Iowa Insurance Exam – Life |120
Questions and Answers
purpose of life insurance - -pay a death benefit to beneficiaries when the
insured dies
- life insurance for personal use - -death benefit serves to replace the
insured's future loss income and pay expenses that occur upon death, living
benefits
- Group insurance vs. individual - --covers many non-related people
-less expensive per person
- group insurance eligibility - --group cannot be formed for the express
purpose of purchasing it
-employers
-labor unions
-trade and professional association groups
- individual insurance - -covers one individual
- ordinary life insurance - -face amounts grater than $25,000, premiums are
payable monthly, quarterly, semi annually, annually; includes every type of
life insurance and annuity product, flexible options
- industrial life insurance - -"burial insurance", small face amounts 1000 or
2500 to 10,000; premiums paid frequently, no medical exam, agent meets
personally with policy owner to collect premium
- permanent life insurance - -provides life ins for the insured's entire life;
coverage is provided until insured dies or reaches 120 years old
- True or false: Level premium of permanent life insurance - once the policy
is issued premiums remain level for the full duration of policy coverage - -
true
- Permanent life insurance accumulation element within the policy is
__________ ____________ - -cash value
- Term life insurance - -coverage is temporary, time limit can be as short as
one year, as long as 20+ years or until the insured reaches a specific age
(ex. 65). No cash value, costs less than permanent life, premiums increase
with age
, - Participating vs nonparticipating life insurance - -par - issued by mutual
ins co's, policyowner is eligible for policy dividends declared by the insurance
co; dividends are paid from insurers divisible surplus
non par - issued by stock ins co, no policy dividends
- fixed life insurance - -insurer guarantees fixed death benefit and min rate
of return on policy's cash value, premiums are invested in co's general
account
- variable life insurance - -premiums are invested in investment sub
accounts managed by the insurer - guarantees min death benefit (face
amount of policy); cash values and death benefit raise and fall based on sub
accounts investment
- Regulation of Variable products - what do the Securities Exchange
commission and financial Industry Regulatory authority do? - -SEC -
responsible for regulating the securities that make up an insurer's separate
account
FIRA - regulates producers who sell variable life products and companies that
sell investment products
- Actuary base life insurance premiums based on 3 things - -mortality,
interest, expenses
- Interest factor - -added to premium calculations to recognize investment
earnings, used as credit - higher rate = lower premium
- Expense factor - -worked into premium calculation to reflect costs that
insurer expects to incur (rent, commissions, benefits)
- Premium Tax - -levied on insurance companies when they receive
premiums
- Net Single premium - -uses factors of mortality and interest - theoretical
amount (excludes expense factor) that would be needed to fund the face
amount for the duration of the policy with single premium payment
- Net level premium - -applying a factor to the net single premium, spreads
out premium for duration of premium paying period
- Gross premium - -charged for the policy by adding the expense load to the
net single premium/net level premium
- Level premium payment plan - -premium is fixed, remains over policy's
term
Questions and Answers
purpose of life insurance - -pay a death benefit to beneficiaries when the
insured dies
- life insurance for personal use - -death benefit serves to replace the
insured's future loss income and pay expenses that occur upon death, living
benefits
- Group insurance vs. individual - --covers many non-related people
-less expensive per person
- group insurance eligibility - --group cannot be formed for the express
purpose of purchasing it
-employers
-labor unions
-trade and professional association groups
- individual insurance - -covers one individual
- ordinary life insurance - -face amounts grater than $25,000, premiums are
payable monthly, quarterly, semi annually, annually; includes every type of
life insurance and annuity product, flexible options
- industrial life insurance - -"burial insurance", small face amounts 1000 or
2500 to 10,000; premiums paid frequently, no medical exam, agent meets
personally with policy owner to collect premium
- permanent life insurance - -provides life ins for the insured's entire life;
coverage is provided until insured dies or reaches 120 years old
- True or false: Level premium of permanent life insurance - once the policy
is issued premiums remain level for the full duration of policy coverage - -
true
- Permanent life insurance accumulation element within the policy is
__________ ____________ - -cash value
- Term life insurance - -coverage is temporary, time limit can be as short as
one year, as long as 20+ years or until the insured reaches a specific age
(ex. 65). No cash value, costs less than permanent life, premiums increase
with age
, - Participating vs nonparticipating life insurance - -par - issued by mutual
ins co's, policyowner is eligible for policy dividends declared by the insurance
co; dividends are paid from insurers divisible surplus
non par - issued by stock ins co, no policy dividends
- fixed life insurance - -insurer guarantees fixed death benefit and min rate
of return on policy's cash value, premiums are invested in co's general
account
- variable life insurance - -premiums are invested in investment sub
accounts managed by the insurer - guarantees min death benefit (face
amount of policy); cash values and death benefit raise and fall based on sub
accounts investment
- Regulation of Variable products - what do the Securities Exchange
commission and financial Industry Regulatory authority do? - -SEC -
responsible for regulating the securities that make up an insurer's separate
account
FIRA - regulates producers who sell variable life products and companies that
sell investment products
- Actuary base life insurance premiums based on 3 things - -mortality,
interest, expenses
- Interest factor - -added to premium calculations to recognize investment
earnings, used as credit - higher rate = lower premium
- Expense factor - -worked into premium calculation to reflect costs that
insurer expects to incur (rent, commissions, benefits)
- Premium Tax - -levied on insurance companies when they receive
premiums
- Net Single premium - -uses factors of mortality and interest - theoretical
amount (excludes expense factor) that would be needed to fund the face
amount for the duration of the policy with single premium payment
- Net level premium - -applying a factor to the net single premium, spreads
out premium for duration of premium paying period
- Gross premium - -charged for the policy by adding the expense load to the
net single premium/net level premium
- Level premium payment plan - -premium is fixed, remains over policy's
term
