Indiana Life & Health Insurance Exam
Participating Insurance Policy
may pay dividends to the policyowner
Material Misrepresentation
misstatement to a question asked in the application process; death benefit claim will
likely be denied
Law of Large Numbers
the larger a group becomes, the easier it is to predict losses; used to predict certain
types of losses and set appropriate premiums
Substandard Risk
results in higher premium
Standard Risk
results in standard premium
Preferred Risk
results in lower premium
Expense Loading
combined with premiums to spread the operating costs of a business to all insureds
Net Premium
premiums without expense loading
Concealment
occurs when a person withholds a material fact that is crucial to making a decision; in
insurance, this involves withholding information that would be crucial to underwriting
decisions
Warranty
a statement guaranteed to be true
Representation
a statement true to the best of an applicant's knowledge
3 Basic Types of Term Life Insurance
level, increasing, and decreasing
Level Term
death benefit doesn't change throughout the life of the policy
Annually Renewable Term (ART)
premium increases annually according to attained age; policy may be guaranteed to be
renewable each without proof of insurability
Re-entry Option
the insured, upon the end of a term policy with guaranteed renewable option, may
qualify for a discounted premium rate with proof of insurability
Decreasing Term
death benefit decreases each year over duration of the policy term; typically used when
the amount of needed protection is time sensitive, or decreases over time
Increasing Term
death benefit increases each year over duration of the policy term (usually by specific
amount or percentage of original amount); often used by insurance companies to fund
certain riders that provide a refund of premiums of a gradual increase in total coverage,
such as the cost of living or return of premium riders
, Convertible Term
provides the policy owner with the right to convert the policy to a permanent insurance
policy without evidence of insurability; premium will be based on the insured's attained
age at the time of conversion
Continuous Premium (Straight Life or Ordinary Life)
basic whole life policy; will typically have the lowest annual premium
Limited Payment
premiums for coverage paid-up before age 100; higher premium and cash value builds
up faster; 20-pay life, life paid-up at 65 (LP-65);
Single Premium Whole Life (SPWL)
provides level death benefit to the insured's age 100 for a one-time, lump-sum payment;
policy completely paid-up after one premium and generates immediate cash
Modified Life
lower premium in first few policy years (3 to 5 years) and higher level premium for
remainder of insured's life
Graded-premium Whole Life
premiums start low, gradually increase each year (for about 5 to 10 years), and remain
level thereafter
Interest Sensitive Whole Life (Current Assumption Life)
provides same benefits as traditional whole life policies with added benefit of current
interest rates which may allow for either greater cash value accumulation or a shorter
premium-paying period
Equity-Indexed Whole Life
cash value is dependent upon the performance of the equity index (S&P 500) although
there is a guaranteed minimum interest rate; policy's face amount increases annually to
keep pace with inflation
Adjustable LIfe
insured determines how much coverage is needed and the affordable amount of
premium; as insured's needs change, policy owner may make adjustments such as
increase or decrease the premium or the premium paying period, increase or decrease
the face amount (requires proof of insurability for increasing the death benefit or
changing to a lower premium type policy), or change the period of protection; policy
owner also has option of converting from term to whole life or vice versa
Universal Life (flexible premium adjustable life)
policy owner has the flexibility to increase the amount of premium paid into the policy
and to later decrease it again; interests sensitive policy with a guaranteed contract
interest rate (usually 3 to 6%) and opportunity to get the current interest rate; two
components: insurance (always annually renewable term insurance) and cash account;
option A (level death benefit) and option B (increasing death benefit)
Fixed Life Insurance and Annuities
contracts that offer guaranteed minimum of fixed benefits that are stated in the contract
Variable Life Insurance and Annuities
cash values accumulate based upon a specific portfolio of stocks without guarantees of
performance; keep pace with inflation, and are determined by the value of securities
backing it
Variable Whole Life Insurance
Participating Insurance Policy
may pay dividends to the policyowner
Material Misrepresentation
misstatement to a question asked in the application process; death benefit claim will
likely be denied
Law of Large Numbers
the larger a group becomes, the easier it is to predict losses; used to predict certain
types of losses and set appropriate premiums
Substandard Risk
results in higher premium
Standard Risk
results in standard premium
Preferred Risk
results in lower premium
Expense Loading
combined with premiums to spread the operating costs of a business to all insureds
Net Premium
premiums without expense loading
Concealment
occurs when a person withholds a material fact that is crucial to making a decision; in
insurance, this involves withholding information that would be crucial to underwriting
decisions
Warranty
a statement guaranteed to be true
Representation
a statement true to the best of an applicant's knowledge
3 Basic Types of Term Life Insurance
level, increasing, and decreasing
Level Term
death benefit doesn't change throughout the life of the policy
Annually Renewable Term (ART)
premium increases annually according to attained age; policy may be guaranteed to be
renewable each without proof of insurability
Re-entry Option
the insured, upon the end of a term policy with guaranteed renewable option, may
qualify for a discounted premium rate with proof of insurability
Decreasing Term
death benefit decreases each year over duration of the policy term; typically used when
the amount of needed protection is time sensitive, or decreases over time
Increasing Term
death benefit increases each year over duration of the policy term (usually by specific
amount or percentage of original amount); often used by insurance companies to fund
certain riders that provide a refund of premiums of a gradual increase in total coverage,
such as the cost of living or return of premium riders
, Convertible Term
provides the policy owner with the right to convert the policy to a permanent insurance
policy without evidence of insurability; premium will be based on the insured's attained
age at the time of conversion
Continuous Premium (Straight Life or Ordinary Life)
basic whole life policy; will typically have the lowest annual premium
Limited Payment
premiums for coverage paid-up before age 100; higher premium and cash value builds
up faster; 20-pay life, life paid-up at 65 (LP-65);
Single Premium Whole Life (SPWL)
provides level death benefit to the insured's age 100 for a one-time, lump-sum payment;
policy completely paid-up after one premium and generates immediate cash
Modified Life
lower premium in first few policy years (3 to 5 years) and higher level premium for
remainder of insured's life
Graded-premium Whole Life
premiums start low, gradually increase each year (for about 5 to 10 years), and remain
level thereafter
Interest Sensitive Whole Life (Current Assumption Life)
provides same benefits as traditional whole life policies with added benefit of current
interest rates which may allow for either greater cash value accumulation or a shorter
premium-paying period
Equity-Indexed Whole Life
cash value is dependent upon the performance of the equity index (S&P 500) although
there is a guaranteed minimum interest rate; policy's face amount increases annually to
keep pace with inflation
Adjustable LIfe
insured determines how much coverage is needed and the affordable amount of
premium; as insured's needs change, policy owner may make adjustments such as
increase or decrease the premium or the premium paying period, increase or decrease
the face amount (requires proof of insurability for increasing the death benefit or
changing to a lower premium type policy), or change the period of protection; policy
owner also has option of converting from term to whole life or vice versa
Universal Life (flexible premium adjustable life)
policy owner has the flexibility to increase the amount of premium paid into the policy
and to later decrease it again; interests sensitive policy with a guaranteed contract
interest rate (usually 3 to 6%) and opportunity to get the current interest rate; two
components: insurance (always annually renewable term insurance) and cash account;
option A (level death benefit) and option B (increasing death benefit)
Fixed Life Insurance and Annuities
contracts that offer guaranteed minimum of fixed benefits that are stated in the contract
Variable Life Insurance and Annuities
cash values accumulate based upon a specific portfolio of stocks without guarantees of
performance; keep pace with inflation, and are determined by the value of securities
backing it
Variable Whole Life Insurance
