Contract Law
In underwriting health and disability insurance, two major considerations that have the potential to affect the proposed insureds probability of experiencing a loss are what?
Probability of disability and average severity of disability
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicants what?
Ancestry
What do modified life and straight life policies have in common?
Accumulation of cash value
During the grace period, the policyowner can what?
Pay a late premium without penalty
What would be considered a non medical insurance application?
An application on which all of the questions, including medical history questions, do not need to be completed by medical professionals, and may be completed by the applicant and the agent
According to the Code, how many separate requirements should an insurance policy have?
6
A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events is called what?
A policy
The term illustration in a life insurance policy refers to what?
A presentation of no guaranteed elements of a policy
Which of the following would describe a legal document which would dictate who can buy a deceased partners share of a business and for what amount?
Business Continuation agreement or Buy-Sell agreement
How is the premium in an insurance policy determined?
By multiplying the rate by the number of units of insurance purchased.
What does liquidity refer to in a life insurance policy?
Cash values can be borrowed at any time
What term best describes the act of withholding material information that would be crucial to an underwriting decision?
Concealment
What does Key Person insurance pay for?
Costs of running the business and replacing the employee
What is TRUE about credit life insurance?
Creditor is the policyowner
A life insurance policy has a legal purpose if both of which of the following elements exist?
Insurable interest and consent
What piece of information is NOT available on the title page?
Primary beneficiary
Who is the owner and who is the beneficiary on a Key Person Life insurance policy?
The employer is the owner AND beneficiary
An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?
The insured would need a written consent of the insurer
Which of the following does NOT need to be identified in an insurance policy?
The insurers financial rating
All of the following are true of key person insurance EXCEPT what?
The plan is funded by permanent insurance only
What is TRUE about an indeterminate premium whole life policy?
The premium can be raised up to a guaranteed maximum rate
What is the purpose of a disclosure statement in life insurance policies?
To explain features and benefits of a proposed policy to the consumer
What is a wrongful act or the violation of someone's right that leads to legal liability called?
Tort
In insurance policies, the insurer is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
Unilateral
Kaylas husband died in a plane crash. She needs a new source of funding that will help put her child through daycare. What would be the best source?
Life insurance proceeds
What is NOT a feature of Indexed Universal Life?
Requirement of securities license to sell product
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT what?
The policy is owned by the employee
Which of the following types of insurance policies would perform the function of cash accumulation?
Whole life
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration
Which of the following is NOT true regarding the Needs Approach method of determining a value of an individual's life?
Need is predicted using the number of years until the insureds retirement
Attempting to determine ho much insurance an individual would require based upon their financial objectives is known as what?
Needs approach
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
Conditional
Since an insurance policy is a contract between the insurer and the insured, it must conform to the state laws governing contract which require all of the following elements except what?
Conditions- it's part of the policy structure
Every expressed warranty made at or before the execution of a policy must be what?
Contained in and referred to in the policy or other document and signed by the insured.
What is Family Income policy?
It combines decreasing term insurance with whole life insurance to provide the insureds family with a monthly income upon the death of he insured, while maintaining permanent coverage until the end of the income payments.
What must an agent receive in order to sell variable life insurance policies?
FINRA registration
Which of the following must be disclosed in all advertisements and policies of term life insurance for individuals 55 years of age or older?
Insurance monetary value index
What is the purpose of a conditional receipt?
It is intended to provide coverage on a date earlier than the date of the issuance of the policy
Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?
Standard risk is representative of the majority of people
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of what?
Stranger-originated life insurance (STOLI)
Define adjustable life policies
They allow for increases or decreases in the face amount or premium so long as the premium is sufficient to pay for the mortality, changing the premium paying period, or changing the period of protection. Any increase in face amount requires proof of insurability
All of the following are true except what?
They may be altered or withdrawn after the issuance of the policy
The least expensive first year premium payment is found in which term insurance?
Annually Renewable Term
Who has the right to convert the existing term coverage to permanent insurance?
Policy owner
What is included in a policy summary?
Premium amounts and surrender values
An intentional or unintentional concealment entitles the affected party to what?
Rescission of a contract
Upon policy delivery, the producer may be required to obtain any of he following EXCEPT what?
Signed waiver of premium
What is a risk classification used by underwriters for life insurance?
Standard
What is the purpose of a buyers guide?
To allow the consumer to compare the costs of different policies
Which of the following is the best reason to purchase life insurance rather than annuities
To create an estate