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53 Cards in this Set

  • Front
  • Back
What is Risk Retention Group
An insurance company that provides self-insurance services to owner-members, born out of the Federal Risk Retention Act of 1986
Surplus Lines Insurers
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
Admitted Insurer
Holds a certificate of authority fromt eh state in which it is admitted
Non-admitted Insurer
Does not hold a certificate of authority in the state in which it is admitted
Domestic company
Doing business in the state in which it is domiciled
Foreign company
doing business in a state other than the state in which it is domiciled
Elements of a Legal Contract
- offer
- acceptance
- comsideration
What two ways is a contract enforceable by law?
A contract may be written or verbal, but it is always an agreement enforceable by law.
Life insurance in business
Life insurance is often used in business situations to help protect the business and partners from losing everything.
What is the reason for a term policy?
Term policy coverage is temporary, applying only for a limited time.
Foreign company
doing business in a state other than the state in which it is domiciled
Elements of a Legal Contract
- offer
- acceptance
- comsideration
What two ways is a contract enforceable by law?
A contract may be written or verbal, but it is always an agreement enforceable by law.
Life insurance in business
Life insurance is often used in business situations to help protect the business and partners from losing everything.
What is the reason for a term policy?
Term policy coverage is temporary, applying only for a limited time.
Interest
The primary means to pay all of the benefits promised under the contract.
Mortality
The element of life insurance premium rate-making that reflects the rate of death of prospective insureds.
Loading
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)
Gross Annual Premium
The total of the net annual premium plus the loading for insurer expenses.
What is set and fixed over a policy's term?
Under a level premium payment plan, the premium is set and remains fixed over the policy's term.
How is life insurance used in business?
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.
Binding receipt
Guarantees coverage from the time the applicant completes the application or the insured completes the medical exam.
When are premium receipts issued?
An insurer only issues premium receipts when the applicant submits the first payment with the application.
Conditional receipt
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.
What should be done if changes need to be made?
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.
Effective Coverage Date
- determines date when coverage begins

- sets the date for annual premium payments
Sources of Underwriting Information
- 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
Can an applicant be denied based solely on MIB information?
No, an insurer may not rate or decline a life insurance risk based solely on MIB information.
Permanent policies
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.
What is insurance?
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.
What types of term life are there?
2 broad types are temporary and permanent.

3 specific types are:
- level term
- increasing term
- decreasing term

THESE ARE SOLD AS RIDERS!
Renewability
Allows the coverage to be renewed for another period or another term without the insured having to provide proof of insurability.
Convertibility
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.
Decreasing Term Life Insurance
Can generally be converted to a permanent plan for most of the term period.

* it cannot be renewed, but is convertible.
How can a decreasing term life death benefit be set up?
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
What age are most renewable term insurance not renewable?
Most renewable term insurance is not renewable beyond age 65 or 70.
Increasing term insurance
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
Renewable term insurance
Allows the continuation of temporary coverage for a new term period.
Convertible term insurance
Allows the exchange of temparary coverage for permanent life insurance policy coverage.
Whole life insurance
Is ordinary life, or straight life.
Single premium life
These policies are MECs, or modified endowment contracts
Grade-in period
The period during which premiums increase each year may be ten to 15 years.
Interest-sensitive whole life
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.
Common Price Index (CPI)
Indexed whole life insurance ties its death benefit and its premiums to a specified index, most commonly the Consumer Price Index.
Variable Life Insurance (VLI)
Has an investment feature; because of this feature, variable-life policies are considered a security.
Traditional Whole Life
These policies and their many variations share a common trait, the insurer invests the premiums in safe, secure, and conservative investments.
VLI cash values
At any time these are the sum of the balance in each variable sub-account, plus the value of the guaranteed fixed account.
What can VLI policyowners do with thier sub-account?
They can transfer funds between each sub-account. They can also transfer funds between sub-accounts and the insurer's general account.
What happens on the monthly deduction day?
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
Death benefit Option 1
Increases in cash value do not increase the death benefit paid at the insured's death
Death benefit Option 2
Equals the policy's specified amount plus its cash value.
Does the death benefit payable decrease?
No, the death benefit payable never decreases to less than the specified amount stated in the policy.
Equity Indexed Life insurance
The interest credited to the contracts cash value is tied to an equity index instead of to a rate declared by the insurer.