Aflac Insurance Study Guide

Front 1

Define insurable interest

Back 1

a financial interest int he life of another person; a possibility of losing something of value if the insured should die. In life and health insurance, insurable interest must be stateda t the time of policy issue

Front 2

At what age can minors contract life insurance on their own lives, and the lives of their immediate family?

Back 2

15

Front 3

an arrangement that allows someone living with a life threatening condition to sell their existing life insurance policy and use the proceeds when and where they are most needed before death

Back 3

Viatical settlement

Front 4

any financial transaction in which the owner of a life insurance policy sells a policy that is no longer needed to a third party for some fomr of compensation, usually cash

Back 4

life settlement

Front 5

This is the calculation of the probable future earnings of the insured using wages, inflation, the number of years to retirement, and the time value of money

Back 5

Human Life Value Approach

Front 6

To calculate an individual's life value, the agent must do the following...

Back 6

Determine the insured's after-tax income fromt he present date until retirement
Deduct the insured's annual expenses for food, clothing, mediacal and other expenses
Calculate the number of years to retirement
Estimate the effect inflation would have on income over the required number of years

Front 7

Which of the following is NOT true of life settlements? (H)

Back 7

b) the seller must be terminally ill

w

Hint 7

a)they involve insurance policies with large face amounts
b)the seller must be terminally ill
c)they could be used for a key person coverage
d)they could be sold for an amount greater than the current cash value

Front 8

Under what purchase plan does each partner agree to sell his or her business interest to the surviving partners, and each surviving partner agrees to buy the interest of the deceased partners?

Back 8

Cross Purchase Plan

Front 9

What is the term used when a person sells his assets as a way to gain money?

Back 9

Liquidation

Front 10

Which of the following statments concerning buy-sell agreements is true?

Back 10

A) Buy-sell agreements are normally funded with a life insurance policy

Hint 10

a)buy-sell agreements are normally funded with a life insurance policy
b)premiums paid are deductible as a business expense
c)benefits received are considered income taxable
d)buy-sell agreements pay in the event of a medical emergency

Front 11

A contract that establishes what will be done with a business in the event that an owner dies is called a...

Back 11

buy-sell agreement

Front 12

Which of the following is correct concerning the taxation of a Key Person Life Insurance Policy premiums and death benefit? (h)

Back 12

C) Premiums are not deductible as a business expense and the death benefit is not taxable to the company

Hint 12

A)Premiums are tax deductible as a business expense and the death benefit is not taxable to the company
B)Premiums are not deductible as a business expense and the death benefit is taxable to the company
D)Premiums are tax deductible as a business expense and the death benefit is taxable to the company.

Front 13

Social security benefits are available for a surviving spouse until the youngest child reaches age 16. Benefits are later resumed when the surviving spouse reaches the retirement age. What is the time period called during which the surviving spouse does not receive benefits?

Back 13

Blackout period

Front 14

When does the blackout period begin and end?

Back 14

Blackout period begins when the youngest child reaches the age of 16, and ends when the surviving spouse qualifies for retirement benefits, as early as age 60.

Front 15

Which of the following would be a unique benefit life insurance has over other types of insurance? (H)

Back 15

D) It performs the function of cash accumulation

Hint 15

A)It is a contract between the policyowner and the insurer
B)It guarantees income when needed
C)Its proceeds are paid to the beneficiary
D)it performs the function of cash accumulation

Front 16

Why does life insurance have a unique advantage over other types of insurance?

Back 16

it performs the function of cash accumulation

Front 17

If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about...

Back 17

Whether an insurable interest exists between the individuals

Front 18

When must an insurable interest exist?

Back 18

At the time the policy is issued

Front 19

What relationships are automatically presumed to qualify as an insurable interest?

Back 19

spouses, parents, children and some business relationships

Front 20

Who is the owner of the policy and who pays the premium in an Executive Bonus Plan?

Back 20

Executive is the owner and the Executive pays the premium

Front 21

Define term life insurance

Back 21

temporary life insurance provided for a specific period of time

aka "pure life insurance"

Front 22

Define Permanent life insurance

Back 22

various forms of whole life insurance policies that remain in effect to age 100 as long as the premium is paid

Front 23

insurance that pays dividends to policyholders is called...

Back 23

Participating Policies

Front 24

insurance that does not pay dividends to policyowners is called...

Back 24

Non-participating Policies

Front 25

Ken has a life insurance policy with a face amount of $500. He pays a premium each week to the agent who sold him the policy. What kind of policy did Ken purchase?

