Kansas Life Insurance Exam Latest Update Graded A+

Kansas Life Insurance Exam Latest Update Graded A+ Insurance - Transfers the risk of loss from an individual to an insurer - Based on the principle of indemnity - Based on the spreading of risk (risk pooling ) and the law of large Insurable Interest - Must exist at the time of application - Insuring one's own life, family member, or a business partner Elements of a Legal Contract - Agreement: offer and acceptance - Consideration: premiums and representations on the part of the insured; payment of claims on the part of the insurer - Competent parties: of legal age, sound mental capacity, and not under the influence of drugs or alcohol - Legal purpose: not against public policy Contract Characteristics - Adhesion: one party prepares the contract; the other party must accept it as is - Aleatory: exchange of unequal amounts - Conditional: certain conditions must be met - Unilateral: only one of the parties to the contract is legally bound to do anything Field Underwriting (By Agent) - Application: completed and signed - Agent's report agent's observations about the applicant that can assist in underwriting - Premiums with application and conditional receipts Company Underwriting - Multiple sources of information: application, consumer reports, MIB - Risk classification 3 types of risks: standard, substandard, preferred Federal Regulations - Fair Credit Reporting Act: protects consumers against circulation of inaccurate or obsolete information - USA PATRIOT Act/Antimoney Laundering and Suspicious Activity Reports Rules Determination - Mode: the more frequently premium is paid, the higher the premium Policy Issue and Delivery - 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 policy delivery Level Premium Term - Level Death Benefit and Level Premium Annually Renewable Term - Renews each year without proof of insurability and Premiums increase due to attained age Decreasing Term - Coverage gradually decreases at predetermined times; best used when the need for protection declines from year to year Renewable Term Policy Renew the policy without evidence of insurability Convertible Term Policy Right to convert a term policy to a permanent policy without evidence of insurability Whole Life Characteristics - Permanent Protection - Guaranteed Elements ( Face Amount, Premium, and Cash Value) - Level Premium - Cash Value and Other Living Benefits Ordinary Whole Life (Continuous Premium) - Basic Policy - Level Death Benefit - Insured Pays Premium for Life or Until Age 100 Whole Life Limited Payment - Premiums Paid until a certain time; coverage in effect to age 100 Whole Life Single Premium - Premiums Paid in One Lump Sum; Coverage Continues to Age 100 Flexible (Whole Life) Insurance Policies (Universal) - An insurance component in the form of annually renewable term - 2 Death Benefit Options: (A) Level Death Benefit (B) Increasing Death Benefit - Can make partial surrender/cash withdrawal Variable Life - Fixed Premium, minimum Death Benefit - Cash Value and the Actual Amount of Death Benefit Are Not Guaranteed - Assets in Separate Accounts - Agents must be dually licensed in insurance and in securities Joint Life (Combination Plan) - Premium is based on the joint average age of the insured - Death Benefit upon the first death only Survivorship Life (Combination Plan) - Premium is based on the Joint Average Age of the Insured - Death Benefit Upon the Last Death Fixed Annuities - Guaranteed, Fixed Payment Amount, Premiums in General Account Variable Annuities - Payment Not Guaranteed; Premiums in Separate Account, and Invested in Stocks 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 Income Payments - Immediate: Purchased with a single premium; income payments start within 12 months from the date of purchase - Deferred: Purchased with either Lump Sum or Periodic Payments Premium; Benefits Start sometime after 1 Year from the date of Purchase Entire Contract Provision - Stipulates that the policy and a copy of the application, along with any riders or amendments, constitute the entire contract Insurance Agreement - Basic Agreement between the Insurer and the Insured Free Look Provision - Allows Policy Owner 10 days from receipt to look over the policy and if dissatisfied for any reason, return it for a full refund of premium Consideration Both Parties to a contract must provide some value Absolute Assignment Involves transferring all right of ownership to another person or entity Collateral Assignment Involves a transfer of Partial Rights to another person Revocable Policy Policy Owner may change the beneficiary at any time Irrevocable Policy Policy Owner must have Beneficiaries signature to change the beneficiary Uniform Simultaneous Death Law It will be assumed that the primary beneficiary died first in a common disaster; the money will go to the contingent beneficiary or the estate Level Premium Premium remains the same throughout the duration of the contract Reinstatement Provision Allows a lapsed policy to be put back in force; the maximum time limit for reinstatement is usually 3 years after the policy has lapsed Incontestability Clause Prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years Exclusions Types of Risks the Policy will not cover Other Insured Rider Provides coverage for one or more family members other than the insured; Spouse can be added until she is 65; Children can be added until 18 or 21 Accelerated Death Benefit Allows the early payment of a portion of the death benefit is the insured has: - Terminal Illness - A medical condition that requires an extraordinary medical intervention - Inability to perform activities of daily living - Permanent confinement to a long term care facility - Any other conditions approved by the Dept of Insurance Living Needs Rider Provides for the payment of part of the policy is the insured has a terminal illness that will result in death within two years Policy Options (Nonforfeiture) - Reduced paidup insurance: uses cash value as a single premium to purchase a permanent policy with a reduced face amount - Extended term: automatic option; uses cash value to convert to term insurance - Cash surrender value: after that, no more insurance Policy Options (Dividend) - Cash: insurer sends a check to the insured - Reduction of premium: dividend is applied to the next year's premium - Accumulation at interest: insurer keeps the dividend in an account where it accumulates interest - Paidup addition: dividend is used to increase the face amount - Paidup insurance: dividend is used to pay up a policy early - One year term: dividend is used to buy additional insurance Policy Options (Settlement) - Cash: lumpsum payment; usually not taxable - Life income: provides an income the beneficiary cannot outlive; no guarantee that the entire principal will be paid out (if the beneficiary dies too soon); available as single life or as joint and survivor - Interest only: insurer retains the principal and only pays out interest - Fixed period: payments for a specified time period until all the proceeds are paid out - Fixed amount: payments in specified amounts until all the proceeds are paid out