Life & Health Insurance Exam Study Guide with correct answers 2024

Whole Life Insurance - answers-A permanent insurance policy which is guaranteed to remain in force for the insured's entire lifetime - Provided that the required premiums are paid, or to the policy maturity date. Whole Life Insurance can also be described as: - answers-Permanent, endowment, or ordinary Whole Life is designed to - answers-Remain in force for the whole life of the insured and the premiums will never increase. Limited pay whole life - answers-Policy allows for a lifetime of premiums to be paid in a shorter period of time. Common forms of limited pay whole life - answers-10-pay or 20-pay whole life; the premiums are payable in 10 or 20 lvele annual installments, and life paid-up at age 65; premiums are payable in level annual installments from the date of purchase to the year the insured turns 65. Single Premium Whole life - answers-Modified endowment contract Has one pmt made at the time of purchase. Covers all future costs of maintaining the policy. Creates immediate cash value Limited pay - answers-Annual premiums for ____________ ______________ policies will be higher than continuous pmt policies. Universal life - answers-Designed for people who want flexible premiums and flexible coverage over the course of their lifetime Universal life - answers-Flexible Premium Cash account - cost of insurance withdrawn monthly - fees withdrawn monthly - current or guaranteed interest Universal Life Option A - answers-Provides for a level death benefit equal to the policy's face value Universal Life Option B - answers-Provides for an increasing death benefit equal to the face value of the policy plus the cash account. Cash value does not increase as quickly bc more premium is applied to the higher cost of the increasing DB over the life of the policy. Variable Policies (think stock mkt when you read variable) - answers-Life Insurance + investments Must have life insurance license & securities license Investments are in a seperate account (securities) - The owner can lose money Variable Whole Life - answers-Death benefit can increase Has guaranteed minimum death benefit Variable Universal Life - answers-No guaranteed death benefit Variable Whole Life - answers-"Fixed-Premium Variable Life" Variable Universal Life - answers-"Flexible-Premium Variable Life" Interest-sensitive whole life - answers-a type of whole life insurance where the cash value can increase beyond the stated guarantee if economic conditions warrant. Interest-sensitive whole life - answers-"Current assumption whole life" Interest-sensitive whole life - answers-Has a current interest rate (fluctuates in relation to the current economic conditions) Guaranteed interest rate Equity-Indexed Universal Life Insurance - answers-A permanent life insurance policy that allows policy holders to tie accumulation values to a stock market index such as the S&P's 500 Index. Equity-Indexed Universal Life Insurance - answers-Current interest on cash account - Up or down based upon a stock market index - Account still guaranteed by the company Level Term life insurance - answers-Death benefit and premiums stay the same during the term Decreasing Term life insurance - answers-Death benefit declines over the coverage period until it reaches zero by the end of the term. Premium remains the same Decreasing Term - answers-Home mortgages, bank loans, or financial obligations that require regular periodic pmts use what kind of term life insurance? Return of Premium Term - answers-If the insured does not pass away within the policy term, the premium is paid back to the insured. Premium is higher than a regular policy Term life insurance (Renewable) - answers-No new application is required Don't ask any medical questions The new premium is based upon applicants attained age Term life insurance (Convertibility) - answers-No new application is required Don't ask any medical questions Allows you to convert your term policy into a whole life policy Only your attained age will increase the premium A single premium immediate lifetime annuity - answers-a contract with an insurance company whereby: You pay them a sum of money up front (known as a premium), and. They promise to pay you a certain amount of money periodically (monthly, for instance) for the rest of your life. flexible premium annuity - answers-intended to be funded by a series of payments. They are deferred annuities; they are designed to have a significant period of payments into the annuity plus investment growth before any money is withdrawn from them. Immediate annuity - answers-Purchased with a single premium Has no accumulation period Income pmts begin within 12 months Deferred annuity - answers-Bought with a single premium Flexible premiums Has an accumulation period Owner will later decide if annuitization is desired Fixed annuity - answers-General account Long term low risk investments If annuitized youll get fixed income pmts Money is guaranteed by the company Variable annuity - answers-Separate account No guarantees by company - the owner assumes the risk Premium buys