Life and Health Insurance – Ohio
Licensing Exam
Absolute Assignment – The assignment by the policy owner of all control and rights to a
third party. This differs from collateral assignment, which allows all the rights and control
to revert to the owner once a loan is paid off
Accident – A fortuitous event; unforeseen and unintended
Accidental Death Insurance – A form of health insurance that provides payment if death
of the insured results from accident. Accidental death insurance is often combined with
dismemberment insurance in a form called accidental death and dismemberment
(AD&D)
Accident and Sickness – Insurance against bodily injury, disability, or death by accident
or accidental means, or expense thereof, or against disability or expense resulting from
sickness and the insurance relating thereto
Accident means – The unexpected cause of an accidental bodily injury. Under an
accidental means definition, the mishap itself must be accidental. If a person does
something to contribute to the accident, the claim would not be paid under this
restrictive definition
Accelerated benefit – Available only if the benefits are available during the insured’s
lifetime, benefit amounts are fixed when accelerated, and the benefits, when paid,
reduces the death benefit
Accumulation at interest option – A dividend option under which the policy owner allows
dividends to accumulate at interest with the company. Only the interest on the dividends
is taxable as income (participating policies only).
Actuary – Once concerned with the application of probability and statistical theory to
insurance. This person sets expenses, and interest assumptions.
ADB – Accidental death benefit, also known as double indemnity. There is another
variation called triple indemnity.
AD&D – Accidental death and dismemberment insurance.
Administrator – The person appointed by a court to settle a deceased’s estate,
sometimes called and executor.
Adverse selection – Selection against the insurance company. The tendency of poorer
risks to want insurance more often than standard risks.
Agent – The individual appointed by an insurance company to solicit, negotiate, effect,
or countersign insurance contracts on its behalf.
Aleatory – Something that depends upon chance or is random. It is derived from the
Latin idea of “rolling the dice.”
Aleatory contract – A contract in which both parties know that one or the other may
receive more than paid in. This payment is dependent upon a fortuitous event. For
example. a person pays the premium for a term policy for many years and does not die,
thus, a claim is never filed.
Alien company – An insured organized and domiciled in a country other than the United
States
Annuitant – The one receiving the Annuity and on whose life expectancy the rates are
figured.
Annuity – 1. An amount of money, payable monthly or yearly, which liquidates a financial
asset. 2. An agreement by an insurer to make periodic payments that continue during
the survival of the annuitant(s) or for a specified period. Annuities are also
accumulations vehicles that function much like savings accounts.
Applicant – The party making application to the insurance company for the policy
Application – A form on which the prospective insured states facts requested by the
insurer and on the basis of which the insurer decides whether to accept the risk, modify
the coverage offered, or decline the risk.
Assignee – The person to whom policy rights are assigned in whole or in part by the
policy owner.
Assignment – The transfer of rights in a policy to someone other than the policy owner.
Attained age – The present age of the insured. This is a factor when a person converts
term insurance to whole life insurance or buys added disability under a GIR provision
Attorney-in-fact – A person to whom authorization is given by an individual to exchange
insurance with other persons. Always present in a reciprocal insurance company.
Authorized company – An insurer permitted to sell insurance within a state, evidenced
by a certificate of authority from the insurance commissioner, also called ADMITTED
Automatic premium loan – A provision in a life policy authorizing the insurance company
to use the loan value to pay premiums not paid by the end of the grace period. May be
present in whole life or other traditional cash value policies only, but never in term
policies
Aviation clause – Limits or excludes coverage when the insured is participating in
specified types of air travel, cush as private planes. Coverage is usually fully in force for
people on regularly scheduled commercial flights. The limit or exclusion often applies to
student pilots
Beneficiary – A person who may become eligible to receive, or is receiving, benefits
under an insurance plan, other than as a participant.
Blanket Insurance Contract – A contract of Health Insurance that covers all of a class of
persons not individually identified. No certificates are issued and people covered may
not be aware that the coverage is in place.
Blue Plan – The generic term for those insurers (usually on a service rather than a
reimbursement bases) who are authorized to use the designation Blue Cross or Blue
Shield and the insignia of either.
Broker – One who represents an insured in the solicitation, negotiation, or procurement
of contracts of insurance, functions. This person is also called an independent agent.
Business Insurance – Life or Health insurance written to vober business situations, such
as key person, sole proprietor, partnership, corporations, ect.
