Insurance Terms and Concepts, Exams of Nursing

Download Insurance Terms and Concepts and more Exams Nursing in PDF only on Docsity! Life Insurance Exam (Texas) Study Guide 2024 Insurance (General concept) Correct Answer is - transfers the risk of loss from an individual to an insurer - based on the principle of indemnity - based on the principle of risk (risk pooling) insurable interest (General Concept) Correct Answer is - must exist at the time of the application - insuring one's own life, family member, or a business partner Solicitation and sales presentation Correct Answer is - illustration- presentation of nonguaranteed elements - buyer's guide is generic information about life polices which must be provided at the time of application - policy summary is a description of features and benefits of the policy being issued and must be provided when the policy is delivered. Underwriting (Field underwriting (by agent) Correct Answer is - application completed and signed - agent's report: agent's observation about the application that can assist in underwriting -premiums with application and conditional receipts underwriting ( company underwriting) Correct Answer is - multiple sources of information: applications, consumer reports, MIB (Medical Information Burea) - Risk Classification: 3 types of risk : standard, substandard, preferred Underwriting (Federal Regulation) Correct Answer is - Fair Credit Reporting Act: protect consumers against circulations of inaccurate or obsolete information - USE PATRIOT Act/ Anti-money Laundering and Suspicious Activity Reports Rules Premium Determination Correct Answer is - 3 key Factors for life insurance: mortality, interest, and expense - Mode: the more frequently premium is paid, the higher the premium Policy Issue and Delivery Correct Answer is Effective date of coverage - if the premium is not paid with the application, the agent must obtain the premium and a statement of continued good health at the time of the policy delivery Agent/ Producer Correct Answer is a legal representative of an insurance company; the classification of producers usually includes agents and brokers' agents are the agents of the insurer Applicant of proposed insured Correct Answer is a person applying for insurance Beneficiary Correct Answer is a person who receives the benefits of an insurance policy Broker Correct Answer is an insurance producer who is not appointed by an insurance company and who represents the client Death benefits Correct Answer is the amount paid upon death of the insured in a life insurance policy Estate Correct Answer is a person's net worth Insurance policy Correct Answer is a contact between a policyowner (and/or insured) and an insurance company which agrees to pay insured or the beneficiary for loss caused by specific events. Insured Correct Answer is a person covered by the insurance policy; may or may not be the policyowner insurer (principal) Correct Answer is the company who issues an insurance policy Lapse Correct Answer is policy termination due to nonpayment of premium Life insurance Correct Answer is coverage on human lives Policyowner Correct Answer is the person entitled to exercise the rights and privileges in the policy Premium Correct Answer is the money paid to the insurance company for the insurance policy Underwriting indexed annuity separate account variable annuity General characteristics (Term life) Correct Answer is - pure protection - lasts for specific term - no cash value Level premium Term (Term life) Correct Answer is level death benefit and level premium Annually Renewable Term (Term life) Correct Answer is - renews each year without proof of insurability - premiums increase due to attained age Decreasing Term (Term life) Correct Answer is coverage gradually decrease at predetermined times; best used when the need for protection declines from year to year Increasing Term (Term life) Correct Answer is coverage increase each year Features of term policies (term life) Correct Answer is - renewable: renew the policy without evidence of insurability - convertible: right to convert a term policy to a permanent policy without evidence of insurability General characteristics (whole life) Correct Answer is - permanent protection - guaranteed elements (face amount, premium, and cash value) until death or age 100 - level premium - cash value and other living benefits Straight life (whole life) (continuous premium) Correct Answer is - basic policy - level death benefits - insured pays premiums for life or until age 100 Limited payment Correct Answer is premiums paid until a certain time; coverage in effect to age 100 Single Premium Correct Answer is premiums paid in one lump sum; coverage continues to age 100 General Characteristics (Flexible Premium) Correct Answer is - types of whole life insurance - flexible premium Adjustable life (Flexible premium) Correct Answer is - policyowner may adjust the premium and premium- paying period, the face amount, and the period of protection - can be converted from term to whole life and vice versa - cash value only develops if the premiums paid are more than the cost of the policy Universal life (Flexible premium) Correct Answer is - an insurance component in the form of annually renewable term - 2 death benefit options: options A level death benefits, and options B- increasing death benefit - can make partial surrender/ cash withdrawal Variable Life (other types of polices) Correct Answer is - fixed premium, minimum death benefits - cash value and the actual amount of the death benefits are not guaranteed - assets in separate accounts - agents must be dually licensed in insurance and in securities Combination Plans (other types of polices) Correct Answer is - Joint life: - premium is based on the joint average age of the insured ;death benefit upon the first death only - Survivorship Life: - premium is based on the joint average of the insured; death benefit upon the last death Phases (Annuities) Correct Answer is - accumulation (pay-in): payment made into the annuity - annuitization (pay-out): payment made to the annuitant from the annuity parties (annuities) Correct Answer is - annuitant: insured (must be a person); policy issued on annuitant's life - Beneficiary: will receive any amount contributed to annuity (plus any gain) if annuitant dies during accumulation period - Owner- has all rights to policy (usually annuitant); can be corporation or trust Types of Annuities Correct Answer is - fixed annuities: guaranteed, fixed payment amount; premiums in general account - variable annuities:payment not guaranteed; premiums in separate account, and invested in stock and bonds. - indexed annuities: interest rate tied to an index; earn higher rate than fixed annuities, not as risky as variable annuities or mutual funds Premium Payments (annuities) Correct Answer is - Single premium: One lumps- sum payment; the principal is created immediately (both immediate and deferred annuities) - Periodic (Flexible) premium: multiple payments; the principal is created over time (used for deferred annuity only) Income Payment (annuities) Correct Answer is - Immediate: purchased with a single premium; income payments start within 12 months from the date of purchase - Deferred: purchase with either lump sum or periodic: payment, premium; benefit start sometimes after 1 year from the date of purchase (often used to accumulate funds for retirement) Activities of daily living (ADLs) Correct Answer is a person's essential activities that include bathing, dressing, eating, transferring, toileting, continence Assignment Correct Answer is transfer of right of policy ownership Consideration Correct Answer is something of value that each party gives to the other (binding force in any contract) Indemnity Correct Answer is a principle of reimbursement of which insurance is based; in the event of loss, an insurer reimburses the insureds or beneficiaries for the loss Lump sum Correct Answer is payment of the entire benefit in one sum Minor Correct Answer is a person under legal age NAIC Correct Answer is National Association of Insurance Commissioners, an organization composed of insurance commissioners from all states and jurisdictions formed to resolve insurance regulatory issues Principal Correct Answer is the face value of the policy; the original amount invested before the earnings Nonforfeiture options Correct Answer is - cash - extended terms (automatic) Correct Answer is - the level of priority. each level in the succession is only eligible if the beneficiary in the level above has died: - primary: first claim to the policy proceeds - contingent (secondary, tertiary): next claim after primary Policyowner's right to change a beneficiary: Correct Answer is - revocable: can be change at any time - irrevocable: can be changed with the beneficiary's consent Common disaster clause (beneficiaries) Correct Answer is protects the right of contingent beneficiaries; if the insured and the primary beneficiary died at approximately the same time, it is assumed that the primary beneficiary died first Cash loans available (Policy loans, withdrawals and partial surrenders) Correct Answer is policy's cash value minus any unpaid loans and interest Automatic premium loans (Policy loans, withdrawals and partial surrenders ) Correct Answer is prevent unintentional policy lapse due to nonpayment of premium withdrawals and partial surrenders (Policy loans, withdrawals and partial surrenders) Correct Answer is available in Universal life; a charge may apply Wavier of premium (Disability ) Correct Answer is waves the premium if the insured becomes totally disabled; 6 months waiting period before benefits begin Waiver of cost insurance (Disability ) Correct Answer is in universal life policies; waives the cost of insurance in the event of the insured's disability Disability income (Disability) Correct Answer is waives the premium and pays monthly income Accelerated Benefits Correct Answer is - early payment if insured is diagnosed with a specified catastrophic illness -a portion of the death benefits - death benefit is reduced by the amount paid plus earnings lost by the insurer Spouse/other insured (Additional insured) Correct Answer is term rider (limited time, limited coverage): usually expires when spouse turns age 65 Children's term (Additional insured) Correct Answer is covers all children of the insured (limited time, limited coverage): can be converted to a permanent policy nonfamily insured (Additional insured) Correct Answer is used by business (e.g. key person insurance) Accidental death (riders affect the death benefits) Correct Answer is pays double or triple indemnity if accidental death occurs as defined in the policy; death must occur within 90 days of accident Guaranteed insurability (riders affect the death benefits) Correct Answer is allows for purchase of additional insurance at specified times without evidence of insurability, at the insured's attained age Return of premium (riders affect the death benefits) Correct Answer is increasing term is added to a whole life policy that provides that if death occurs prior to a given age, not only is the death benefits payable to the beneficiary, but all premiums paid as well cash surrender value (Nonforfeiture) Correct Answer is after all that, no more insurance, extended term (Nonforfeiture) Correct Answer is automatic optional; uses cash value to convert to term insurance reduced paid (Nonforfeiture) Correct Answer is uses cash value as a single premium to purchase a permanent policy with a reduced face amount Cash (Dividend ) Correct Answer is insurer sends a check to the insured Reduction of premium (Dividend ) Correct Answer is dividend is applied to the next year's premium Accumulation at interest (Dividend ) Correct Answer is insurers keeps the dividend in an account where its accumulates interest Paid up addition (Dividend ) Correct Answer is dividend is used to increase the face amount Paid- up insurance (Dividend ) Correct Answer is dividend is used to pay up a policy early One year term (Dividend ) Correct Answer is dividend is used to buy additional insurance Cash (settlement) Correct Answer is lump sum payment; usually not taxable Life income (settlement) Correct Answer is provides an income the beneficiary cannot outlive; no guarantee that the entire principle will be paid out (if the beneficiary dies too soon); available as single life or as joint and survivor Interest only (settlement) Correct Answer is insurer retains the principal and only pays out interest Fixed period (settlement) Correct Answer is payments for a specified time period until all the proceeds are paid out Fixed amount (settlement) Correct Answer is payments in specified amounts until all the proceeds are paid out