Which of the following statements most accurately characterizes life insurance? After a person’s death, it delivers benefits to their loved ones. Which of the following statements best describes the term “deductible”? It’s a fee paid before a customer can file a claim.
What term best describes insurance?
Insurance is a contract in which an individual or entity receives financial protection or compensation from an insurance firm in the form of a policy. The firm pooled the risks of its clients to make payments more reasonable to the insured.
Which statement best defines credit life insurance?
Credit life insurance is a form of life insurance coverage that pays out a borrower’s outstanding obligations in the event that the borrower passes away. As the debt is paid off over time, the face value of a credit life insurance policy declines proportionately with the outstanding loan amount, until both approach zero.
Which statement describes a life insurance policy dividend?
Agent – A state-licensed agent of an insurance firm that solicits and negotiates insurance contracts and offers service to policyholders on behalf of the insurer. An agent can be either an independent agent who represents at least two insurance firms or a direct writer who represents and sells policies for a single business.
Annuity – A contract that pays a set amount of money at regular intervals, usually for the rest of one’s life.
Annuity Certain – A contract that guarantees a set amount of money for a set number of years, regardless of whether the person lives or dies.
A person applying for life insurance makes a statement of information called an application. It aids the life insurance provider in determining the risk’s acceptability. The underwriting classification and premium rates of an applicant are determined based on the statements made in the application.
Beneficiary – The individual designated in the policy who will receive the insurance proceeds upon the insured’s death. Beneficiaries can be named by anyone.
An extra percent of interest is awarded to an annuity during the first year it is in force, known as a bonus rate annuity. The extra amount is in excess of the interest rate that will be credited beginning in the second year and for the remainder of the annuity’s term. In order to attract new policyholders, the higher rate is paid in the first year.
Cash Surrender Value – The amount available in cash if a policy owner chooses to terminate it before it becomes payable due to death or maturity. The sum is equal to the cash value of the policy minus a surrender charge and any outstanding loans and interest.
Direct Response – Insurance offered by an insurance firm directly to the insured via mail or over the counter by its own workers.
Dividend – A portion of the premium paid on participating insurance is returned as a dividend to represent the difference between the premium paid and the actual mortality, expense, and investment experience. Because dividends are understood as a reimbursement of a portion of the premium paid, they are not considered taxable distributions.
Evidence of Insurability – A statement or proof of your health, money, or employment that aids the insurer in determining if you are a suitable candidate for life insurance.
Expense – Your policy’s portion of the company’s operational costs, such as fees for medical exams and inspection reports, underwriting, printing costs, commissions, advertising, agency expenditures, premium taxes, salaries, and rent. Dividends and premium rates are heavily influenced by such costs.
Face Amount – The amount mentioned on the policy’s face that will be paid in the event of death or policy maturity. Additional sums due under accidental death or other special provisions, as well as amounts earned through the application of policy dividends, are not included.
Free Look Provision – A period of time given to an insured (typically 10-30 days) to evaluate the insurance policy and, if dissatisfied, return it to the insurer for a full refund.
Insurable Interest – A considerable interest created through love and affection for blood relatives, and a lawful and substantial economic interest in the insured’s life continuing for all others. When buying life insurance on someone else, you must have an insurable interest.
The rate at which life insurance policies expire due to nonpayment of premiums is known as the lapse rate. When policies lapse before sufficient premium payments have been received to cover early policy expenses, the business must make up the difference from the remaining policyholders. As a result, the lapse rate has an impact on the policy’s cost.
Life Expectancy The likelihood of an individual living to a specific age based on a mortality table. The basic premium reflects the starting point for calculating the pure cost of life insurance and annuities.
Falsification of the applicant’s birth date on the insurance application is known as misstatement of age. When this is identified, the policy will be updated to reflect the right age based on the premium paid.
Non-Forfeiture – One of the options available if the insurance owner stops paying premiums on a cash value policy. You can either cash in the cash value or use it to get extended term insurance or reduced paid-up insurance.
Non-Participating – A life insurance policy in which the firm does not share any of its surplus with policyholders.
A Participating Policy is a life insurance policy in which the firm commits to donate to policyholders the portion of its surplus that its Board of Directors believes is not required at the conclusion of the fiscal year. The distribution is intended to lower the premiums paid by policyholders.
The printed legal document that the firm issues to the policyowner explaining the terms of the insurance contract.
