Iowa Insurance Exam – Life UPDATED
Study Guide QUESTIONS AND
CORRECT ANSWERS
purpose of life insurance - CORRECT ANSWERS pay a death benefit to
beneficiaries when the insured dies
life insurance for personal use - CORRECT ANSWERS death benefit
serves to replace the insured's future loss income and pay expenses that occur
upon death, living benefits
Group insurance vs. individual - CORRECT ANSWERS -covers many
non-related people
-less expensive per person
group insurance eligibility - CORRECT ANSWERS -group cannot be
formed for the express purpose of purchasing it
-employers
-labor unions
-trade and professional association groups
individual insurance - CORRECT ANSWERS covers one individual
ordinary life insurance - CORRECT ANSWERS 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 - CORRECT ANSWERS "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 - CORRECT ANSWERS 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 -
CORRECT ANSWERS true
Permanent life insurance accumulation element within the policy is __________
____________ - CORRECT ANSWERS cash value
Term life insurance - CORRECT ANSWERS 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 - CORRECT ANSWERS
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 - CORRECT ANSWERS 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 - CORRECT ANSWERS 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? - CORRECT ANSWERS
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 - CORRECT
ANSWERS mortality, interest, expenses
Interest factor - CORRECT ANSWERS added to premium calculations
to recognize investment earnings, used as credit - higher rate = lower premium
Expense factor - CORRECT ANSWERS worked into premium
calculation to reflect costs that insurer expects to incur (rent, commissions,
benefits)
Premium Tax - CORRECT ANSWERS levied on insurance companies
when they receive premiums
Net Single premium - CORRECT ANSWERS 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 - CORRECT ANSWERS applying a factor to the net
single premium, spreads out premium for duration of premium paying period
Study Guide QUESTIONS AND
CORRECT ANSWERS
purpose of life insurance - CORRECT ANSWERS pay a death benefit to
beneficiaries when the insured dies
life insurance for personal use - CORRECT ANSWERS death benefit
serves to replace the insured's future loss income and pay expenses that occur
upon death, living benefits
Group insurance vs. individual - CORRECT ANSWERS -covers many
non-related people
-less expensive per person
group insurance eligibility - CORRECT ANSWERS -group cannot be
formed for the express purpose of purchasing it
-employers
-labor unions
-trade and professional association groups
individual insurance - CORRECT ANSWERS covers one individual
ordinary life insurance - CORRECT ANSWERS 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 - CORRECT ANSWERS "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 - CORRECT ANSWERS 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 -
CORRECT ANSWERS true
Permanent life insurance accumulation element within the policy is __________
____________ - CORRECT ANSWERS cash value
Term life insurance - CORRECT ANSWERS 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 - CORRECT ANSWERS
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 - CORRECT ANSWERS 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 - CORRECT ANSWERS 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? - CORRECT ANSWERS
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 - CORRECT
ANSWERS mortality, interest, expenses
Interest factor - CORRECT ANSWERS added to premium calculations
to recognize investment earnings, used as credit - higher rate = lower premium
Expense factor - CORRECT ANSWERS worked into premium
calculation to reflect costs that insurer expects to incur (rent, commissions,
benefits)
Premium Tax - CORRECT ANSWERS levied on insurance companies
when they receive premiums
Net Single premium - CORRECT ANSWERS 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 - CORRECT ANSWERS applying a factor to the net
single premium, spreads out premium for duration of premium paying period
