Arizona Life Insurance Exam - Life
Insurance Basics
Beneficiary - answer A person who receives the benefits of an insurance policy
Death Benefit - answer The amount paid upon the death of the insured in a life
insurance policy
Cash Value - answer Equity amount accumulated in permanent life insurance
Estate - answer A person's net worth
Illustrations - answer Presentation or depiction of nonguaranteed elements of a life
insurance policy
Life Insurance - answer Coverage on human lives
Liquidation - answer Selling assets in order to raise capital (such as using cash value
for capital needs)
Lump-Sum - answer Payment of the entire benefit in one sum
Minor - answerA person under legal age
Solvency - answerThe ability to meet financial obligations (an insurance company
maintains enough assets to pay claims)
Survivor Protection - answerLife insurance can provide the funds necessary for the
survivors of the insured to be able to maintain their lifestyle in the event of the insured's
death and this is called ________________
Estate Conservation - answerLife insurance proceeds may be used to pay inheritance
taxes and federal estate taxes so that it is not necessary for the beneficiaries to sell off
the assets which is ___________________
Estate Creation - answerThe insured will have an estate worth the amount of the life
policy upon the first paid premium which is ______________
Viatical Settlements - answer____________________ allows someone living with a life-
threatening condition to sell their existing life insurance policy and use the proceeds
when they are most needed, before their death
Viator - answerThe insured selling their life insurance in a viatical settlement
, Viatical Settlement Provider - answerA person, other than a viator, that enters into a
viatical settlement contract (the person buying the life insurance policy)
Viatical Producer - answerA person who represents the viatical settlement provider
Viatical Broker - answerA person who represents the viator
Life Settlement - answerAny financial transaction in which the owner of a life insurance
policy sells a policy that is no longer needed to a third party for some form of
compensation, usually cash
Uses of Life Insurance - answer1. Survivor Protection
2. Estate Creation and Conservation
3. Liquidity and Cash Accumulation
4. Viatical Settlements and Life Settlements
Human Life Value Approach - answerThis approach gives the insured an estimate of
what would be lost to the family in the event of the premature death of the insured. It
calculates an individual's life value by looking at the insured's wage, inflation, the
number of years to retirement, and the time value of money.
Needs Approach - answerThis approach is based on the predicted needs of a family
after the premature death of the insured. It includes income, the amount of debt
(including mortgage), investments, and other ongoing expenses.
Lump-Sum Needs - answer1. Costs associated with Death
2. Debt Cancellation
3. Emergency Reserve Funds
4. Education Funds
5. Retirement Fund
6. Bequests
Costs associated with Death - answerThe final medical expenses of the insured, funeral
expenses, and day-to-day expenses family maintenance (also called Post Mortem)
Debt Cancellation - answerPaying off debts of the insured, such as home mortgage or
auto loans
Emergency Reserve Funds - answerPaying for unexpected expenses following the
death of the insured, such as travel and lodging for family members
Education Funds - answerPaying for children's education expenses so they can remain
in school, or for a surviving spouse to train for a skill to re-enter the workforce
Retirement Funds - answerUsing life insurance as a source of retirement income
Insurance Basics
Beneficiary - answer A person who receives the benefits of an insurance policy
Death Benefit - answer The amount paid upon the death of the insured in a life
insurance policy
Cash Value - answer Equity amount accumulated in permanent life insurance
Estate - answer A person's net worth
Illustrations - answer Presentation or depiction of nonguaranteed elements of a life
insurance policy
Life Insurance - answer Coverage on human lives
Liquidation - answer Selling assets in order to raise capital (such as using cash value
for capital needs)
Lump-Sum - answer Payment of the entire benefit in one sum
Minor - answerA person under legal age
Solvency - answerThe ability to meet financial obligations (an insurance company
maintains enough assets to pay claims)
Survivor Protection - answerLife insurance can provide the funds necessary for the
survivors of the insured to be able to maintain their lifestyle in the event of the insured's
death and this is called ________________
Estate Conservation - answerLife insurance proceeds may be used to pay inheritance
taxes and federal estate taxes so that it is not necessary for the beneficiaries to sell off
the assets which is ___________________
Estate Creation - answerThe insured will have an estate worth the amount of the life
policy upon the first paid premium which is ______________
Viatical Settlements - answer____________________ allows someone living with a life-
threatening condition to sell their existing life insurance policy and use the proceeds
when they are most needed, before their death
Viator - answerThe insured selling their life insurance in a viatical settlement
, Viatical Settlement Provider - answerA person, other than a viator, that enters into a
viatical settlement contract (the person buying the life insurance policy)
Viatical Producer - answerA person who represents the viatical settlement provider
Viatical Broker - answerA person who represents the viator
Life Settlement - answerAny financial transaction in which the owner of a life insurance
policy sells a policy that is no longer needed to a third party for some form of
compensation, usually cash
Uses of Life Insurance - answer1. Survivor Protection
2. Estate Creation and Conservation
3. Liquidity and Cash Accumulation
4. Viatical Settlements and Life Settlements
Human Life Value Approach - answerThis approach gives the insured an estimate of
what would be lost to the family in the event of the premature death of the insured. It
calculates an individual's life value by looking at the insured's wage, inflation, the
number of years to retirement, and the time value of money.
Needs Approach - answerThis approach is based on the predicted needs of a family
after the premature death of the insured. It includes income, the amount of debt
(including mortgage), investments, and other ongoing expenses.
Lump-Sum Needs - answer1. Costs associated with Death
2. Debt Cancellation
3. Emergency Reserve Funds
4. Education Funds
5. Retirement Fund
6. Bequests
Costs associated with Death - answerThe final medical expenses of the insured, funeral
expenses, and day-to-day expenses family maintenance (also called Post Mortem)
Debt Cancellation - answerPaying off debts of the insured, such as home mortgage or
auto loans
Emergency Reserve Funds - answerPaying for unexpected expenses following the
death of the insured, such as travel and lodging for family members
Education Funds - answerPaying for children's education expenses so they can remain
in school, or for a surviving spouse to train for a skill to re-enter the workforce
Retirement Funds - answerUsing life insurance as a source of retirement income
