Iowa Insurance Exam – Life Questions
and Answers
purpose of life insurance - ANS-pay a death benefit to beneficiaries when the insured
dies
life insurance for personal use - ANS-death benefit serves to replace the insured's
future loss income and pay expenses that occur upon death, living benefits
Group insurance vs. individual - ANS--covers many non-related people
-less expensive per person
group insurance eligibility - ANS--group cannot be formed for the express purpose of
purchasing it
-employers
-labor unions
-trade and professional association groups
individual insurance - ANS-covers one individual
ordinary life insurance - ANS-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 - ANS-"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 - ANS-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 - ANS-true
Permanent life insurance accumulation element within the policy is __________
____________ - ANS-cash value
Term life insurance - ANS-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 - ANS-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 - ANS-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 - ANS-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? - ANS-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 - ANS-mortality, interest,
expenses
Interest factor - ANS-added to premium calculations to recognize investment earnings,
used as credit - higher rate = lower premium
Expense factor - ANS-worked into premium calculation to reflect costs that insurer
expects to incur (rent, commissions, benefits)
Premium Tax - ANS-levied on insurance companies when they receive premiums
Net Single premium - ANS-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 - ANS-applying a factor to the net single premium, spreads out
premium for duration of premium paying period
Gross premium - ANS-charged for the policy by adding the expense load to the net
single premium/net level premium
Level premium payment plan - ANS-premium is fixed, remains over policy's term
flexible premium plan - ANS-policyowner can change the premium payment amount
after the first payment within range set by insurer, includes universal life insurance and
variable universal life insurance
and Answers
purpose of life insurance - ANS-pay a death benefit to beneficiaries when the insured
dies
life insurance for personal use - ANS-death benefit serves to replace the insured's
future loss income and pay expenses that occur upon death, living benefits
Group insurance vs. individual - ANS--covers many non-related people
-less expensive per person
group insurance eligibility - ANS--group cannot be formed for the express purpose of
purchasing it
-employers
-labor unions
-trade and professional association groups
individual insurance - ANS-covers one individual
ordinary life insurance - ANS-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 - ANS-"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 - ANS-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 - ANS-true
Permanent life insurance accumulation element within the policy is __________
____________ - ANS-cash value
Term life insurance - ANS-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 - ANS-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 - ANS-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 - ANS-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? - ANS-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 - ANS-mortality, interest,
expenses
Interest factor - ANS-added to premium calculations to recognize investment earnings,
used as credit - higher rate = lower premium
Expense factor - ANS-worked into premium calculation to reflect costs that insurer
expects to incur (rent, commissions, benefits)
Premium Tax - ANS-levied on insurance companies when they receive premiums
Net Single premium - ANS-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 - ANS-applying a factor to the net single premium, spreads out
premium for duration of premium paying period
Gross premium - ANS-charged for the policy by adding the expense load to the net
single premium/net level premium
Level premium payment plan - ANS-premium is fixed, remains over policy's term
flexible premium plan - ANS-policyowner can change the premium payment amount
after the first payment within range set by insurer, includes universal life insurance and
variable universal life insurance
