Life Insurance State Exam

Front 1

-Non-forfeiture
-Dividen
-Settlement

Back 1

3 LIFE INSURANCE OPTIONS

Front 2

-Cash Surrender Value
-Paid-up Insurance
-Extended Term Insurance

Back 2

NON-FORFEITURE OPTIONS

Front 3

-LI builds cash value. If premium payments stop, cash value can still exist, the formally insured doesn't give it up.
-Only included in whole and in term 20 years or longer

Back 3

DEFINITION OF NON-FORFEITURE OPTIONS

Front 4

-Refund if policy is cancelled prior to mature
-Take the money and run

Back 4

CASH SURRENDER VALUE (NF)

Front 5

-Premium payments stop, and cash value is used as a SINGLE PREMIUM to purchase new WHOLE ins. with a lower face amount for as much as the CV will buy.

Back 5

PAID-UP INSURANCE (NF)

Front 6

-Premium payments stop, and cash value is used to purchase new TERM ins. with the SAME face amount.
-Used as a default when premium payments stop.

Back 6

EXTENDED TERM (NF)

Front 7

1.)CASH
2.)REDUCED PREMIUMS
3.)PAID-UP ADDITIONS
4.)ONE-YEAR TERM
5.)ACCUMULATION AT INTEREST

Back 7

5 DIVIDEND OPTIONS

Front 8

A payment made to the policy owner when the PP company makes a profit at the end of the year.

Back 8

DIVIDEND

Front 9

Company that issues dividens

Back 9

PARTICIPATING POLICY

Front 10

-not TAXABLE
-calculated @ end of the year
-dispursed on individual policy anniversary dates, then the insured decides what to do with the extra cash!

Back 10

DIVEDEND II

Front 11

-simply taking the money from the dividend and blowing it.

Back 11

CASH (DVO)

Front 12

-simply taking the dividend amount and applying it to reduce your premium

Back 12

REDUCE PREMIUM (DVO)

Front 13

-the dividend is used as a SINGLE PREMIUM to purchase more insurance of the same kind, increasing the face amount substantially over time.

Back 13

PAID-UP ADDITIONS (DVO)

Front 14

-This DV is used when a policy holder has taken a loan out on their CV and has NOT paid it back.
-The insured takes the DIVIDEND and uses it to buy a ONE YEAR TERM equal to the remaining CV to beef up the deat benefits to the beneficiary.
-Risk to the IC, so insurability is required

Back 14

ONE-YEAR TERM (DVO)

Front 15

-The insured lets the IC keep the dividen and invest it.
-Interest earned is taxable

Back 15

ACCUMULATION AT INTEREST

Front 16

-Interest Only
-Life Income
-Joint & Survivor
-Fixed Period Installments
-Fixed Amount Installments
-Life With Term Certain
-Misc.

Back 16

LIFE INS SETTLEMENT OPTIONS

Front 17

-A settlement option where the IC keeps the face amount and invests it. The beneficiary then receives payments on the interest
-Interest is taxable
-Option used only when large face amount

Back 17

INTEREST ONLY (SO)

Front 18

-A settlement option where the beneficiary gets installed payments for life.
-Payment amounts are determined by the age of the beneficiary
-Payments consist of both principle and interest where the interest is taxable
-If beneficiary dies before receiving all possible payments, the left-over amount goes back to the IC to pay claims on people who lived longer than expected

Back 18

LIFE INCOME (SO)

Front 19

-A settlement option written on two or more people.
-Benefits received when first of the group dies.
-Benefits cease when last one dies
-Common option for married couples.
-Payment amount depends on #of beneficiaries and age.

Back 19

JOINT & SURVIVOR (SO)

Front 20

-A settlement option where payments are made to the beneficiary over a certain period of time.
-Length of period determines amount.
-Payments are guaranteed. If beneficiary dies, payments will go to contingent ben.
-Payments consist of principle & interest(taxable)

Back 20

FIXED PERIOD INSTALLMENTS (SO)

Front 21

-A settlement option where the insured chooses an exact amount of each payment to the beneficiary.
-Payments are made until face amount is exhausted.
-Amount of payment determines how long they will go on.

