Kentucky Life Insurance Exam with 100%
Correct Answers | Verified | Latest Update
2024| Already Passed
Elements of a Contract - ANSWER Competent parties, legal purpose, offer and acceptance, consideration
Waiver - ANSWER Voluntary giving up of a known right or privilege, can be express or implied
Estoppel - ANSWER A person is prohibited by virtue of his own past actions from claiming a right that
would work to the detriment of another who relied on the past conduct
Aleatory Contract - ANSWER a contract where the values exchanged may not be equal but depend on an
uncertain event
Contracts of Adhesion - ANSWER One-sided in regards to preparation (prepared by the insurer)
Contract of Utmost Good Faith - ANSWER Both parties bargain in good faith when forming and entering
into the contract. The two parties rely upon the statements and promises of the other and assume no
attempt to conceal or deceive has been made.
Executory Contract - ANSWER A contract that has not yet been fully performed.
Mortality Rate - ANSWER Determined by dividing the average number of people who will die each year
at each age by the entire population of people that age (1980 CSO table)
Functions of Life Insurance - ANSWER Create an immediate estate, requires no management or physical
upkeep, paid in installments, can be used as collateral
,Final Expenses - ANSWER Medical and funeral expenses, outstanding debts
Total Needs Approach - ANSWER Totaling the amount required to pay for current and future expenses
Living Benefits of Life Insurance - ANSWER Loan value (can be used as collateral,) retirement benefits
Human Life Value - ANSWER The monetary value of an individual's life
Tax Advantages of Life Insurance - ANSWER Cash value earnings accumulate tax free, proceeds at death
pass income tax free
4 Types of Life Insurance - ANSWER Permanent, Term, Industrial, Group
Permanent Life Insurance - ANSWER Accumulates cash value, insurance protection decreases as cash
value increases
Term Life Insurance - ANSWER Accumulates no cash value, only provides death benefits
Whole Life Insurance - ANSWER A permanent policy for which you pay a specified premium each year for
the rest of your life, cash value accumulates, endows at age 100
Limited-Pay Life Policies - ANSWER Premiums are paid to a specified age or for a specified number of
years and then stop. Protection remains for the rest of the insured's life.
Endowment Policies - ANSWER As of 1984, no policy can endow before age 95 because the CV and DB
would be taxed
Single Premium Whole Life - ANSWER Policy is completely paid up after one premium, policyholder pays
less than if premiums stretched out over several years
, Modified Endowment Contract (MEC) - ANSWER TAMRA: All single premium policies, any policy that
does not satisfy the 7-pay test // money taken from the policy is taxed as ordinary income // if policy
owner is younger than 59 1/2 and not disabled 10% penalty is assigned
Joint Life Policies - ANSWER First-to-die, contract comes to an end at the first death, no further insurance
protection for the other person or persons covered by the policy
Survivorship Policies - ANSWER Second-to-die, covers 2 lives and guarantees payment only when second
insured dies
Adjustable Life Policies - ANSWER Policyholder can adjust face amount of policy, amount/frequency of
premium payments, period of insurance protection
Universal Life Insurance - ANSWER Flexible premium, adjustable death benefits, accumulates cash
values: earlier models have front-end load, later models have back end load. Insurance costs are debited
and guaranteed and excess interest are credited.
Universal Life Death Benefit Option A - ANSWER Level death benefit throughout life of policy (can be
increased with proof of insurability, can also be reduced.)
Universal Life Death Benefit Option B - ANSWER Increasing death benefit made up of the policy face
value plus cash value account
Risk Corridor - ANSWER The minimum separation between the cash value and death benefit.
