NEW MEXICO LIFE AND HEALTH EXAM

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NEW MEXICO LIFE AND HEALTH EXAM

Actual Qs and Ans - Expert-Verified Explanation -Guaranteed passing score -53 Questions and Answers

-Format: Multiple-choice / Flashcard

Question 1: Interim term

Answer:

Usually for a short period of time until the permanent policy goes into effect.

Question 2: Methods of Handling Risk

Answer:

-Avoidance -Retention -Sharing -Reduction

Question 3: Current assumption whole life (CAWL)

Answer:

Is a whole life insurance that bases its premiums on current interest rates. Its premiums and face amounts will fluctuate with interest rates.

Question 4: Exposure

Answer:

A measure of vulnerability of loss, usually expressed in dollars or units, to which an insurance rate is applied.

Question 5: Problems with Investment Plans

Answer:

Time factor - can't complete a plan if you die prematurely.Spend factor - most plans are hard to put money in east to take out.Fluctuation factor - no guarantees in most investment plans.

Question 6: Capital conservation

Answer:

This method derives income only from interest gained on the principal. It generates income indefinitely.

Question 7: Accumulation period

Answer:

During this period, no taxes are place on accumulations. Taxes will only come into play at the time of distribution.

Question 8: Combination policy

Answer:

Typically a permanent policy with a term rider, as with Family Income (decreasing term) or Family Maintenance (level term) added to the base policy. Term is used to compliment the permanent plan.

Question 9: Capital liquidation

Answer:

This method uses both interest and principal to provide income. This means that a smaller fund is needed when using this method because there is no concern for leaving the principal intact.

Question 10: Decreasing term

Answer:

Death benefit decreases each year.

Question 11: The 3 Types of Risk

Answer:

1) Pure Risk - there is only a chance of loss and there is no possibility of gain.

2) Speculative Risk - involves both an uncertainty of loss and of gain.

3) Insurable Risk

Question 12: Needs Approach

Answer:

How much life insurance is needed by surviving dependents to cover their needs and expenses, and also any expenses that result from the death of the insured.

Question 13: Automatic premium loan provision

Answer:

Will automatically take a loan against the policy cash value to pay the premium and keep the policy in force. Available on permanent types of insurance policies.

Question 14: Nonforfieture provisions

Answer:

Right to the cash value (can take it out).

Question 15: Limited-pay whole life

Answer:

Premiums are payable for a certain period time or to a certain age usually 65. Although premiums are paid-up, the policy does not mature until age 100.

Question 16: Annuity certain

Answer:

Provides income during certain period to annuitant and beneficiary.

Question 17: Insuring clause

Answer:

This contains the basic promise of the life insurance company to pay a specific sum of money in a lump sum or an equivalent income stream.

Question 18: Life Insurance

Answer:

A contract under which one party (the insurer) in consideration of the premium payment, agrees to pay an amount stipulated in the contract to a designated person (the beneficiary) upon the occurrence of a contingency defined in the contract (usually that of death).

Question 19: Insurable Risk

Answer:

The more closely a risk align with the following characteristics, the more insurable it is: Due to chance, measurable/predictable, it is based upon a large enough pool, so that the law of large numbers allows for the accurate prediction of loss, and there must be a significant potential for economic loss.

Question 20: Modified premium

Answer:

Increases yearly each year for 3-5 years or for a longer period of time.

Question 21: Adjustable life

Answer:

A life policy that offers the policy owner the options to adjust the policy's face amount, premium, and length of protection without having to complete a new application or actually exchange policies.

Question 22: Risk

Answer:

The uncertainty of financial loss.

Question 23: Life annuity certain

Answer:

With period certain is life income for annuitant and certain period for the beneficiary.

Question 24: The 4 Elements of a Legal Contract

Answer:

1) Offer and Acceptance

2) Consideration

3) Legal Purpose

4) Competent Parties

Question 25: Renewable term

Answer:

Allows the insured to renew the term policy at the end of the period without providing insurability.