Download PSI LIFE: UNBREAKABLE and more Exams Finance in PDF only on Docsity!
PSI LIFE: UNBREAKABLE
◉ Pure Risk vs. Speculative Risk. Answer: Pure risks are insurable but Speculative risks are not Pure Risks - A possibility of loss, no loss, or gain Pure Risk - A possibility of loss or no loss; there is no possibility for gain ◉ Contract of Adhesion. Answer: One party writes the contract without inout from the other party on a "take-it-or-leave-it" basis ◉ Aleatory Contract. Answer: The exchange of value is unequal. Insured's premium payment is less than the potential benefit to be received in the event of a loss. ◉ Indemnity Contract. Answer: An agreement to pay on behalf of another party under specified circumstances ◉ Unilateral Contract. Answer: Only one party is legally bound to the contractual obligations after the premium is paid to the insurer
Only the insurer makes a promise of future performance, and only the insurer can be charged with breach of contract ◉ 4 elements of a valid contract. Answer: 1) Competent Parties
- Legal Purpose
- Agreement (offer and acceptance)
- Consideration ◉ Preferred Risks vs Standard Risks. Answer: Standard Risks are individuals who have the same health, habits, sex/gender, and occupational characteristics as those reflected in the mortality table Preferred Risks are individuals who meet certain requirements and qualify for lower premiums because of ideal health, height and weight. Individuals in this category have a longer than average life expectancy ◉ Human Life Value Approach vs. Needs Analysis Approach. Answer: Human Life Value approach is a measure of the projected future earnings and services of a person at risk in the event of a premature death. The objective is to provide the proper amount of coverage as determined by the value of the individual to his/her dependents using the following factors:
- The individual's age and gender
- The individual's occupation, annual wage, and planned retirement age
The policyowner must continue to pay premiums during the waiting period, but once eligible, the waiver is retroactive to the start of the disability and the premiums will be refunded. During the disability, the insured will credit the premiums to the policy and all benefits, such as cash value accumulation and dividend payments, will continue. ◉ Disability Income Rider. Answer: Life Insurance Disability Rider In the event of total disability and after the initial waiting period (such as 6 months), premiums are waived and the insured is paid a monthly income. The monthly disability income benefit is typically limited to a percentage of the face value. The benefit paid from the rider does not reduce the death benefits paid out upon death. ◉ Accidental Death Benefit rider. Answer: Life Insurance Rider affecting the death benefit amount May be called multiple indemnity rider In the event of a claim, the policy normally pays double or triple the face amount only if the insured's death was a result of an accident.
The benefit is payable only if death occurs before a specific age and within 90 days of the accident ◉ Separate Account (Variable) vs General Account (Life Insurance). Answer: The separate account is invested in debt or equity securities as offered by the insurance company. o Both the cash value in the separate account and the death benefit will fluctuate based on market conditions and performance of the subaccounts. o There is no guaranteed minimum return on the cash value in the separate account and the policy may lose both cash value and death benefit if there are market losses. o The death benefit is recalculated annually. The general account provides a fixed rate of interest and the cash value in the general account provides for a guaranteed minimum death benefit. ◉ Viatical Settlement. Answer: An agreement between a policyowner and a third-party buyer to purchase the life policy covering a person who is diagnosed as terminally ill with less than 24 months remaining life expectancy. ◉ Principle of Indemnity. Answer: To indemnify means to restore a person, in whole or in part, to the same physical or financial condition which existed prior to a loss, but without profit or gain.
◉ Partial Surrender. Answer: A partial withdrawal is considered a partial surrender of a Universal or Variable Universal Life policy. o The partial surrender is actually paid from the policy value and reduces both the amount of the death benefit and the amount of cash value in the policy. ◉ Per Capita. Answer: This is a method of distribution that will pay to surviving beneficiaries equally if named a beneficiary dies before the insured does ◉ Per Stirpes. Answer: This is a method of distribution that will pay to surviving beneficiaries equally if named a beneficiary dies before the insured does ◉ Grace Period. Answer: The grace period is the time period provided after the premium due dates before a policy lapses.
