A group contract is between the insurer and the employer.
What is a Keogh plan?
A retirement plan for those who are self employed.
What is an "Illustration"?
A presentation or depiction that includes non-guaranteed elements of a policy of life insurance over a period of years.
What does "non-guaranteed elements" mean in a life insurance policy illustration?
The premiums, benefits, values, credits or charges under a policy of life insurance that are not guaranteed or not determined at issue.
What does a stock redemption buy/sell agreement facilitates?
The purchase of a deceased shareholder's shares from the shareholder's heirs by a corporation.
When is a widow or widower without children eligible for Social Security survivors benefits?
at age 60
If a senior has purchased an annuity which is invested in a mutual fund and they cancel during the free look, what does the CIC requires?
the CIC requires seniors be refunded the value of the account.
Where in the free look notice for seniors must the print be in no less than 10-point uppercase type?
On the cover page of the policy or certificate and the outline of coverage
How can a collateral assignment be utilized?
It can be utilized to obtain a loan.
What will be effected if a policy loan is outstanding when the insured dies and the beneficiary selects the fixed period settlement option?
will effect the amount of the payments received. NOT the length they are received for
What rates does an Equity Indexed Annuity have?
a fixed minimum interest rate, and the chance to get a higher rate of return like that of the stock market
What is the penalty for an early withdrawal from a Modified Endowment Contract?
A 10% IRS penalty
Where does and agent's commission come from?
from the insurer expenses portion of the premium charged
For what reason were Life Insurance policy illustrations NOT created?
to eliminate disclosure
How does the CIC defines Insurance?
a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event
What does join life policy cover and when does it pay?
covers multiple lives and pays out when the first insured dies
What do Life Agents, Fire & broker-agents, and Personal Lines agents must also complete in addition to pre-licensing?
a 12-hour Ethics and Code course
Who is responsible for the content on an agents website?
the insurance agent, not the designer
When can an insured change the beneficiary?
at anytime if it is revocable
When can a representation may be altered or withdrawn?
before the insurance is effected, but not afterwards
What must exist exist in Life Insurance before a policy is first issued?
What is the Measure of Liability in life insurance?
the sum or sums payable as provided in the policy the person entitled thereto
What is the "exclusion allowance"?
is the formula used to determine the amount of annuity distribution which is taxable
How shall the Insurance Commissioner be elected?
shall be elected by the people in the same time, place and manner as the Governor
What must be included in advertisements, policies, and certificates of term life insurance sold to those age 55 and older according to CIC?
a term life insurance monetary value index, which is similar to the Life Insurance Surrender Cost Index. In developing a term life insurance monetary value index, the commissioner shall consider actual premiums and policy and certificate benefits and the manner in which they are affected with the passage of time. Any term life insurance monetary value index developed pursuant to this sections shall assume an insured's desire to retain coverage for a least 10 years.
What does term life insurance directed to individuals 55 year of age or older must prominently disclose?
any change in premium resulting from the aging of the insured, policy duration, or any other factor. If the insurer retains any right to modify premiums in the future, that fact shall also be disclosed.
What is the social Security Blackout period?
a period of time when surviving family members are NOT eligible for Social Security survivors benefits (survivors benefits stop during this period.)
When does the Social Security Blackout period begins?
when the youngest child reaches age 16.
When does the Social Security Blackout period ends?
when the surviving spouse reaches age 60.
What does Social Security base full retirement age on?
is based upon the year a person was born.
To whom are retirement benefits under Social Security available?
to workers who are fully insured.
What is an Employee Ownership Program (ESOP)?
is a qualified, defined contribution, employee benefit plan designed to invest primarily in the stock of the sponsoring employer.
What is a profit sharing plan?
a plan that gives employees a share in the profits of the company. Each employee receives a percentage of those profits based on the company's earnings.
What is a speculative risk?
a risk situation that includes a chance of loss and a potential for gain. Speculative. risks are not insurable.
What is the premium?
the amount the insured pays the insurer for the coverage provided.
What does the Law of Large Numbers state?
states the more similar risks the insurance company combines together the better they can guess approximately how many losses they will have in a given time period.
What does the Doctrine of Utmost Good Faith allow?
allows each party to rely on the representations made by the other party.
What does life insurance companies are required to give policyholders during the free look?
a minimum 10 day free look, unless the policyholder is age 60 or older in which case they are considered a senior citizen and must receive a 30 day minimum free look.
How many appointments must insurance agents hold in order to transact (sell) insurance?
agents must hold at least one insurer appointment.
What is a Tax Sheltered Annuity (TSA or 403-B)
is a qualified plan created for public school employees and non-profits.
What is it that Roth IRA's have?
have non-deductible contributions.
What are annuity death benefits NOT?
NOT tax deductible or tax free. Life insurance death befits are tax free however annuities are not life insurance. The beneficiary of an annuity death benefit would have to pay ordinary income tax on any amount they receive over and above the cost basis (amount invested) of the annuity owner.
How man types of ordinary life insurance there are?
There are tree types remembered by the acronym W-E-T (Whole Life, Endowment, Term). Group insurance is not a type of ordinary life insurance.
Who is the insurance applicant?
is the individual who is applying to purchase insurance.
What is an authorized insurer required to establish?
a division within the insurer to investigate fraudulent claims.
What statement related to fraudulent claims are claims forms required to include?
"Any person who knowingly present a false or fraudulent claim for the payment of a loss is guilty of a crime and may be subject to fines and confinement in state prison"
When is an individual, who becomes disabled, currently insured under Social Security.
when an individual has contributed to Social Security 6 of the last 13 quarters.
What kind of authority Bob working for Alpha Insurance Company exercises when he does things necessary to transact insurance that are not specified in his contract?
What happens if an annuitant with a 10 year certain period annuity payout option guarantee dies with in the first 120 payments?
the remaining payments will be made to the beneficiary. However, the annuitant will be paid as long as they live. Which could be substantially longer than 10 year.
What does an insurance company do when an annuitant enters the payout period and annuitizes the contract?
it spreads the annuitant's cost basis (amount invested) over the annuitant's projected lifespan. For example, if an annuitant had invested $50,000 into the annuity (the cost basis) and the annuity account balance was now $100,000 then the annuitant annuitized is to receive payments of $4,000 per year the annuitant would not have to pay tax on the first $2,000 they receive each year.
How is an annuitized annuity annual payment calculated when the cost basis is $50,000
First, divide the total amount ($100,000) by $4,000 (the annual payments the annuitant will receive) to find out the annuitant's projected lifespan (25 years). Then divided the annuitant's cost basis ($50,000) by 25 year ($2,000). The first $2,000 of payment the annuitant receives each year for the first 25 years is a return of their cost basis and is not taxable. Any amount over the $2,000 they receive each year is taxable as ordinary income. What happens if the live longer than 25 year? The $4,000 per year will continue to be paid but will now be fully taxable since all of their cost basis has been returned to them.
When is a insurance agent's license inactive?
when the insurance agent no longer holds any insurer appointments.
What does an employer need to do if it holds an insurance agent's license and wants to cancel it?
the employer is required to send written notice to the commissioner.
What does the Employees Retirement Income Security Act (ERISA) states?
that fiduciary pension plan were created for the benefit of plan participants and beneficiaries.
What and when needs to happened when a retirement plan that includes a 7 year vesting schedule reaches its 7th year?
each employee must be vested 100% by the end of the 7th year. Vesting means ownership of employer contributions.
What is an insurance company based in Utah selling in California?
is a Foreign insurer in California.
How is an insurance company that has enough reserves to pay for all its liabilities referred as?
a solvent insurer
What does the State Insurance Guarantee Provides to policyholders whose insurer becomes insolvent (financially impaired).
the fund only provides cover to policyholders of member insurers (licensed insurance companies)
What can happen to an applicant that has had a professional license revoked in the past 5 years?
The insurance commissioner can deny the licensing application without prior hearing.
How is an insurance company that purchases reinsurance referred as?
the primary insurer (a.k.a. ceding insurer)
What does the Waiver of Premium Rider does?
will waive the insured's premium if the insured becomes disabled.
What does an Added Disability Rider to a life insurance policy does?
will pay a replacement of the insured's lost income if the insured becomes disabled.
What does an Accidental Death Benefit Rider does?
will pay double the face amount if the insured dies in an accident, and is also known as double indemnity.
Why would an insured name a contingent beneficiary?
to ensure where the policy proceeds will go if the primary beneficiary dies prior to the insured.
What is an Extended Term?
a non-forfeiture option that provides a new term life insurance policy with the same face amount of coverage as the original policy. Extended term is not a settlement option.
What does a Mutual Insurer pay?
pays dividends to policyholders. The dividend option is selected by the policyholder on the insurance application.
What does a Non-Participating policy holder not receive?
it does not receive dividends. Non-participating policies are issued by stock insurers. Stock insurers pay dividends to stockholders, not policyholders.
Who declares dividends?
Dividends are declared by board of directors and cannot be guaranteed.
What does the conversion feature allows.
an employee to go from group coverage to an individual policy.
What does a family policy provides?
provides life insurance for an entire family an allows the children to convert from term to whole life coverage without a physical exam.
What must an employee do to enroll without any restrictions.
must enroll during the eligibility period (open enrollment period)
What is a Non-Contributory Group Plan?
a group contract where the employer pay 100% of the premium.
What happens when an individual increases the insurance policy limits.
not eliminating the risk, but transferring more of individual's risk.
What premium charge does a preferred risk receive?
the lowest premium charges as is posing the lowest risk to the insurer.
What is the main difference between a binder and a conditional receipt?
the binder always creates immediate coverage
What does the incontestability clause states?
that after a life insurance policy has been in effect for 2 years it becomes totally incontestable. This is very restrictive for the insurer and prevents them from contesting a claim for any reason after 2 years.
What is replacement?
when the agent (you) replaces a customer's current policy with a new one and is NOT illegal. However, it should NOT be replaced if the new policy is worse and the premium is higher. This would be considered twisting and is illegal.
What is a Captive Insurer?
an insurer created by a corporation to insure its own risks.
What impact does a company self insuring has on claims severity?
it would not have any impact.
What does the Entire Contract Clause state?
It states that the application is part of the contract if attached when issued.
What does an insured need to do in order to sell a life insurance policy to an investor (viatical/life settlement)?
need to request an absolute assignment.
What is an Absolute Assignment.
a permanent transfer of ownership rights
What do individuals who hold a Life-Only and/or and Accident & Health also licensed as a property broker-agent and/or casualty broker-agent license must complete every two years?
24 hours of Continuing Education every two years in order to renew their license
What is an insurance company based in Canada and doing business in California called?
an alien insurer
What does the doctrine of The Utmost Good Faith state?
that all parties to the contract can rely upon the statement of the other party.
What is concealment?
when a party fails to communicate that which a party knows, and ought to communicate, so that the other party may make a sound decision
What do employees covered under a group policy receive?
certificates of insurance as their proof of coverage
What type of use is purchasing live insurance to fund a buy/sell agreement?
is a business use of life insurance NOT a personal use
What use does a Key Person Life Insurance have?
is used by a business to protect themselves in case a valued employee dies. The death benefit would be paid to the company to hire and train a replacement.
In a Contributory Group Policy how is the premium shared?
is shared between the employer and employee. The employee contributes toward the premium.
Who do most workers contribute to Social Security and how are benefits based?
they contribute through taxes levied on their earnings. Benefits are based on contributions, but are NOT equal to contributions
What does the underwriting division within the insurance company select?
which risks the insurer will take on
How is decreasing term life insurance often used?
to pay off an outstanding mortgage upon death of the borrower
What a Payor Benefit Rider will do if added to a Juvenile Life Policy?
it will waive the premium for the policy until the child reaches certain age (often 21) it the parent dies
Why are Variable Insurance Products regulated by the state department of insurance and the Securities and Exchange Commission (SEC)?
because they are considered to meet the definition of a securities product
What happens if a rider is added to a Cash Value Life Insurance Policy?
the extra premium paid for the rider will NOT apply toward the cash value
What happens if an insured purchases a Cost of Living Rider?
the rider will automatically increase the insured's policy limits tied to the consumer price index. However, if the policy limit increases, so will the underlying premium
What does the Misstatement of Age Clause allows the insurance company?
to adjust the face amount at the time of death to what the premium the insured paid would have purchased had the insured told the truth about the insured's age when the policy was purchased
When is a person considered to be a senior citizen in California and what is the Free Look Period?
at age 60. Senior citizens who buy life insurance are required to receive a 30 day minimum free look. People under age 60 who buy life insurance are required to receive a minimum 10 day free look
When does the common disaster clause applies and what does it state?
when both the insured and primary beneficiary dies as a result of the same accident. It states that the primary beneficiary always dies first and protects the interest of the contingent beneficiary
What will the reduced paid-up non-forfeiture option provide?
a new whole life policy with a reduced face amount of protection
What is ti that life insurance agents CANNOT issue under the California Insurance Code (CIC)?
What happens if an organization terminates a key employee?
the organization will still be eligible to hold a license as since it will be unaffected
What happens when an agent fails to produce documents when the insurance Commissioner issues a Notice of Seizure for documents?
The agent would be subject to up to 1 year in jail and/or a $1,000 fine.
How long does an agent who receives commission must keep records?
for three years
Is financial exposure one of the three major types of loss exposures?
It is NOT one of the three major types of loss exposures.
What happens if an issues a binder for a company when not appointed by the commissioner?
The commissioner can suspend or revoke the agent's license
Where is the money invested in variable annuities held by insurance companies?
It is held in separate accounts.
What happens upon the death of a licensed agent?
the agent's license will terminate.
What happens under the CIC if an applicant enters a plea of "nolo contender"?
the applicant will give the Commissioner the ability to convict. "Nolo contendere" is Latin for no contest.
What does the spendthrift clause does?
however, the spendthrift clause will not apply if the proceeds are paid out in a lump sum.
How is an insurer organized in California and selling in California considered?
It is considered to be a domestic insurer in California.
Who owns mutual insurers?
They are owned by policyholders.
Is an agent required to send a copy of the replacement notice to the existing insurer?
No, The new insurance company will provide notice to the existing insurer.
What is ERISA?
Is the Federal law that is designated to protect group plan participants, establish pension equality and mandate strict reporting and disclosure requirements.
What type of crime is committed by a person who is transacting insurance without a license?
is guilty of a misdemeanor
What does a insurer must to have in order to remain financial solvent under the CIC?
An insurer must have enough assets to provide for its liabilities and for reinsurance for all outstanding risks and must also meet minimum requirements equal to their paid-in capital (value of company if liquidated.
How can a representation be considered in insurance terms?
can be considered an implied warranty
What happens if an agent engages in unfair methods of competition?
Agents are subject to penalties of no more than $5,000 for each act, not to exceed $10,000 if the act is judged to be willful.
What happens if the insurer discovers the insured has violated a material warranty?
The insurer can rescind the contract (void the policy)
What does an intentional concealment do?
It entitles the injured party the option to rescind the contract.
What is neither party to a contract bound to communicate, even upon inquiry?
information of his won judgment upon the matters in question
What will the insurance company when a premium is paid on a universal life policy?
It will subtract from it the mortality and general expenses then add the current interest and deposit it into the cash value.
How long insurance agents must keep records regarding policies sold in California?
for minimum of 5 years
How does an insurer determine the amount of premium and insured will pay?
The insurer multiplies the rate by the number of exposure units purchased.
How are insurance agents acting when they are handling their customer's premiums?
Agents are acting in a fiduciary capacity.
Is growth accumulating in a qualified plan currently taxable to the employee?
No, It is taxable upon withdrawal.
Can employee befit plans self fund for life insurance benefits?
No, only health benefits.
What is the insurance policy?
is the written instrument in which the insurance contract is set forth.
Which records are life insurance agents not required to keep?
printed material in general use which has been distributed by the insurer
What does the interest settlement option allow?
will allow only the death benefit earnings to be paid to the beneficiary
What is a define contribution plan?
is a plan in which employers make specific contributions to an employee's retirement account
What will the insurer require if an applicant reveals medical conditions that require more information?
the insurer will usually require an attending physicians report.
