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