- The grace period in California is 60 days. ◉ Incontestability clause. Answer: Within the first 2 years of a policy, the insurer may contest a claim and void the contract upon proof of a material misstatement or fraud. ◉ Free Look. Answer: Every policy of individual life insurance and annuities (other than variable contracts) that is used for delivery in California must contain a notice regarding a return of the policy for cancellation of 10-30 days after its receipt by the owner. o The minimum free look period is 10 days for persons under age 60.
o Persons who are age 60 or older must be given a 30-day free look period. ◉ Uniform Simultaneous Death Act. Answer: Provides that when the insured and primary beneficiary die as the result of the same event and the order of death cannot be determined, it is assumed the insured died last, protecting their secondary beneficiary or heirs. ◉ Cease and Desist order. Answer: Given when unlicensed persons are caught transacting insurance without appropriate licensing, and penalties can be up to $5,000 a day. ◉ Immediate vs. Deferred Annuity. Answer: Immediate Annuity: Annuity that does not have an accumulation period and is used to generate immediate income within a year of the issue date. Deferred Annuity: Annuity that will pay periodic benefits starting at some specified time in the future; begins more than 1 year from the issue date. Deferred annuities are ideal for accumulating a retirement fund. ◉ Life Income Joint & Survivor. Answer: Joint annuity with lifetime income and is payable to 2 annuitants (in one check) while both are living. Upon the death of the first annuitant, survivor benefits continue, either paying the full amount of reduced to 2/3 or ½ for the survivor's income until the survivor dies.
o HMOs are deemed to be both a health care financing and servicing mechanism by emphasizing preventive medicine by providing routine medical exams, wellness programs, and diagnostic screenings. Services include usual physician, hospitalization, prescription drugs, laboratory, x-ray, urgent care. ◉ Primary Care Physician (PCP). Answer: Gatekeeper in HMOs PCP will either provide treatment after being the first contact for a person with an undiagnosed health concern, or make the determination to refer the subscriber to a specialist. ◉ Preferred Provider Organizations (PPO). Answer: An Preferred Provider Organizations (PPO) is an arrangement under which a selected group of independent hospitals and medical practitioners become preferred providers in a geographic area. o Providers perform services to subscribers and charge a discounted fee- for-service negotiated in advanced. o The contracting agency or organizer of a PPO might be a commercial insurance company, Blue Cross/Blue Shield, local group of hospitals or physicians, an HMO, large employers, or trade unions. o PPOs share the concept of cost reduction by health care management and differ from HMOs in that PPOs do not have separate physical facilities and not as capable of controlling expenses other than negotiating standard fees for services with its network provider.
◉ Exclusive Provider Organization (EPO). Answer: An EPO is a type of PPO that REQUIRES a subscriber to seek treatment from a limited number of network providers. ◉ Noncontributory Plan. Answer: Employers pay the entire premium and 100% of the eligible employees must be covered. ◉ Social Security Blackout Period. Answer: The time between when the youngest child reaches age 16 and the spouse is eligible for retirement benefits at age 60. ◉ Morbidity Tables. Answer: Morbidity: The predicted number of claims resulting from illness or injury in any given year for a specific group of insureds.
- Morbidity tables are used to provide statistics that give the company a basic estimate of how many insureds might be expected to suffer an illness or injury in any year. ◉ Fully Insured Status. Answer: • Fully Insured status requires an individual to have earned 40 quarters or credits, which is approximately 10 years of employment. o A fully insured worker has permanent coverage under Social Security and cannot lose this status. o Benefits that may be received under fully insured status are: Retirement income at age 62 or older. Spousal retirement at age 62 or older.
◉ Adult Day Health Care. Answer: A LTC coverage designed to provide custodial care and supervision on a day care basis outside the home for individuals not requiring 24-hour confinement in a nursing home nut who continue to live at home. ◉ Custodial Care. Answer: Nonmedical care (non-skilled care) to provide assistance with activities of daily living such as bathing, toileting, eating, dressing, transferring, and continence. May be provided in a nursing home or in one's own home. Providers are not required to undergo medical training ◉ Hospice Care. Answer: Provides pain control, comfort, and counseling for the terminally ill patient. Hospice care also includes a family counseling benefit. ◉ Respite Care. Answer: Provides relief to a primary caregiver and can include a service, such as someone coming to the home while the original caregiver tends to other matters. Most policies will include benefits for temporary institutionalization of the insured during a period of respite. ◉ Assuming CE requirements have been met, how is the life agent's license renewed ?. Answer: Pay the renewal billing notice the Department sends out 90 days before the renewal date.
