Chapter 1-15 ADBanker Course
All of the following are recognized classes of insurance in California, except:
Medicare Supplement
When credit life insurance is used to protect against the unpaid balance of a mortgage, it is commonly referred to as:
Mortgage redemption insurance
A policy may not be voided for which of the following reasons?
Non-payment of premium
In California, which of the following is true concerning the right of cancellation period for an individual life insurance policy or individual annuity contract purchased by a senior citizen (60 years of age or older):
Not less than 30 days
What is an insurer permitted to do if and when it discovers during the underwriting process that a proposed insured has AIDS?
Insurers may refuse to issue a policy to individuals based on positive HIV test results
All of the following are considered part of the consideration of an insurance contract, except:
Issuance of a policy or binder
If the insured qualifies for long-term care benefits based on being chronically ill as defined in the Long-Term Care rider, how will this impact the ultimate death benefit payable to the beneficiary?
It will be reduced
Quentin, age 65, has a life insurance policy he no longer needs and no longer can afford but he does have a need for cash. XYZ Inc. purchased his policy for less than the face amount but more than the cash value and is now the policyowner and premium payor. This was which of the following transactions?
Life Settlement
Interest earned on premiums paid to an insurer helps to ________ the premiums charged.
Lower
The Commissioner, Director, or Superintendent of insurance is responsible for all of the following, except:
Make insurance laws when appropriate
Which one of the following will pay the highest premium for a life insurance policy all other factors being equal?
Male Age 70
Disclosure or lack of disclosure in a statement that would change an insurer's decision to issue a policy for the same premium is considered:
Material
If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a:
Notice of replacement
Which of the following best describes producer field underwriting?
Taking the time to probe beyond the stated questions on the application based upon the applicant's responses
The interest earned on dividends is:
Taxable
What type of a receipt provides immediate coverage during the underwriting period (rather than a specified number of days) until a policy is issued or the application is declined?
Temporary insurance agreement
When does a change in beneficiary take effect?
The date the policyowner signs the request to change the beneficiary
If an insured has a Life Paid-Up at 75 Policy (a limited-pay life paid-up at age 75), what would the beneficiary receive if the insured died at age 68?
The face amount
Which of the following is true?
The insured and the policyowner are usually the same, but not necessarily
All of the following are true of the Law of Large Numbers, except:
The prediction of individual losses is based exclusively upon past experience
In determining the proper amount of life insurance, the Needs Analysis Approach takes into consideration all of the following factors, except:
The projected future value of services provided by the insured
Which one of the following must be communicated in an insurance contract?
The risks insured against
Before the process of underwriting begins, who will make the final determination as to whether insurable interest exists?
The underwriter
What happens if a Return of Premium Term policy is not held to the end of term?
There will be a nominal return of premiums paid, the amount will depend upon how long the policy was in-force
Every insurer and life agent offering for sale individual life insurance policies, or individual annuity contracts that are issued for delivery to senior citizens in California with the use of non-preprinted illustrations of non-guaranteed values must disclose on those illustrations, or on an attached cover sheet, which one of the following statements?
This is an illustration only which is not intended to predict actual performance, therefore interest rates, dividends, or values that are contained herein are not guaranteed, except for those items clearly labeled as guaranteed
Life insurance policy illustration requirements apply to which one of the following?
Traditional whole life insurance
When an individual's risk of loss is assumed by a larger homogeneous group, it is known as risk _________.
Transfer
The method of premium can vary depending on the:
Type of policy issued
The process of evaluating a risk for the purpose of issuing insurance coverage is:
Underwriting
Premiums paid in advance are considered what type of premiums until coverage has been provided?
Unearned
A Guaranteed Universal Life policy is also referred to as a(n):
Universal Life with a No-Lapse Guarantee
Which of the following is NOT a type of Term Life Insurance Policy?
Variable
Which of the following policies requires a producer to have both a life and securities license to sell?
Variable Universal
All of the following life insurance policies have a cash value that increases based on interest being credited to the cash value, except:
Variable Universal Life
For life and health insurance, when must an insurable interest exist?