Policy Proceeds – The amount paid out on a life insurance policy when the policyowner dies or receives payment at surrender or maturity.
The person who owns a life insurance policy is known as the policyowner. This is normally the insured individual, although it could also be a close relative, a partnership, or a corporation.
A policyowner agrees to pay a premium, or one of the periodic payments, for an insurance policy. The premium may be paid in one payment or a series of recurring installments, such as annually, semi-annually, quarterly, or monthly, depending on the policy’s terms. The premium is based on the likelihood of a loss, as well as expenses and profit contingencies.
Rating – The reason for an increase in the standard premium because the person insured is considered to be a higher-than-average risk, usually due to poor health or a dangerous employment.
Reduced Paid-Up Insurance (RPI) is a non-forfeiture option for insurance. It allows the original insurance plan to be continued, but at a lower cost and without the need for further premiums.
Reinstatement – Returning a lapsed policy to its former premium-paying status once the policy owner pays all overdue premiums and policy loans, plus interest, and the insured presents adequate evidence of insurability.
Rider An insurance policy endorsement that alters the policy’s clauses and restrictions, including or excluding coverage.
Risk Classification – The process through which a firm determines how premium rates for life insurance should differ based on the risk factors of individuals insured (e.g., age, occupation, sex, health status), and then applies the resulting criteria to individual applications.
Settlement Options – The various options available to a policyholder or beneficiary for receiving policy benefits other than direct cash settlement. The following are some of the most common choices:
- The death benefit is left on deposit with the insurance company, generating interest, and the earnings are paid to the beneficiary annually.
- Fixed Amount Option – death benefit is paid in a series of fixed amount installments until the proceeds and interest generated have been exhausted.
- Fixed Period Option – death benefit is deposited with the insurance company, and the death benefit plus interest is paid out in equal payments over the time period chosen.
- The Life Income Option pays out a death benefit plus interest via a life annuity. Income continues for as long as the recipient lives under a straight life income option, or for a period of time regardless of whether the beneficiary lives under a life income with period certain option.
Standard Risk – A person applying for a life insurance policy who meets the physical, occupational, and other criteria used to determine regular premium rates.
A individual applying for a life insurance policy who does not match the standard risk requirements is classified as a substandard risk. Substandard risks are given a higher premium to account for the likelihood that they would live for a shorter period of time than a standard risk.
Supplementary Contract – An agreement between a life insurance company and a policyowner or beneficiary in which the firm keeps at least part of the cash sum payable under an insurance policy and pays the policyowner or beneficiary according to the settlement option selected.
Underwriter – A person who examines an insurance application and determines whether or not the applicant is acceptable and at what premium rate.
Underwriting is the process by which a life insurance company assesses whether or not it can accept a life insurance application and, if so, on what basis, in order to charge the right premium.
How can avoiding speeding tickets affect an automobile insurance policy quizlet?
What impact does avoiding speeding tickets have on a car insurance policy? It may be able to assist keep rates low. Mitchell purchases insurance to safeguard his brand-new stereo equipment.
What is the meaning of term life insurance?
Term life insurance is a form of life insurance policy with a set termination date, such as 20 years from the policy’s inception. The most frequent type of death benefit for a term policy is a level term policy, which means the death benefit value remains constant during the life of the policy.
What is insurance explain the principles of insurance?
The underlying idea of insurance is that an organization will opt to spend little amounts of money on a regular basis in order to protect itself against the chance of a large unexpected loss. In a nutshell, all policyholders pool their risks. Any losses they sustain will be covered by the premiums they pay.
What does liquidity refer to in life insurance?
In a life insurance policy, what does the term “liquidity” mean? Liquidity refers to the ease with which you can withdraw cash from your life insurance policy. Because permanent life insurance accumulates monetary value over time, the notion is best applicable to it. There is no cash value component in term life insurance.
What is an ordinary life insurance policy?
Life as a whole or in the ordinary The most prevalent sort of permanent insurance policy is this one. It includes both a death benefit and a savings account. If you choose this sort of life insurance, you are agreeing to pay a set amount of premiums on a regular basis in exchange for a set death benefit.
Do they check credit for life insurance?
Life insurance firms run a light credit check on you and assign you an insurance score based on your income and debts, insurance history, and driving history, which determines your final premiums.
What best describes what policy dividends are?
Dividends are regarded as a reimbursement of premiums that have not been used. After a loss, the insured might file a proof of claim to the insurer.