Life insurance Basics

A surviving spouse without dependent children is eligible for Social Security survivor benefits at age:

- 60

Life policies may be backdated no more than

- 90 days

When Eddie was married to Blanche, his first wife, she applied for and was issued a life policy on Eddie, naming herself as beneficiary. She has kept the policy in force all of these years since their divorce. Three wives later, currently married to Nicole, Eddie dies. Who will receive the death benefit?

- Blanche

What is NOT a source of information used in underwriting applicants for individual life insurance policies?

- Commissioners' standard ordinary mortality table

What statement regarding insurable interest is true or permitted?

- George buys a policy on himself and names his nephew as the beneficiary

Marie signed an application for a $100,000 life insurance policy on September 2nd and took a required medical exam on September 4th. She gave the agent the check for the initial premium and received a conditional receipt at the time of application. The company issued the policy with a policy date of September 26th. The agent delivered the policy to her on October 15th. Marie's insurance protection actually began on

- September 4th

What statement regarding Social Security survivor benefits is NOT correct?

- a healthy, dependent child of a deceased worker will be entitled to an income benefit until age 18, or to age 22 if he or she attends college EXPLANATION: Social Security (OASDI) benefits to a healthy child cease when the child reaches age 18 (19 if still in high school or age 22 if disabled), but are not extended to a child in college over age 18.

In the rating of a life insurance policy, a preferred risk is an applicant who has

- a low-risk occupation, a healthy lifestyle (including not smoking), good height and weight ratio, and no significant personal or family medical history.

If a medical exam is required for an applicant, it is completed by

- a paramedic or examining physician

A policy may NOT be rated in what way?

- a permanent reduction of the face amount at standard rates

Replacement does NOT pertain to what transaction?

- a policy owner borrows ten percent of the cash value of an existing policy and later purchases another policy.

An adverse underwriting decision is defined as one where the

- agent refused to send an application to the insurance company preferred by the applicant.

What is NOT an example of insurable interest?

- airline insuring the lives of its passengers

Coverage under a life insurance contract will be in effect when

- an agent delivers a policy to the insured and collects the initial premium

The applicant, if other than the proposed insured, must have

- an insurable interest in the life of the insured

To protect the insuring public, an applicant applying for insurance on someone else's life does NOT need to have

- an insurable interest in the life of the proposed insured throughout the term of the policy.

When is an agent required to give the life insurance applicant a Buyer's Guide?

- at the time of app, unless the insurance company offers an unconditional 10-day free look

In life insurance, insurable interest must exist

- at the time of the application

Jackson Electric Supply Company wants to buy a Key Employee Disability policy on its top salesperson, Marie. When will Jackson have to prove it has an insurable interest in Marie?

- at the time of the application

Placing a date on an insurance policy application that is earlier than the date the policy was actually applied for is known as

- backdating

What would NOT provide an insurance company with information about an applicant?

- beneficiary

In reviewing the application on Bert's life, the underwriter has access to legitimate sources of information to evaluate this risk EXCEPT

- bert's birth certificate establishing legal age.

To comply with disclosure requirements, agents must deliver what to all life insurance applicants?

- buyers guide and policy summary

What is NOT an alternative an insurance company has when asked to insure a sub-standard risk?

- charge a lower-than normal premium rate

What is NOT used by an actuary to set the pricing on a life insurance contract?

- charge for interest earned on policy cash.

A conditional receipt guarantees that the

- company will continue to process the application if the insured dies during the underwriting process

the MIB

- compiles confidential info about past health insurance apps for member insurers

The Smith twins are joint owners of an entertainment business. Each buys a life policy on the life of the other to be used to buy out the heirs of the deceased sister's half of the business so the survivor takes full control. This type of arrangement is

- cross purchase buy/sell

Three business owners have entered into an agreement that, upon the death of one of the owners, the remaining owners will buy the deceased owner's share of the business from the deceased owner's heirs. This agreement is a(n)

- cross purchase buy/sell plan

Agents are NOT allowed to give clients information about the Life and Health Guaranty Association in what situation?

- during the sales process

Underwriting is a process of

- evaluation, classification, and rating of risks

The Kalamazoo Stove and Screen Door Company applies for life insurance on its key vice president, Harold. The company is the premium payor and beneficiary, and controls all rights to the policy. What is true?

- harold is the proposed insured; his company is the applicant/policy owner

What is NOT a duty of the agent when a new life insurance policy is being written and the old policy surrendered?

- have the policy owner cancel the existing policy immediately

What individual does NOT have an insurable interest in popular novelist Tim's life?

- his adult sister, married and living in another state.

In determining an individual's need for personal life insurance, the method that capitalizes the present value of the insured's income over his working lifetime is referred to as

- human life value

We have examined several methods that an agent might employ to determine an individual's need for personal life insurance. The method that capitalizes the present value of the insured's income over his or her working lifetime is referred to as

- human life value

The principal difference between an entity purchase and a cross purchase buy/sell agreement for two owners is the

- identity of the policy owner

What statement is NOT true concerning sources and uses of underwriting information?

- inspection report contents are provided to an applicant by the insurer

Education funds created by life insurance death benefits are designed to cover the cost of all of the following, except:

- medical care

What is NOT a premium mode?

- modified premiums

What premium mode will have the highest total premium for the policy year?

- monthly

Premium rates for life insurance are computed using what three factors?

- mortality, interest, expenses.

When a life insurance policy replacement is to take place, the agent of the replacing insurer is required to have the applicant sign a

- notice regarding replacement of life insurance

In calculating the amount of death benefit a prospect would need, the human life value approach to life insurance would consider the

- number of earning years remaining

What is NOT a part of the risk selection process?

- payment of the first premium

The document that contains information to help prospective life insurance buyers make an informed choice is called a

- policy summary

The life actuary does NOT build the cost of an insurance policy using

- premium assumption

Sally, Harry's ex-wife, has been divorced from Harry for 15 years. Harry has been married three times since then. When Harry dies, Sally submits the paperwork for the policy she purchased on Harry immediately after their honeymoon. What action will the insurer take on this claim?

- refuse to pay Sally since she is divorced from Harry.

Purchasing a life insurance policy benefiting one or more people who at the time of the issuance lack insurable interest is an example of:

- stranger oriented life insurance

A rated life insurance policy is issued at:

- sub-standard risk rates

What statement is NOT true about the Medical Information Bureau?

- the MIB can be the sole source of info used to decline an applicant

What statement pertaining to the Medical Information Bureau (MIB) is correct?

- the MID provides assistance in the underwriting of life insurance

Company A uses a corporate check to pay the premiums for key employee life insurance on the life of Sid, its most prized investment officer. How do taxes work on this transaction?

- the company does not deduct the premium, and the benefits are income tax free

Human life value refers to the

- the monetary value based on the earning potential of a person

A signed statement of continued good health must reflect no change in health status from the

- time when an initial premium is not paid until the policy is delivered

All of the following are reasons for purchasing life insurance on a spouse who does not work for pay outside the home, except:

- to guarantee that newborn children will be eligible for life insurance.

An agent who wishes to sell viatical settlements must be licensed as a

- viatical broker

In arranging the viatical settlement, the viatical broker represents the?

- viator.

Social Security survivors' benefits are NOT paid to what relatives of a deceased worker?

- widow age 55 with no children under 16

A policy that shares in the company's excess funds or divisible surplus is called

-a participating policy