract

Front 46

Distinct Characteristics of an Insurance Contract:
contract of adhesion

Back 46

conditions stick "take it of leave it"

Front 47

Distinct Characteristics of an Insurance Contract:
aleatory contract

Back 47

unegual amounts of values are exchanged

Front 48

Distinct Characteristics of an Insurance Contract:
personal contract

Back 48

individualized contracts

Front 49

Distinct Characteristics of an Insurance Contract:
unilateral contract

Back 49

one–sided, insurance company is the only one with mandatory actions

Front 50

Distinct Characteristics of an Insurance Contract:
conditional contract

Back 50

If (death) than (death benefit)

Front 51

Legal interpratations affecting contracts:
ambiguities in a contract of adhesion

Back 51

any ambiguity in the contract shouold be interpreted in favor of the insured

Front 52

Legal interpratations affecting contracts:
reasonable expectations

Back 52

if an insured could reasonably expect the coverage, than it shall be granted

Front 53

Legal interpratations affecting contracts:
Indemnity

Back 53

collect only to the extent of financial loss, not allowed to gain financially due to insurance

Front 54

Legal interpratations affecting contracts:
utmost good faith

Back 54

parties can rely on each other for valid critical information

Front 55

Legal interpratations affecting contracts:
representations/misrepresentaions

Back 55

written response to questions on an application/false statement with intent to defraud, if found could result in policy being voided

Front 56

Legal interpratations affecting contracts:
warranty

Back 56

statement to the insurer from the insured

Front 57

Legal interpratations affecting contracts:
concelment

Back 57

intentional withholding of information of a material fact

Front 58

Legal interpratations affecting contracts:
Fraud

Back 58

intentional misrepresentation or concelment of a material fact. Grounds for voiding the contract if found during the first two years(contestability period)

Front 59

Legal interpratations affecting contracts:
waiver/estoppel

Back 59

intentional act of relinquishing a known right, claim, or privilege/can be used to prevent a party to a contract from re–asserting a right or privilege after said right or privilege has been waived.

Front 60

Insurable Interest

Back 60

policy owner must face the possibility of losing money in case of a loss.

Front 61

Insurable Interest:
three areas of existence

Back 61

insuring ones own life
insuring life of a family member
insuring the life of a business partner

Front 62

Personal Uses of Life Insurance:
Survivor Protection

Back 62

purchase insurance to leave to your surviviors

Front 63

Personal Uses of Life Insurance:
Estate Creation

Back 63

an estate may be created through earings

Front 64

Personal Uses of Life Insurance:
Cash Accumulation

Back 64

money will be avalaible when needed.

Front 65

Personal Uses of Life Insurance:
liquidity

Back 65

borrowing of money allowed

Front 66

Personal Uses of Life Insurance:
estate conversion

Back 66

to pay state inheritance taxes

Front 67

Personal Uses of Life Insurance:
viatical statements

Back 67

posibility to sell policy and use proceeds before death

Front 68

Determining the amount of personal life insurance:
Human life value approach

Back 68

calculation of the posible future earnings of the insured.
Net Income
Annual Expenses
Years to retire
Effect on inflation

Front 69

determing amount of personal life insurance:
Needs Approach

Back 69

what is needed in the present.
Dept
Income
Mortgage
Expenses

Front 70

Business uses of life insurance:
Buy–Sell Funding

Back 70

determines what will be done with a business in the event that the owner dies. partners agree to sell their portions of company to surviving partner at a predetermined rate.

