Life Insurance Exam-Illinois
Warranties - ANSWER-guaranteed statements in an application attachment regarding
extra risk upon which the insurance company can contest the policy within the first 2
years of the policy if the statement is in anyway concealed or false
Which is more difficult to contest? Warranties or Representations? - ANSWER-
Representations
most statements are what? Warranties or Representations? - ANSWER-
Representations
Incontestability Clause - ANSWER-required by law-provides that after the policy has
been in effect two years, the insurance company cannot contest the policy due to any
misstatement or concealment on application
Actuarial Tables - ANSWER-Are statistical tables that are used when calculating
premium rates and mortality loss reserves
Life Insurance Policies transfer: - ANSWER-financial risks of premature death on a
defined amount
Loss of income - ANSWER-the face amount of life insurance is determined as a multiple
of income
Life annuity - ANSWER-contract which is issued by a life insurance company protects
an individual against the financial risk of outliving a normal life expectancy according to
the mortality actuarial tables and running out of money in old age
Pooling of Risks - ANSWER-A large group of people contribute money to a fund out of
which their losses can be paid
Policyowner - ANSWER-is the person or org that applies for the policy and pays the
premium
Life annuity - ANSWER-guarantees monthly income benefits to the annuitant for the
rest of his/her life no matter how long he/she lives
Insurable interest - ANSWER-a person must be in a position where he/she will lose
money should loss occur only at the time the policy is issued
, Who must have insurable interest? - ANSWER-the policy owner; he/she will lose money
should hte insured die prematurely
tax qualified plans - ANSWER-contributions can be deducted
non qualified plans - ANSWER-contributions cannot be deducted
tax deferred plans - ANSWER-tax on the interest and/or earnings is postponed as it
compounds and accumulates until it is withdrawn
tax free - ANSWER-no tax on benefits
cost basis - ANSWER-total contributions made to the plan
Tax: premiums paid on individual life insurance policies... - ANSWER-cannot be
deducted (non-qualified)
Tax: the benefits paid to the beneficiary at the insured's death... - ANSWER-is usually
not taxed (tax free)
Participating policy - ANSWER-pays a dividend
Tax: dividends paid to the policyowner on participating policies... - ANSWER-are usually
not taxed (tax free)
Modified Endowment Contract - ANSWER-The IRS has written rules that define when a
life insurance policy does not have a real, valid life insurance purpose and is in
substance an investment or savings plan
If a cash value life insurance policy does not have a valid life insurance purpose, the
IRS classifies it as a - ANSWER-modified endowment contract
Underwriter - ANSWER-is an insurance company employee who reviews applications
and additional information and decides whether the applicant is acceptable and what
the correct premium rate should be
Application includes (7 items) - ANSWER-age, sex, occupation, dangerous recreational
activities, aviation, smoking, agent's report
Medical reports can be (3 items) - ANSWER-health questionare, paramedic examiner's
report, and physician's report
Who completes the health questionnaire? - ANSWER-the agent and the applicant with
questions about applicant's health history as well as the applicant's parents' health
history
Warranties - ANSWER-guaranteed statements in an application attachment regarding
extra risk upon which the insurance company can contest the policy within the first 2
years of the policy if the statement is in anyway concealed or false
Which is more difficult to contest? Warranties or Representations? - ANSWER-
Representations
most statements are what? Warranties or Representations? - ANSWER-
Representations
Incontestability Clause - ANSWER-required by law-provides that after the policy has
been in effect two years, the insurance company cannot contest the policy due to any
misstatement or concealment on application
Actuarial Tables - ANSWER-Are statistical tables that are used when calculating
premium rates and mortality loss reserves
Life Insurance Policies transfer: - ANSWER-financial risks of premature death on a
defined amount
Loss of income - ANSWER-the face amount of life insurance is determined as a multiple
of income
Life annuity - ANSWER-contract which is issued by a life insurance company protects
an individual against the financial risk of outliving a normal life expectancy according to
the mortality actuarial tables and running out of money in old age
Pooling of Risks - ANSWER-A large group of people contribute money to a fund out of
which their losses can be paid
Policyowner - ANSWER-is the person or org that applies for the policy and pays the
premium
Life annuity - ANSWER-guarantees monthly income benefits to the annuitant for the
rest of his/her life no matter how long he/she lives
Insurable interest - ANSWER-a person must be in a position where he/she will lose
money should loss occur only at the time the policy is issued
, Who must have insurable interest? - ANSWER-the policy owner; he/she will lose money
should hte insured die prematurely
tax qualified plans - ANSWER-contributions can be deducted
non qualified plans - ANSWER-contributions cannot be deducted
tax deferred plans - ANSWER-tax on the interest and/or earnings is postponed as it
compounds and accumulates until it is withdrawn
tax free - ANSWER-no tax on benefits
cost basis - ANSWER-total contributions made to the plan
Tax: premiums paid on individual life insurance policies... - ANSWER-cannot be
deducted (non-qualified)
Tax: the benefits paid to the beneficiary at the insured's death... - ANSWER-is usually
not taxed (tax free)
Participating policy - ANSWER-pays a dividend
Tax: dividends paid to the policyowner on participating policies... - ANSWER-are usually
not taxed (tax free)
Modified Endowment Contract - ANSWER-The IRS has written rules that define when a
life insurance policy does not have a real, valid life insurance purpose and is in
substance an investment or savings plan
If a cash value life insurance policy does not have a valid life insurance purpose, the
IRS classifies it as a - ANSWER-modified endowment contract
Underwriter - ANSWER-is an insurance company employee who reviews applications
and additional information and decides whether the applicant is acceptable and what
the correct premium rate should be
Application includes (7 items) - ANSWER-age, sex, occupation, dangerous recreational
activities, aviation, smoking, agent's report
Medical reports can be (3 items) - ANSWER-health questionare, paramedic examiner's
report, and physician's report
Who completes the health questionnaire? - ANSWER-the agent and the applicant with
questions about applicant's health history as well as the applicant's parents' health
history