Cancelable – A contract of Insurance that may be terminated by the insurance company
or insured at any time. Virtually every form of insurance is cancelable except Life
insurance and those health policies designated as guaranteed renewable, or noncancelable and guaranteed renewable.
Cancellation – The termination of a contract of insurance in force by voluntary act of the
insurance company or insured, effected in accordance with provisions in the contract or
by mutual agreement.
Capital Sum – The maximum amount payable in one sum in the event of accidental
dismemberment. It is typically half of the face amount of principal sum.
Cash Surrender Value – The value reposing in a policy that is the legal property of the
policy owner and that may be expected should the policy be surrendered for cash.
Synonymous with cash value.
Certificate – A statement Evidencing that a policy has been written and stating the
coverage in general. Often used with group coverage.
Claim – A demand for payment under the insurance policy.
Ohio Life Insurance Final Exam
complete update
Which of the following is usually the owner of the annuity? – The annuitant
Which of the following is not true of the straight life income option for annuities? – A
beneficiary will receive any balance of the annuity upon the annuitant’s death.
When an insurance policy is taken out, if the owner of the policy is someone other than
the actual insured, the owner must be able to prove: – That he/she has an insurable
interest
Tax-sheltered annuities (TSA) provide retirement income for employees who work for: –
A nonprofit organization
Which of the following statements regarding policy loans from personal life insurance
policies is not true? – When a personal life insurance policy endows, the amount of any
unpaid loan plus interest is not deducted from the policy proceeds.
When the only logical beneficiary is a minor, all of the following options are available,
EXCEPT: – The benefits can go directly to the estate of the insured
All of the following are major factors in the determination of premiums for life insurance,
EXCEPT: – Marital status
Which of the following is true about policy loans? – They are subject to interest.
What requires that an individual have a valid concern for the continuation of the life or
well being of the person insured? – Insurable interest
Which of the following is true regarding taxes on nonqualified annuities? – Premiums are
not tax-deductible, but interest is tax-deferred
What is the time between when an annuity is purchased and the time when benefits
begin? – The accumulation period
All of the statements are true about universal life policies, EXCEPT: – Universal life
policies are only subject to the interest rates stated in the contract.
Universal life policies allow the policyowner to: – a. Take out a policy loan
b. Withdraw cash
(Both)
All of the following are federal income tax free transactions for a life insurance policy,
EXCEPT: – Gain on policy surrender value
Which of the following pertains to Modified Endowment Contracts (MECs)? – a. Once a
MEC, always a MEC.
b. Funds withdrawn are subject to LIFO (Last in first out) tax treatment.
c. Any policy exchanged for an MEC is automatically classified as an MEC.
(all)
Which of the following is not an assignment whereby someone would transfer legal
rights as the policyowner of a life contract? – Total, complete, unconditional assignment
Which of the following statements is not true about a retirement income annuity? – It is
an ordinary immediate annuity.
All of the following statements are true about an annuity certain, EXCEPT: – If the
annuitant dies, the payments cease.
An applicant for insurance may pay an initial premium with the application and receive a
document called: – Conditional Receipt
Which of the following statements is not true about the tax liabilities for individual life
insurance policies? – Policy loans are taxable as income.
An adjustable life policyowner may do any of the following, EXCEPT: – The premium will
vanish after 7 years
What type of life policy has premiums paid weekly to an agent who comes to your home
to collect? – An industrial policy
What law requires that an applicant be notified that an insurance underwriter may
request a report from an investigative agency? – Fair Credit Reporting Act
Which of the following is not true about the accelerated benefit rider? – Provides a
monthly check when you become disabled.
All of the following are true about Roth IRAs, EXCEPT: – Contributions are tax
deductible.
All of the following statements are true regarding the IRS early withdrawal penalty for
nonqualified annuities, EXCEPT: – The IRS early withdrawal penalty is 10%.
A temporary insurance agent license can be issued for what maximum period of time? –
180 days
OHIO Life Insurance Exam new guide
Insurance: – A contract in which the insurance company agrees to indemnify the insured
party against loss, damage or liability arising from an unknown event.
Insurance Transfers: – The risk of loss from an individual or business entity to an
insurance company, which in turn spreads costs of unexpected losses to many
individuals.
Direct response marketing: – A direct response marketing system effectively bypasses
the insurance agent. Business is conducted over the phone, through the mail, or online.