Front 71

Business uses of life insurance:
Buy–Sell Funding:
stock redemption

Back 71

company owns policy, pays premium, and is beneficiary

Front 72

Business uses of life insurance:
Buy–Sell Funding:
cross purchase

Back 72

each partner owns policy on other partners

Front 73

Business uses of life insurance:
Key Person

Back 73

insurance for a key employee, used in the replacement process

Front 74

Business uses of life insurance:
Executive Bonuses

Back 74

company gives the employee a wage increase to purchase a policy, taxes must be paid

Front 75

Classes of Insurance Policies:
Group

Back 75

master policy written and is issued to the organization, covering the lives of more than 1 individual. Individuals recieve a certificate of insurance. group must exist for a reason other than life insurance. Right to convert without evidence of insurability

Front 76

classes of insurance policies:
Fixed life insurance and annuities

Back 76

contracts that offer garanteed minimum or fixed benefits

Front 77

classes of insurance policies:
Variable life insurance and annuities

Back 77

cash values acumulate based on a portfolio of stocks without a performance guarantee.

Front 78

determining premium:
Mortality

Back 78

mortality tables used to determine average death rate

Front 79

determining premium:
Interest Earning

Back 79

interst earned off of invested premiums

Front 80

determing premium:
expense

Back 80

Net Premium=Mortality–Interest
GrossPremium=NetPremium+expense(cost of operating the company)

Front 81

premium payment modes

Back 81

annually
semi–annually
quarterly
monthly

Front 82

application:
Part 1(General Information)

Back 82

general questions about applicant, type of policy and amount of coverage, beneficiary and other insurance owned

Front 83

application
part 2(medical Information)

Back 83

medical background and family deaths, medical examination may be requiired for large policies

Front 84

application:
part 3(agents report)

Back 84

agent reports any and all observations to underwritng

Front 85

application:
signatures required

Back 85

agent, proposed insured, policy owner. If proposed insured is a minor child, there is no need to sign.

Front 86

application:
premium with application

Back 86

policy will not go in effect until it has been deliverednd the first premium is paid. a premium reciept or conditional receipt is issued when first premium is collected.

Front 87

application:
conditional reciept

Back 87

coverage begins on the date of the application or the date of the medical exam, whichever occurs last.

Front 88

statement of good health

Back 88

collected when policy is delivered if premium was not previously collected

Front 89

determining premium:
preferred risk

Back 89

superior physical condiitons, lifestyles, and habits

Front 90

determining premium:
Standard Risk

Back 90

representative of a majority of people

Front 91

determining premium:
substandard risk:

Back 91

could be issued with premium rated up.

Front 92

Term Life Insurance

Back 92

Temporary
1 year: ART
pure death protection

Front 93

Term Life Insurance:
renewable provisoin:

Back 93

right to renew coverage at expiration date without evidence of insurability. Premium increases are subject to current age.

Front 94

term life insurance:
convertible provision

Back 94

right to convert to a permanent insurance policy without evidence of insurability. premium changes subject to age.

Front 95

term life insurance:
Level premium term:

Back 95

premium and coverage stay same for term. most common type of term insurance

Front 96

term life insurance:
Increasing/decreasing term

Back 96

premium stays the same but the coverage either increases or decreases with time. decreasing is the least expensive term insurance.

Front 97

whole life insurance policies:

Back 97

level death benefit (to age 100)
living benefit
level premium
if cash value is pulled out you can be taxed on interest gained

Front 98

whole life insurance policies:
Straight Life

Back 98

level premium
lowest annual premium of whole life policies

Front 99

whole life insurance policies:
limited payment

Back 99

pay higher premium to get it paid off faster

Front 100

whole life insurance policies:
single premium

Back 100

one lump sum payment

Front 101

flexible premium policies:
Adjustable Life

Back 101

combination of term and perm.
policy owner has option to adjust premium, paying period, face amount, period of protection. Requires proof of insurability

Front 102

flexible premium policies:
Universal Life (flexible premium adjustable life"

Back 102

death benefit can be increased or decreased
increase and decrease the amount of premium going into the policy.
a premium may be skipped as long as there is sufficient cash value.
has a current intrest rate on cask value

Front 103

Universal Life:
option A

Back 103

level death benefit
cash value gradually decreases

Front 104

Universal Life:
option B

Back 104

death benefit increases with the amount of cash value.

