Kentucky Life Insurance Exam Questions With All Correct Answers | Graded A+

Kentucky Life Insurance Exam Questions With All Correct Answers | Graded A+ 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 /.Variable Universal Life - Answer-Flexible premiums, choice of death benefits (A or B,) NASD registration required, separate account holds assets, fluctuating death benefit but never below a guaranteed minimum (face amount of policy,) but no guaranteed CV /.Indeterminate Premium Policies - Answer-Low current premium for first 3 years, premium is adjusted at end of 3 year duration based on investment return, mortality, and expenses, which can result in increase or decrease of premium (within a stated maximum) /.Level Term Insurance - Answer-Term insurance where the face value of policy remains the same from the date the policy is issued until the date the policy expires. /.Decreasing Term - Answer-A type of life insurance that features a level premium and a death benefit that decreases each year over the duration of the policy. /.Convertible Term Insurance - Answer-Term to Permanent, no requirement of proof of insurability, most people convert at attained age to avoid paying back premiums, time-limit varies by policy /.Renewable Term - Answer-Insurance which can, at the election of the policyowner, be renewed at the end of a term attained age without evidence of insurability within a time limit (commonly 30 days) /.Interim Term - Answer-Interim term coverage provides instantaneous coverage and is intended for people who plan on purchasing permanent life insurance coverage within one year, no proof of insurability, at attained age, built in time limit /.Family Income Policies - Answer-Income is paid upon death of family breadwinner, combination of permanent and decreasing term coverage, children are added without additional premium and can convert at specified age without proof of insurability. Benefit duration lasts not starting from death but from when policy was purchased. /.Family Maintenance Policies - Answer-Combination of level term and permanent policies, income provided starting from insured's death /.Jumping Juvenile Policy - Answer-Purchased by parent, the child reaches age 21, coverage increases to five times the face amount, premiums remain the same and no evidence of insurability is required. /.Industrial Life Insurance - Answer-A type of insurance in which the policies are sold in small amounts and an agent of the company collects the premiums at the insured's home usually monthly or weekly (by home service companies) /.Monthly Debit Ordinary Policy - Answer-Higher premium amounts but paid monthly and collected at policyowner's home or by mail or bank account /.Annuities - Answer-A fixed sum of money paid to someone each year, typically for the rest of their life. /.Annuitant - Answer-The person who receives the payments from an annuity /.Beneficiary - Answer-Receives any survivor benefits payable under the annuity on the death of the annuitant /.Fixed Annuity - Answer-Specifies a fixed, guaranteed minimum rate of interest paid on the principle amount invested in the annuity, taxes are deferred during accumulation period /.Variable Annuity - Answer-Offers a variable, nonguaranteed rate of interest, taxes are deferred during accumulation period /.Fixed Payout - Answer-For a fixed annuity, the cash value accumulation at the beginning of the annuity period is simply annuitized—that is, the accumulation is converted into a stream of periodic payments. The result is a fixed dollar amount payout that remains the same for the rest of the contract. /.Nonforfeiture Options - Answer-Three options available by law to policyowners that enable them to recover a policy's cash-value upon surrender of that policy. (1) Cash (2) Reduced Paid-Up Insurance (3) Extended Term Insurance /.Immediate Annuities - Answer-- Can only be funded using the Single Premium payment method - First income payment is made one payout interval from the date of annuity purchase - Typically designed to provide income immediately upon retirement - In exchange for a lump sum premium the company pays them a monthly income for the rest of their life. /.Deferred Annuities - Answer-- Can be funded through either the single premium payment or through periodic premium payments