TEXAS LIFE, ACCIDENT, AND HEALTH

TEXAS LIFE, ACCIDENT, AND HEALTH

INSURANCE LATEST 2024 LATEST QUESTIONS

WITH COMPLETE ANSWERS

risk - ANSWER✔✔chance of loss speculative risk - ANSWER✔✔-involves the chance of gain or loss and is NOT insurable

-ex: gambling

pure risk - ANSWER✔✔involves only the chance of loss and is insurable exposure - ANSWER✔✔being subject to the possibility of loss because of an activity, location, or characteristics -second hand smoke -no control on exposure peril - ANSWER✔✔cause of loss natural peril - ANSWER✔✔lightning, hail, hurricane, and so forth human peril - ANSWER✔✔theft, murder, auto accidents, industrial accidents, and illness loss - ANSWER✔✔accidental/unexpected death or injury to a person or any reduction in quality, quantity, or value of property hazard - ANSWER✔✔situation that introduces or increases the probability of loss -triggers the event -overloaded light switch elements of an insurable risk - ANSWER✔✔(CANHAM)

-Calculable

-Affordable (premiums have to be affordable)

-Noncatastrophic (not war, nuclear) 1 / 4

-Homogenous (similar in nature; how many 31-yr-old males die each yr)

-Accidental and definite (not on purpose)

-Measurable (have to be able to put a $ amount on it) insurance vs. gambling - ANSWER✔✔insurance is a pooling of funds and sharing the cost of losses.the insured transfers risk away from themselves to another entity what is buying insurance? - ANSWER✔✔a transfer of risk -risk management personal uses of life insurance - ANSWER✔✔1. final illness and funeral expenses

• liquidity for immediate expenses

• income for ongoing expense

• survivor protection (loan spouse $ if you die, or recoup loss if spouse dies & you are sole provider)

• estate creation (life ins. creates an estate to the death but life ins. could create estate tax)

• cash accumulation (cash value life ins. is appropriate for all except emergency fund)

• estate conservation

what could ownership of life insurance cause in an estate? - ANSWER✔✔estate tax, only if over 3.5 million Contract - ANSWER✔✔the legal agreement between the insurer and the policyowner.What are the essential elements of all enforceable contracts? - ANSWER✔✔1. competent parties

• legal purpose
• agreement 2 / 4

• consideration

competent parties - ANSWER✔✔a). insurance agency--certificate of authority b). applicant requirements of competent party applicant - ANSWER✔✔1. of lawful age (usually 18; for the purchase of life insurance, 14 in Texas)

• mental competence

• not acting under duress

what does the contract agreement consist of? - ANSWER✔✔offer and acceptance (counteroffer)

-counteroffers are NOT required What is cash value life insurance good for? - ANSWER✔✔all except emergency fund consideration - ANSWER✔✔equitable terms are not required what is not considered an element of an enforceable contract? - ANSWER✔✔counteroffer counteroffer - ANSWER✔✔-not considered an element of an enforceable contract -occurs when the offeree rejects the offer, amends the offer and submits a different offer back to offerer (e.g. the insurer rejects the applicant's offer as a standard risk and counteroffers a policy as a substandard risk; an agreement is not reached until the two parties agree to the exact offer or counteroffer) no consideration = - ANSWER✔✔no coverage insurable interest - ANSWER✔✔the applicant/policyowner has an insurable interest (emotional and financial) in his own life and can name any beneficiary he chooses when is insurable interest required? - ANSWER✔✔a). when the proposed owner/applicant is to be someone other than the proposed insured (third-party insured)

b). at the time of ISSUE, not at time of LOSS in life insurance (e.g. not at time of claim) insurable interest is NOT on... - ANSWER✔✔next door neighbor types of insurable interest - ANSWER✔✔-emotional interest (i.e., blood or marriage) -financial interest--for someone to whom you owe a debt or with whom you have a business relationship 3 / 4

insurable interest & co-signing a loan - ANSWER✔✔if you co-sign a loan, you now have insurable interest on person getting a loan, by that person does not have insurable interest on you law of large numbers - ANSWER✔✔1. when you increase the number of units exposed to loss in a study, the accuracy of predictions of future losses also increases

• the larger the number of events observed, the greater the accuracy of the prediction

actuary - ANSWER✔✔business professional who analyzes the financial consequences of risk who uses the law of large numbers - ANSWER✔✔actuaries -come up with raw numbers two methods to determine how much insurance you need - ANSWER✔✔1. salary

• economic worth

determining amounts of life insurance - ANSWER✔✔1. human life value approach

• needs approach
• planning for income needs
• liquidation vs. retention of capital
• social security blackout period
• face value vs. death benefit

human life value approach - ANSWER✔✔an individual's economic worth, measured by the sum of his or her future earnings that is devoted to his or her family needs approach - ANSWER✔✔a method for determining how much insurance protection a person should have by analyzing a family's or business's needs and objectives should the insured die, become disabled, or retire -NOW -whether you need money for mortgage credit cards NOW liquidation vs. retention of capital - ANSWER✔✔-pay off lower -the proceeds (capital) will be used up either at or slightly after the end of the surviving spouse's life expectancy.-your family's life insurance proceeds should last just through the 4 ongoing income periods:

• readjustment
• dependency
• blackout
• / 4