Back 21

FIXED AMOUNT INSTALLMENTS (SO)

Front 22

-A settlement option so that the INSURED can collect from his or her policy
-Payments are made form the CV, not the face amount
-Payments are fixed amount and period
-If insured dies: the beneficiary then gets the $$.
-If insured lives: he/she continues to get payments for life.

Back 22

LIFE WITH TERM CERTAIN (SO)

Front 23

-Some settlement options can be tailor-made.

Back 23

MISC. SETTLEMENT OPTIONS

Front 24

-Prevents the beneficiary, who probably isn't that good with money, from getting their hands on the total amount and blowing it.
-Also keeps the beneficiary's creditors, if they have any, from accessing the money.

Back 24

SPENDTHRIFT CLAUSE

Front 25

-Beneficiary recieves one lump sum
-Insured's SPOUSE is the beneficiary

Back 25

PAYMENTS NOT TAXED

Front 26

-Beneficiary's interest on installment payments
-Insured who cashes in on policy, or policy matures = EQUITY.
-Paid to the insured's estate (must exceed 1million)

Back 26

PAYMENTS TAXED

Front 27

-Beneficiary buys policy from insured (must be done within 3years of the insured's death)
-GIFTING: insured gives up all rights of policy and gives it to the beneficiary

Back 27

AVOIDING TAXATION

Front 28

-Must appear at the bottom left of the first page

Back 28

BRIEF & CORRECT DESCRIPTION OF BENEFITS & FORM NUMBER

Front 29

-defines the intent of the contract. (Ex.) Life policy states death = payment of X dollars

Back 29

INSURING CLAUSE

Front 30

-states when the intent of the contract will take place
-IC has 30 days to fork it over

Back 30

SETTLEMENT CLAUSE

Front 31

-The anniversary date of a policy

Back 31

POLICY YEAR CLAUSE

Front 32

-List of Dividen options

Back 32

PARTICIPATING POLICY CLAUSE

Front 33

-States that the AGENT can NOT make any changes to the policy

Back 33

MODIFICATION CLAUSE

Front 34

-Policy + application

Back 34

ENTIRE CONTRACT

Front 35

-States that the IC can't use any statements on the app to avoid paying any claims

Back 35

CONTRACT BY THE ENTIRETY

Front 36

-States that an IC must prove that the insured DELIBERATELY concealed material facts in order to deny a claim

Back 36

REPRESENTATIONS (not warranties)

Front 37

-IC has 2 years to find use of any fraudulant info by the insured. After 2 years, insured is good to go.

Back 37

INCONTESTABILITY

Front 38

-Payments to the beneficiary are adjusted according to correct age.

Back 38

MISSTATEMENT OF AGE

Front 39

The insured can...
-Name the beneficiary
-Select premium mode
-Choose settlement options
-Cash in or borrow on policy
-Choose dividend options
-Assign policy

Back 39

OWNER'S RIGHTS

Front 40

-When the Owner's Rights are transferred to someone else.

Back 40

ASSIGNMENT

Front 41

-ABSOLUT
-COLLATERAL

Back 41

2 TYPES OF ASSIGNMENT

Front 42

-Owner transfers all of their rights

Back 42

ABSOLUT ASSIGNMENT

Front 43

-Owner retains some of their rights and transfers the rest.
-Usually used when the insured wants to borrow $$

Back 43

COLLATERAL ASSIGNMENT

Front 44

-Allows the insured to make a change or switch policies at any time
*If insured switches to LOWER PREMIUM Insurability is required

Back 44

POLICY CHANGE

Front 45

-People who most likely forsee a loss will buy insurance

Back 45

ADVERSE SELECTION

Front 46

-States amount of the premium, where and when it should be paid.

