Insurance and Agency: Concepts and Contracts, Exams of Nursing

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Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ Insurance - correct answers transfer of risk Speculative risk - correct answers has a possibility of both loss and gain Pure risk - correct answers only has a possibility of loss (no gain) Exposure - correct answers risks for which an insurance company would be liable expressed in units Peril - correct answers cause of a loss Hazard - correct answers an increase in the chance of loss Moral hazard - correct answers arise from people's character (faking a loss) Morale hazard - correct answers state of mind or careless attitude (accidentally leaving door unlocked) Methods of handling risk - correct answers STARR Share, transfer, avoid, retain, reduce Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ The law of large numbers - correct answers the larger the group, the more accurately losses can be predicted Elements of insurable risk - correct answers CANHAM Calculable, affordable, non-catastrophic, homogenous, accidental, measurable Adverse selection - correct answers tendency for higher-risk individuals to get and keep insurance Reinsurance - correct answers an insurance company (ceding) pays another insurance company (reinsurer) to assume some risk in the event of a catastrophic loss Facultative reinsurance - correct answers reinsurer evaluates each risk before allowing the transfer Treaty reinsurance - correct answers reinsurer accepts all risk of a certain type from the ceding company Stock insurer - correct answers insurance company owned by shareholders who chose the board of directors taxable dividends can be paid from profits issues non-participating (non-par) policies Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ admitted/authorized/approved- licensed in state nonadmitted/unauthorized/unapproved- not licensed. sometimes allowed to insure surplus risks Surplus lines insurer - correct answers insurance sold by nonadmitted insurers from a state's approved surplus insurers list can only be sold to high risks insureds can't be purchased just due to being cheaper than insurance from admitted insurers 4 different types of insurance agents - correct answers 1. independent agents 2. exclusive/captive agents 3. general agents 4. direct writing companies Independent agent - correct answers reps more than 1 company General agent - correct answers recruits other agents that actually sell the insurance Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ Direct writing companies - correct answers pays salaries to the employees selling the insurance (vs. commission) Direct response insurance - correct answers no agent involved. insurance is sold directly by the company to the public Agency - correct answers relationship in which one person (agent) is authorized to represent another (principal) Law of agency (insurance) - correct answers contracts made by the agent are considered to be contracts of the principal (insurance company) 3 types of authority - correct answers express, implied, apparent express- written in contract implied- assumed in accordance with general business practices apparent- perceived authority 5 elements of a legal contract - correct answers 1. consideration ($) 2. legal purpose 3. offer 4. acceptance Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ 5. competent parties Adhesion - correct answers insurer writes the contracts and the insured adheres any ambiguity favors the insured Aleatory - correct answers unequal receipt of value small premium payments for a large amount of coverage Unilateral contract - correct answers only one promise is made - insurance company promises to pay in the event of loss Personal contracts - correct answers can't be assigned to someone else (home and auto) Indemnity - correct answers contract restores the insured to a pre-loss condition, no better and no worse Warranty - correct answers a promise Fraud and false statements punishment - correct answers fine and/or imprisonment (10-15 years) Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ below average health and short life expectancy can only be accepted by charging higher rates Insurable interest - correct answers person applying for insurance must be at risk of suffering a significant loss if the insured dies the loss may be emotional or financial When must insurable interest exist? - correct answers home and auto- time of loss life- time of application Human Life Value approach - correct answers annual income x years to retirement Needs approach - correct answers focuses on both cash and income needs Social Security blackout period - correct answers time during which a surviving spouse is ineligible to receive SS survivor benefits stops after the youngest child turns 16, resume at age 60 Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ 2 types of buy-sell agreements - correct answers entity plan and cross purchase plan entity plan- business owns policy on business owner's life cross purchase- each business owner owns a policy on the other business owners Executive bonus plans (section 162) - correct answers employer pays a bonus to employee, who uses the bonus to pay for life insurance premiums. bonus is tax deductible to employer as salary and is included in the employees gross income employee has full access to living benefits during lifetime Industrial life insurance - correct answers issues very small face amounts premiums paid weekly and collected in person Home service life insurance - correct answers slightly larger than industrial life insurance policy owners encouraged to pay online so agent doesn't have to collect in person 3 premium elements - correct answers 1- mortality 2- interest Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ 3- expenses Net premium - correct answers mortality - interest = net premium Gross premium - correct answers mortality - interest + expenses = gross premium aka loaded premium. the amount the policy owner pays Decreasing term insurance - correct answers death benefit decreases over policy's term, premium level Level term - correct answers death benefit is