Chapter 3 Exam Review

Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?

A debtor has an insurable interest in the life of a lender

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

Any form of life insurance

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to

Charge a higher premium

Which oof the following is NOT an example of a valid insurable interest?

Debtor in the life of the creditor

When an applicant purchased a life insurance policy, the agent dated the application 4 months prior. When asked by the applicant, the agent said he was allowed to backdate policies up to 6 months if it would...

Lower the insured's premium

What describes the specific information about a policy?

Policy Summary

Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly?

The producer

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will

Issue the policy anyway and pay the face value to the beneficiary

Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds?

Vacation Travel Expenses

Which is the primary source of information used for insurance underwriting?

Application

In terms of Social Security, what is the name for the time period after the youngest child of a family turns 16 and before the surviving spouse may start receiving retirement benefits?

Blackout Period

All of the following are business uses of life insurance EXCEPT

Funding against company's general financial loss

All of the following are characteristics of group life insurance EXCEPT

Premiums are determined by the age, sex, occupation of each individual certificate holder

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?

Replacement Rule