Indiana Life & Health Insurance Exam
- ANS-
3 Basic Types of Term Life Insurance - ANS-level, increasing, and decreasing
7-Pay Test - ANS-cumulative premiums paid during the first 7 years of the policy must not
exceed the total amount of net level premiums that would be required to pay the policy up using
guaranteed mortality costs and interest; new test required any time there is a material change to
a policy (increase in death benefit); essentially, determines if policy is "overfunded" or if it's a
MEC
Absolute Assignment - ANS-transferring all rights of ownership to another person or entity; new
policy owner doesn't need to have insurable interest in the insured
Accidental Death Rider - ANS-pays some multiple of the face amount if the death is the result of
an accident as defined in the policy; death must usually occur within 90 days of such an
accident
Accumulation Period - ANS-the pay-in period; the period of time over which the owner makes
payments (premiums) into an annuity; period during which payments earn interest on a
tax-deferred basis
Accumulation Phase - ANS-period after an annuity has been purchased but before distributions
begin
Adjustable LIfe - ANS-insured determines how much coverage is needed and the affordable
amount of premium; as insured's needs change, policy owner may make adjustments such as
increase or decrease the premium or the premium paying period, increase or decrease the face
amount (requires proof of insurability for increasing the death benefit or changing to a lower
premium type policy), or change the period of protection; policy owner also has option of
converting from term to whole life or vice versa
Annually Renewable Term (ART) - ANS-premium increases annually according to attained age;
policy may be guaranteed to be renewable each without proof of insurability
Annuity - ANS-contract that provides income for a specified period of years, or for life; protects
person against outliving his or her money; vehicle for accumulation of money and the liquidation
of an estate; deferred grows tax free
Annuity Income Amount Based On - ANS-amount of premium paid or cash value accumulated;
frequency of payment; interest rate; annuitant's age and gender
Annuity Period - ANS-known as annuitization period, liquidation period, or pay-out period; time
during which the sum that has been accumulated during the accumulation period is converted
into a stream of income payments to the annuitant; may last for the lifetime of the annuitant or
for a specified period, which could be longer or shorter
Application of State Law - ANS-provision that states that no matter what the home state of the
insurance company or the applicant is, the law of the state in which the policy is sold would be
considered the law under which the policy will be enforced
Automatic Premium Loans - ANS-loan that prevents the unintentional lapse of a policy
, Bail-Out Provision (Annuity) - ANS-allows the contract holder, in the event that interest rates
drop a specified amount within a specified time frame, to surrender the contract without charge
Buy-Sell Agreement - ANS-business continuation agreement that determines what will be done
with the business in the event that an owner dies or becomes disabled
Cash Refund (Annuity) - ANS-when annuitant dies, the annuitant's beneficiary receives a refund
of the principal, or the original amount paid into the annuity minus benefit payments already
made to the annuitant; guarantees the return of the amount to purchase the annuity but it does
not guarantee to pay any interest; only difference between cash refund and installment refund is
that cash refund is a lump-sum payment
Collateral Assignment - ANS-transfer of partial rights to another person; usually done to secure
a loan or some other transaction; partial and temporary assignment of some of the policy rights;
once debt/loan repaid, assigned rights returned to the policy owner
Common Disaster Clause - ANS-provided under the Uniform Simultaneous Death Law;
assumed that the primary beneficiary died first in a common disasters; most insurers specify a
certain period of time, usually 14 to 30 days, in which death must occur for this provision to
apply; as long as the beneficiary dies within this specified period of time following the death of
the insured, it will still be interpreted that the beneficiary died first
Concealment - ANS-occurs when a person withholds a material fact that is crucial to making a
decision; in insurance, this involves withholding information that would be crucial to underwriting
decisions
Continuous Premium (Straight Life or Ordinary Life) - ANS-basic whole life policy; will typically
have the lowest annual premium
Convertible Term - ANS-provides the policy owner with the right to convert the policy to a
permanent insurance policy without evidence of insurability; premium will be based on the
insured's attained age at the time of conversion
Cost Recovery Rule - ANS-the amount of cash value that exceeds the sum of the total
premiums will be taxed as ordinary income when cash withdrawn or policy surrendered for cash
value
Credit Life - ANS-written to insure the life of the debtor and pay off the balance of a loan in the
event of the death of the debtor; usually decreasing term insurance; individual policy or group
plan (if group policy, creditor is owner of the master policy and each debtor receives a certificate
of insurance); creditor is owner and beneficiary of the policy and premiums usually paid by
debtor; cannot pay out more than the balance of the debt
Decreasing Term - ANS-death benefit decreases each year over duration of the policy term;
typically used when the amount of needed protection is time sensitive, or decreases over time
Deferred Annuity - ANS-purchased with single lump sum (single premium-deferred annuities) or
is purchased thought periodic payments (flexible premium-deferred annuities); grow tax free;
income payments begin sometime after one year from purchase; used to accumulate funds for
retirement; owner receives current interest rate or guaranteed interest rate, whichever is higher;
if surrendered prior to age 59 1/2, income tax must be paid on gain, and 10% penalty will be
imposed on the taxable portion
Dividends (policy) - ANS-non-taxed returns of unused premiums
Entire Contract - ANS-provision that stipulates that the policy and a copy of the application,
along with any riders or amendments, constitute the entire contract