Back 46

PREMIUM PAYMENT

Front 47

-Gives the insured extra time to pay the premium.
-31 days by law
-Covered for those 31 days

Back 47

GRACE PERIOD

Front 48

-Premium payments are made directly from the CV

Back 48

AUTOMATIC PREMIUM LOAN

Front 49

-When insured doesnt' pay premiums and makes use of the automatic premium loan, they have 3 years to get back on track and start paying premiums.
-Must payback all premiums + interest
-Must improve insurability

Back 49

REINSTATEMENT

Front 50

-The insured borrows money on their life insurance policy.
-IC must loan the $$
-Policy has to be in force for at least 3 years
-IC charges interest b/c they now can't invest the $.
-IC can demand payment of current year premiums
-IC's max amt. = current CV.
-IC can wait up to 6 mths.
-Non-repayment = FV deduction
-IC can't void policy until amount owed > CV
-IC must notify insured if possibility of voiding policy

Back 50

POLICY LOANS

Front 51

-Insured has 10 days to look things over before the deal is sealed.
-Entitled to a full refund

Back 51

10-DAY FREE LOOK

Front 52

-Insured gets 31 days to look thins over before the deal is sealed
-ONLY for policies that are sold by DIRECT MARKETERS

Back 52

31-DAY FREE LOOK

Front 53

-Exclusions on a life policy
WAR
AVIATION:except for fare paying passengers
SUICIDE:loser must wait 2 years befor killing themselves.
HAZARDOUS OCCUPATIONS/SPORTS:

Back 53

W.A.S.H

Front 54

-A SEPERATE sheet of paper that includes CHANGES to the policy
-Has ABSOLUTE rule over policy uncertainties

Back 54

RIDERS

Front 55

-Type of rider that pays an additional amount if the insured's death is ACCIDENTAL

Back 55

ACCIDENTAL DEATH BENEFIT (ADB)

Front 56

-Type of rider where the insured is able to buy more life insurance of the same kind WITHOUT proving insurability

Back 56

GUARANTEED INSURABILITY

Front 57

-Type of rider that allows the waiver of premium payments if the insured becomes totally disabled
-Must pay for 6 mths, if disability continues, 6 mths is refunded as well as premium payments waivered

Back 57

WAIVER OF PREMIUM

Front 58

-A type of rider that is similar to the WAIVER OF PREMIUM, but includes additional income to cover wage loss.
-Depends on FV of policy ("X" dollars per $1,000 of FV)

Back 58

WAIVER OF PREMIUM + DISABILITY

Front 59

-A type of rider that increases it's death benefits to keep up with inflation (according to CPI)

Back 59

COST OF LIVING

Front 60

-A rider a parent puts on to cover their current and future children.
-$1,000 to $10,000 FV
-Ends when child = 23 or parent = 65
-Child can convert coverage to their own Whole policy (cant'exceed 5x FV)

Back 60

CHILDREN'S TERM RIDER

Front 61

-A type of rider that pays the primary insured if the secondary insured dies within the term, but if the primary insured dies within the term, the secondary insured receives a paid-up policy.

Back 61

SPOUSE/OTHER INSURED TERM RIDER

Front 62

-A type of rider that consists of an increasing term where the pay the amount of the total premiums paid up to death.

Back 62

RETURN OF PREMIUM

Front 63

-A type of rider that covers accident and health
-Must be approved by Director

Back 63

ACCIDENT & HEALTH RIDER

Front 64

-A type of rider that includes LIVING BENEFITS.
-Insured collects a % of FV
-Amt. collected gets reduced from FV

Back 64

ACCELERATED DEATH BENEFIT

Front 65

-Literature that helps the purchaser of Life Insurance decide how much and what kind he/she should buy.

Back 65

BUYER'S GUIDE

Front 66

-A consumer's description of the consumer's overall look at a policy

Back 66

POLICY SUMMARY

Front 67

-When a new policy is bought to replace one that already exists
-Applicant must receive a NOTICE OF REGARDING REPLACEMENT.
-Agent must receive a list of all existing life policies / annuities
-Must send the existing insurers a COMPARITIVE INFORMATION FORM.

Back 67

REPLACEMENT

Front 68

-A way of telling an existing IC that you could quite possibly take their business by issuing a policy to one of their unhappy customers

Back 68

COMPARATIVE INFORMATION FORM

Front 69

-Attempts made by an existing IC when they find that their policy might be replaced by super-agent Ben Decker

Back 69

CONSERVATION