Front 105

specialized policies:
Joint Life

Back 105

more than 1 person on policy.
1st to die, policy is paid out and expires

Front 106

specialized policies:
juvenile life

Back 106

premium stays level, at designated age the death benefit jumps up.

Front 107

group life insurance:
characteristics examined by underwriter

Back 107

purpose of group
size of group
turnover of group
financial strength of group

Front 108

group life insurance:
conversion policy

Back 108

convert to individual whole life policy without proof of insurability. Death benefit will stay same but premium will increase.

Front 109

credit life insurance

Back 109

written to pay off the balance of a loan. Premiums paid by borrow (the debtor). The creditor is the beneficiary for the amount of benefit to the outstanding balance of the loan.

Front 110

Credit Life Insurance:
If group:

Back 110

creditor is owner, each debtor receives certificate of insurance.

Front 111

Provisions

Back 111

explain the rights and charecteristics of an insurance contract

Front 112

Provisions:
ownership

Back 112

policyowner has all ownership rights, including the responsibility of paying the premium

Front 113

Provisions:
Assignment

Back 113

specifies the policy owners right to transfer the policy to another person without the consent of the insurer

Front 114

Provisions:
Assignment
Absolute/Collateral

Back 114

transferring all rights of ownership/transferring partial rights to another person.

Front 115

Provisions:
Entire Contract

Back 115

the policy, application, riders, and amendments make up the entire contract.

Front 116

Provisions:
modifications

Back 116

any modifications or changes must be endorsed by an executive officer of the insurer

Front 117

Provisions:
right to examine

Back 117

allows policy owner 10 days from receipt to look over with option of declining.

Front 118

Provisions:
grace period

Back 118

period of time after the premium due date that the policy owner has to pay before the policy lapses.(usually 30–31 days)

Front 119

Provisions:
Reinstatement

Back 119

allows policyowner to reinstate a policy that has lapsed, subject to proving continued insurability. Max. time limit is 3 years. All back premiums, interest, and loans are to be paid off.

Front 120

provisions:
Incontestability

Back 120

prevents insurer from denying a claim due to statements in an application after the policy has been in force for 2 years.

Front 121

provisions:
misstatement of age or sex

Back 121

allows insurer to adjust benefits of the claim at the correct age.

Front 122

Provisions:
Exclusions

Back 122

exclude certain types of risks. Insurer will not provide coverage.
most common are aviation, hazardous occupations or hobbies, and war or military service.

Front 123

Provisions:
suicide

Back 123

suicide is no defense for paying a claim, unless applicant intended suicide at time of application.

Front 124

provisions:
payment of claims

Back 124

insurer must pay death claims immediately

Front 125

provisions:
autopsy

Back 125

insurer may, at own costs, order an autopsy be performed to determine if death was caused by accident or natural causes

Front 126

Beneficiaries:
primary

Back 126

has first claim to policy. more than one primary may be named

Front 127

Beneficiaries:
secondary (contingent)

Back 127

has second claim in the event that the primary dies before the insured.

Front 128

Beneficiaries:
tertiary

Back 128

third in line in the case that both the primary and contingent beneficiaries die before insured.

Front 129

Beneficiaries:
per capita

Back 129

by the head

Front 130

Beneficiaries:
per stirpes

Back 130

by the bloodline

Front 131

Beneficiaries:
estates

Back 131

if no beneficiaries, estate will automatically recieve payout.

Front 132

Beneficiaries:
minor

Back 132

benefits given to a minor need wither given to the guardian of the minor, or placed in a trust for the minor.

Front 133

Beneficiaries:
Irrevocable

Back 133

beneficiary that has a vested interest in the policy, and must consent with changes on the policy.

