Indiana Life and Health Insurance Detailed Exam 2025

Participating Insurance Policy - -may pay dividends to the policy owner 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 Warrant - -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 Indiana Indiana 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) Indiana Indiana 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 - -level, fixed premium, investment-based product; guaranteed minimum death benefit; cash value is not guaranteed and fluctuates with the performance of the portfolio in which the premiums have been invested by the insurer; policy owner bears investment risk in variable contracts Variable Universal Life Insurance - -securities version of universal life insurance Joint LIfe - -insures two or more lives; term or permanent; premium based on a joint average age and the death benefit is paid upon the first death only Buy-Sell Agreement - -business continuation agreement that determines what will be done with the business in the event that an owner dies or becomes disabled Survivorship Life - -premium based on joint age; pays on the last death; lower premium than joint life; used to offset the liability of the estate tax upon the death of the last insured Juvenile Life - -any life insurance written on the life of a minor; "jumping juvenile" is a common type where the face amount increases at a predetermined age, often age 21; premium remains level throughout Family Protection Policy - -combines whole life with term insurance to cover family members in a single policy; whole life on breadwinner (permanent life insurance) and convertible term insurance (term riders) on the other family members Credit Life - -written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor; usually decreasing term insurance; individual policy or group plan (if group policy, creditor is owner of the master policy and each debtor receives a certificate of insurance); creditor is owner and beneficiary of the policy and premiums usually paid by debtor; cannot pay out more than the balance of the debt Cost Recovery Rule - -the amount of cash value that exceeds the sum of the total premiums will be taxed as ordinary income when cash withdrawn or policy surrendered for cash value Policy Loan - -loan from cash value of life insurance policy; not income taxable to the policy owner; individual cannot receive a deduction for interest paid on life insurance policy loan Indiana Indiana Estate Taxation - -death benefit of life insurance policy may be included in the insured's taxable estate at death and can be subject to the federal estate tax Settlement Options - -interest portion of the payments received is taxable as income; immediate annuity is purchased with the fa