Insurance License Testing

Front 1

Types of Insurers

Back 1

• Stock (Company)

• Mutual (Company)

• Lloyd's of London

• Reinsurers

• Home Service Insurers

Hint 1

Which are the only two Companies?

Front 2

Non-par

Back 2

Policyholders do not participate in being paid in dividends

Hint 2

Par = Pol

Front 3

Stock Companies

Back 3

• Owned by the stockholders, who get paid a share of the company's profit through dividends

• Nonparticipating (non-par)

Front 4

Dividends

Back 4

Front 5

Mutual Company

Back 5

•Mutual insurance companies have no stockholders, instead the Policyholders own the company

• Policyholders then get paid through the dividends

•Par

Front 6

What do Stock and Mutual Insurance companies have in common?

Back 6

Both companies are organized and incorporated under state law

Front 7

Par

Back 7

Policyholders collect all the dividends

Front 8

Mutualization

Back 8

The process of a stock company being to converted into a mutual company

Hint 8

SC to MC

Front 9

Demutualization

Back 9

The process of a mutual company being converted into a stock company.

Hint 9

MC to SC

Front 10

Lloyd's of London

Back 10

Front 11

Reinsurers

Back 11

• Reinsurance is an Arrangement by which an insurance company transfers or sells a portion of the risk to a reinsurance company

• Assuming the risk

Front 12

Ceding Company

Back 12

Insurance company that that is transferring a risk to a reinsurer

Front 13

The Reinsurer is the company ______ the risk and the ceding company _______ the risk

Back 13

•Assumes

•Transfers

Front 14

Home Service Insurers

Back 14

• Premiums collected weekly, door to door, by agents

• Face amounts are small ($1,000- $2,000)

Front 15

Service Providers

Back 15

• Offer benefits to subscribers in return of the premium payment.

Front 16

2 types of Service Providers

Back 16

• Health Maintenance Organizations (HMO)

• Preferred Provider Organizations (PPO)

Hint 16

Acronyms

Front 17

Government Insurance Programs

Back 17

Offered through Social Security, Medicare, Medicaid

Front 18

1945 McCarran and Ferguson Act

Back 18

Front 19

1970 Fair Credit Reporting Act

Back 19

Provides individuals privacy protection and fair and accurate credit reporting

Front 20

Independent credit rating is the rate or grade of the financial strength and stability of an insurance company. What is that rating based on?

Back 20

Rating is based on Claims, Reserves, and Company Profits

Front 21

Fraternal Benefit Society

Back 21

A non-profit Incorporated society that does not have Capital stock and operates for the sole benefit of its members

Front 22

Insurance Contract by Definition

Back 22

A contract as a legally binding agreement between two or more parties when a promise of benefits is exchanged for a consideration

Front 23

Competent Parties

Back 23

Must be of legal age, mentally capable of understanding the terms, and not under the influence of drugs or alcohol

Front 24

Aleatory

Back 24

Not an equal exchange of values.

Front 25

Adhesion Contract

Back 25

Contracts prepared by only one party, the insurance company

Hint 25

"take it or leave it"

Front 26

Unilateral Contract

Back 26

• Policy owners are under no legally binding promises to pay premiums. However, the insurance company is legally bound to pay losses covered by the policy.

Front 27

Personal Contract

Back 27

Contract between an individual and the insurance company in cannot transfer ownership without the insurance company's written consent

Front 28

Insurable Interests

Back 28

Front 29

3 types of Agent Authority

Back 29

• Express

• Implied

•

Front 30

Express Authority

Back 30

Front 31

Implied Authority

Back 31

Front 32

Contract

Back 32

What consists of an offer, acceptance, and consideration?

Front 33

Fiduciary Responsibility

Back 33

Taking receipt of Premiums and holding them for the insurance company

Front 34

Unilateral Contracts

Back 34

Life and Health insurance policies

Front 35

Insurance Company

Back 35

A policy of adhesion can only be modified by...

Front 36

Promise to pay death benefit to named beneficiary

Back 36

What does consideration mean in the consideration clauses of life policy

Front 37

Representations

Back 37

Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge

Front 38

When an offer is made and accepted by both parties

Back 38

When does a informal contract become binding?

Front 39

Investor-originated Life Insurance

Back 39

What allows you to bypass insurable interest laws?

Front 40

Term Life Insurance

Back 40

Temporary life insurance provided for a specific period of time.