level for the term, premium level Increasing term - correct answers death benefit increases, premium increases Return of premium term - correct answers all or partial return of premium if alive by end of term Renewable term - correct answers guarantees the insured can renew insurance for the same term, but premium will go up with age Convertability - correct answers allows conversion of term to permanent insurance Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ Variable Universal Life - correct answers permanent insurance and cash value can be invested Separate account - correct answers fund in which a life insurance company holds and invests variable annuity and life insurance premium maintained separately from general account, where company holds premium for fixed products Which variable policy has no guaranteed death benefit? - correct answers variable universal life variable whole life does Joint Life Policy - correct answers first to die pays death benefit when first insured dies costs less than 2 individual policies Survivorship Life Policy - correct answers second to die can pay the estate costs of deceased Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ also costs less than 2 individual policies Jumping Juvenile Policy - correct answers death benefit of a juvenile policy increases at 18 or 21 Waiver of Premium rider - correct answers premium is waived in the event of disability for flex premium policies, the cost of insurance deduction from cash value is waived instead of premium Disability Income Rider - correct answers provides a monthly benefit check if insured becomes disabled. benefit usually 1% of face value during disability premiums are waived and DB is still paid out to benes Payor Benefit Rider - correct answers usually associated with juvenile policies if the person paying premium becomes disabled or dies before the child is legally an adult, the premiums are waived until the child is 18 Accelerated Benefits Rider - correct answers allows insured to apply for an advance of some or all of death benefit (25-100%) Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ they must have a limited life expectancy or meet certain medical circumstances (chronic illness or catastrophe) Other Insured Rider - correct answers provides convertible term for another person (spouse, children, business partner) Exchange Privilege Rider - correct answers allows policyowner to switch the insured often used when a business owns insurance on a key employee who retires or leaves Term Insurance Rider - correct answers added to a permanent policy to increase coverage for a lower cost than paying separate term policy premium Return of Premium Rider - correct answers upon death, death benefit = permanent policy death benefit + premiums paid for rider Accidental Death Benefit Rider - correct answers pays an extra benefit if the insured dies as a result and within 90 days of an accident often referred to as double or triple indemnity Guaranteed Insurability Rider - correct answers rider that allows owner to purchase additional life insurance without proving insurability from ages 25-40 at 3 year intervals Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ Life Income Settlement - correct answers like an annuity, beneficiary is guaranteed a stream of income for life options- life only, life with period certain, life with refund, joint and survivor life Policy loans - correct answers no credit check, lower interest rate and flexible repayment schedule. If insured dies with a loan it reduces the death benefit dollar for dollar Participating vs. nonparticipating policies - correct answers participating- can pay dividends but not guaranteed nonparticipating- no dividends Life insurance dividend options - correct answers CARPPO Cash, accumulation of interest, reduced premium, paid up additions, paid up interest, one-year term Policy provisions - correct answers the terms of a life insurance policy- describe how common situations will be handled and the rights/obligations of the insured and insurer Life insurance ownership rights - correct answers -name and change bene -select settlement options Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ -borrow or withdraw cash value -receive dividends -surrender or cancel policy -assign or transfer ownership -select and change premium payment method -select a nonforfeiture option Provisions - Free Look - correct answers policy owner can return the policy within 10 days of delivery and receive all premium paid Provisions - Insuring Clause - correct answers states the insurer's promise to pay upon the insured's death and how much usually found on the 1st page of the policy and signed by an officer of the insurance company Provisions - Assignment (2 types) - correct answers collateral assignment- temporary pledging of death benefit as collateral for a loan. does not change ownership absolute/permanent assignment- permanent change of ownership Provisions - Entire Contract - correct answers the policy and a copy of the original application are the entire contract Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ insurer may not refer to any other documents when paying or denying a claim Provisions - Endorsements - correct answers any modifications to the policy must be made in writing, agreed to by insurer and insured, and signed by an officer at the insurance company Provisions - Consideration - correct answers legal term meaning something of value ($) insured's consideration- premium payments insurer's consideration- payment of benefits at time of claim Provisions - Premium Payments - correct answers premiums are due in advance of the coverage period grace period is 31 days and if the insured dies within the 31 days, the insurer will pay death benefit minus premiums missed Provisions - Reinstatement - correct answers restoring a lapsed policy almost always allowed for permanent policies if the insured submits an application for reinstatement within 3 years, pays all missed premiums plus interest, and does another medical exam Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ Common Disaster Provision - correct answers expansion of Uniform Simultaneous