When the insurance takes effect
A person or entity that buys insurance for protection from loss of life or disability is a(n):
Insured
All of the following are characteristics of a Mutual Insurance Company, except:
Stockholders have ownership
The Attending Physician's Statement (APS) is completed by:
An applicant's physician to provide information about the applicant's medical history
All of the following statements regarding a warranty is correct, except:
An implied warranty is stipulated in the contract and is considered a fact
Which of the following best describes the return of premium rider?
An increasing term benefit that matches the cumulative premiums paid
Regarding insurable interest which one of the following is false?
An insurable interest exists in cases where a financial or economic loss by the insured results in the event that the policy owner dies
The Medical Information Bureau (MIB) is formed by:
Insurance companies
An insurer authorized to transact insurance in a particular state by that state's insurance department is known as:
An admitted insurer
Jason has a Whole Life insurance policy with a face amount of $100,000, an annual premium of $1,000, and a cash value of $10,000. If he wants to borrow money from the insurer, what is the maximum he can obtain?
$10,000
An insured purchases a 20-Pay Life Policy with a face amount of $25,000 and an annual premium of $1,000. The insured dies 15 years later when the cash value is $5,000. What amount will the beneficiary receive?
$25,000
If Alvin purchases a Variable Universal Life Policy with a face amount of $250,000, and chooses death benefit Option B, upon his death the amount of the benefit payable to the beneficiary would be _________ if the policy had $25,000 in cash values.
$275,000
The applicant/insured wants a term life insurance policy that will last for 20 years and is willing to risk that the insurer is managing its financial affairs properly and is not concerned about the premium of the policy down the road so long as there is a cap on how much it can ultimately become, so the producer should show him/her a(n):
20 year indeterminate premium term life insurance policy
A Living Needs Accelerated Benefit Rider allows the early payment of a portion of the face amount of a life insurance policy before death, should the insured become terminally ill with less than how many months to live?
24
If a policyowner returns a variable life insurance contract during the free look period, he/she is entitled to a refund of account value and policy fee paid for the policy within how many days from the date the insurer is notified of cancellation?
30
Joe has a whole life policy with a guaranteed insurability rider. He was 21 at the time the policy was issued. If he exercises all of the options at the ages specified under the typical rider, how many policies will he end up with?
7?
The Double Indemnity Rider requires that the insured die within _____ days of the accident.
90
Under the California Financial Information Privacy Act, what must consumers be advised of?
A financial institution has authority to share their personal financial information
If a medical exam is required as part of the underwriting process, who normally conducts the exam?
A physician or nurse
Which one of the following applicants is most likely to have an insurable interest in the insured?
A spouse applying for coverage on their spouse
Typical exclusions or restrictions found in an accelerated death benefit include all of the following, except:
Accidental injury while at work
Which insurance company department determines the probability of loss and sets the premium rates?
Actuarial
An insurer that is authorized to transact insurance in California and has been issued a Certificate of Authority from the California Department of Insurance is a(n):
Admitted Insurer
The idea that there are always some insureds (risks) that are less desirable than average risks, and that these insureds tend to seek or continue insurance coverage to a greater extent than better risks is termed:
Adverse selection
In order for an insurance policy to be issued, the insured must have:
An Insurable interest with the policyowner
Constructive or legal delivery occurs only if the premium was paid at the time of:
Application
Which statement is true of the Law of Large Numbers?
As the number of insured units increases, predictability of losses improves
If a basic life insurance illustration is used by an insurance producer in the sale of life insurance and the policy is applied for as illustrated, a signed copy of that illustration must be submitted to the insurer and provided to the applicant:
At the time of policy application
A married couple wants to have funds available so that the heirs to their estate have the funds necessary to pay the estate taxes. Which of the following would be the most economical and effective way to accomplish this?
Buy a Joint Survivorship Life Policy
Policy delivery in California will be accomplished by all of the following, except:
Calling the applicant/insured to inform him/her that the policy was issued and keep in the client file
Which of the following personal uses of life insurance is specifically designed to provide benefits to the policyowner while the insured is still alive?
