PA Life and Health Insurance Exam - Life Insurance Basics Questions and Answers

Insurable Interest The policyowner must face the possibility of losing money or something of value in the event of loss...Must exist at the time of application Personal Uses of Life Insurance Survivor protection, estate creation/conservation, Liquidity, Asset protection Purchase of Life Insurance creates this Immediate estate Liquidity The policy's cash values can be borrowed against at any time and used for immediate needs Asset Protection The use of life insurance to guard one's wealth against creditor claims Insured's creditors have no right to the proceeds or cash value except when: Bankruptcy within 2 years, amount of premiums paid with intent to defraud creditors is not exempt, creditor possessing a valid assignment from the policyowner may recover the amount secured Viatical Settlement Allow someone living with a life-threatening condition to sell their existing life insurance policy and use the proceeds when they are most needed, before their death. They are separate contracts in which the insured sells the death benefit to a third party at a discounted rate How much do viators receive from the person who purchases the policy? A percentage of the face value Chronically ill A condition in which a person is unable to perform at least 2 activities of daily living or requires substantial supervision to protect the individual from threats to health Terminally ill A condition that can reasonably be expected to result in death within 24 months Viator Means the owner of a life insurance policy who enters into or seeks to enter into a viatical settlement contract