How is an employee considered if the employee is working part-time and receiving lost income under the employee's long-term disability benefit?
An employee would be considered to be partially disabled.
What will the insurance commissioner do in case of violation under section 770 of the CIC?
The insurance commissioner will usually issue a cease and desist order for a violation of more than one transaction if the violation dealt with loans on the security or real or personal property.
How is the process whereby a mutual insurer becomes a stock company called?
It is called demutualization.
How is a any situation that present the possibility of a loss known?
a loss exposure
Is the beneficiary required to sing the application for insurance?
is not required to sign the application for insurance
What is the rate?
the cost per exposure unit
What does an applicant must sign in order to authorize the release of an attending physician's report?
a consent form
What are members of the Medial Information Bureau required to report during the underwriting process?
What must accompanied a request for an attending physician's report?
a copy of the signed authorization
Are live insurance companies members of the Medical Information Bureau?
Yes, they are members of the Medical Information Bureau.
What must be made available to the commissioner at any time?
What can an insured face if found guilty of tuning in a fraudulent claim?
An insured can face imprisonment and/or a $150,000 fine or twice the dollar amount of the fraudulent claim,whichever is greater. For example, if an insured turned in a fraudulent claim totaling $85,000 they would be fine $170,000.
How is the chronically ill trigger of a long term care policy met?
An individual must be unable to perform a minimum of 2 activities of daily living to meet the trigger.
What are the rules regarding life insurance policy illustrations NOT intended to ensure?
that the illustration specify that non-guaranteed elements will continue unchanged for all years shown
For how many violations can an insurer be prosecuted for if the insurer is inadvertently found guilty of unfair trade practices while issuing, renewing, and servicing a policy?
The insurer could be prosecuted for 3 violation, one for each act.
what does group live insurance does NOT exclude?
accidental death is not excluded in this type of insurance.
What is the minimum amount of employees covered required in California for a group life contract?
A minimum of 2 employees must covered in a group life contract.
What doe life insurance creates upon the death of the insured?
An immediate estate is created in that the death benefit will be paid to the beneficiary upon the insured's death.
What must every insurer offering individual life insurance policies or annuities to senior citizens that use non-guaranteed elements in illustrations must provide?
a statement to that effect which must appear in bold print when provided to senior citizens
How is an industrial life insurance generally written?
It is generally written with a death benefit of $2,000 or less.
What is linked in a defined benefit plan?
Benefits are linked to the employee's years of service and/or amount of compensation.
What do life insurance illustrations showing premiums, values, credits, or charges that are not determined at issue show?
The show non-guaranteed elements.
What can an insurer present in an illustration for life insurance use?
The insurer CAN use the insurer's "disciplined current scale" in the illustration.
How is an insurance company which is owned by individuals who purchase share of stock in the company, share in profits in proportion to shares owned, and vote for a board of directors is known?
It is known as a stock insurer
What is the eligibility for Social Security retirement benefits based upon?
eligibility is based upon the number of quarters earned
Is an insurance broker appointed by an insurer?
Not appointed by an insurer
Does the California Life and Health Insurance Guarantee Association (CLHIGA) cover employer self-funded plans?
Employer self-funded plans are not covered.
Does the California Life and Health Insurance Guarantee Association (CLHIGA) cover group stop-loss plans?
Group stop-loss plans are not covered.
What is taxed in a group life policy with a death benefit of more than $50,000?
The premium cost for insurance above $50,000 is taxable as income to the insured.
When does a corporation insurance license terminates?
when the corporation ceases to exist
What may the commissioner do if an insurer knowingly allows one of its agents to mislead a member of the public in order to induce the person to change their existing insurance?
The commissioner may suspend the insurer's certificate of authority for the class of business involved.
What are life insurance illustrations NOT required to include?
a statement that the benefits in the illustration are guaranteed. Benefits may be guaranteed or non-guaranteed.
What an insurer must send when an insurer indicates that an illustration will be used?
The insurer must send a summary status report to the policy owner annually.
What happens if a dependant child covered by a group life plan is incapable to self-support?
Coverage under the plan may continue without any age limitation.
How long may child attending an educational institution be covered in a group life plan?
May be covered until age 24 if attending an educational institution.
How does the IRS requires contributions made into a qualified plan on behalf of employees by employers be vested?
Contributions made into a qualified plan on behalf or employees by employers vest as specified intervals. Under the year graded plan an employee is required to be at least 20% vested after 3 years of employment. Vesting simply means ownership of employer contributions. An employee is 100% vested in their contributions immediately when made.
What is the least contributions required by IRS under a 7 year graded vesting schedule?
40% after 4 years, 60% after 5 year, 80% after 6 years and 100% after 7 years.
What must agent included on and internet ad?
the agent's license number, name and business address, but NOT their phone number
What happens if a applicant lies about their age to obtain a rate of $8 per thousand of life insurance coverage when in fact the rate at their correct age should have been $12 per thousand?
At death the insurer will only pay 8/12th of the face amount of the policy.
What happens under the misstatement of age provision?
If the insured lies about their age in order to obtain a lower premium, at death the insurer will pay less than the face amount.
What is an Automatic Premium Loan?
It is a rider that can be added to a cash value life insurance policy in case the insured forgets to pay their premium. It takes effect at the end of the grace period.
What is another known description for "free look" on life insurance and annuities?
It is also known as the "right of return".
Are dividends received by policyholders of a mutual insurer taxable?
No, dividends are not taxable.
what does a "binding receipt" receipt provide?
provides a limited amount of coverage right away
What does a "conditional receipt" provide?
NO coverage, coverage is provided after all conditions are satisfied.
Are deferred compensation plans qualified or non-qualified?
Deferred compensation plans are non-qualified.
What type of contributions and distributions does and a ROTH IRA have?
has non-deductible contributions and non-taxable distributions
How is a qualified plan where the employer contributes a specified amount is known?
It is know as a "defined contribution" plan, such as a 401K.
What kind of face amount and premium does a renewable term life insurance have?
It has a level face amount, but an increasing premium.
What is a Family Policy of Life Insurance convertible into?
The dependents coverage is convertible to whole life insurance without a physical exam based upon their attained age.
What does a Family Life Insurance Policy consists of?
whole life on a spouse and level, convertible term on the other spouse and children
How else is Whole Life Insurance known as?
It is also known as "continuous premium" whole life insurance.
How is Life Insurance Policy that allows the policy owner to "self-direct" cash value into different sub-accounts known as?
It is know as Variable Life.
What does the Guaranteed Insurability Rider allows the insured to adjust?
guarantees benefits upwards at specified future option dates
What will the rate of return paid on the cash value of an Indexed Whole Life policy will do?
It will keep up with the rate of infaltion
What may Group Life Policies exclude?
aviation, suicide and military action, but not death due to other accidents
What should a beneficiary do if the beneficiary wants to leave the life insurance proceeds with the insurer and receive investment income select?
The beneficiary should select the "interest" option
Who so participate in a non-contributory group life plan?
all eligible employees should participate
Do life insurance policies contain a probationary period for pre-existing conditions?
No, life insurance policies do not contain a probationary period for pre-existing conditions.
What does "Fully Insured Status" requires on Social Security?
It requires a 40 quarters of coverage
Who must sign the "Notice Regarding Replacement"?
both the agent and the applicant must sign
What do agents need to have the in order to use their actual name?
the commissioner's approval
Is group coverage or individual coverage less expensive?
group coverage is less expensive
Why are insurers concerned about "persistency"?
because they will lose money if a policy does not stay in force due its high initial acquisition cost
How is the formula used to determine the amount of an annuity distribution that is taxable known as?
it is know as the "exclusion ratio"
What is the result of a cash surrender of an annuity prior to age 59 1/2?
will result in ordinary income tax and a 10% premature distribution penalty, both of which apply to the earning portion
What allows the insurer to write a life insurance policy without a physical exam?
a "non-medical" application
What is the amount exchanged for coverage?