accumulation units Value can go up or down Must be licensed by the state and security regulators Indexed annuity - answers-Fixed annuities Value is guaranteed by company interest earned can go up or down like the stock mkt interest is tied to stock market not a variable product - so no securities license required Joint life policy - answers-covers 2 or more lives with the DB being paid when the first insured dies Survivorship policy - answers-insures 2 individuals and will pay the DB when the last insured dies Wavier of Premium - answers-One of the most common types of life insurance riders If the policy owner becomes disabled, the rider will pay the premiums so the policyholder can continue to have coverage for the duration of the policy. Waiting period - answers-The insured must be unable to work for a certain period before the waiver takes effect 90 to 180 days - answers-How long is the waiting period? If the insured is still disabled @ the end of the waiting period, the company retroactively refunds any premiums paid during the waiting period. Waiver of premium - answers-is available during the insureds working years and expired between ages of 60 and 65. If an insured becomes permanently disabled before that age, premiums will continue to be waived for life. Waiver of monthly deduction - answers-Disability waiver for flexible premium policies if called Guaranteed insurability rider - answers-may be attached to a permanent life insurance policy and allows the owner to purchase additional life insurance at specified intervals in the future for certain amts without having to provide evidence of insurability. No medical questions asked Options to purchase can be excerssed between ages 25 and 40 at 3 year intervals. May want to add life insurance when life events happening (marriage or birth) Payor Rider - answers-Pays the premium of a juvenile policy if the adult premium payor either dies or becomes disabled May require the adult to provide evidence of insurability Accidental Death Benefit - answers-Pays an extra benefit if the insured dies as a result of an accident. For it to be payable, the insured must die within 90 days of the accident. Has to be an Accident!! Less expensive bc there is a higher risk from dying of natural causes than from an accident.. Accidental Death & Dismemberment - answers-If policy holder dies as a direct result of an accident, a full DB will be paid out to the policy's beneficiary. If the policy is for 100,000, the benefit will be 100,000. If the policy holder does not die as a result of the accident and instead loses a limb, he or she will receive 50% benefit payout. - Losing 2 or more limbs would compound for a full benefit pmt. Principal sum - answers-pays 100% of the DB Capital sum - answers-pays 50% of the benefit. Loss of foot, arm, hand, sight or hearing, or paralysis. Term Rider - answers-The insured can add term insurance to a permanent insurance policy using a ______ ______. It provides coverage similar to a term insurance policy however the premium is lower than purchasing a separate policy. Term Rider - answers-expires at a specified age or after a certain # of years. The premium is paid while it's in force. Long term care rider - answers-Advance of the DB while insured is living receive a percentage of face amount each month may pay for home care, assisted living, and nursing home care reduces DB payable upon death Return of Premium Rider - answers-Is an increasing term rider; the DB always equals the total premiums paid for the rider and the underlying permanent policy. Has limited duration and expire @ a specific age or after a certain amt of years If insured doesn't pass away, he is written a check. Free look - answers-Begins when the owner receives the policy Has 10 days to look over Policy can be returned for a full refund Insuring Clause - answers-**Found on the 1st page of the policy Insurers promise to pay upon death includes the face amount usually signed by an executive of the company Entire Contract (life insurance contract) - answers-The Policy itself Copy of the application Any riders or amendments **know these three for test** - will ask "which of the following is not part of a life insurance contract?" Consideration - think of money - answers-Legal Agreement Consideration Competent parties LACC An exchange of value is necessart to form a valid contract. Ownership rights - answers-name or change the beneficiary select settlement options borrow or withdraw policy cash values receive policy dividends surrender or cancel policy assign or transfer ownership change premium mode select a non-forfeiture option Premium pmt - answers-pay in advance for coverage grace period of 31 days if not paid on time pmts can be level, single, or flexible Reinstatement - answers-If a policy gets cancelled, might have to get a ________________. have up to 3 years to get reinstated must pay missed premiums + interest have to prove insurability Incontestability - answers-provided to protect the insured. If a policy has been in effect for 2 years, the company cannot claim that a statement made in the application was meant to