- ANS-
3 Basic Types of Term Life Insurance - ANS-level, increasing, and decreasing
7-Pay Test - ANS-cumulative premiums paid during the first 7 years of the policy must not
exceed the total amount of net level premiums that would be required to pay the policy up using
guaranteed mortality costs and interest; new test required any time there is a material change to
a policy (increase in death benefit); essentially, determines if policy is "overfunded" or if it's a
MEC
Absolute Assignment - ANS-transferring all rights of ownership to another person or entity; new
policy owner doesn't need to have insurable interest in the insured
Accidental Death Rider - ANS-pays some multiple of the face amount if the death is the result of
an accident as defined in the policy; death must usually occur within 90 days of such an
accident
Accumulation Period - ANS-the pay-in period; the period of time over which the owner makes
payments (premiums) into an annuity; period during which payments earn interest on a
tax-deferred basis
Accumulation Phase - ANS-period after an annuity has been purchased but before distributions
begin
Adjustable LIfe - ANS-insured determines how much coverage is needed and the affordable
amount of premium; as insured's needs change, policy owner may make adjustments such as
increase or decrease the premium or the premium paying period, increase or decrease the face
amount (requires proof of insurability for increasing the death benefit or changing to a lower
premium type policy), or change the period of protection; policy owner also has option of
converting from term to whole life or vice versa
Annually Renewable Term (ART) - ANS-premium increases annually according to attained age;
policy may be guaranteed to be renewable each without proof of insurability
Annuity - ANS-contract that provides income for a specified period of years, or for life; protects
person against outliving his or her money; vehicle for accumulation of money and the liquidation
of an estate; deferred grows tax free
Annuity Income Amount Based On - ANS-amount of premium paid or cash value accumulated;
frequency of payment; interest rate; annuitant's age and gender
Annuity Period - ANS-known as annuitization period, liquidation period, or pay-out period; time
during which the sum that has been accumulated during the accumulation period is converted
into a stream of income payments to the annuitant; may last for the lifetime of the annuitant or
for a specified period, which could be longer or shorter
Application of State Law - ANS-provision that states that no matter what the home state of the
insurance company or the applicant is, the law of the state in which the policy is sold would be
considered the law under which the policy will be enforced
Automatic Premium Loans - ANS-loan that prevents the unintentional lapse of a policy
, Bail-Out Provision (Annuity) - ANS-allows the contract holder, in the event that interest rates
drop a specified amount within a specified time frame, to surrender the contract without charge
Buy-Sell Agreement - ANS-business continuation agreement that determines what will be done
with the business in the event that an owner dies or becomes disabled
Cash Refund (Annuity) - ANS-when annuitant dies, the annuitant's beneficiary receives a refund
of the principal, or the original amount paid into the annuity minus benefit payments already
made to the annuitant; guarantees the return of the amount to purchase the annuity but it does
not guarantee to pay any interest; only difference between cash refund and installment refund is
that cash refund is a lump-sum payment
Collateral Assignment - ANS-transfer of partial rights to another person; usually done to secure
a loan or some other transaction; partial and temporary assignment of some of the policy rights;
once debt/loan repaid, assigned rights returned to the policy owner
Common Disaster Clause - ANS-provided under the Uniform Simultaneous Death Law;
assumed that the primary beneficiary died first in a common disasters; most insurers specify a
certain period of time, usually 14 to 30 days, in which death must occur for this provision to
apply; as long as the beneficiary dies within this specified period of time following the death of
the insured, it will still be interpreted that the beneficiary died first
Concealment - ANS-occurs when a person withholds a material fact that is crucial to making a
decision; in insurance, this involves withholding information that would be crucial to underwriting
decisions
Continuous Premium (Straight Life or Ordinary Life) - ANS-basic whole life policy; will typically
have the lowest annual premium
Convertible Term - ANS-provides the policy owner with the right to convert the policy to a
permanent insurance policy without evidence of insurability; premium will be based on the
insured's attained age at the time of conversion
Cost Recovery Rule - ANS-the amount of cash value that exceeds the sum of the total
premiums will be taxed as ordinary income when cash withdrawn or policy surrendered for cash
value
Credit Life - ANS-written to insure the life of the debtor and pay off the balance of a loan in the
event of the death of the debtor; usually decreasing term insurance; individual policy or group
plan (if group policy, creditor is owner of the master policy and each debtor receives a certificate
of insurance); creditor is owner and beneficiary of the policy and premiums usually paid by
debtor; cannot pay out more than the balance of the debt
Decreasing Term - ANS-death benefit decreases each year over duration of the policy term;
typically used when the amount of needed protection is time sensitive, or decreases over time
Deferred Annuity - ANS-purchased with single lump sum (single premium-deferred annuities) or
is purchased thought periodic payments (flexible premium-deferred annuities); grow tax free;
income payments begin sometime after one year from purchase; used to accumulate funds for
retirement; owner receives current interest rate or guaranteed interest rate, whichever is higher;
if surrendered prior to age 59 1/2, income tax must be paid on gain, and 10% penalty will be
imposed on the taxable portion
Dividends (policy) - ANS-non-taxed returns of unused premiums
Entire Contract - ANS-provision that stipulates that the policy and a copy of the application,
along with any riders or amendments, constitute the entire contract
