Webce Life and Health Study Guide 2023 with complete
solution
Representations and Warranties
Representations are statements the applicant makes on an application that are deemed
to be true to the applicant's best knowledge. Warranties are statements the insurer
makes in the contract.
Underwriting vs. Actuarial Departments
Two related insurance company functions. Through the process of _________,
applications are assessed for insurability and to assign premium rates. The ________
department analyzes data to help estimate future losses and to produce rate tables.
Managerial System vs. General Agency System
Two variations of the career agency system in which producers represent a single
company. One is headed by a company employee called a general manager (GM), the
other by an independent contractor called a general agent (GA).
Fraternal Insurance Company
A non-profit form of insurance provider sponsored by an organization of people who
share a common ethnic, religious, or vocational affiliation.
Peril and Hazard
Two related general insurance terms:
Peril is the immediate cause of a loss (and the event that is insured against).
Hazard is any condition that increases the risk of incurring a loss.
Contract of adhesion
A type of contract in which one party (the offeror) drafts the terms that must be accepted
as-is by the offeree. Insurance policies are this type.
Mutual Insurance Company
A form of insurance company that is owned by policyowners. May distribute policy
dividends (non-taxable) through participating policies.
Independent Agency System
An insurance distribution system in which the manager and producers are fully
independent and not affiliated with any single insurer.
Buyer's Guide and Policy Summary
Two related disclosure documents that are required by most states to be presented to
life and health insurance applicants at some point during the buying process.
Risk
A basic insurance term referring to the possibility of incurring a loss.
Law of Large Numbers
A mathematical principle that is the basis for predicting the odds of a loss occurring in a
certain population in any given year.
Social Security (OASDI)
A federal insurance program that provides disability, death, and retirement benefits to
covered workers and their qualifying beneficiaries.
Agents vs. Brokers
Two basic types of insurance producer: an ______ represents a single insurer and a
_____ sells policies from multiple insurers.
,Reinsurance
The process through which insurance companies spread large risks among other
insurers.
Domestic, Foreign, and Alien Insurers
Insurers can be categorized by their state of domicile. There are three categories,
known as _____, _____, and _____.
Stock Insurance Company
A form of insurance company that is owned by stockholders who may or may not also
be policyowners. May distribute stock dividends (taxable).
Admitted Insurer
An insurer that has a certificate of authority in a given state is said to be
an___________ insurer in that state.
Express, Implied, and Apparent Authority
Express authority—The right to sign an application as an agent for the insurer.
Implied authority—Using a computer program to identify insurance needs and to
recommend solutions.
Apparent authority—Advising the applicant to not disclose on the application any
important health facts that might reduce his or her insurability.
Indemnity vs. Valued Contract
Two forms of insurance contract. An indemnity contract bases policy benefits on
reimbursement of actual losses. A valued contract bases benefits on a stated amount
without regard for the value of the loss.
Loss
An unplanned reduction in economic value resulting from the occurrence of a covered
peril.
Medicare
A federal insurance program that provides medical care benefits to covered workers
(retirees).
Underwriting
The process by which an insurance company assesses an application to determine if it
represents an insurable risk.
Risk Management
The natural process by which people contend with the perils faced daily, of which there
are five common techniques.
The five basic elements of a valid contract
Offer, acceptance, consideration, competent parties, and legal purpose
Concealment
The willful nondisclosure of material facts on an application for the purpose of obtaining
insurance.
Insurable Risk (5 Criteria)
Loss must be definable and measurable.
The covered peril must be accidental or outside the insured's control.
The risk must be shared by a large group of similar risks.
The loss must not be catastrophic.
The risk must not be generally excluded from coverage.
Needs Approach
,The needs approach to determining life insurance needs is based on a detailed review
of a person's specific situation. It examines personal and family income, liabilities, and
assets, as well as future financial goals, to calculate the right amount of life insurance.
Bring-Back Rule
In estate planning, this rule requires life insurance policies transferred from the insured
within 3 years before death to be returned to the decedent's estate for valuation
purposes.
Life Insurance "Living Benefits"
Living benefits are made possible by the policy's cash value, which is always available
to the policyowner through policy loans, withdrawals, and partial surrenders. The funds
may be used for any purpose.
Key Person Life Insurance
If a key employee ends his or her employment, the employer can continue the policy in
force. However, many employers choose to:
sell the policy to the insured for an amount equal to its cash value
surrender the policy or
change insureds if allowed by the insurance company and applicable state law
Annuity
An insurance contract between a person and an insurer to distribute an accumulated
sum of money over a certain period, including the person's lifetime.
Annuities come in many forms, but they all have two common purposes:
to accumulate money on a tax-deferred basis
to distribute the accumulated money as income in a guaranteed amount for a
guaranteed period (including the annuitant's life)
Decreasing Term Life Insurance
This form of term life features a death benefit that diminishes over time and premium
that remains level for the term of the policy.
Fully Insured Status (Social Security)
To be considered fully insured, a worker must have 40 quarters of coverage. A fully
insured worker is eligible for disability, retirement, and death benefits.