defraud the insurer. Suicide Clause - answers-If insured commits suicide prior to having a policy for 2 years, only the premium will be paid back. After 2 years the full face amount will be paid Misstatement of Age or sex - answers-Insured older than application states - DB is reduced to correct premium amount Insured is younger than application states - DB is increased to correct premium amount Incontestability provision does not apply Primary beneficiary - answers-first in line to receive the policys DB Contingent beneficiary - answers-next in line if the primary beneficiary has died Revocable beneficiary - answers-can be changed at any time by the owner Irrevocable beneficiary - answers-cant be changed without beneficiary consent usually become revocable upon death of irrevocable beneficiary Minor beneficiary - answers-person under age of 18 who is deemed legally incompetent, therefore cannot take ownership of life insurance proceeds. May be able to get proceeds if insurer is instructed to hold the death proceeds until the minor is of legal age. Common disaster provision - answers-If both insured and primary beneficiary are in a common accident and die within 30-90 days after accident then the proceeds will be paid as if the primary beneficiary died first and the proceeds will go to contingent beneficiary rather than the state. Nonforfeiture options - answers-its your money, how do you want it? Cash surrender - policy is cancelled and owner receives the current cash value Reduced paid up insurance - nonforfeiture - answers-new single premium policy premium based upon attained age less face value than old policy immediate cash values Extended term insurance - nonforfieture - answers-single premium term insurance same face amount as old policy only for a stated term of time default option selected by insurer Dividends - answers-referred to as participating policies nonparticipating policy - answers-do not pay policy dividends policy dividends - answers-a refund of a portion of the premium paid when a company has favorable claims Dividend options (Remember, dividends are NOT guaranteed!!) - answers-cash-send me the money accumulate interest-dividends in the bucket reduce next premium amt-can take dividends out to pay portion of premium paid up insurance sooner-20 yr pay life policy you can utilize dividends to lower time to pay up on premiums one year term insurance at attained age Accelerated DB - answers-TAX FREE an advance of DB's for reasons like: -critically ill -terminally ill -death applicant - answers-changes in the application must be initialed by the __________. Confidential Required signatures for application include: - answers-Insured Producer/agent Applicant, owner (if not the insured) collecting initial premium - answers-"offer to buy" insurance exists when the 1st premium is submitted w the life insurance app. if no premium is submitted with the app, coverage is delayed until the premium is paid for the issued policy. Issuing Receipt - answers-when first premium is collected, the producer must provide the applicant with a receipt. the effective date of coverage will depend on the type of receipt issued HIPAA - answers-Have to keep private information private w HIV - results are never revealed to agent, just to applicant and medical firm Consumer reports - answers-aka credit checks used to determine eligibility for personal credit or insurance or for employment Fair credit reporting act - answers-have to get written consent to run credit report third part info notice to applicant is REQUIRED consumers have rights and can dispute info in files penalty: fines up to 5000 and/or 1 year imprisonment USA Patriot act - anti money laundering provisions - answers-designed to prevent and detect money laundering and financing of terrorism your obligation to report suspicious acitivity (receipts of cash pmt exceeding 10000) STOLI/IOLI Stranger-Owned Life Insurance/Investor-Owned Life Insurance - answers-Life insurance arrangements involve investors who persuade seniors to take out a new life insurance policy, w/ the investors named as the beneficiary Banned in most states Standard risks - answers-average health and normal life expectancy and fall into the normal range anticipated byt he company when it established its premium. can be insured for standard rates Preferred risks - answers-represent excellent health. A risk of loss that is below avg and therefore favorable to the company. Favorable risk factors include such things as healthy lifestyle, clean medical history, or low-risk occupation. can be insured at discounted rates Substandard risks - answers-represent below average life expectancy, high-risk life insurance. A risk o floss that is above avg and therefore unfavorable to the company. Unfavorable risk factors include poor health, dangerous occupation, or risky habits. can only be accepted by charging them higher rates. sometimes referred to as being rated up Declined risk - answers-applicant is not insurable at any price. In such case the applicant is declined. adhesion - answers-policy written by insurance company, and applicant has