Cash accumulation
The value within a permanent life insurance policy that the policyowner can access through a policy loan or policy surrender is known as the ___________.
Cash value
When the initial premium is not paid with the application, what must the producer do before coverage can begin?
Collect the premium and obtain a signed Statement of Good Health from the applicant/insured at time of policy delivery
The neglect to communicate known information that is material is called:
Concealment
Any attempt by the existing insurer or agent to deter a policyowner from the replacement of an existing life insurance or an annuity is called:
Conservation
Which of the following is the correct term to describe a contract prepared by one party and submitted to the other party on a take it or leave it basis, without negotiations?
Contract of Adhesion
The net amount at risk in an Ordinary Whole Life Insurance Policy _________ over the life of the policy.
Decreases
Which of the following is a type of life insurance that provides an amount of coverage that diminishes while the policy is in effect and is most often used to pay an outstanding loan or mortgage balance upon the death of the insured?
Decreasing Term
An insurance transaction includes any of the following, except:
Determining rates
All of the following are true of insurance, except:
Eliminates risk
When the life insurance policy's cash value equals the face amount of the policy and the proceeds are paid to the policyowner, this is known as the policy's _________.
Endowment
The date on which insurance coverage is no longer in effect is referred to as the _________ date.
Expiration
The insurer has the right to rescind a policy due to all of the following, except:
Failing to pay the premium in full and on time
A person who handles insurer funds in a trust capacity is a(n):
Fiduciary
If the premium can fluctuate at the policyowner's discretion, meaning it can be increased, decreased, or even skipped at any premium due date, what premium paying method was used?
Flexible
In California, which of the following statements is false regarding a 'basic illustration' used in the sale of life insurance?
For a policy in which illustrations will be used, the insurer shall provide each policyowner with a report on the status of the policy every third anniversary date
Which of the following is FALSE about the Automatic Premium Loan Provision (APL)?
For it to be included in the policy, there is an additional premium charge
An insurer organized in another state than the state in which it is authorized to do business is known as which type of insurer?
Foreign
The _________ period keeps a policy in force for a short time after the premium due date, allowing policyowners a little extra time to pay an overdue premium without a lapse in coverage.
Grace
Ultimately it is up to the _______ to determine if the proposed insured is an acceptable risk.
Home office underwriter
All of the following are characteristics of Ordinary Whole Life Insurance, except:
If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner
A Return of Premium Term policy provides for a full refund of premiums under what situations and circumstances?
If the insured is still living at the end of the term
The Return of Premium Rider, the Return of Cash Value Rider, and the Cost of Living Rider all use which type of term insurance to accomplish their objective?
Increasing Term
An agent that enters into agreements with more than one insurer is which of the following?
Independent
What type of term life insurance policy has a policy premium that can fluctuate between the current charge and a maximum rate stated in the policy based on the insurer's mortality, expenses, and investment returns?
Indeterminate
Life insurance applications cannot contain questions about prior HIV testing unless the question is limited to prior testing for the purpose of obtaining:
Insurance
What should the producer do, if the insured is in the hospital with a heart condition pending surgery on the day the newly issued policy was to be delivered and initial premium collected?
Return the policy to the insurer with a letter of explanation
In order to receive a policy dividend, the policy owner must own a __________ policy.
Participating
Policies that may pay dividends to the policyowner are known as:
Participating
While a Guaranteed No-lapse Rider relieves the policyowner of the responsibility of monitoring the policy's cash value what is required of him/her to make sure that the policy's no-lapse rider remains in effect?
Pay the premium in full and on time
In a replacement transaction, why should the existing policy not be terminated until the replacing policy is issued and delivered?
Potential of new evidence of insurability being required
An underwriter will consider each of the following factors when considering a risk, except:
Rates
The face amount of an Ordinary Whole Life Policy _________ over the life of the policy.
Remains the same
Which of the following term life insurance policies would be the most expensive, everything else being equal at the time of issuance?
Renewable and Convertible
An oral or written statement made at the time of application or before issuance of the policy that is believed to be true to the best of the knowledge of the applicant is called a(n):
Representation
Which term describes the probability of loss?
Risk