Front 134

Beneficiaries:
common disaster clause

Back 134

in the case of a simultanious death with the policyholder and primary beneficiary, the proceeds will be paid out to the contingent beneficiary

Front 135

Beneficiaries:
spend thrift clause

Back 135

requires benefits be paid in a fixed period or fixed amount installments

Front 136

settlement options:

Back 136

methods used to pay death benefits.

Front 137

settlement options:
cash payment

Back 137

lump sum payment of proceeds

Front 138

settlement options:
Interest only

Back 138

insurer retains proceeds and pays interest only at regular intervals

Front 139

settlement options:
fixed–period installments

Back 139

equal installments are paid for a specified amount of time.

Front 140

settlement options:
Fixed–Amount Installments

Back 140

pays a fixed, specified amount until proceeds are paid out

Front 141

settlement options:
life income

Back 141

installment payments guaranteed for the life of the beneficiary

Front 142

settlement options:
life income Joint and Survivor

Back 142

guarantees income for two or more recipients, which they cannot outlive.

Front 143

Nonforfeiture Options:
Cash Surrender Value

Back 143

policyowner surrenders policy for cash value. if cash value exceeds the premiums paid, the excess is taxable. a surrender charge is also applied.

Front 144

Nonforfeiture Options:
Extended term

Back 144

insurer uses cash value to convert to term with same face value. this is the automatic nonforfeiture option if none is chosen.

Front 145

Nonforfeiture Options:
reduced paid–up insurance

Back 145

cash value is used to purchase a completely paid up permanent policy with a reduced face amount

Front 146

disability Riders:
waiver of premium

Back 146

serves to waive the premium of the policy if the insured becomes totally disabled, for the duration of the disablement.

Front 147

disability Riders:
waiver of costs of insurance

Back 147

Universal Life insurance only
waives cost of the insurance but does not waive the cost of premiums necessary to accumulate cash values

Front 148

disability Riders:
disability income benefit

Back 148

insurer waives premiums, and pays a monthly income to the insured

Front 149

disability Riders:
payor benefit life/disability (juvenile Insurance)

Back 149

if the payor becomes disabled, the insurer will waive premiums until the minor reaches a certain age.

Front 150

accelerated benefit rider:
living needs rider

Back 150

payment of part of death benefit if insured is diagnosed with a terminal illness that will result in death within 2 years

Front 151

accelerated benefit rider:
long term care

Back 151

payment of part of death benefit in order to help pay for health care expenses in a nursing home.

Front 152

spouse Term rider

Back 152

allows spouse to be added to coverage for a limited pariod of time and for a specified amount.

Front 153

children's term rider

Back 153

allows children to be added to coverage for a limited period of time for a specified amount. once minor reaches a certain age, they are allowed to convert without proof of insurability

Front 154

Family Term Rider

Back 154

spouse and children's term rider

Front 155

Accidental Death Rider

Back 155

pays a multiple of death benefit if death is an accident.

Front 156

Guaranteed Insurability Rider

Back 156

allows insured to purchase additional coverage at specified future dates without evidence of insurability.

Front 157

cost of living rider

Back 157

increase or decrease the face value by a cost of living factor calculated each year.

Front 158

return of premium rider

Back 158

at death prior to a specified age, face amount and all premiums paid are payable to beneficiary

Front 159

annuity

Back 159

contract that provides income for a specified period of years, or for life.

Front 160

annuity:
accumulation period

Back 160

period of time in which the annuitant makes payments. Payment earn interest and grow tax deductable

Front 161

annuity:
annuity period

Back 161

sum that has been collected during the accumulation period is converted into a stream of income payments

Front 162

annuity:
single premium immediate annuity

Back 162

purchased with one single lump sum and income payments start within 1 year

Front 163

annuity:
deferred annuity

Back 163

purchased either by lump sum or by periodic payments, and the annuity period does not start until age 60. If surrendered prior to age 59 1/2 income tax must be paid on the gain and a 10% penalty on the taxable portion.