to adhere to the requirements aleatory - answers-benefits that are exchanged are not equal (small premium for a large amount of coverage) unilateral - answers-only one promise is made insurance company promises to pay for a covered loss conditional - answers-certain rules to comply with in order for there to be coverage you dont pay your premium you wont be provided with coverage conversion privilege - answers-allows the policy owner, before an original insurance policy expires, to elect to have a new policy issued that will continue the insurance coverage. Premiums may change bc of attained age Savings Incentive Match Plans for Employees (SIMPLEs) - answers-Simplified retirement plan for small employers with 100 or fewer employees and no other type of retirement plan. All employees earning $5000 or more per year must be allowed to participate Taking out early under this plan will result in a 25% penalty. key person insurance - answers-businesses can protect themselves against the financial harm that would result from the death of such an employee with this coverage business owns, pays for, and is the beneficiary of the policy if the _________ person dies, the proceeds are used to offset financial losses and help to find a train a replacement buy-sell agreement - answers-provide for the sale of a business interest at the death or disability of an owner. Entity plan - answers-the purchaser of a deceased ownders business interest is the business entity itself. Sometimes called stock redemtion plans bc the corp is redeeming the deceased owners stock. usually used with non-incorporated businessess such as partnerships cross-purchase plan - answers-the surviving owner(s) purchase the deceased owners interest in the business. When funded by life insurance, each partner or shareholder owns a policy on the lives of each of the other partners. If there are 2 or more partners, many more policies are needed for this plan than the other buy to sell plan. Health Maintence Organization HMO - answers-Major emphasis on "Preventative Care" Goal is to detect conditions early before they require more treatment Preferred Provider Organization PPO - answers-Managed care Fee for service Pre-negotiated rates insured pays less in network of ppo providers Relationship between PPO and its providers is contractual Point of service Plans POS - answers-Old school insurance plan allows subscribers to obtain care from providers who do not belong to the HMO as well as those who do. subscribers pay more of the cost called an open-ended HMO Group health insurance contract - answers-this contract covers many people under one contract while individual policies insure only one person reduces the plan cost and lowers premiums group insurance premiums are less than individual coverage participants receive cert of insurance group health insurance criteria - answers--size of group -composition of group -flow of members through the group -plan design -contributory- employee pays part min 75% participation or noncontributory-employer pays entire cost 100% participation -persistence -administrative capability COBRA - test question - answers-Extends coverage for 18 months if: - employees employment is terminated - reduction in hours Extends coverage for 36 months if dependents no longer qualify due to: - divorce - too old - death of employee Very expensive How long is the grace period when a premium is not paid at the due date? - answers-31 days Reinstatement - answers-Policy lapsed for non payment of premiums. have up to 3 years to reinstate must pay missed premiums plus interest might have to get reinstatement if policy gets cancelled grace period for weekly premium policies - answers-7 days grace period for monthly premium policies - answers-10 days grace period for all other policies (annually, semiannually, and quarterly) - answers-31 days Reinstatement provisions for health insurance policies - answers-Application and receipt Must deny within 45 days after application or policy is in effect Accident claims covers immediately Sickness claims covered 10 days after reinstatement Notice of Claim - answers-must be given to insurer within 20 days after occurrence of any loss covered by the policy or as soon thereafter as is reasonably possible. Claim Forms - answers-Insurers must provide a _______ _________ within 15 days upon receipt of the insured's notice of a claim. Proof of Loss - answers-Written _______ ___ ______ must be provided to the insurer within 90 days of the date of loss. 91 days in Texas Time Payment of Claims - answers-Insurers must pay lump sum claims immediately after receiving proof of loss. For claims involving periodic payments such as disability income, payments must be made at least monthly. Payment of Claims - answers-Any death benefits are paid to beneficiary or the insured's estate Facility of Payment includes - $1000 to a family member Physical Examination and Autopsy - answers-Insurers may require insured's to submit to a physical examination, or an autopsy to be performed on a deceased insured. Insurer pays all costs if the company requires it and/or the law allows