| A | B |
|---|
| With life insurance the company agrees to pay | the face amount or benefit |
| Health insurance the company agrees to pay | a portion of the insureds medical bills |
| 4 elements of any contract to be valid and legally enforceable | consideration, legal purpose, offer and acceptance, competent parties |
| an offer is made when the applicant submits an application and | initial premium is paid |
| competency includes | legal age, mental capabilities of understanding the terms, not influenced by drugs/alcohol |
| one author, which is the insurance company | contract of adhesion |
| only the insurer is legally bound | unilateral contract |
| insurable interest | only needs to exist at the time of the application |
| insured is entitled to coverage under a policy that a sensible person would expect it to provide | reasonable expectations |
| relationship in which one person is authorized to represent and act for another person or company | agent authority |
| express, implied,apparent | types of agent authority |
| a spy is a | secret agent |
| responsible to handle or supervise affairs or funds of another | fiduciary responsiblity |
| combiningg money from applicants with agent's own personal funds | comingling |
| voluntary giving of a known right | waiver |
| gives greatest amt. of coverage for a limited time | term life insurance (1) |
| cheapest type of pure life insurance | term life insurance (1) |
| term life insurance has | no cash value |
| level term insurance also called | level premium level term |
| term insurance always expires at | the end of the term |
| level term provides a fixed low preiumium in exchange for | coverage which lasts a specific time period |
| provides an annually decreasing face amount over time with level preiums | Decreasing term insurance |
| decreasing term insurance | often written for a mortgage or other debt that decreases over time |
| typically purchased using a decreasing term life insurance policy | Credit policy |
| credit policy can only be purchased for | up to the amount of the debt or the loan outstanding |
| term life insurance that provides an increase in face amount over time | Increasing term |
| increasing term life insurance face value increases based on | specific amounts or a perccentage of the original face amount |
| term life insurance policy that allows policyowners to convert their term insurance into permanent policy without showing proof of insurability | Convertible term life insurance |
| physical exam, blood tests, review of medical records to make sure someone is healthy | proof of insurability |
| term insurance that guarantees the insured to continue term coverage after expiration of the initial policy period WITHOUT HAVING TO PROVE INSURABILTY | Renewable term life insurance |
| when a person renews a term life insurance policy the insurer uses this to determine the new premium | current age |
| term coverage that provides a level face amount that renews annually | Annual renewable term |
| type of life insurance product which covers children under their parents policy | term rider |
| insurance that provdes death benefits for the entire life of the insuraed | whole life |
| whole life usually matures at age | 100 |
| whole life usually has this kind of premium | level |
| whole life provides both | living and death benefits |
| whole life | Provides both living and death benefits and provides permanent life insurance protection for the insured's entire life |
| Types of whole life insurance include | Straight, limited pay, single premium, modified and graded |
| Straight life premiums are paid | payments made until death of insured or age 100 |
| Limited pay life | premiums are paid for a limited time as the premium payment period shortens cash value increases faster and the fixed premiums are higher |
| Graded whole life | premium increases yearly for a stated number of years then remains level |
| Family Plan Policies | family head covered with whole and spouse/children included as level term life riders |
| Family Income Policies include | both whole life and decreasing term insurance |
| Provides monthly income if death occurs during the initial decreasing term but if death occurs after only the face value is paid in this type of policy | Family Income Policy |
| Family Maintenance Policies include | whole life and level term life |
| Provides income, "maintaining" the family using level term. then beneficiaries get face amt; if death occurs after the term family get only face value in this plan | Family Maintenance Policy |
| Multiple protection policies | pays a benefit of double or triple the face amt. if death occurs during a specified period |
| combination of permanent insurance and level term insurance | Multiple protection policies |
| Multiple protection policies pay a benefit of double or triple for either | a specified number of years or to a specified age |
| Joint Life Policy | does not refer to marijuana |
| policy that covers 2 or more people | Joint Life Policy |
| Joint Life Policy covers 2 or more people, but the ages are averaged | and a single premium is charged |
| Joint and Survivor Policy | covers 2 lives but the benefit is paid upon the death of the last surviving insured |
| The premium for a Joint and Survivor Policy is | lower than compared to the combined premiums for separate policies |
| Juvenile INsurance Policies | a payor provision is typically attached to this |
| a payor provision on a juvenile insurance policy | waives the premiums until child reaches specified age if payor dies or is disabled |
| Credit Life INsurance | designed to cover the life of a debtor and pays the amt. due on a loan if the debtor dies before the loan is repaid |
| New life products | designed to keep up with inflation are interest sensitive |
| Nontraditional life policies are | interest-sensitive whole life, adjustable life, universal life, variable life & variable universal life |
| interest sensitive whole life | whole life policy where cash value can increase beyond the stated guarantee if economic conditions warrant |
| risk with interest sensitive whole life insurance is that | premiums can vary due to investment and expense factors |
| adjustable life policies | offer flexibility in combining term and life into a single plan |
| allows you to vary your coverage as your needs change without requiring | evidence of insurability |
| Universal Life | allows its policyowners to determine the amt. and frequency of premium payments which will adjust the policy face amount |
| variation of whole life with significant flexibility | Universal Life |
| In Universal Life investment gains | go towards cash value |
| Features of Universal Life: | flexible premiums, flexible benefits and no minimum death benefit |
| With Universal LIfe cash accumulatinos | are subject to a minimum interest guarantee |
| Equity Index Universal Life insurance | minimum fixed guaranteed interest rate that is tied to S&P 500 |
| Modified Endowment Contract | policy that is overfunded according to IRS tables |
| Modified Endowment Contract are subject to | tax treatment that assumes the earnings are withdrawn first; LIFO tax treatment |
| LIFO | Last in first out |
| Policies that don't meet the 7 pay test are considered | MEC's (Modified Endowment Contract) |
| 7 pay test | limitation on teh total amt. you can pay into your policy in the first seven yrs. of existence |
| With Modified Endowmnet Contracts 10% penalty on | withdrawals prior to age 59 1/2 |
| Penalty taxes on premature distributions from MEC's | normally apply to policy loans |
| Variable Insurance Products | are considered securities as well as insurance |
| Producers of variable insurance products required to register with | National Association of Security Dealers |
| Variable whole life was created to | offset the inflation on death benefits |
| Variable insurance is different than whole life in the | way that the money is invested |
| Money with Variable Insurance is invested in | in stocks, bonds, money market accounts |
| Basic Characteristics of Variable Life Insurance policy are | fixed premiums, guaranteed min. death benefit which fluctuates over the minimum, and cash values which fluctuate and are not guaranteed |
| Money with Whole Life INsurance is invested in | contractual guarantees and liabilities |
| Variable Universal Life Insurance | choice of accounts where the money goes is up to the contract owner |
| If the death benefit is increased with VUL | evidence of insurability may be required |
| An insuring clause is | the insurer's basic promise to pay specific benefits to a designated person in the event of a covered loss |
| Consideration clause is | policy owner's consideration consists of completing teh application and paying the initial premium |
| Grace period | period of time that policy owners are requierd to pay an overdue premium, usually 30 days |
| Reinstatement periods | permits the policy owner to reinstate a policy that has lapsed, as long as the policy owner can provide proof of insurability and pays back outstandcing premiums, loans and interest |
| Reinstatement period is usually | 3 yrs. |