Death Act if both the insured and primary beneficiary die within 30-90 days as a result of the same accident, the primary bene is assumed to have died first and proceeds are still paid to the contingent bene (not the primary bene's estate) Spendthrift Provision - correct answers death benefit can't be paid in a lump sum, claimed by creditors, pledged by a bene to creditors, or used by the bene as loan collateral Exclusions - correct answers coverage does not apply for: -suicide within 2 years -non-commercial aviation pilots and passengers -military (status-type and results-type) -hazardous hobby- might still get coverage but for a higher premium Status-Type vs. Results-Type Military Exclusion - correct answers status-type- coverage is void for the entire duration of military service results-type- coverage is only void if death results from military Groups eligible for group insurance - correct answers group must have been formed for a purpose other than insurance -employers Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ -multiple employer trust (multiple smaller employers in similar industry) -labor unions -trade associations -group credit life Group Credit Life Insurance - correct answers lender sponsors a group life insurance plan for its debtors insurance can't exceed the debt and the lender is bene Master Policy vs. Certificate of Insurance - correct answers 1 master policy is issued to the sponsoring group (employer) and those covered under the plan receive a certificate of insurance Contributory vs. Noncontributory Employer Group Plan - correct answers contributory- employee pays part of the premium and 75% of eligible employees must enroll for the employer to sponsor the plan noncontributory- employer pays whole premium and 100% of eligible employees must enroll Group underwriting - correct answers underwriter underwrites the group, not the individuals no health exam Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ Employee eligibility for group plans - correct answers employers can't chose which individuals they will cover and not cover, but they can choose which classes of employees receive coverage common classes are full time vs. part time and years of service Probationary & enrollment periods - correct answers probationary period is the period employees must wait before enrolling enrollment period typically 31 days after probationary Group coverage conversion privilege - correct answers certificate holders (employees) must be allowed to convert their group coverage to an individual policy within 31 days of losing coverage and without providing proof of insurability must be a permanent policy for the same coverage amount Annuity accumulation vs. annuitization periods - correct answers accumulation- additional premium payments can be made, accumulated value can be partially withdrawn or surrendered, interest grows tax deferred, annuity belongs to owner annuitization- accumulated value is converted to a regular stream of income and the annuity now belongs to the insurance company Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ -loans- reduce death benefit, not taxed when in force, only taxed if policy is surrendered with a gain -dividends- not taxed. considered return of premium so reduce cost basis -death benefit- not taxed. if paid over time, interest earned is taxed but never original death benefit -accelerated death benefit- not taxed Business life insurance taxation - correct answers premiums are not tax deductible (except for executive bonus policies) and death benefit not taxable Group life insurance taxation - correct answers premiums paid by employer are tax deductible as a business expense premiums for the first $50k of coverage not taxable income for employees. taxable over $50k Modified Endowment Contract (MEC) - correct answers too much premium paid in the first 7 years of a policy (7 pay test). once a MEC always a MEC withdrawals and loans are taxed LIFO so interest withdrawn first. 10% penalty on interest if withdrawn before 59 1/2 (unless disabled) Annuity taxation - correct answers -premiums- not tax deductible -interest during accumulation- tax deferred -withdrawals during accumulation- LIFO (same as MEC) Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ -annuity payments- taxed per exclusion ratio -annuity payments past life expectancy- fully taxable -death benefit- lump sum, 5 year deferral, annuity payout, spousal continuation Exclusion ratio - correct answers cost basis / value = % of payment attributed to cost basis and excluded from gross income paid in $650 / $1k value = 65% exclusion ratio. The additional 35% is ordinary income Annuity death benefit taxation - correct answers -lump sum- gain is taxable -5 year deferral- interest in first out (LIFO) but no 10% penalty -annuity payout- taxed per exclusion ratio -spousal option 1035 contract exchange taxation - correct answers section 1035 of tax code allows the exchanging of contracts without gain taxation life to life- not taxable annuity to annuity- not taxable life to annuity- not taxable *annuity to life- not eligible. gains are taxed Life & Health Insurance Exam Practice Test ( Latest 2024/2025 Questions and Answers)(100% Verified Answers)RATED A+ Life insurance proceeds & gross estate - correct answers included in deceased insured's estate if: -payable to insured's estate -insured owns policy at time of death -insured transferred ownership of policy within 3 years Annuity death benefit & gross estate - correct answers if death occurs during accumulation, entire value of annuity included in estate if death occurs during annuitization, present value of future payments included in estate IRA contribution deductibility - correct answers deductible when under certain AGI limits or when not covered by an employer plan Investments NOT allowed in IRAs - correct answers life insurance, collectibles, hard assets (gold or silver) Penalty for missed RMD - correct answers 25% on taxes owed Taxation of IRA withdrawals - correct answers deductible contributions are fully taxed, nondeductible contributions are tax free IRA & gross estate - correct answers entire value included in gross estate