Prepare for the Life Insurance license exam with these flashcard questions and answers. This guide covers term life, whole life, universal life, and policy provisions.
Q: life insurance
Answer: insurance that pays to a named beneficiary or the deceased’s estate upon the death of the insured,may b annuity or endowment, may incl benef for accident death/dismemberment, disability, protects against risk pf premature death which exposes a finNcial riskto family or business. ie:burial expenses, pay debts, loss of family inc/business profits
Q: insurance
Answer: content that indemnifies another against loss, damage, liab arising from unknown event
Q: indemnify
Answer: make a person whole by restoring that person to the same financial poistion that existed. 4 the loss
Q: insured
Answer: policy owner
Q: premium
Answer: set amount of money payable for policy/coverage
Q: insurance company
Answer: insurer
Q: policy
Answer: agreement insurer and insured, agreeement/contract
Q: loss
Answer: reduction in value and asset
Q: claim
Answer: demand for payment of insured benefit to person named in policy
Q: risk
Answer: uncertainty of financial loss when one or more outcome is possible. must be element of doubt and uncertainity
Q: pure risk
Answer: only a chance of loss, only pure risk is insurable, risk associated with chance of loss
Q: speculative risk
Answer: involves both uncertain of loss and gain ie betting at a race track/ investing in the stock market
Q: peril
Answer: immediate specific event causing loss and giving rise to risk. ie building burns as a result of “fire” or person dies as a result of “death”
Q: hazard
Answer: fsctor that gives rise to peril
Q: three types of hazards
Answer: physical, moral, morale
Q: physical hazard
Answer: arises from material, structural, or operational features ie: unsanitary conditions slippery floors
Q: moral hazard
Answer: arise from peoples habits or values (lying, cheating)
Q: morale hazard
Answer: arises out of human negligence ie: dont wear seatbelt
Q: 5 ways to manage risks
Answer: share transfer avoid reduction retention
Q: sharing risk
Answer: when risk cannot be avoided& retention causes too much exposure
Q: transfer risk
Answer: move risk to another insurance co
Q: types of transfers
Answer: non insurance and contract
Q: avoidance of risk
Answer: abstenance
Q: reduction of risk
Answer: smoke alarm to reduce potential loss
Q: retention of risk
Answer: do nothing, assume part of risk yourself ie: deductible
Q: law of large numbers
Answer: ins co cannot predict loss expected for a given individual using this law, insurers can predict how many losses will occur with this law
Q: exposure unit
Answer: item of property or insured person
Q: insurable interest
Answer: must have this to preserv life or property of insured
Q: insurable interest for life insurance
Answer: must exist at time of app notnecessary T time of death
Q: insurable risk
Answer: large #s of homogenous units in order for pooling & insurance mechanismsof insurance to function
Q: insurable risk
Answer: loss must bemeasureable, place a specific amount tp calculate premiums and claims settlement
Q: insurable risk
Answer: loss must be uncertain not deliberate act of destruction
Q: insurable risk
Answer: must be an econimic hardship must suffer significant loss to your own self
Q: foreign insurer
Answer: licensed to conduct business in states and dist of columbia or other US territories other than the one it is inc
Q: domestic insurer
Answer: conducting bus within the state it is inc
Q: alien insurer
Answer: companies inc in a country other than US, dist of columbia or any US territorial possesion
Q: “admitted”
Answer: a company is a legal insurer who recieves a license to do business in a state is considered this
Q: “nonadmitted”
Answer: insurers not licensed to transact insurance within a state are considered this
Q: unauthorized
Answer: insurer not entitled to transact insurance within a state
Q: “authorized”
Answer: insurer entitled to transact insurance within a state, having compiled with the law and satisfies all conditions to transact insurance
Q: types of distributions systems
Answer: agency system, mass marketing
Q: agency system/insurance is made available to the public thru a number of distribution systems
Answer: indep ins agent, exclusive or captive agents,general agent of managing general agents, direct writing companies
Q: indep ins agent
Answer: sells ins products of several companies and work for themselves or other agents
Q: indep ins agent
Answer: owns the expiration of the policies he sells, meaning he may place the business with another insurer upon renewal if it is in the best interest of the client
Q: exclusive or captive agents
Answer: represent only one company, career agents
Q: general agents or managing general agents
Answer: hire supervise train other career agents within a certain geograph area
Q: MGA
Answer: managing general agent
Q: MGA
Answer: compensated by comissions earned on business sold by herself as well as an overriding commission on commiss produced by other agents managed by the general agent
Q: direct writing company
Answer: usually pays salaries to employees whos job is to sell company’s insuranceroducts
Q: agency systems
Answer: ins agents,
Q: forms of mass marketing
Answer: direct response, franchise
Q: direct response
Answer: conducted by mail, ads,newspaper, magazines, tv, radio having limited benefits and low premium ie disability only
Q: franchise marketing
Answer: provides cov to employees of small firms or to members of assoc receive indiv policies that vary according to indiv needs. employers can offer employees insur at a lower prem, poss ddeducted from their payck
Q: producer
Answer: agent repres ins co or broker rep potential insd
Q: categories of producers
Answer: life and health,prop n cas, brokers, soilcitors, ins consultants
Q: life and health agent
Answer: usually rep insurer to the buyer and do not have authority to issue or modify ins contracts
Q: prop and cas agents
Answer: granted more authority by ins co, may bind or commit co by oral or written agreement, accept risks, collect premiums, issue contracts
Q: brokers
Answer: reps for buyer to insurer who select ins coverages from various cos for their. clients