Back 25

Industrial Life

Front 26

This type of insurance policy is written on an individual basis in small amounts, usually with a face amount of less than $1000, with premium payable weekly or monthly

Back 26

Industrial Life

Front 27

Table showing the probability of death at specified ages

Back 27

Mortality Tables

Front 28

What do Mortality Tables indicate to fa life insurance company?

Back 28

the "natural premium" for an individual applying for life insurance

Front 29

The amount of premium taht must be collected from each member of a group composed of the same age, sex and risk in order to pay $1000 for each death that will occur in the group each year is called...

Back 29

Natural premium

Front 30

Mortality - Interest =

Back 30

Net Premiumq

Front 31

Net Premium + Expense(loading) =

Back 31

Gross Premium

Front 32

Mortality - Interest + Expense(loading) =

Back 32

Gross Premium

Front 33

The method of premium payment whether annually, semiannually, quarterly, or monthly is...

Back 33

Mode of Payment

Front 34

Mode refers to...

Back 34

the frequency the policyowner pays the premium

Front 35

Higher Frequency of premium payment =

Back 35

Higher Premium

Front 36

This allows someone living with a life threatening condition to sell their existing life insurance policy and use the proceeds when they are most needed, before their death.

Back 36

Viatical Settlements

Front 37

If applicant has precious insurance, what must the producer do no later than the time of application?

Back 37

Give the applicant a notice regarding replacement approved by the Director.

Front 38

What describes the features and elements of a policy?

Back 38

Policy Statement

Front 39

The booklet that describes insurance policies and concepts, and provides general information to help an applicant make an informed decision

Back 39

buyer's guide

Front 40

When must a buyer's guide and policy summary be provided to all prospective purchasers?

Back 40

Before the initial premium is accepted

Front 41

What is the major difference between a Stock Redemption Play and a Cross Purchase Plan?

Back 41

In a Stock Redemption plan, the policies are owned by an entity and in a cross purchase plan, the policies are owned by individuals

Front 42

What is the process of reviewing, accepting or rejecting applications for insurance called?

Back 42

Underwriting

Front 43

What is an underwriter?

Back 43

a person who evaluates and classifies risks to accept or reject them on behalf of the insurer

Front 44

Document that provides information for underwriting purposes. After the policy is issued, any unanswered questions are considered waived by the insurer

Back 44

Application

Front 45

A person making application for, or offering him/herself or another to be insured under an insurance contract

Back 45

Applicant

Front 46

What is used by the agent to discuss his or her personal observations concerning the proposed insured?

Back 46

Agent's report

Front 47

What is a statement usually obtained from the applicant's doctor?

Back 47

Attending physician's statement

Front 48

A report similar to consumer report, but one that also provides information on the consumer's character, reputation and habits

Back 48

Investigative Consumer Reports

Front 49

A federal law that established procedures that consumer-reporting agencies must follow in order to ensure that records are confidential, accurate, relevant and properly used

Back 49

Fair Credit Reporting Act

Front 50

This is an information database that stores the health histories of individuals who have applied for insurance in the past. Most insurance companies subscribe to this database for underwriting purposes

Back 50

Medical Information Bureau (MIB)

Front 51

A prospective insured may be rated as one of three classifactions which are...

Back 51

standard, substandard or preffered

Front 52

An insurance classification for applicants who have a lower expectation of incurring loss, and who, therefore, are covered at a reduced rate

Back 52

Preferred Risk

Front 53

An applicant or insured who is considered to have an average probability of a loss based on health, vocation and lifestyle

Back 53

Standard Risk

Front 54

An applicant or insured who has a higher than normal probability of loss, and who may be subject to an increased premium

Back 54

Substandard Risk

Front 55

Two ways to calculate the amount of life insurance needed

Back 55

Human Life value approach and the needs approach

Front 56

What is the purpose of key person insurance?

Back 56

to lessen the risk of financial loss becuase of the death of a key employee

Front 57

An applicant wants to buy a life insurance policy that has a cash value element. Which type should she buy?

Back 57

Permanent

Front 58

Unlike term insurance, permanent insurance provides...

Back 58

lifetime death protection and a savings or cash value option

Front 59

Who has insurable interest in the insured?

Back 59

The applicant

Front 60

An applicant who receives a preferred risk classification qualifies for lower or higher premiums than a person who receives a standard risk?

Back 60

Lower