New Mexico Life and Health Exam Questions And Answers Solutions Guaranteed

Insurance - Correct Answers A method of spreading the result of financial loss among a large number people. Life Insurance - Correct AnswersA contract under which one party (the insurer) in consideration of the premium payment, agrees to pay an amount stipulated in the contract to a designated person (the beneficiary) upon the occurrence of a contingency defined in the contract (usually that of death). Indemnity - Correct AnswersThe concept that insurance should restore the insured, in whole or in part, to the condition he enjoyed before the loss. Risk - Correct AnswersThe uncertainty of financial loss. The 3 Types of Risk - Correct Answers1) Pure Risk - there is only a chance of loss and there is no possibility of gain. 2) Speculative Risk - involves both an uncertainty of loss and of gain. 3) Insurable Risk Insurable Risk - Correct AnswersThe more closely a risk align with the following characteristics, the more insurable it is: Due to chance, measurable/predictable, it is based upon a large enough pool, so that the law of large numbers allows for the accurate prediction of loss, and there must be a significant potential for economic loss. Methods of Handling Risk - Correct Answers-Avoidance -Retention -Sharing -Reduction Exposure - Correct AnswersA measure of vulnerability of loss, usually expressed in dollars or units, to which an insurance rate is applied. Hazard - Correct AnswersA specific situation that introduces or increases the probability of occurrence of a loss. The conditions that increase risk or the chance of a loss occurring: - Correct AnswersPhysical - arise from material, structural, or operation features of a risk situation. Moral - The Insured's habits. Morale - Careless attitude on the part of the insured that increased the chance of loss. Legal - Court of legislative actions increases the risk of loss. Peril - Correct AnswersThe cause of a potential loss. Loss - Correct AnswersThe happening of the event for which insurance pays. The 4 Elements of a Legal Contract - Correct Answers1) Offer and Acceptance 2) Consideration 3) Legal Purpose 4) Competent Parties Estoppel - Correct AnswersThe concept that, once a fact has been admitted to be true by a previous action, it can no longer be denied to be true. Aleatory - Correct AnswersEqual value not given to both parties. Contract of Adhesion - Correct AnswersPrepared by one party - courts interpret against the one who prepared it. Contract of Utmost Good Faith - Correct AnswersTruthfulness and integrity on bot parties = trust. Benefits of Life Insurance - Correct AnswersCash Accumulation & Liquidity, Survivor Protection, Estate Conservation, Pre-arrangement or Pre-needs policies, Security, and Timeliness and Certainty. Problems with Investment Plans - Correct AnswersTime factor - can't complete a plan if you die prematurely. Spend factor - most plans are hard to put money in east to take out. Fluctuation factor - no guarantees in most investment plans. Living Benefits of Permanent Life Insurance - Correct Answers-Cash values -Potential retirement income -Withdrawals -Dividends Property Human Life Value Approach - Correct AnswersThis approach calculates the capitalized value of an individual's earning ability into the future. Needs Approach - Correct AnswersHow much life insurance is needed by surviving dependents to cover their needs and expenses, and also any expenses that result from the death of the insured. Capital conservation - Correct AnswersThis method derives income only from interest gained on the principal. It generates income indefinitely. Capital liquidation - Correct AnswersThis method uses both interest and principal to provide income. This means that a smaller fund is needed when using this method because there is no concern for leaving the principal intact. Level term - Correct AnswersLevel death benefit. Indefinite amount of time but premiums go up with age. Decreasing term - Correct AnswersDeath benefit decreases each year. Convertible term - Correct AnswersAllows the insured to convert/exchange their term policy to a form of permanent insurance. (No contestability/no exam). Renewable term - Correct AnswersAllows the insured to renew the term policy at the end of the period without providing insurability. Re-entry provision - Correct AnswersAllows insured to re-enter the product after the original purchased period is up, at a reduced premium, if the insured can prove insurability. Interim term - Correct AnswersUsually for a short period of time until the permanent policy goes into effect. Continuous premium whole life - Correct AnswersDesigned to endow at age 100 - Pay level premium up to age 100. This type of policy is often referred to as straight life insurance. Limited-pay whole life - Correct AnswersPremiums are payable for a certain period time or to a certain age usually 65. Although premiums are paid-up, the policy does not mature until age 100. Combination policy - Correct AnswersTypically a permanent policy with a term rider, as with Family Income (decreasing term) or Family Maintenance (level term) added to the base policy. Term is used to compliment the permanent plan. Endowment - Correct AnswersEndows at a certain age before 100, maturity benefits to insured and insurance benefits to a named beneficiary. (No longer offered - but might come up on test to trick). Economatic - Correct AnswersA whole life -type policy with a term rider that uses dividends to purchase additional paid-up insurance. As policy dividends are declared, they are used to purchase additional paid-up insurance which replaces an equal amount of term insurance. Universal life - Correct AnswersFlexible premium adjustable life that may create cash value (Buy term and invest the difference). Policy is designed to endow at 95. Variable whole life or Variable universal life - Correct AnswersWith the cash values invested in securities. No guarantees, dual regulation (SEC, NASD, & Life insurance license). Adjustable life - Correct AnswersA life policy that offers the policy owner the options to adjust the policy's face amount, premium, and length of protection without having to complete a new application or actually exchange policies. Current assumption whole life (CAWL) - Correct AnswersIs a whole life insurance that bases its premiums on current interest rates. Its premiums and face amounts will fluctuate with interest rates. Graded premium - Correct AnswersLow initial premium increases after 3-5 years then stays level. (Niche product that doesn't require you to much as much at first but then policy increases every year and levels out after year 5). Modified premium - Correct AnswersIncreases yearly each year for 3-5 years or for a longer period of time. Juvenile life - Correct AnswersWritten on the life of someone not yet considered an adult for life insurance purposes. Industrial life insurance - Correct AnswersPremiums payments are made on a frequent basis. Premiums are collected, by the agent, at the insured's home or workplace. Sales are made in premium units rather than insurance units. Accumulation period - Correct AnswersDuring this period, no taxes are place on accumulations. Taxes will only come into play at the time of distribution. Fixed annuities - Correct AnswersThese annuities offer fixed interest so the growth and final size are known from the beginning. Variable annuities - Correct AnswersOffer a variable rate of return to hedge against inflation. Death benefits - Correct AnswersPays the beneficiary at least the principal that was put in. Nonforfieture provisions - Correct AnswersRight to the cash value (can take it out). Exclusion ratio - Correct AnswersApplied to each payment the annuitant receives: Investment in Contract/Expected Return Annuity certain - Correct AnswersProvides income during certain period to annuitant and beneficiary. Life annuity certain - Correct AnswersWith period certain is life income for annuitant and certain period for the beneficiary. Insuring clause - Correct AnswersThis contains the basic promise of the life insurance company to pay a specific sum of money in a lump sum or an equivalent income stream. Automatic premium loan provision - Correct AnswersWill automatically take a loan against the policy cash value to pay the premium and keep the policy in force. Available on permanent types of insurance policies.