Life and Health License Maine Solved 100% Correct!!

Life and Health License Maine Solved 100% Correct!! Lapse policy termination due to nonpayment of premium Premium amount paid to the insurance company for the insurance policy "Insurance Transaction" (by email or other means) Solicitation Negotiations Sale Advising an individual concerning coverage or claims Elements of legal contract to be legally binding (4 Essential elements) 1. Agreement 2. Consideration 3. Competent Parties 4. Legal Purpose Consideration (contract) Is something of value that each party gives to another. Insured = payment on premium Insurer = promise to pay in event of loss. Competent Parties Must be entering contract in eyes of the law. -Both parties must be legal age, mentally competent, not under influence of alcohol or drugs. Contract of Adhesion prepared by one party (insurer) and accepted or rejected by the other party. Aleatory Contract Means exchange of unequal amounts or values. Premium paid is small in relation to amount paid by insurer in event of loss. Unilateral Contract Only one parties to the contract is legally bound to do anything. (Insured = no legally binding promises, Insurer promises to pay losses covered by policy) Conditional Contract Certain conditions met by policy owner and company in order for the contract to be executed. (Proof of loss...) Warranty Absolutely true statement upon which the validity of insurance policy depends. Representations Statements believed to be true to best of one's knowledge. Misrepresentations & Material Misrepresentations can lead to..... FRAUD "Completing application" 2 basic Parts: Part 1: general information Part 2: Medical information Agent's Report Provides the agents personal observations concerning the proposed insured. Changes in Application Should have applicant initial the change or complete a new application. Consequences of Incomplete Application Incomplete then must return it to applicant. If a policy is issued with questions left, insurer waived it right to have an answer to the question. Collecting premium Whenever agent collects premium, must issue "premium receipt." "Conditional receipt" is used only when the applicant submits a prepaid application. Replacement Terminating policy or letting it lapse, and getting a new one. Underwriting Risk selection process. Underwriter responsible for selecting only those risks that are considered insurable and meet insurer's standards. Sources of underwriting information Application Agent's Report Investigative Consumer Report (Inspection) Underwriter can order inspection from investigation firm or credit agency. (subject to fair credit reporting act) Fair Credit Reporting Act est. procedures that consumer-reporting agencies must follow. Consumer Reports written / oral information regarding consumers credit, character, reputation, or habits. Investigative consumer reports Similar to Consumer report but use information from friends, neighbors and associates. Medical Information Bureau (MIB) (A nonprofit trade organization) Owned by member insurance companies, receives medical information from insurance companies and maintains confidential information. Medical Examinations Two kinds: 1. Paramedical report - completed by paramedic or registered nurse. 2. Attending Physician's Statement (APS) HIPAA (Health Insurance Portability and Accountability ACT) federal law that protects health information. Risk Classification If accepted: -Standard -Substandard (High Exposure) -Preferred Stranger Originated Life Insurance (STOLI) Life insurance arrangement in which a person with no relationship to the insured purchases a life policy on the insured's life with the intent of selling the policy to an investor and profiting financially when the insured dies. *STOLI's violate the principle of insurable interest Investor Owned Life Insurance Another name for "STOLI" Buyer's Guide Provides basic, generic information about life insurance policies. Policy Summary Written statement describing the features and elements of the policy being issued. Illustration A presentation or depiction of elements of a policy of individual or group life insurance over a period of years. When coverage begins When the initial premium has been paid. USA Patriot Act (Anti-Money Laundering) AML = anti money laundering Est. 2001 SAR Suspicious activity reports SAR Rules Any company subject to AML Program also subject to SAR Rules: Must have plans and procedures in place to identify activity that one would deem suspicious of money laundering. Term Life Insurance Term insurance = temporary protection. They provide greatest amount of coverage for the lowest premium. AKA "pure life insurance" -Provides "Pure Death Protection" 3 Types of term coverage -Level -Increasing -Decreasing (Premium is always the same throughout coverage, only the death benefit may fluctuate) Level Term Insurance Most common type of temporary protection purchase. Death benefit does not change. Level Premium Premium and death benefit does not change. Annually Renewable Term (ART) Purest for of insurance. Death benefit remains the same. But the premium goes up as someone gets older and closer to dying. Decreasing Term Death benefit and premium decrease over time. Return of Premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid. (Usually Low Risk) Renewable Allows policy owner right to renew the coverage at the expiration date without evidence of insurability. Convertible Allows policy owner the right to convert the policy to as permanent insurance policy without evidence of insurability. Traditional Whole Life products Permanent life - is a general term used to refer to policies that build cash value and remain in effect entire life of insured. Whole Life Insurance - provides lifetime protection, includes saving element (cash value), Premium equals face amount of policy at age 100. Adjustable Life Term and Permanent coverage. Policy owner also has ability to convert from term to whole life. Universal Life Insurance "Flexible premium adjustable life" Policy owner has the flexibility to increase the amount of premium paid into the policy and to later decrease it again. Variable Whole Life is a level, fixed premium, investment-based product. Has fixed premiums and guaranteed minimum death benefit. Cash value of policy fluctuates with the performance of the portfolio. Variable Universal Life Combines whole life with the flexible premium of universal life and investment component of variable life. (considered securities) so they are dually regulated by state and federal gov. Interest-sensitive whole life "current assumption life" a whole life policy. Insurer set initial premium based on current assumptions about risk. If actual values change company will lower and raise the premium at designated intervals. Indexed Whole life Insurance is that the cash value is dependant upon the performance of the equity index (S&P 500) Joint Life