Cross-Purchase Buy-Sell Agreement
A type of buy-sell agreement in which each owner purchases a life insurance policy on
each of the other owners.
ERISA
The Employee Retirement Income Security Act of 1974 (ERISA) protects the rights of
employees covered under an employer-sponsored plan by stipulating minimum
participation, vesting, and funding requirements.
Irrevocable Beneficiary
This beneficiary designation cannot be changed by the policyowner without that
beneficiary's permission.
Guaranteed Insurability Rider
This life policy rider guarantees that additional coverage can be added to a whole life
policy even if the insured has become uninsurable.
Annuity Beneficiary
, The person the annuity owner chooses to receive the annuity contract's values if either
the owner or the annuitant dies before annuitization.
Whole Life Insurance
Whole life insurance features a guaranteed cash value, a fixed guaranteed death
benefit, level premiums, and coverage that can remain in effect as long as the insured
lives (up to age 120). Its most basic form is called straight (or ordinary) whole life
insurance.
Buy-Sell Agreement
A legal agreement through which two or more owners of a business arrange for the
disposition of each owner's share of the business upon death.
Expense Charge (Load Factor)
The load factor reflects the costs the insurer expects to incur on the policy. In
determining its load factor, an insurer is generally guided by three objectives:
to cover total operating costs
to provide a safety margin
to contribute to profits or surplus
Term Life Insurance
This basic form of life insurance provides temporary protection and does not include a
cash value while the insured is alive.
Insurable Interest
The financial interest a policyowner has in a person or property being insured, justifying
the purchase of insurance.
Annuitization
The process through which a sum of money is converted into periodic payments
through an annuity contract.
Different for every age and annuity income option, annuity purchase rates are defined in
terms of income dollars per $1,000 of accumulation.
Variable Annuity
An investment-focused annuity whose contract values vary in response to the contract's
underlying assets and are therefore not guaranteed.
Accelerated Benefit Rider
Also available through a policy provision, the typical accelerated benefit rider allows up
to 50 percent of the death benefit to be available to the eligible insured, though some
policies allow up to 100 percent. This money may be used for any purpose.
Third-Party Policy Ownership
A policy ownership situation in which the life insurance policyowner and insured are two
different people.
In third-party ownership, the three parties to the contract are: the insurer, the owner,
and the insured
Premium Receipt
Given to the applicant in return for the initial premium, this item provides interim
coverage during underwriting. There are two basic types.
The conditional receipt provides interim coverage only as long as the applicant is found
solution
Representations and Warranties
Representations are statements the applicant makes on an application that are deemed
to be true to the applicant's best knowledge. Warranties are statements the insurer
makes in the contract.
Underwriting vs. Actuarial Departments
Two related insurance company functions. Through the process of _________,
applications are assessed for insurability and to assign premium rates. The ________
department analyzes data to help estimate future losses and to produce rate tables.
Managerial System vs. General Agency System
Two variations of the career agency system in which producers represent a single
company. One is headed by a company employee called a general manager (GM), the
other by an independent contractor called a general agent (GA).
Fraternal Insurance Company
A non-profit form of insurance provider sponsored by an organization of people who
share a common ethnic, religious, or vocational affiliation.
Peril and Hazard
Two related general insurance terms:
Peril is the immediate cause of a loss (and the event that is insured against).
Hazard is any condition that increases the risk of incurring a loss.
Contract of adhesion
A type of contract in which one party (the offeror) drafts the terms that must be accepted
as-is by the offeree. Insurance policies are this type.
Mutual Insurance Company
A form of insurance company that is owned by policyowners. May distribute policy
dividends (non-taxable) through participating policies.
Independent Agency System
An insurance distribution system in which the manager and producers are fully
independent and not affiliated with any single insurer.
Buyer's Guide and Policy Summary
Two related disclosure documents that are required by most states to be presented to
life and health insurance applicants at some point during the buying process.
Risk
A basic insurance term referring to the possibility of incurring a loss.
Law of Large Numbers
A mathematical principle that is the basis for predicting the odds of a loss occurring in a
certain population in any given year.
Social Security (OASDI)
A federal insurance program that provides disability, death, and retirement benefits to
covered workers and their qualifying beneficiaries.
Agents vs. Brokers
Two basic types of insurance producer: an ______ represents a single insurer and a
_____ sells policies from multiple insurers.
,Reinsurance
The process through which insurance companies spread large risks among other
insurers.
Domestic, Foreign, and Alien Insurers
Insurers can be categorized by their state of domicile. There are three categories,
known as _____, _____, and _____.
Stock Insurance Company
A form of insurance company that is owned by stockholders who may or may not also
be policyowners. May distribute stock dividends (taxable).
Admitted Insurer
An insurer that has a certificate of authority in a given state is said to be
an___________ insurer in that state.
Express, Implied, and Apparent Authority
Express authority—The right to sign an application as an agent for the insurer.
Implied authority—Using a computer program to identify insurance needs and to
recommend solutions.
