Life Insurance Contracts
KNOWLEDGE EXPECTED OF: QAFP® Professionals
Highest Knowledge Level: Understanding
Knowledge Levels and Associated Verbs
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Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
|
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
|
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
|
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
|
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|---|---|---|---|---|---|---|---|---|---|
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Define
To state exactly the meaning of
|
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
|
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
|
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
|
Compare
To note the similarities and differences between two or more things
|
Estimate
To determine an approximate value for
|
Calculate
To find the value using mathematics
|
Convert
To change from one form or purpose to another
|
Evaluate
To reach a conclusion or make a through careful study
|
Interpret
To give the meaning of / to construe or understand / to translate orally
|
Hold cursor over or click on each term to read its definition.
- Define parties to a life insurance contract,1 such as:
- Policyholder
- Insured
- Insurer
- Identify the documents forming a life insurance contract.
- Application
- Policy
- Riders
- Ancillary documents referred to in policy
- Delivery receipt
- Define insurability.
- Identify elements that an insurance company may use to determine an individual’s insurability,2 such as:
- Age
- Gender
- Medical history
- Previous claims
- Amount of coverage requested
- Identify types of approvals upon adjudication of an application for life insurance, such as:
- Approval with standard premiums
- Approval with rated premiums (discounted or added premium)
- Approval with restrictions
- Define insurable interest as it relates to life insurance.
- The time at which it must be in place for a policy to be valid
- The relationship of the policyholder to the life insured
- Define material fact.
- Define material misrepresentation.
- Define terms associated with the validity of a life insurance contract, such as:
- Void contract
- Voidable contract
- Identify how the validity of a life insurance contract may be impacted.
- When a mistake with respect to a material fact is made
- When a material fact is omitted
- When a misrepresentation of a material fact is made
- Define underwriting.
- Define the periods when a life insurance contract may be underwritten.
- Pre-approval
- Post-claim
- Identify benefits and risks associated with pre-approval and post-claim underwriting.
- Identify policy provisions associated with life insurance contracts, such as:
- Definition of the contract
- Death benefit / coverage amount
- Length of coverage
- Beneficiaries
- Settlement options
- Riders / endorsements / floaters
- Misstatements (of age or sex)
- Material misrepresentation
- Fraudulent misrepresentation
- Incontestability clause
- Right to rescind the contract
- Cash values
- Non-forfeiture options
- Policy loan provisions
- Reinstatement provisions for lapsed or cancelled policy
- Suicide clause
- Identify the coverage amounts / death benefit options available on life insurance policies.
- Level death benefit
- Increasing death benefit
- Decreasing death benefit
- Identify the types of joint life insurance policies.
- Joint first-to-die
- Joint last-to-die
- Identify the purposes for which joint first-to-die and joint last-to-die life insurance policies may be used.
- Define terms associated with the continuation of a life insurance policy, such as:
- Cancellable
- Non-cancellable
- Guaranteed renewable
- Conditional renewable
- Commercially renewable
- Convertible
- Define a beneficiary3 for a life insurance policy.
- Identify entities who may be named as a beneficiary of a life insurance policy, such as:
- Individual
- Trust
- Charitable organization
- Corporation
- Identify the impact of naming each entity as a beneficiary.
- Explain the impact of naming a minor child as a beneficiary of a life insurance policy.
- Explain the impact of naming multiple children as beneficiaries of a life insurance policy.
- Identify who may receive the proceeds of a life insurance policy.
- When a beneficiary is named
- When the beneficiary and insured predecease the policyholder
- When the beneficiary predeceases the policy holder, and the policyholder predeceases the insured
- Define the types of beneficiaries that may exist on a life insurance policy.
- Irrevocable
- Revocable
- Preferred
- Contingent
- Identify advantages and disadvantages of beneficiary designations on a life insurance policy.
- Naming a revocable beneficiary
- Naming an irrevocable beneficiary
- Naming a preferred beneficiary
- Naming a contingent beneficiary
- Naming the estate as a beneficiary
- Identify the actions for which the policyholder requires the consent of the irrevocable beneficiary named on a life insurance policy.
- Identify the actions for which the policyholder does not require the consent of the irrevocable beneficiary named on a life insurance policy.
- Identify parties who are preferred beneficiaries.
- Identify the documents in which a beneficiary to a life insurance policy may be designated.