What is a hazard?
something that increases the risk
Does the quarterly mode of payment cost more than the annual mode of payment?
the quarterly mode of payment costs more
What happens is death occurs due to suicide within 2 years?
the life insurance premiums are refunded
When is a policy considered to be "executed"?
when coverage is bound
What are the characteristics of premiums and benefits for a "Key Person Life Insurance"?
premiums are not tax deductible, but benefits are not taxable
What does the owner of a variable annuity receives if it is returned during the right-to-return?
the owner will receive the value of the account
How is a representation as to the future considered?
unless it is merely a statement of an expectation or belief, it is considered to be a "promise"
What portion of the premium used by an employer to buy Group Life Coverage for an employee is taxable and to whom?
the portion that is in excess of $50,000 is taxable to the employee
Does a "Variable/Universal Life Policy" have a fixed, guaranteed of return?
No, a "Variable/Universal Life Policy" has no fixed, guaranteed rate of return
What is an Extended Term?
a life insurance non-forfeiture provision, not a rider or a settlement option
Are sole proprietors without any employees eligible for group life coverage?
No, they are not eligible for group life coverage
What is the "Principle of Indemnity" most closely associated with?
with insurable interest
What may a "prohibited" person not do?
engage in business of insurance without the written consent of the Commissioner
What is a "prohibited" person under federal law?
is a person whose activities affect interstate commerce and who knowingly, with the intent to deceive, makes any false material statement or financial report to any insurance regulator for the purpose of influencing their actions
What can happen to a "prohibited" person under federal law upon conviction?
upon conviction the person may be imprisoned 10 to 15 years and fined up a maximum of $50,000 per violation
What does an agent should do before making a sale?
identify the client's overall financial objectives
What information does not need to be communicated in a contract?
a) known information, b) information that should be know, c) information which the other party waives, d) information that is not material to the risk
What does a representation in an insurance qualify as?
it qualifies as an implied warranty
What is "materiality of concealment"?
is the rule used to determine the importance of a misrepresentation
When is a representation false?
when the facts fail to correspond with its assertion or stipulations
Is the "financial rating" of the insurer required to be specified in the insurance policy?
No, the financial rate does not need to be specified.
What does intentional or unintentional concealment entitles an injured party?
to rescission of a contract
How is the price of insurance for each exposure unit called?
Who can be an MGA?
any person, firm, association, partnership, or corporation that manages all or part of an insurer's business (including a separate division, department or underwriting office)
How does an MGA act?
it acts as an agent and produces and underwrites gross direct written premium equal to or more than 5 percent of the policyholder surplus as reported in the insurer's last annual statement an either: a) Adjusts or pays claims in excess of an amount determined by the Commissioner, or: b) Negotiates and binds ceding reinsurance on behalf of the insurer
What is not of the duties of a co-partnership whose membership has changed?
to return the old license with signatures of the original members to the commissioner is NOT one of those duties.
What is not a primary objective of insurance regulation?
the interpretation of policy provisions
Who is the primary insurer when loss exposure is transferred to another insurer?
A primary insurer is the insurance company who transfers its loss exposure to another insurer in a reinsurance transaction.
who may be an insurer?
a person, association, organization, partnership, business trust, limited liability company or corporation
What is a de-mutualization
is a process whereby a mutual insurer becomes a stock company
Refusing to deliver what items to the commissioner is a misdemeanor?
refusing to deliver any books, records, or assets to the Commissioner once a seizure order has been executed in an insolvency proceeding
When is a insured may be guilty of perjury?
when an insured signs a fraudulent claim form
What needs to be know about "Survivorship Life Insurance"?
c) face amounts are usually more than one million dollars
What is "Extended Term Insurance"?
is the nonforfeiture option that uses cash surrender values to purchase paid-up term insurance for the full face amount of the policy
How are viatical settlements effected?
are effected though the use of absolute assignment
What is a written binder deemed?
It is deemed a valid insurance policy for the purpose of proving that the insured has insurance coverage. THIS EXCLUDES LIFE INSURANCE
Who pays all or part of the cost in a contributory group insurance plan?
When is an attending physician's statement required?
when an application reveals conditions that require more information
Who may opt for a self insured medical and disability plan?
labor unions, fraternal, an co-ops
Who do fiduciary standards in the "Employee Retirement Income Security Act of 1974" (ERISA) benefit?
fiduciary standards benefit plan participants and beneficiaries
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School: Southern California University of Health Sciences
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