◉ Assume two people apply for life insurance with exactly the same monthly premiums. One individual buys a whole life policy, and the other, a 10-year renewable term plan. Both are standard risks with no difference in their age or health rating. Select the statement from below which is false. C. The 10-year renewable term contract will have a premium increase every 10 years while the whole life policy premium remains level. D. The whole life policy will pay a higher amount to the beneficiary should the insured die within the first 10 years. Answer: D ◉ An annuity which may be used to help fund retirement in a few years maintains a "separate account". the owner purchases "accumulation units". This is called a ____ annuity.. Answer: Variable ◉ According to the terms of the suicide clause found in a life insurance policy, if an insured commits suicide 6 months after the policy is issued, what will the insurer do ?. Answer: Refund all the premiums paid ◉ What regard to the tax treatment of the death benefit in life insurance is true?. Answer: Death benefits are exempt from taxation ◉ A hospital confinement indemnity insurance policy pays:. Answer: A daily dollar benefit for each day the insured is confined to a hospital
◉ Arnold and Bertha are married and work for different firms. Arnold has group health insurance through his company that also insures Bertha. Likewise Bertha has group health insurance also covering Arnold. Select the correct statement below about how benefits are affected by the coordination of benefits provision in both plans. A. If Bertha files a medical claim Arnold's company is considered secondary. B. If Arnold files a medical claim Bertha's company is considered primary C. First the secondary insurer will decide what it won't pay for which will dictate what the primary insurer will pay D. Since both Arnold and Bertha are covered by a group plan neither insurer will pay if the other insurer is primary. Answer: D ◉ All of the following are used in determining life insurance rates, except: A. Investment and interest return B. Insurance company expenses C. Mortality expenses D. Policy reserves. Answer: Policy Reserves ◉ In the California Insurance Code there is a definition that reads, in short, "....a person who, for a fee, offers to advise any insured having
any interest in life or disability insurance contracts..." This is the definition of : A. An insurance broker paid on a fee-for-service B. A solicitor C. A life and disability analyst. Answer: C ◉ Disability income insurance pays a weekly or monthly income to replace a portion of the one's lost salary due to an inability to work. When a disability income insurance application is submitted, what reason might the underwritting department use to reject it? A. Insurers are willing to only accept applications with extremely small risks exposure. B. Underwriters have to reject a certain number of applications per a certain number of approved applications C. Disability insurers have to eliminate applications that seem likely to have losses much more frequently or much more severely than what the insurer's rates anticipate. D. None of the above.. Answer: C ◉ When any change in residence address occurs, every licensee and every applicant for a license must notify the Commissioner _______________. (Select the most correct response) A. Within 6 months after the move has taken place
A. Estimate of employers premiums B. Certificate of insurance C. Master policy D. Monthly premium notification on a non-participating plan. Answer: B ◉ Which of the following is false about dividends paid from life insurance policies? A dividend is: A. Treated as a return of excess premium paid by the owner and is therefore taxable. B. Interest earned on dividends and paid to the policy owner. It is considered taxable. C. Not guaranteed to be paid to the policy owner.. Answer: A ◉ In order for insurers to help avoid the problem of over-insurance they include ___ provisions in their policies. A. Maximum limits B. Coordination of benefits C. Neither of the above. Answer: Coordination of benefits
◉ An agent mostly sells long-term care insurance to individuals. He obtained his insurance license (life and health) in January of 1998. In 1998 he must: A. Complete 25 hours of life and health continuing education only B. Complete 25 hours of life and health continuing education and, in addition, complete 8 hours of LTC specific continuing education, a total of 33 hours C. Complete 25 hours of life and health continuing education, 8 of which are LTC specific D. None of the above. Answer: C ◉ Jose is covered by an insurance plan that will pay him disability income benefits if he is injured either while working or at home. The type of plan he has is a/an: A. Workers compensation policy B. Key person policy C. Non-occupational policy D. Occupational Policy. Answer: D ◉ Teresa is injured while woking at her company's plant. She is taken to a hospital and receives several weeks of care. She has a non- occupational group health plan at work. The hospital will not be paid by the non-occupational policy because:
