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53 Cards in this Set
- Front
- Back
What is Risk Retention Group
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An insurance company that provides self-insurance services to owner-members, born out of the Federal Risk Retention Act of 1986
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Surplus Lines Insurers
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are by definition not licensed in the state, but they must be eligible to provide the type of coverage requested under a state's insurance laws
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Admitted Insurer
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Holds a certificate of authority fromt eh state in which it is admitted
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Non-admitted Insurer
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Does not hold a certificate of authority in the state in which it is admitted
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Domestic company
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Doing business in the state in which it is domiciled
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Foreign company
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doing business in a state other than the state in which it is domiciled
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Elements of a Legal Contract
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- offer
- acceptance - comsideration |
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What two ways is a contract enforceable by law?
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A contract may be written or verbal, but it is always an agreement enforceable by law.
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Life insurance in business
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Life insurance is often used in business situations to help protect the business and partners from losing everything.
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What is the reason for a term policy?
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Term policy coverage is temporary, applying only for a limited time.
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Foreign company
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doing business in a state other than the state in which it is domiciled
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Elements of a Legal Contract
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- offer
- acceptance - comsideration |
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What two ways is a contract enforceable by law?
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A contract may be written or verbal, but it is always an agreement enforceable by law.
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Life insurance in business
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Life insurance is often used in business situations to help protect the business and partners from losing everything.
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What is the reason for a term policy?
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Term policy coverage is temporary, applying only for a limited time.
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Interest
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The primary means to pay all of the benefits promised under the contract.
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Mortality
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The element of life insurance premium rate-making that reflects the rate of death of prospective insureds.
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Loading
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The expense component of the pricing process, which, includes the insurer's expenses for rent, salaries, benefits, commissions, and field expenses. (a margin of profit)
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Gross Annual Premium
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The total of the net annual premium plus the loading for insurer expenses.
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What is set and fixed over a policy's term?
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Under a level premium payment plan, the premium is set and remains fixed over the policy's term.
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How is life insurance used in business?
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A typical business use of life insurance is known as key person or key employee life insurance.
- Upon the insured employee's death, the business receives the policy death benefit. |
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Binding receipt
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Guarantees coverage from the time the applicant completes the application or the insured completes the medical exam.
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When are premium receipts issued?
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An insurer only issues premium receipts when the applicant submits the first payment with the application.
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Conditional receipt
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Under the provisions of a conditional receipt, a proposed insured's coverage can begin immediately once he or she applies for a life insurance policy.
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What should be done if changes need to be made?
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A proposed insured should make any changes to a life insurance application by crossing out the incorrect entry, then make the correct entry and initial the change.
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Effective Coverage Date
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- determines date when coverage begins
- sets the date for annual premium payments |
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Sources of Underwriting Information
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- the application
- a medical examination (if required) - the agent's report - an attending physician's statement - the Medical Information Bureau (MIB) report - an inspection or consumer report |
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Can an applicant be denied based solely on MIB information?
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No, an insurer may not rate or decline a life insurance risk based solely on MIB information.
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Permanent policies
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Can create cash values that may grow over the life of the policy.
- can use the cash value for many purposes, like a down-payment on a vacation home or for meeting a financial emergency. |
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What is insurance?
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Insurance (risk sharing) has been a part of human life since as early as 64 B.C, used by Phoenician traders in the Mediterranean Sea.
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What types of term life are there?
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2 broad types are temporary and permanent.
3 specific types are: - level term - increasing term - decreasing term THESE ARE SOLD AS RIDERS! |
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Renewability
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Allows the coverage to be renewed for another period or another term without the insured having to provide proof of insurability.
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Convertibility
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Provision of a term life policy lets the owner exchange or convert the term coverage for a permanent life insurance policy.
* cannot exceed the coverage under the term insurance at the time of conversion. |
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Decreasing Term Life Insurance
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Can generally be converted to a permanent plan for most of the term period.
* it cannot be renewed, but is convertible. |
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How can a decreasing term life death benefit be set up?
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Decreasing term life insurance death benefit can be set up to decrease evenly over the term of coverage; or slowly at first and more rapidly as the term nears its end.
* Resembling a mortgage |
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What age are most renewable term insurance not renewable?
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Most renewable term insurance is not renewable beyond age 65 or 70.
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Increasing term insurance
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Normally provided as a rider usually added to a base policy at a slightly lower cost than issuing a term policy.
- level premiums - a death benefit that incxreases monthly over the term |
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Renewable term insurance
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Allows the continuation of temporary coverage for a new term period.
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Convertible term insurance
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Allows the exchange of temparary coverage for permanent life insurance policy coverage.
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Whole life insurance
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Is ordinary life, or straight life.
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Single premium life
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These policies are MECs, or modified endowment contracts
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Grade-in period
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The period during which premiums increase each year may be ten to 15 years.
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Interest-sensitive whole life
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With this policy, only the death (mortality) charges and expense charges are guaranteed.
* The investment (interest credited to the policy's cash value) not guaranteed. |
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Common Price Index (CPI)
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Indexed whole life insurance ties its death benefit and its premiums to a specified index, most commonly the Consumer Price Index.
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Variable Life Insurance (VLI)
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Has an investment feature; because of this feature, variable-life policies are considered a security.
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Traditional Whole Life
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These policies and their many variations share a common trait, the insurer invests the premiums in safe, secure, and conservative investments.
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VLI cash values
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At any time these are the sum of the balance in each variable sub-account, plus the value of the guaranteed fixed account.
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What can VLI policyowners do with thier sub-account?
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They can transfer funds between each sub-account. They can also transfer funds between sub-accounts and the insurer's general account.
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What happens on the monthly deduction day?
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Each month, on the monthly deduction day, the insurer:
- credits to the policy any premiums it received since the last monthly deduction day - credits to the policy the interest on the cash value for the previous month - deducts from the policy the cost of insurance (the monthly charge) and expense charge |
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Death benefit Option 1
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Increases in cash value do not increase the death benefit paid at the insured's death
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Death benefit Option 2
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Equals the policy's specified amount plus its cash value.
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Does the death benefit payable decrease?
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No, the death benefit payable never decreases to less than the specified amount stated in the policy.
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Equity Indexed Life insurance
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The interest credited to the contracts cash value is tied to an equity index instead of to a rate declared by the insurer.
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