Front 164

annuity:
surrender charge

Back 164

if prematurly surrendered, a charge may apply. this is back end loaded, 1st year 7%, 2nd year 6%,...

Front 165

annuity payment options:
pure life

Back 165

payments are made throughout the annuitants life. highest payments

Front 166

annuity payment options:
life with guaranteed minimum

Back 166

payments made through life. if premature death, payments made to beneficiary until the principal amount has been paid off.

Front 167

annuity payment options:
life with period certain

Back 167

guaranteed payments for a period of time, rather to the annuitant or beneficiary

Front 168

taxation of personal life insurance:

Back 168

premiums are not deductable, when proceeds are paid the principle is tax free and the interest is subject to federal income tax

Front 169

taxation of personal life insurance:
cash value increases

Back 169

cash value grows tax defferred, if cash value is surrendered any value in excess of premiums payed it taxable. Death benefits are not taxable.

Front 170

taxation of personal life insurance:
dividends

Back 170

return of unused premium, thus not taxable. intrest is taxable

Front 171

taxation of personal life insurance:
policy loans

Back 171

money borrowed is not taxable,
insurer can charge interest on outstanding loans

Front 172

taxation of benefits to beneficiary:
general rule and exceptions

Back 172

proceeds paid to beneficiary are generally tax free. If a policy is transfered for value (sold to another party) than it may be taxable. Unless if it is transferred to a lender.

Front 173

taxation of benefits to beneficiary:
settlement options

Back 173

interest portion of any settlement is taxable.

Front 174

taxation of benefits to beneficiary:
estate

Back 174

if death benefit is included in an estate it is subject to federal estate taxation.

Front 175

Seven Pay Test

Back 175

premium paid into policy in first 7 years can not be more than what would have been paid into a life policy with paid up 7 years.

Front 176

taxation of non–qualified annuities:

Back 176

exclusion ratio: a portion of an annuity payment is taxable and a portion is not.
Anticipated return of principle is "cost Base" and is not taxable
intrest earned on principle is "tax Base" and is taxable.

Front 177

taxation of non–qualified annuities:
accumulation phase

Back 177

taxes on the "tax base" are deferred during the accumulation period. also, a 10% penalty can be imposed on the "tax base" for premature withdrawl

Front 178

section 1035 exchanges

Back 178

life insurance––>life insurance, endowment contract, annuity contract
endowment contract––>endowment contract, annuity
annuity––>annuity contract

Front 179

qualifications for licensing

Back 179

at least 18
file an application with director
pay $100 license fee
pass examination

Front 180

producers license

Back 180

sell, solicit, or negotiate insurance. issued for 2 years

Front 181

temporary producers license

Back 181

good for 90 days.

surviving spouse, next of kin, or personal representative of a deceased producer
spouse, next of kin, employee, or conservator of a licensed producer who is disabled
to the designee of a licensed producer who enters active service in the armed forces of the United Sates

Front 182

license renewal

Back 182

biennial renewal fee of $100

Front 183

license expiration

Back 183

if renewed within 12 months of fee due date there will be a 25$ per month fee with proof of cont. edu., no test is required.

Front 184

change of address

Back 184

must notify the director within 30 days in writing

Front 185

continuing education

Back 185

16 hours for life license, accident and health license, or life, accident and health license.

10 hours for a property license, casualty license.

16 hours for holding life, accident, and health license and a property/casualty license (does not have to be divided equally).

Front 186

cease and desist order

Back 186

given by the director. if violated, monetary penalty of not more than $25,000 for each act or violation not to exceed $250,000 or suspension of license.

Front 187

director penalties

Back 187

if found guilty of unfair practices a fine of not more than $1000 can be charged for each violation not to exceed $100,000 in any 12 month period and/or license suspension

Front 188

directors general duties and powers

Back 188

regulate the internal affairs of the department of insurance
prescribe forms and procedures to be followed in proceedings
aid in the interpretation of any state insurance law.