Hint 40

Aka; Pure Life Insurance

Front 41

Pure Death Protection

Back 41

When insured dies during policy term, policy pays a death benefit to beneficiary

Front 42

3 Basic Types of Term Coverage

Back 42

• Level Term

• Increasing Term

• Decreasing Term

Front 43

Level Term Insurance

Back 43

Death Benefit does not change throughout the policy's life

Hint 43

Most common Temporary

Front 44

Decreasing Term Insurance

Back 44

Level Premium, yearly decrease of death benefits

Front 45

Decreasing Term Insurance

Back 45

Most commonly used to insure a mortgage payment.

Front 46

Increasing Term Insurance

Back 46

Level Premiums, yearly increase of Death benefits

Front 47

Policyowner

Back 47

Who benefits in Investor-Organized Life Insurance (IOLI) when the insured dies?

Front 48

Hold a Life Insurance and a Security license

Back 48

Variable Life products require a producer to...

Front 49

Age 100

Back 49

How long does a Limited-pay Life Policy cover the insured?

Front 50

Joint Life plan

Back 50

What combination plan is designed to protect a insured from an unpaid mortgage balance upon premature death

Front 51

Variable Life products are considered security contracts as well as insurance contracts

Back 51

Why does an agent with a Variable Life Policy have to register with the National Association of the Securities Dealers (NASD) before selling?

Front 52

Upon the insured's death during the term of the policy

Back 52

A Term Life Insurance Policy "matures"...

Front 53

Payor Provision

Back 53

A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?

Front 54

Upon death of the last insured

Back 54

What is the face amount paid under a Joint Life and Survivor policy

Front 55

Conversion privilege

Back 55

A feature of a group term life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability

Front 56

Universal Life

Back 56

A forty-two-year-old executive wants to purchase life insurance that will allow for increases or decreases to cover as his / her needs change, what policy is best?

Front 57

Limited Pay Life

Back 57

Life insurance that covers an insured's whole life with level premiums paid over a limited time

Front 58

Face Amount Plus Cash Value Policy

Back 58

What does a face amount plus cash value policy supposed to pay at the insured's death

Front 59

Will lose many of its tax advantages

Back 59

A policy that becomes a Modified Endowment Contract (MEC)

Front 60

A Whole Life Policy with other insured rider

Back 60

Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of term coverage on himself under the same policy. What kind of policy should Q purchase?

Front 61

Variable Life

Back 61

_______ ______ Policy offers the owner investment in products such as money-market funds, long-term bonds and equities

Front 62

Whole Life Insurance Policy

Back 62

Provides a policy with cash value along with a level face amount

Front 63

Face Amount

Back 63

Another term for death benefit

Front 64

Term life

Back 64

Type of life insurance that gives the greatest amount of coverage for a limited period of time

Front 65

A fixed, level premium

Back 65

An element of a Variable Life policy

Front 66

Level Term Insurance

Back 66

What type of Term insurance maybe renewable?

Front 67

Term Rider

Back 67

A kind of life insurance product that covers children under their parents policies

Front 68

Family Maintenance policy

Back 68

Pays a monthly income from the date of death of the insured to the end of the pre-selected period. The payment of the face amount of the policy is payable at the end of such selected period.

Front 69

Insured

Back 69

He renewable Term Policy is renewable at the option of who?

Front 70

Level

Back 70

Whole Life policies have ______ premiums.

Front 71

Decreasing term Rider

Back 71

Additional coverage can be added to a whole life policy by adding...

Front 72

Examples of Nonforfeiture options

Back 72

Extended term, reduced paid-up, cash Surrender

Front 73

Return of Premium Rider

Back 73

S buys a $10,000 whole life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of writer did S include on the policy?

Front 74

Avoid a policy lapse

Back 74

The automatic premium loan provision is designed to...

Front 75

10 days

Back 75

How long is the "free look" period?

Front 76

Interest-Sensitive Whole Life Policy

Back 76

What has flexible premium payments?

Front 77

Joint Life

Back 77

What combination plan is designed to protect an insured from an unpaid Mortgage Balance upon premature death?

Front 78

10%

Back 78

Premature IRA distributions are assessed a penalty tax of what percent?

Front 79

Keogh Plan

Back 79

What plan is intended to be used by a sole proprietor and the employees of that business?

Front 80

180 days

Back 80

The amount of time a temporary license may be issued for