This is a perfectly legal approach to selling insurance. It is not mandatory in all
situations for the insured to physically sign any documents in order for coverage to go
into effect.
Insurance Transaction: (4) – Solicitation, Negotiations, Sale (effectuation of a contract of
insurance, and Advising an individual concerning coverage of claims.
Risk: (Two Types) – The uncertainty or chance of a loss occurring.
Pure Risk:
-Situations that can only result in a loss or no change. There is no opportunity for
financial gain. This is the only type that insurance companies will accept.
Speculative Risk:
-Involves the opportunity for either loss or gain. Ex: Risk of gambling. These are not
insurable risks.
Concealment: – The withholding of information that will result in an imprecise
underwriting decision.
Exposure: – A unit of measure used to determine rates charged for insurance coverage.
EX of Life insurance factors:
-Age, medical history, occupation, and sex.
Homogenous: – A large number of units having the same or similar exposure to loss.
Hazards: (3 types) – Conditions or situations that increase the probability of an insured
loss occurring.
Physical hazards:
-Individual characteristics that increase the chances of the cause of loss. Ex: past
medical history, condition at birth (blindness).
Moral Hazards:
-Tendencies towards increased risk. Involves evaluating the character and reputation of
a proposed insured. Ex: When an applicant lies on the application for insurance.
Morale Hazards:
-Arise from a state of mind that causes indifference to loss, such as carelessness. Ex:
Not spending money on a flu shot because if you get the flu your insurance company
will pay for it.
Perils: – The causes of loss insured against in an insurance policy.
-Life insurance
-Health insurance
-Property insurance
-Casualty insurance
Loss: – The reduction, decrease, or disappearance of the value of the person or
property insured in a policy, caused by a named peril.
Look at transfer stuff pg 7
Avoidance: (Method of handling risk) – Eliminating exposure to a loss. Ex: If a person
wanted to avoid the risk of being killed in an airplane crash, he/she might choose never
to fly in an airplane. It is effective but not practical.
Risk Retention: (Method of handling risk) – The planned assumption of risk by an
insured through the use of deductibles, copayments, or self-insurance.
Purpose of retention: (3 things) – 1) Reduce expenses and improve cashflow
2) Increase control of claim reserving and claims settlements
3)To fund for losses that cannot be insured
Sharing: (Method of handling risk) – Method of dealing with risk for a group of individuals
or businesses with the same or similar exposure to loss to share the losses that occur
within that group.
Reduction: (Method of handling risk) – Includes actions such as installing smoke
detectors in our homes, having an annual physical to detect health problems early, or
perhaps making a change in our lifestyles.
Transfer: – The most effective way to handle risk. Transfer it to another party.
Reinsurance: – Is a contract which one insurance company indemnifies another
insurance company for part or all of its liabilities.
Nonparticipating policies: – Does not pay dividends to policyowners, but taxable
dividends are paid to stock holders. Usually issued by stock companies
Participating policies: – Pay dividends to policy owners based upon actual mortality cost,
interest earned and costs.
Risk Retention Group: – A liability insurance company owned by its members.
Lloyd’s Association: – Provides support facilities for underwriters or groups of individuals
that accept insurance risk.
Surplus lines: – Insurance for which there is no readily available admitted market. They
do not have a certificate of authority to transact business in the state, but are on the
Commissioner’s approved list to transact business under the state’s surplus lines laws.
Offer: – This is made when submitting the application
Acceptance: – Takes place when an insurer’s underwriter approves the application and
issues a policy.
Consideration: – The binding force in any contract.
Competent Parties: – The parties to a contract must be capable of entering into a
contract in the eyes of the law.
Legal Purpose: – The purpose of the contract must be legal and not against public
policy.
Contract of adhesion: – Is prepared by one of the parties and accepted or rejected by
the other party. Known as a take it or leave it contract
Aleatory Contract: – There is an exchange of unequal amounts or values.
Personal Contract: – A contract is personal because it is between the insurance
company and an individual.
Unilateral Contract: – Only one of the parties to the contract is legally bound to do
anything.
Conditional Contract: – Requires that certain conditions must be met by the policy
owners and the company in order for the contract to be executed.
Utmost of Good Faith: – Implies that there will be no fraud, misrepresentation or
concealment between the parties.