Q: solititors
Answer: salespersom for the ins co who works for the agent or broker
Q: insurance consultant
Answer: not paid by commision, work strictly for benefit of insured and pd a fee by insured
Q: actuaries
Answer: mathematicians who study and compile statistical data regarding exposure and risks for insurance company
Q: major channels of regulation in the ins industry
Answer: federal, state, self
Q: federal regulation
Answer: applies to idiv or companies whose activities affect interstate commerce, oversee areas not cov by state regulation of the industry
Q: paul vs virginia
Answer: transact of ins across state lines was not interstate commerce and therefore should be regulated by local law, held for 75 yrs
Q: southeastern underwriters decision
Answer: supreme ct decision overturned paul vs virginia: ins trNsacted across state lines WAS in fact interstate commerce
Q: McCarran ferguson act
Answer: 1945 enacted by congress:fed govt has roght to regulate bus of ins that is not regulated by state law
Q: privacy
Answer: disclosure authorization, penalties
Q: privacy
Answer: protect the public frominaccurate or misused info
Q: disclosure authorization
Answer: producers respons to explain to applicant various resources from which insurer will obtain info regarding that applicants insurability
Q: disclosure authorization
Answer: forms must be furnished stating who is author to disclose personal info, kimf of info that may be disclosed, reason info is being colllected, how it will b used
Q: penalty for any one person who obtains info about a client without having a legit reason to recv it
Answer: $10000 or up to one year on jail
Q: fair credit reporting act
Answer: …all insurers must comply with this. ..regarding info obtained from a third party concerning the applicant
Q: consumer rights
Answer: persons may dispute info they feel is inaccurate or imcomplete and may require reporting agency to correct or delete info.
Q: notice to applicant
Answer: informs applicant a report will b ordered concerning past credit report history and any other life and health insurance for which they have aplied
Q: violators of fair reporting act
Answer: $5000 fine, pay damages suffered by consumer, attny fees punitive damages, imprisonment for one yr for obtaining info under false pretenses
Q: consumer report
Answer: contains a persons credit info, character reputation , habits used or collected to determine whether a person is elegible for credit, insurance, employment or other purposes
Q: investigate consumer report
Answer: includes info re persons character, personal habits, and mode of living obtsined thru investigation ie: interviews with assoc , friends person must be informed to obtain info
Q: pretext interview
Answer: someone pretends to b someone else to obtain info about another person, pretends to b someone else, misreps the purpose of interview, refuses to properly identify themself
Q: pretext interview
Answer: prohibited inles evidence of criminal activity, fraud or misrepresentation
Q: consumer reporting agency
Answer: collects info on people, prepare reports and make them avail to organiz with legit reason to recv info
Q: experian / equifax
Answer: profit consumer reporting agency
Q: medical information bureau or credit union
Answer: nonprofit reporting agency
Q: agnecies are required to provide a notification system to consumers that allow them to request exclusion of their info. how long is this nitification good for?
Answer: 2 years
Q: fraud and false statements
Answer: making false material statements, making false entry of material in any report/statement to deceive, embezzeling or misappropriating monies, corruptin/influencing admin from an ongoing investigation of a rep of insurer
Q: financial services modernization
Answer: also know as Graham-Leach-Bliley Act (GLBA)
Q: graham leach blilely act
Answer: passed n 1999 to remove depressn area barriers between commercial banking investment banking and insurance to allowstate ins regulators to oversee banks as a holding co for ins purposes
Q: financial holding co has minimal financial standards for financial privacy
Answer: ensure security and confidentiality of customer srecords and info, protect against threats or hazards to security of records and protect against unauth use of records that could damage consumer
Q: consumer
Answer: anyone about a comapny collects infoand who has an ongoing relationship with a financial institution
Q: opt out
Answer: opportunity for consumer to keep company from sharing info about them
Q: GLBA requires the company make two primary disclosures to customer/company – fed regulation
Answer: company gives customer a clear conspicuious explanation of policies and procedures for customer pricacy and customers roght to opt out
Q: **products that are regulated by both fed state
Answer: Securities Exchange Commisssion and State insurance dept’svariable contracts, variable lif annuities and var life insurance co products
Q: body of laws at state level that administers and enforces ins laws, states how co must b organized,requirements for inc,amts for minimum capital and surplus
Answer: state insurance code
Q: statutes
Answer: body of law developed by legislative branch of govt that outline duties of commissioner and activities of dept of ins
Q: rules and regulations
Answer: developed by dept of ins to expand upon statutory requirements and legislative intent
Q: commisioner, superintendent or director of insurance
Answer: supervises and regulates ins affairs at state level
Q: duties of ins commissioner
Answer: issues certificate of authority,examirs boks docs, of insurer broker oragent
Q: dept of insurance monitors financial stmnts,reserves, accting, investments etc to prevent…
Answer: insurance co solvency
Q: annual statement
Answer: each ins co must report financial condition on this
Q: organizations that rate financial stength ofnins carriers byanalyzing a co claim experience, invest performance management, etc
Answer: AM best co, Weiss research, Standard &Poor’s/Duff and Phelps, Mood’s Investment Service
Q: state dept of ins may examine insurers records anytime but at least
Answer: ever three to five years