LAH Exam Flashcards
Adverse selection - answer tendency of poorer risks to seek insurance coverage (ex:
smoker applies for life insurance, gets approved and still continues to smoke
Agency - answer legal relationship where one party acts on behalf another; insurer is
the principal and the producer is the agent
Three types of agent authority - answer1. Actual/express authority: agent authority
found in the agent contract; when in force, the insurer is responsible for the act of its
agents and producers
2. Implied authority: not specified in agent contract but extension of agent's regular
duties
3. Apparent authority: authority insurance the buying public perceives an agent has
Alien insurer - answer Authorized in any state in the U.S. but principal office located in
another country
Domestic insurer - answer One authorized to insure in the same state that one has their
principal office in
Foreign insurer - answer One authorized to insure in one state but headquartered in
another state
Human life value approach - answerone approach to determining how much life
insurance is needed
- Value of an individual's earning potential over a period of time
(take projected earned income per year * # of years until retirement)
Insurable interest - answerany unknown event that may create any liability against
another person; MUST exist at time of the application or at least at the issuance of the
policy so as to have the insured's consent
· Does NOT need to exist at time of loss
Insurance - answertransfer of risk from one party to another through legal contract;
reduces financial uncertainty for potential future losses; spreads risk from one person to
a large # of people
Life insurance- provides for the immediate creation of funds/estate; replaces unknown
risk with a known benefit
Personal uses: life insurance may be used for survivor protection, estate creation, cash
accumulation, liquidity and estate conservation
,Insurer - answermakes a promise to policymakers after receiving a premium; four types
of insurers
Law of large numbers - answerthe larger the number of occurrences or risk exposures,
the more predictable losses will be or the more the actual results will approach the
expected results for an event & helps develop premium rates
accelerated benefits rider - answerif insured has terminal illness and life expectancy of
12-24 months, may receive % of the death benefit in advance for any purpose; amount
received is not taxable to the insured
accidental death benefits rider - answeraka Multiple Indemnity Rider - additional death
benefit if death of insured caused by an accident ONLY and must occur within 90 days
after accident occurs; death benefit payable here = principal sum
principal sum - answeraccidental death
capital sum - answeraccidental dismemberment; 1/2 of the principal sum
Family/dependent riders - answerwhole life on primary insured and term for spouse and
children
living benefits rider - answerAttached to a life insurance policy and allows for the
payment of a percentage of the death benefit for terminally ill insureds. Normally there is
no cost for this rider.
LTC rider - answerAttached to a life insurance policy and allows for the payment of a
percentage of the death benefit if an individual is not terminally ill but requires long-term
care.
payor rider - answerA rider that provides for the waiver of premiums on a policy
covering a child following the death or the total disability of the adult owner (i.e.,
premium payor).
buy-sell agreement - answerthe agreement provides for the continuation of the business
when, for example, one of
the partners dies. The remaining partners "buy-out" the interest of the deceased partner
by paying an
agreed-upon amount of funds to the deceased's survivors
binding receipt - answerunconditional receipt;becomes effective on the date of the
receipt and continues for a specified period of time or until the insurer declines the
application.
cash refund annuity - answerbeneficiary will receive a lump sum payment that
represents the difference between the
, amount the annuitant paid to the insurer and the total income payments received by the
annuitant
common disaster clause - answerWhen insured and primary beneficiary die at the same
time, it is assumed that the primary beneficiary died first
larceny - answerillegal activity where there's commingling or misappropriation of funds
conditional receipt - answerIn Life and Health insurance, a Conditional Receipt provides
that if premium accompanies the application, coverage shall be in force from the date of
application (whether the policy has yet been issued or not) provided the insurance
company would have issued the coverage on the basis of facts as revealed by the
application and other usual sources of underwriting information. Remember, there is
never any coverage unless the premium has been paid!
credit life insurance - answerLife insurance designed to pay the balance of a loan if the
insured dies before the loan has been repaid in full.
defamation - answersaying false, malicious statements re finances of a competing
company
dividends - answertax exempt/tax free but interest earned is taxable; not considered
income so not taxable; return over an overpaid premium; there are "CRAPO" options
"CRAPO" - answerdividend options (what do with the extra)
1. Cash - turn into cash
2. Reduced premium
3. Accumulate at interest- interest is taxable
4.Purchase additional whole life insurance
5. One year term insurance
equity indexed annuity - answerfixed or non-variable annuity. The contract pays a
guaranteed minimum interest rate and account assets are tied to an index such as
Standard and Poor's. If
the index is higher than the guaranteed rate each year, the contract owner receives the
greater return.
extended term insurance - answercoverage has changed from permanent to level term
protection.
