Life Insurance Basics

For executive bonuses (aka IRS section 162 Plan)-- the amount of the raise is tax-deductible to the employer and income is ________ to the employee.

The predicted needs of family after the premature death of the insured is referred to as the _______ approach.

Net Premium + Expense (Loading) = ________________________

A written statement summarizing the features and elements of a policy is

• Suitability

• Comparative method

• Policy summary

• Replacement

Cash values accumulate based upon a specific portfolio of stocks without guarantees of performance.  Keep pace with inflation--determined by the value of the securities backing it.

LA state rules indicate that illustrations must state that policy issuance may depend on answers to health questions.

• True

• False

The two types of partnership funding methods include the cross purchase method and the entity purchase method.

• True

• False

A replacing insurer is the company that issues the new policy.

• True

• False

Formulata for Net Premium= Mortality - ____________

A ________________________ life insruance policy is any poclicy that distributes its non-taxable divdends to policyowners by cash payments, reduced premiums, units of paid up insurance, a savings program, or by the purchase of term insurance.  (This permits the insurer to establish a more generous margin in the form of an intentional overcharge which will be returned to the policyholder if not needed.)

Agents performing transaction involving any variable products are required to be registered with the _____________

A non-participating (stock) life insurance policy does NOT pay dividends to policyowners.

• True

• False

The employee would need to give permission for "Key Person" coverage.

• True

• False

Retention of advertisement files is ________ years.

During Human Life Value Apporach, you determine insured's after-tax income from ___________ to retirement. 

Buy-sell funding is a personal use of life insurance.

• True

• False

A physical exam is not required for ordinary life insurance.

• True

• False

___________________________ method is when the partnership buys the policies on the partners (better for more than 2 partners).

When insurers plans to seek and use information from investigartors, they must first provide the applicatnt or insured with a written ___________________________________________.

• Field Underwriter

• Subpoena

• Disclosure of Insurance Information

• Disclosure Authorization Notice

Industrial or Home Service Insurance are written in small amount (less than 1000)

• True

• False

The cost of 1 year of mortality + (commissions + taxes+ advertising + profit margin) =

• Net Premium

• Gross Annual Premium

• Net Annual Premium

• Higher Premium

As a general rule, the lower your frequency of payments, the higher your premium.

• True

• False

Determining Lump Sum Needs includes does not include which of the following:

• Bequests or charity

• Retirement Income

• Insurance Against Suicide

• Spousal Education

Debt Concellation does not pay off debts.

• True

• False

The risk selection and classifaction process is referred to as ___________________.

Estate tax, day care, and insurance premiums are considered lump sum needs.

• True

• False

Which Person Use of Life Insurance is NOT correctly matched wit the explanation

• Estate Conversion-- important for young families that have not yet had time to accumulate assets.

• Survivor Protection- Survivors maintain their lifestyle in the event of death.

• Cash Accumulation--Guarantees that the amount of money will be available when needed (ie. whole life policy).

• Liquidity-- availability of cash to the policy owner.

A stock purchase method is

• When the corporation buys on policy on each shareholder.

• When each partner buys a policy on the other.

• When the partnerships buys the policies on the partners.

• When each stockholder buys a policy on each of the others.

The agent (field underwriter) must complete the following:

• Help prevent adverse selection

• Complete the application

• Collect the Initial Premium (and issuing receipt if applicable)

• Properly solicit applicants.

Which of the following are lump sum needs associated with death

• Charity

• Final Medical Expenses

• Children's Education

• Rent or Mortgage Payments

What is a viatical settlement?

What is an emergency reserve for determining lump sum needs?

When is the social security blackout periond?

What are the two corporate funding methods?

What are the two classes of life insurance policies?

What is a fixed life insruance or annuity?

What is the net single premium?

What is a substandard (high exposure) risk?