Apparent authority—Advising the applicant to not disclose on the application any
important health facts that might reduce his or her insurability.
Indemnity vs. Valued Contract
Two forms of insurance contract. An indemnity contract bases policy benefits on
reimbursement of actual losses. A valued contract bases benefits on a stated amount
without regard for the value of the loss.
Loss
An unplanned reduction in economic value resulting from the occurrence of a covered
peril.
Medicare
A federal insurance program that provides medical care benefits to covered workers
(retirees).
Underwriting
The process by which an insurance company assesses an application to determine if it
represents an insurable risk.
Risk Management
The natural process by which people contend with the perils faced daily, of which there
are five common techniques.
The five basic elements of a valid contract
Offer, acceptance, consideration, competent parties, and legal purpose
Concealment
The willful nondisclosure of material facts on an application for the purpose of obtaining
insurance.
Insurable Risk (5 Criteria)
Loss must be definable and measurable.
The covered peril must be accidental or outside the insured's control.
The risk must be shared by a large group of similar risks.
The loss must not be catastrophic.
The risk must not be generally excluded from coverage.
Needs Approach
,The needs approach to determining life insurance needs is based on a detailed review
of a person's specific situation. It examines personal and family income, liabilities, and
assets, as well as future financial goals, to calculate the right amount of life insurance.
Bring-Back Rule
In estate planning, this rule requires life insurance policies transferred from the insured
within 3 years before death to be returned to the decedent's estate for valuation
purposes.
Life Insurance "Living Benefits"
Living benefits are made possible by the policy's cash value, which is always available
to the policyowner through policy loans, withdrawals, and partial surrenders. The funds
may be used for any purpose.
Key Person Life Insurance
If a key employee ends his or her employment, the employer can continue the policy in
force. However, many employers choose to:
sell the policy to the insured for an amount equal to its cash value
surrender the policy or
change insureds if allowed by the insurance company and applicable state law
Annuity
An insurance contract between a person and an insurer to distribute an accumulated
sum of money over a certain period, including the person's lifetime.
Annuities come in many forms, but they all have two common purposes:
to accumulate money on a tax-deferred basis
to distribute the accumulated money as income in a guaranteed amount for a
guaranteed period (including the annuitant's life)
Decreasing Term Life Insurance
This form of term life features a death benefit that diminishes over time and premium
that remains level for the term of the policy.
Fully Insured Status (Social Security)
To be considered fully insured, a worker must have 40 quarters of coverage. A fully
insured worker is eligible for disability, retirement, and death benefits.
Cross-Purchase Buy-Sell Agreement
A type of buy-sell agreement in which each owner purchases a life insurance policy on
each of the other owners.
ERISA
The Employee Retirement Income Security Act of 1974 (ERISA) protects the rights of
employees covered under an employer-sponsored plan by stipulating minimum
participation, vesting, and funding requirements.
Irrevocable Beneficiary
This beneficiary designation cannot be changed by the policyowner without that
beneficiary's permission.
Guaranteed Insurability Rider
This life policy rider guarantees that additional coverage can be added to a whole life
policy even if the insured has become uninsurable.
Annuity Beneficiary
, The person the annuity owner chooses to receive the annuity contract's values if either
the owner or the annuitant dies before annuitization.
Whole Life Insurance
Whole life insurance features a guaranteed cash value, a fixed guaranteed death
benefit, level premiums, and coverage that can remain in effect as long as the insured
lives (up to age 120). Its most basic form is called straight (or ordinary) whole life
insurance.
Buy-Sell Agreement
A legal agreement through which two or more owners of a business arrange for the
disposition of each owner's share of the business upon death.
Expense Charge (Load Factor)
The load factor reflects the costs the insurer expects to incur on the policy. In
determining its load factor, an insurer is generally guided by three objectives:
to cover total operating costs
to provide a safety margin
to contribute to profits or surplus
Term Life Insurance
This basic form of life insurance provides temporary protection and does not include a
cash value while the insured is alive.
Insurable Interest
The financial interest a policyowner has in a person or property being insured, justifying
the purchase of insurance.
Annuitization
The process through which a sum of money is converted into periodic payments
through an annuity contract.
Different for every age and annuity income option, annuity purchase rates are defined in
terms of income dollars per $1,000 of accumulation.
Variable Annuity
An investment-focused annuity whose contract values vary in response to the contract's
underlying assets and are therefore not guaranteed.
Accelerated Benefit Rider
Also available through a policy provision, the typical accelerated benefit rider allows up
to 50 percent of the death benefit to be available to the eligible insured, though some
policies allow up to 100 percent. This money may be used for any purpose.
Third-Party Policy Ownership
A policy ownership situation in which the life insurance policyowner and insured are two
different people.
In third-party ownership, the three parties to the contract are: the insurer, the owner,
and the insured
Premium Receipt
Given to the applicant in return for the initial premium, this item provides interim
coverage during underwriting. There are two basic types.
The conditional receipt provides interim coverage only as long as the applicant is found
