Life Exam Study Guide

Table of Contents

• General Insurance Terms - Page 2
• Contract Terms - Page 5
• The Application - Page 7
• Life Insurance Policies - Page 8
• Policy Provision Terms - Page 11
• Policy Options - Page 13
• Policy Riders - Page 15
• Annuities - Page 17
• INDEX - Page 20

General Insurance Terms

• Insurance: Contract where insurer indemnifies insured against loss for a premium.
• Risk Types:
  • Pure risk (insurable)
  • Speculative risk (not insurable)
• Hazards:
  • Physical: Medical conditions
  • Moral: Dishonesty
  • Morale: Irresponsibility
• Peril: Cause of loss (e.g., fire, accident)
• Law of Large Numbers: Predicts death occurrences more accurately in larger groups.
• Agent Types:
  • Captive: Sells products of one company
  • Independent: Sells products of various companies
  • Domestic, Foreign, Alien: Based on where the company is incorporated
• Fiduciary: Person in financial trust position
• Appointment: Authorization of an agent by an insurer
• Certificate of Authority: License for insurers to conduct business in a state
• Insurance Official Roles:
  • Commissioner: Enforces state insurance laws
  • Conditional Receipt: Effective coverage based on conditions

Contract Terms

• Consideration: Value exchange for benefit payment
• Insurable Interest: Must exist at application time
• Adhesion & Aleatory Contracts: Take it or leave it; unequal exchange
• Contract Types:
  • Conditional: Duties required for enforceability
  • Unilateral: Only one party bound after premium payment
• Indemnify: Restore to prior condition without gain
• Utmost Good Faith: Mutual intent to fulfill contract terms
• Underwriting: Assessing risk and insurability

The Application

• Human Life Value Approach: Considers probable future earnings
• Needs Approach (DIME): Considers debt, income, mortgage, expenses
• Application Parts:
  • General Information
  • Medical
  • Agent's Report
• Risk Classifications:
  • Preferred, Standard, Substandard

Life Insurance Policies

• Term Life:
  • Level, Annual Renewable, Decreasing
• Whole Life: Straight, Limited Pay, Single Premium
• Specialized Policies: Joint Life, Survivorship Life, Group Life
• Flexible Premium Policies: Adjustable Life, Universal Life

Policy Provision Terms

• Key Clauses: Insuring, Consideration, Grace Period, Reinstatement
• Beneficiary Designations: Primary, Contingent, Revocable, Irrevocable
• Common Disaster & Spendthrift Clauses
• Premium Modes: Frequency impacts total cost

Policy Options

• Settlement Options (CLIFF): Cash, Life Income, Interest Only, Fixed Period/Amount
• Dividend Options (OCRAP): Non-taxable return of premiums
• Policy Loans/Withdrawal: Options and their tax implications
• Non-forfeiture Options (REC): Reduced paid-up, extended term, cash

Policy Riders

• Disability & Death Benefit Riders: Waiver of Premium, Accelerated Benefit
• Riders for Additional Insureds: Term Riders, Spouse, Child
• Death Benefit Riders: Accidental Death, Guaranteed Insurability

Annuities

• Purpose: Retirement planning, not life insurance
• Components: Owner, Annuitant, Beneficiary
• Periods: Accumulation, Annuity
• Payment Options: Single, Level, Flexible
• Tax Implications: Different for qualified and non-qualified annuities

These notes provide a comprehensive summary of important concepts and terminology related to life insurance and annuities as detailed in the Life Exam Study Guide document.