GBA 2 QUESTIONS AND ANSWERS
Approaches for estimating the amount of life insurance to own. - Answers :1. Human life
approach
2. Needs approach
3. Capital retention approach
Yearly renewable term insurance versus level premium method. - Answers :Yearly
renewable are 1 year terms. Level premium method has 5, 10, 15, or 20 year terms.
Limitations of term life insurance. - Answers :(1) Premiums increase exponentially with
age (2) No savings value (3) Decreasing term poses many cons
Ordinary whole life insurance - Answers :aka: continuous premium whole life or straight
life -- is level premium policy that provides coverage to either age 100 or 121. It the
insured survives, the face amount is paid
Limited-payment whole life insurance. - Answers :Permenant lifetime coverage in which
the premiums are paid for in a shorter period such as 10, 20, 25, 30 years on in a single
premium or at age 65 or 70. VERY EXPENSIVE
Variations of whole life insurance - Answers :1. Variable live insurance
2. Universal life insurance
3. Variable universal life insurance
4. Current assumtion whole life insurance
5. Indeterminate-premium whole life insurance
Employee benefit-related death benefits - Answers :1. Group term
2. Goup paid-up
3. Group permanent
4. Group universal
5. Group survivor income
6. Group dependent life
7. Group AD&D
8. Group travel
9. Joint and survivor annuity benefits under retirement
10. Preretirement annuity benefits
11. Supplemental / optional life
Employee benefit plan considerations for group term life insurance. (5 items) - Answers
:1. An entire group is insured w/o medical examination
2. Premiums often based on an experience rating (prospective or retrospective)
3. Economies of administration
4. A master contract
5. Plan lasts longer than any lifetime
, Group term life provisions - Answers :1. Beneficiary Designation
2. Settlement Options
3. Assignment
4. Conversion provision
5. 31 day continuation of Protection
6. Continuation of Insurance
7. Waiver of Premium Provision
8. Accelerated Benefits
Conversion provision - Answers :1. EE must apply within 30 days of termination
2. No medical evidence of insurability
3. ER must inform EE of conversion rights within 15 days of being eligible
4. If master contract terminated, EEs can only convert up to $2000
31-day continuation-of-protection provision - Answers :Terminated EEs get 31 days of
protection to evaluate conversion option.
Continuation-of-insurance provision - Answers :ER can continue to provide term
coverage for limited periods during temporary interuptions of active full-time
employment.
disability benefit provisions (3 types) - Answers :1. Waiver of Premium Provision
2. The maturity value benefit
3. Extended death benefit.
Accelerated death benefits - Answers :The payment of all or part of the death benefit if a
patient can prove that he is terminally ill. The practice has become more common as
third-parties have been purchasing the benefit rights covering those that are ill.
Dependent group life insurance - Answers :May be part of the main policy or optional.
(1) amounts over $2000 are taxable (2) usaully paid as a lump sum. (3) typically pays
50% of covereds coverage not to exceed $2000. High amounts may be offered through
supplemental coverage.
Coverage of older employees and retirees - Answers :Some ERs offer redudced
amounts using various formulas. (1) immediate reduction of 50% (2) gradual reduction
each year (3) or offer a lower flat amount
Advantages of Group term life to ERs - Answers :1. EE morale and productivity may be
enhanced
2. Coverage may be necessary for competitive reasons
3. Good for public and ER-EE relations
Human life value approach - Answers :The present value of the family's share of the
deceased breawinner's future earnings.
[Future earnings - (taxes, insurance, maint. costs)]*discount rate
Approaches for estimating the amount of life insurance to own. - Answers :1. Human life
approach
2. Needs approach
3. Capital retention approach
Yearly renewable term insurance versus level premium method. - Answers :Yearly
renewable are 1 year terms. Level premium method has 5, 10, 15, or 20 year terms.
Limitations of term life insurance. - Answers :(1) Premiums increase exponentially with
age (2) No savings value (3) Decreasing term poses many cons
Ordinary whole life insurance - Answers :aka: continuous premium whole life or straight
life -- is level premium policy that provides coverage to either age 100 or 121. It the
insured survives, the face amount is paid
Limited-payment whole life insurance. - Answers :Permenant lifetime coverage in which
the premiums are paid for in a shorter period such as 10, 20, 25, 30 years on in a single
premium or at age 65 or 70. VERY EXPENSIVE
Variations of whole life insurance - Answers :1. Variable live insurance
2. Universal life insurance
3. Variable universal life insurance
4. Current assumtion whole life insurance
5. Indeterminate-premium whole life insurance
Employee benefit-related death benefits - Answers :1. Group term
2. Goup paid-up
3. Group permanent
4. Group universal
5. Group survivor income
6. Group dependent life
7. Group AD&D
8. Group travel
9. Joint and survivor annuity benefits under retirement
10. Preretirement annuity benefits
11. Supplemental / optional life
Employee benefit plan considerations for group term life insurance. (5 items) - Answers
:1. An entire group is insured w/o medical examination
2. Premiums often based on an experience rating (prospective or retrospective)
3. Economies of administration
4. A master contract
5. Plan lasts longer than any lifetime
, Group term life provisions - Answers :1. Beneficiary Designation
2. Settlement Options
3. Assignment
4. Conversion provision
5. 31 day continuation of Protection
6. Continuation of Insurance
7. Waiver of Premium Provision
8. Accelerated Benefits
Conversion provision - Answers :1. EE must apply within 30 days of termination
2. No medical evidence of insurability
3. ER must inform EE of conversion rights within 15 days of being eligible
4. If master contract terminated, EEs can only convert up to $2000
31-day continuation-of-protection provision - Answers :Terminated EEs get 31 days of
protection to evaluate conversion option.
Continuation-of-insurance provision - Answers :ER can continue to provide term
coverage for limited periods during temporary interuptions of active full-time
employment.
disability benefit provisions (3 types) - Answers :1. Waiver of Premium Provision
2. The maturity value benefit
3. Extended death benefit.
Accelerated death benefits - Answers :The payment of all or part of the death benefit if a
patient can prove that he is terminally ill. The practice has become more common as
third-parties have been purchasing the benefit rights covering those that are ill.
Dependent group life insurance - Answers :May be part of the main policy or optional.
(1) amounts over $2000 are taxable (2) usaully paid as a lump sum. (3) typically pays
50% of covereds coverage not to exceed $2000. High amounts may be offered through
supplemental coverage.
Coverage of older employees and retirees - Answers :Some ERs offer redudced
amounts using various formulas. (1) immediate reduction of 50% (2) gradual reduction
each year (3) or offer a lower flat amount
Advantages of Group term life to ERs - Answers :1. EE morale and productivity may be
enhanced
2. Coverage may be necessary for competitive reasons
3. Good for public and ER-EE relations
Human life value approach - Answers :The present value of the family's share of the
deceased breawinner's future earnings.
[Future earnings - (taxes, insurance, maint. costs)]*discount rate
