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TEXAS GROUP 1 LIFE AND HEALTH INSURANCE SECTION #2 EXAM QUESTIONS WITH CORRECT ANSWERS
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TEXAS GROUP 1 LIFE AND HEALTH INSURANCE SECTION #2 EXAM QUESTIONS WITH CORRECT ANSWERS
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TEXAS GROUP 1 LIFE AND HEALTHINSURANCE SECTION #2 EXAM
QUESTIONS WITH CORRECT ANSWERS
Viatical Settlements - Answer-A terminally ill policyowner sells his or her life insurance
policy at a discount for cash to a third party.
STOLI plans (Stranger originated life insurance) - Answer-a third party is involved who
has no relation with the policy owner and initiates the purchase of the policy by paying
the premiums and later buying the policy thereby.
Human Life Value Approach - Answer-Calculates the capitalized value of an individuals
earning capacity into the future. (Current income is multiplied by the number of years
until retirement)
Needs approach - Answer-attempts to determine how much life insurance will be
needed by surviving dependents to cover their needs and expenses, and also any
expenses that result from the death of the insured.
Lump-Sum Needs - Answer--last expenses ( funeral, taxes, debts, medical costs)
-an emergency fund to help with unexpected expenses, especially in the period
immediately following the death of the insured.
-educational needs of the family
-mortgage and other payment funds
Business Life Insurance - Answer-provides capital needed to keep a business running
through the economic impact of an owner or major employee's death
Buy-Sell Agreements/ Cross-Purchase Plans - Answer-Arrangements between partners
or associates in which surviving members agree to purchase the ownership interest in
the company from the deceased owner's estate at a predetermined price.
Split-Dollar Life Insurance - Answer-Allows employees to buy life insurance at reduced
costs, "splitting" premium costs with employers. Once the employee deceases their
beneficiary is paid the death benefit minus the amount paid to the employer.
Executive Bonuses - Answer-the company pays the executive a bonus so that an
individual can purchase cash value life insurance with him or her as the owner, insured,
and designator of the beneficiary
Section 303 Stock Redemption - Answer-takes place when a corporation buys its own
stock form the estate of a stockholder to pay death taxes, funeral expenses and the cost
of estate administration. The sale is income tax free to the estate.
, Viatical/Life settlement purchase agreement - Answer-the contract or agreement in
which the buyer agrees to buy all or part of a life insurance policy on the life of someone
with a critical or terminal illness. This gives the buyer access to the policy's death
benefit.
Chronically Ill - Answer-Being unable to perform at least two activities of daily living, or
ADLs (eating, toileting, bathing, dressing) and requiring substantial supervision by
another person to protect the individual form threats to health and safety.
Terminally Ill - Answer-Having an illness or sickness that can reasonably be expected to
result in death in 24 months or less
Viator - Answer-The owner of a life insurance policy
Individual Policies - Answer-single policies written on or for a particular individual who
receives a copy of the policy
Group Policies - Answer-Written on a group of people under a single master policy
usually issued to their employer or another trustee.
Ordinary life insurance - Answer-normally have a face value amounts of more than
$1,000, and have a variety of structures and benefits
Industrial Life Policies - Answer--benefits of $1,000 or less (but may be more)
-premiums that are collected at the insured's home on a weekly or monthly basis.
Term life - Answer-offers coverage for a specific and predetermined period of time and
its only benefit is a death benefit
Permanent Life - Answer-offers a death benefit and the accumulation of cash value,
three examples of which are whole, universal, and variable life policies.
Fixed Life Insurance - Answer-policy that has a set, guaranteed interest rate
Variable Life Insurance - Answer-policy that has an interest rate that changes along with
a set of mutual funds or other stock market indicator.
General Accounts - Answer-money invested in a fixed policy goes to this account and
consequently the safety of such an investment may be affected by the stability and
strength of the company.
Separate Account - Answer-account that is held by an insurance company for the
investments made through variable contracts. The general and separate accounts may
not be co-mingled.
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