- For revocable beneficiaries
- For irrevocable beneficiaries
- Identify when a beneficiary to a life insurance policy may be designated.
- For revocable beneficiaries
- For irrevocable beneficiaries
- Explain the potential impact of a discrepancy in beneficiary designations within an insurance contract and a will.
- Identify settlement options that may be available to a beneficiary, such as:
- Lump sum payment
- Funds held on deposit
- Annuity installment payments
- Identify the tax treatment to a beneficiary from receiving the proceeds of a life insurance policy.
- Identify the purpose of riders that may be added to a life insurance policy, such as:
- Waiver of premium
- Accidental death and dismemberment
- Guaranteed insurability
- Convertible
- Cost of living adjustments
- Term insurance
- Return of premium
- Family income benefit
- Identify the grace period for a life insurance policy.
- Identify that a life insurance policy that has lapsed may be reinstated with conditions.
- Identify the suicide clause for a life insurance policy.
- Minimum timeframe
- Maximum timeframe
- Impact if policy lapses
- Identify that an advanced benefit may be available on a life insurance policy under certain circumstances, such as a shortened life expectancy.
- Identify factors that may impact the premium of a life insurance policy, such as:
- Age
- Current health status
- Health history
- Weight
- Smoking and drinking status
- Gender
- Value of death benefit
- Term of policy
- Identify elements that may be considered in structuring life insurance coverage, such as:
- Cash flow replacement needs
- Final expenses
- Retirement of debt
- Education costs for survivors
- Tax liabilities upon death of insured
- Bequests
- Equalization of estate for survivors
- Continuation provisions
- Future insurability
- Affordability
REFERENCES
KNOWLEDGE EXPECTED OF: CFP® Professionals
Highest Knowledge Level: Understanding
Knowledge Levels and Associated Verbs
|
Awareness
The state of being aware that something exists / to have familiarity with a particular activity or subject
|
Understanding
To comprehend the general relationship of particulars / to have an expertise with how something works
|
Application
Ability to put information to use / to use knowledge for relevant, practical purposes
|
Evaluation
To judge or conclude by utilizing data / a systematic determination of something’s worth or significance
|
||||||
|---|---|---|---|---|---|---|---|---|---|
|
Define
To state exactly the meaning of
|
Identify
To be aware of / to recognize and correctly name / to locate an appropriate resource
|
Explain
To make clear the meaning of / to describe something in more detail or reveal relevant facts or ideas related to it
|
Determine
To ascertain / to come to a decision, such as by investigation or reasoning
|
Compare
To note the similarities and differences between two or more things
|
Estimate
To determine an approximate value for
|
Calculate
To find the value using mathematics
|
Convert
To change from one form or purpose to another
|
Evaluate
To reach a conclusion or make a through careful study
|
Interpret
To give the meaning of / to construe or understand / to translate orally
|
Hold cursor over or click on each term to read its definition.
- Define parties to a life insurance contract,1 such as:
- Policyholder
- Insured
- Insurer
- Identify the documents forming a life insurance contract.
- Application
- Policy
- Riders
- Ancillary documents referred to in policy
- Delivery receipt
- Define insurability.
- Identify types of approvals upon adjudication of an application for life insurance, such as:
- Approval with standard premiums
- Approval with rated premiums (discounted or added premium)
- Approval with restrictions
- Define material fact.
- Define material misrepresentation.
- Define terms associated with the validity of a life insurance contract, such as:
- Void contract
- Voidable contract
- Define underwriting.
- Define the periods when a life insurance contract may be underwritten.
- Pre-approval
- Post-claim
- Identify policy provisions associated with life insurance contracts, such as:
- Definition of the contract
- Death benefit / coverage amount
- Length of coverage
- Beneficiaries
- Settlement options
- Riders / endorsements / floaters
- Misstatements (of age or sex)
- Material misrepresentation
- Fraudulent misrepresentation
- Incontestability clause
- Right to rescind the contract
- Cash values
- Non-forfeiture options
- Policy loan provisions
- Reinstatement provisions for lapsed or cancelled policy
- Suicide clause
- Define terms associated with the continuation of a life insurance policy, such as:
- Cancellable
- Non-cancellable
- Guaranteed renewable
- Conditional renewable
- Commercially renewable
- Convertible
- Define a beneficiary3 for a life insurance policy.
