Insurers suffering from an impairment of paid-in capital are insolvent.
The commissioner may begin conservation proceedings against companies who cannot meet solvency regulations.
Insurers may not advertise their membership in the Guarantee Association.
An insurer may be liquidated if conservation proves to be futile.
An insurer suffering from an impairment of their minimum required paid-in capital is labeled solvent.
While “blood and business” can be used as a way to
remember the insurable interest relationship; employees do not have an insurable interest relationship with their employer.
A parent buys insurance on their adult child
An employee insures their employer in the fear of losing their job
A spouse insures the other spouse
A local hospital insures its chief of surgery
The missed premium will be deducted from the full death benefit if death occurs during the grace period.
The automatic premium loan can keep a policy in force when payments are missed and there is sufficient cash value to pay the premium.
Death during the grace period results in a full death benefit being paid.
The insuring clause states the insurer’s promise to pay a death benefit if premiums are paid, and proof of death is received.
Suicide during the policy’s first two years results in policy rescission.
Morale hazards are characterized by an indifference
towards risk. DUIs show apathy towards hurting oneself and others.
A reinstated policy will be contestable again for another two years.
Reinstatement requires payment of past due premium plus interest.
Reinstatement usually requires an application with underwriting questions, but may not require any physical exams.
A reinstated policy’s premium is based upon the insured’s original age.
The reinstated policy is incontestable if the first time it was in force it already passed the two year mark.
This is the definition of annuitant. The owner does
not have to be the annuitant, there may not be a beneficiary, and an annuity is a retirement plan, not insurance.
The Roth has non-deductible contributions, while the Traditional IRA allows tax deductible contributions.
Both allow the investor to invest for themselves and their non-income earning spouse
Both have penalties for early withdrawal
Both grow tax deferred
Both are tax deductible to the investor
Endowment policies mature, or endow at any time specified in the contract.
An endowment policy
Non-guaranteed elements will change over time.
Guaranteed elements show the minimum, guaranteed performance that will occur.
To be understandable, policy illustrations must follow certain formats so the insured can make informed buying decisions.
The illustration will note that both guaranteed and non-guaranteed elements will remain unchanged for the years illustrated.
Guaranteed elements must be emphasized in bold print.
Illustrations must note that they are only an illustration.
Exclusive agents work for or represent one insurer at
a time. Independent agents work for themselves and can be appointed by multiple insurers.
If an agent submits business to an insurer that the agent is not appointed with, the insurer can submit a notice of appointment within 14 days to validate the relationship.
Independent agents can be appointed by multiple insurers.
Exclusive agents work for themselves.
Agents need to complete 4 hours of ethics continuing education every license renewal as a part of their regular CE hours.
Brokers represent the insureds and can place those
clients with various insurers. Life-only agents sell life insurance on behalf of an insurer.
Insurance agents are not authorized to sell life insurance.
An agent or broker must exercise care when using apparent authority during the sales process.
Mass marketing techniques usually involve selling insurance without the use of an agent.
Brokers represent insurers in negotiating coverage with various insureds.
Group insurance premium paid by the employer is tax
deductible to the employer, while individual insurance premium is non-deductible.
Both provide a tax free death benefit.
Group insurance has a non-deductible premium while individual insurance has a tax deductible premium to the payor.
Group life tends to have a lower premium per person than individual life.
Group insurance is automatic and requires less medical information than the individual coverage.
Which of the following is not a personal use of life insurance?
A client buys insurance to pay off their mortgage should they pass away prematurely.
A client buys insurance to fund a buy-sell agreement.
A client buys cash value insurance to fund their children’s college education.
A client buys insurance to provide future income to a surviving spouse.
“Lump sum” is the default option. Life settlement
options are good for those who cannot handle large sums of money, but the interest portion of each payment is taxable income. Only the face amount or lump sum amount is tax free.
Settlement options like fixed period are good ways to provide an income to a beneficiary who cannot handle large sums of money.
Fixed amount is the default option when no option is selected.
Life income with 10 years certain provides at least 120 months of payments.
Life income payments are income tax free.
The “accumulate with interest” option and the “cash
option” are dividend options, not settlement options. The “interest only” option is the settlement option that pays earnings on the death benefit.
Interest only option
Accumulate with interest option
Life income option
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