**This is the non-forfeiture option that provides the policyowner with the greatest face
amount of coverage**
family income policy - answerwhole life policy with a decreasing term
rider in order to provide a death benefit together with monthly income payments to the
beneficiary
Adverse selection - answer tendency of poorer risks to seek insurance coverage (ex:
smoker applies for life insurance, gets approved and still continues to smoke
Agency - answer legal relationship where one party acts on behalf another; insurer is
the principal and the producer is the agent
Three types of agent authority - answer1. Actual/express authority: agent authority
found in the agent contract; when in force, the insurer is responsible for the act of its
agents and producers
2. Implied authority: not specified in agent contract but extension of agent's regular
duties
3. Apparent authority: authority insurance the buying public perceives an agent has
Alien insurer - answer Authorized in any state in the U.S. but principal office located in
another country
Domestic insurer - answer One authorized to insure in the same state that one has their
principal office in
Foreign insurer - answer One authorized to insure in one state but headquartered in
another state
Human life value approach - answerone approach to determining how much life
insurance is needed
- Value of an individual's earning potential over a period of time
(take projected earned income per year * # of years until retirement)
Insurable interest - answerany unknown event that may create any liability against
another person; MUST exist at time of the application or at least at the issuance of the
policy so as to have the insured's consent
· Does NOT need to exist at time of loss
Insurance - answertransfer of risk from one party to another through legal contract;
reduces financial uncertainty for potential future losses; spreads risk from one person to
a large # of people
Life insurance- provides for the immediate creation of funds/estate; replaces unknown
risk with a known benefit
Personal uses: life insurance may be used for survivor protection, estate creation, cash
accumulation, liquidity and estate conservation
,Insurer - answermakes a promise to policymakers after receiving a premium; four types
of insurers
Law of large numbers - answerthe larger the number of occurrences or risk exposures,
the more predictable losses will be or the more the actual results will approach the
expected results for an event & helps develop premium rates
accelerated benefits rider - answerif insured has terminal illness and life expectancy of
12-24 months, may receive % of the death benefit in advance for any purpose; amount
received is not taxable to the insured
accidental death benefits rider - answeraka Multiple Indemnity Rider - additional death
benefit if death of insured caused by an accident ONLY and must occur within 90 days
after accident occurs; death benefit payable here = principal sum
principal sum - answeraccidental death
capital sum - answeraccidental dismemberment; 1/2 of the principal sum
Family/dependent riders - answerwhole life on primary insured and term for spouse and
children
living benefits rider - answerAttached to a life insurance policy and allows for the
payment of a percentage of the death benefit for terminally ill insureds. Normally there is
no cost for this rider.
LTC rider - answerAttached to a life insurance policy and allows for the payment of a
percentage of the death benefit if an individual is not terminally ill but requires long-term
care.
payor rider - answerA rider that provides for the waiver of premiums on a policy
covering a child following the death or the total disability of the adult owner (i.e.,
premium payor).
buy-sell agreement - answerthe agreement provides for the continuation of the business
when, for example, one of
the partners dies. The remaining partners "buy-out" the interest of the deceased partner
by paying an
agreed-upon amount of funds to the deceased's survivors
binding receipt - answerunconditional receipt;becomes effective on the date of the
receipt and continues for a specified period of time or until the insurer declines the
application.
cash refund annuity - answerbeneficiary will receive a lump sum payment that
represents the difference between the
, amount the annuitant paid to the insurer and the total income payments received by the
annuitant
common disaster clause - answerWhen insured and primary beneficiary die at the same
time, it is assumed that the primary beneficiary died first
larceny - answerillegal activity where there's commingling or misappropriation of funds
conditional receipt - answerIn Life and Health insurance, a Conditional Receipt provides
that if premium accompanies the application, coverage shall be in force from the date of
application (whether the policy has yet been issued or not) provided the insurance
company would have issued the coverage on the basis of facts as revealed by the
application and other usual sources of underwriting information. Remember, there is
never any coverage unless the premium has been paid!
credit life insurance - answerLife insurance designed to pay the balance of a loan if the
insured dies before the loan has been repaid in full.
defamation - answersaying false, malicious statements re finances of a competing
company
dividends - answertax exempt/tax free but interest earned is taxable; not considered
income so not taxable; return over an overpaid premium; there are "CRAPO" options
"CRAPO" - answerdividend options (what do with the extra)
1. Cash - turn into cash
2. Reduced premium
3. Accumulate at interest- interest is taxable
4.Purchase additional whole life insurance
5. One year term insurance
equity indexed annuity - answerfixed or non-variable annuity. The contract pays a
guaranteed minimum interest rate and account assets are tied to an index such as
Standard and Poor's. If
the index is higher than the guaranteed rate each year, the contract owner receives the
greater return.
extended term insurance - answercoverage has changed from permanent to level term
protection.
**This is the non-forfeiture option that provides the policyowner with the greatest face
amount of coverage**
family income policy - answerwhole life policy with a decreasing term
rider in order to provide a death benefit together with monthly income payments to the
beneficiary