Ohio Life insurance Exam complete
update
A life insurance company has transferred some of its risk to another insure. The insurer
assuming the risk is called –
all of the following are examples of business continuation plan except – Deffered
Compensation
All of these are valid options for an Adjustable Life Policy EXCEPT
The policy’s premium can be increased or decreased
The policy’s death benefit can be increased or decreased
A nonforfeiture option can be used to increase the death benefit
The policy’s protection period can be modified – A non forfeiture option can be used to
increase the death benefit
the superintendent determines an examination of an insurers books and record is
necessary. After receiving the notification, the insurer – must not impede the
examination
the double indemnity prevision in a life insurance policy pertains to an insureds death
caused by a(n) – accident
Which of these is not considered to be a risk factor in life insurance underwriting –
number of children
the suicide clause of a life insurance policy states that if an insured commits suicide
within the stated period from the policy inception the insurer will only be liable fora
return of premiums paid – minus indebtedness and without interest
A minor may receive a life inurance polciys death benefit only – if the minor has an
appointed guardian
a life insruacne policy that has premiums fully paid up within a stated time period is
called – limited payment insurance
When a qualified plan starts making payments to its recipient, which portion of the
distributions is taxable?
Principal
Contributions made by employee
Contributions made by employer
Gains – Gains
Which of the following does a life insurance policy summary normally include – the
policys cash value
a whole life policy option where extended term insurance is selected is called –
nonforfeiture option
which of the following is a reinstatement condition – proof of insurability
a securities license is required for the life insurance producer to sell – variable life
insurance
all of these characteristics of a universal life insurance policy except
flexible death benefit
fixed surrender value
flexible premiums
builds cash value – fixed surrender value
a provision that allows a policyowner to temporarily give up ownership rights to secure a
loan is called a(n) – collateral assignment
An insurance company needs to obtain personal information from a third party
concerning an applicant. Which law do all insurers and their producers need to comply
with – Fair credit Reporting Act
If an insured dies during the grace period with no premiums paid
the policy would be payable, minus the premium amount
the policy would be payable only after the beneficiary makes past due premium
payment
all past premiums will be refunded with interest
the claim would be denied – the policy would be payable, minus the premium amount
decreasing term life insurance is often used to – provide coverage for a home mortgage
What are an applicant’s statements concerning occupation, hobbies, and personal
health history regarded as? – representation
which of the following are the premium payments for a universal life policy not used for
death benefits
cash value
loading costs
Ohio Life Insurance Exam
To qualify for appointment of agent – 18 YOA, US citizenship not required, no minimum
residency
Original certificate good for…. – 180 days
Renewal for license – beinnially on birth month, $5 fee
Types of risk – Pure risk – covered by insurance
Speculative risk – not covered (gambling)
How to handle risk – avoid it
retain it – self insurance
reduce it
share it
transfer it – buy insurance, spreads risk to large group
Mortality Rate – based on “law of large numbers”
by age 100 we assume everyone dies
females live longer
Principal – The insurance company
The agent represents the principal
Implied Authority – Needed to do job
Not written in contract
Expressed Authority – written out authority
ex. collecting premiums…
Apparent Authority – actions seem to be those of principal
ex. business cards, applications….
Change of name and address – 30 days to be reported
Fiduciary – financial trust
timely manner
agents cannot comingle
Amount of solicitors allowed to be hired – unlimited
Brokers – Represent their client/insured person
Consultants – Sell their advice for a fee
Usually no commission stuff
Legal Contracts Require – competent parties
legal purpose
consideration
offer and acceptance
Adhesion – company has responsibility to write the policy and the client has to comply
(take it or leave it)
Aleatory – pay a little get a lot
Unilateral – One sided
Waiver – voluntarily gives up know right
ex. wont insure student pilots
Utmost Good Faith – both parties rely on honesty
Estoppel – once a right is waived, it can not be reasserted by the company
Term Insurance – no cash value
cheapest price for most coverage
can decrease or remain the same
Whole Life Insurance – permanent
creates cash value
endows for face value (savings and db together)
Limited Insurance – pay whole life premiums for less years
premiums stop at specified year
pays out till 100
Joint Life – pays at first death
Survivorship – pays at last death
used for estate problems
Juvenile Policies – covers under 15 years old
provide for final expenses
Endowment – provide certain cash value for college and retirement
Universal Life – term insurance and interest sensitive cash value accounts
flexible premiums
pay a guaranteed minimum interest