- Identify entities who may be named as a beneficiary of a life insurance policy, such as:
- Individual
- Trust
- Charitable organization
- Corporation
- Explain the impact of naming each entity as a beneficiary.
- Explain the impact of naming a minor child as a beneficiary of a life insurance policy.
- Explain the impact of naming multiple children as beneficiaries of a life insurance policy.
- Identify who may receive the proceeds of a life insurance policy.
- When a beneficiary is named
- When the beneficiary and insured predecease the policyholder
- When the beneficiary predeceases the policy holder, and the policyholder predeceases the insured
- Define the types of beneficiaries that may exist on a life insurance policy.
- Irrevocable
- Revocable
- Preferred
- Contingent
- Identify parties who are preferred beneficiaries.
- Identify the documents in which a beneficiary to a life insurance policy may be designated.
- For revocable beneficiaries
- For irrevocable beneficiaries
- Identify when a beneficiary to a life insurance policy may be designated.
- For revocable beneficiaries
- For irrevocable beneficiaries
- Explain the potential impact of a discrepancy in beneficiary designations within an insurance contract and a will.
- Identify the grace period for a life insurance policy.
- Identify that a life insurance policy that has lapsed may be reinstated with conditions.
- Identify the suicide clause for a life insurance policy.
- Minimum timeframe
- Maximum timeframe
- Impact if policy lapses
- Identify that an advanced benefit may be available on a life insurance policy under certain circumstances, such as a shortened life expectancy.
- Identify factors that may impact the premium of a life insurance policy, such as:
- Age
- Current health status
- Health history
- Weight
- Smoking and drinking status
- Gender
- Value of death benefit
- Term of policy
Additional Knowledge Expected of CFP Professionals
- Explain the factors that an insurance company may use to determine an individual’s insurability,2 such as:
- Age
- Gender
- Medical history
- Previous claims
- Amount of coverage requested
- Explain insurable interest as it relates to life insurance.
- The relationship of the policyholder to the life insured
- The time at which it must be in place for a policy to be valid
- Explain how the validity of a life insurance contract may be impacted.
- When a misrepresentation of a material fact is made
- When a material fact is omitted
- When a mistake with respect to a material fact is made
- Explain benefits and risks associated with pre-approval and post-claim underwriting.
- Explain the coverage amounts / death benefit options available on life insurance policies.
- Level death benefit
- Increasing death benefit
- Decreasing death benefit
- Explain the types of joint life insurance policies.
- Joint first-to-die
- Joint last-to-die
- Explain the purposes for which joint first-to-die and joint last-to-die life insurance policies may be used.
- Explain advantages and disadvantages of beneficiary designations on a life insurance policy.
- Naming a revocable beneficiary
- Naming an irrevocable beneficiary
- Naming a preferred beneficiary
- Naming a contingent beneficiary
- Naming the estate as a beneficiary
- Explain the actions for which the policyholder requires the consent of the irrevocable beneficiary named on a life insurance policy.
- Explain the actions for which the policyholder does not require the consent of the irrevocable beneficiary named on a life insurance policy.
- Explain settlement options that may be available to a beneficiary, such as:
- Lump sum payment
- Funds held on deposit
- Annuity installment payments
- Explain the tax treatment to a beneficiary from receiving the proceeds of a life insurance policy.
- Explain the purpose of riders that may be added to a life insurance policy, such as:
- Waiver of premium
- Accidental death and dismemberment
- Guaranteed insurability
- Convertible
- Cost of living adjustments
- Term insurance
- Return of premium
- Family income benefit
- Explain factors that may be considered in structuring life insurance coverage, such as:
- Cash flow replacement needs
- Final expenses
- Retirement of debt
- Education costs for survivors
- Tax liabilities upon death of insured
- Bequests
- Equalization of estate for survivors
- Continuation provisions
- Future insurability
- Affordability
- Explain characteristics that may be used when comparing individual and group life insurance policies, such as:
- Types of policies available
- Ownership and control
- Cancellability
- Period of coverage
- Portability
- Termination options
- Application requirements
- Evidence of insurability requirements
- Time of underwriting
- Benefit recipient
- Optional riders
- Premium guarantees
- Premiums
- Tax impact
previous / Foundations of Life Insurance