it Legal action against insurer - answers-The insured has to give us 60 days to investigate before filing a suit after the expiration of 3 years after filing a written proof of loss. Change of Beneficiary - answers-The right to change beneficiaries is up to the policyowner. Change of occupation - answers-This provision states that the insurance company may make changes to the premium rates or benefits if the insured changes occupation. Reduced benefits if occupation becomes - answers-more hazardous Refund of excess premiums if occupation becomes - answers-less hazardous Relation of Earnings - answers-Benefit cannot exceed earnings. Disability benefit exceeds earnings benefit reduced excess premiums refunded Illegal Occupation - answers-The insurer will not be liable for any loss that was caused by the insured's commission of attempt to commit a felony. No benefits in any of those cases. Free Look - Health insurance provision - answers-10 days from receipt to look over and decide whether or not to keep policy (30 days for senior products like medicare supplements or LTC) If policy is returned within this period, full refund of money. Insuring Clause - Health insurance provision - answers-states the insurers promise to pay under the conditions described in the policy. -First provision -promise to pay -conditions of payment Consideration Clause - Health Insurance provision - answers-An exchange of value and is necessary element of a legal contract. Company promises to pay Applicant provides information and pays premium Medicare Eligibliity requirements - answers-Age 65+ Have end-stage renal disease Have been receiving Social Security disability benefits for at least 24 months Medicare Part A - answers-Covers hospital, skilled nursing facility, hospice, and home health care Federal/State To enroll in Medicare Part A - answers-Must be age 65 and eligible for SS Supported by payroll taxes Premium charge for those not fully qualified for SS Medicare Part A Hopsital - answers-90 days of hospital care per benefit period new benefit period starts 60 days after discharge 1-60 100% 61-90 80/20 Skilled Nursing Facility Care - answers-For people that need round the clock medical care provided by licensed nurses, but does not need actual care provided by a hospital. Intermediate or Custodial Care - answers-Help with activities of daily living. Not covered by Medicare Skilled nursing care begins immediately after release from a hospital stay of atleast ____ Days? - answers-3 days Skilled nursing care - answers-Provides 100 days of coverage Day 1-20 = 100% paid by Medicare Day 21-100 = 80/20 split Home health care - answers-Part time nursing care at home 24/7 nursing is not available 100% paid my medicare Hospice care - answers-Designed to keep the patient comfortable before they pass away. Medicare Part A does not cover: - answers-first 3 pints of blood private duty nursing non-medical services intermediate or custodial care Medicare Part B - answers-An individual who enrolls in part a is automatically enrolled in part b. Optional and requires a monthly part ___ premium. Premium is tied to individuals income level and is deducted from the SS monthly benefit check Medicare Part B - answers-No stop loss limit for part __. Deductible on an annual basis of a calender year. Dental is not covered under part __. Federal/State Medicare Part B initial enrollment period - answers-3 months before age 65 month of age 65 3 months after age 65 Coverage under Medicare part B - answers-Inpatient and outpatient care home health care and outpatient medical services and supplies physical, occupational, and speech therapy etc Part b excludes - answers-routine foot, vision dental or hearing care most immunizations private duty nursing cosmetic surgery Part C - answers-Have to have part A and B to get part ___. Insurance Company Medicare Part C - answers-Called Medicare Advantage - designed to fill the gaps between A + B. Offered by the government types of medicare advantage plans - answers-HMOS or POS -gatekeeper -care must be obtained in network -enrollees pay with a copay PPO -no gatekeeper -more cost if out of network Medicare Part D - answers-Prescription Drug Coverage Part D - answers-Monthly Premium Deductible Designed to pay for drugs Insurance Company Part D - answers-Purchased from a private company Medicare pays the private company Private company pays the drug store premium charged - reduced by income lvl annual deductible Medicare Supplement Insurance (Medigap) - answers-Sold by private companies, can help pay some of health care cost that original medicare doesn't cover like (co payments, coinsurance, and deductibles) Desgined to fill the gaps in orginial mericare part A and B. Medicaid - answers-Government insurance program for persons of all ages whose income is insufficient to pay for health care. Jointly funded by the state and federal government. To receive Medicaid - answers-On welfare Supplemental Security Income, assistance program for people living at or near the poverty line who are age 65 or over, blind, or disabled. What can terminate COBRA? - answers-Medicaid