Partial Withdrawal - ANSWER Permanent deduction of the cash value and cannot be reversed, no
interest credited or paid, repayment treated as premium payment
Cash Value of ULP $0 - ANSWER Contract expires, policy goes into grace period,
Variable Life - ANSWER Securities based, whole life, NASD registration required, separate account holds
assets, fluctuating death benefit but never below a guaranteed minimum (face amount of policy,) but no
guaranteed CV, traditionally a fixed premium
Correct Answers | Verified | Latest Update
2024| Already Passed
Elements of a Contract - ANSWER Competent parties, legal purpose, offer and acceptance, consideration
Waiver - ANSWER Voluntary giving up of a known right or privilege, can be express or implied
Estoppel - ANSWER A person is prohibited by virtue of his own past actions from claiming a right that
would work to the detriment of another who relied on the past conduct
Aleatory Contract - ANSWER a contract where the values exchanged may not be equal but depend on an
uncertain event
Contracts of Adhesion - ANSWER One-sided in regards to preparation (prepared by the insurer)
Contract of Utmost Good Faith - ANSWER Both parties bargain in good faith when forming and entering
into the contract. The two parties rely upon the statements and promises of the other and assume no
attempt to conceal or deceive has been made.
Executory Contract - ANSWER A contract that has not yet been fully performed.
Mortality Rate - ANSWER Determined by dividing the average number of people who will die each year
at each age by the entire population of people that age (1980 CSO table)
Functions of Life Insurance - ANSWER Create an immediate estate, requires no management or physical
upkeep, paid in installments, can be used as collateral
,Final Expenses - ANSWER Medical and funeral expenses, outstanding debts
Total Needs Approach - ANSWER Totaling the amount required to pay for current and future expenses
Living Benefits of Life Insurance - ANSWER Loan value (can be used as collateral,) retirement benefits
Human Life Value - ANSWER The monetary value of an individual's life
Tax Advantages of Life Insurance - ANSWER Cash value earnings accumulate tax free, proceeds at death
pass income tax free
4 Types of Life Insurance - ANSWER Permanent, Term, Industrial, Group
Permanent Life Insurance - ANSWER Accumulates cash value, insurance protection decreases as cash
value increases
Term Life Insurance - ANSWER Accumulates no cash value, only provides death benefits
Whole Life Insurance - ANSWER A permanent policy for which you pay a specified premium each year for
the rest of your life, cash value accumulates, endows at age 100
Limited-Pay Life Policies - ANSWER Premiums are paid to a specified age or for a specified number of
years and then stop. Protection remains for the rest of the insured's life.
Endowment Policies - ANSWER As of 1984, no policy can endow before age 95 because the CV and DB
would be taxed
Single Premium Whole Life - ANSWER Policy is completely paid up after one premium, policyholder pays
less than if premiums stretched out over several years
, Modified Endowment Contract (MEC) - ANSWER TAMRA: All single premium policies, any policy that
does not satisfy the 7-pay test // money taken from the policy is taxed as ordinary income // if policy
owner is younger than 59 1/2 and not disabled 10% penalty is assigned
Joint Life Policies - ANSWER First-to-die, contract comes to an end at the first death, no further insurance
protection for the other person or persons covered by the policy
Survivorship Policies - ANSWER Second-to-die, covers 2 lives and guarantees payment only when second
insured dies
Adjustable Life Policies - ANSWER Policyholder can adjust face amount of policy, amount/frequency of
premium payments, period of insurance protection
Universal Life Insurance - ANSWER Flexible premium, adjustable death benefits, accumulates cash
values: earlier models have front-end load, later models have back end load. Insurance costs are debited
and guaranteed and excess interest are credited.
Universal Life Death Benefit Option A - ANSWER Level death benefit throughout life of policy (can be
increased with proof of insurability, can also be reduced.)
Universal Life Death Benefit Option B - ANSWER Increasing death benefit made up of the policy face
value plus cash value account
Risk Corridor - ANSWER The minimum separation between the cash value and death benefit.
Partial Withdrawal - ANSWER Permanent deduction of the cash value and cannot be reversed, no
interest credited or paid, repayment treated as premium payment
Cash Value of ULP $0 - ANSWER Contract expires, policy goes into grace period,
Variable Life - ANSWER Securities based, whole life, NASD registration required, separate account holds
assets, fluctuating death benefit but never below a guaranteed minimum (face amount of policy,) but no
guaranteed CV, traditionally a fixed premium
