Life insurance-Basics
2 What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act
$2,500
In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT
Applicant's past income
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective
As of the application date
Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process
Buyer's Guide
If an insured changes his payment plan from monthly to annually, what happens to the total premium
Decreases
A producer agent must do all of the following when delivering a new policy to the insured EXCEPT
Disclose commissions earned from the sale of the policy
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)
Executive bonus
In the Executive Bonus plan, who is the owner of the policy, and who pays the premium
Executive is the owner, and the executive pays the premium
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company
Fair Credit Reporting Act
Harry has just received his life insurance policy. In reviewing the title page, Harry was able to ascertain the following information EXCEPT
His spouse had been assigned the primary beneficiary
Stranger-originated life insurance policies are in direct opposition to the principle of
Insurable interest
The mode of premium payment
Is defined as the frequency and the amount of the premium payment
What is an advantage of the Temporary Insuring Agreement to the applicant
It gives the applicant immediate coverage
Which of the following best describes the MIB
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance
In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium
It will likely be higher because the applicant is a substandard risk
Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life
Need is predicted using the number of years until the insured's retirement
Attempting to determine how much insurance a family would require based upon their financial objectives is known as
Needs approach
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will
Pay the policy proceeds only if it would have issued the policy
What describes the specific information about a policy
Policy summary
The Federal Fair Credit Reporting Act
Regulates consumer reports
In the event of a loss, business overhead insurance will pay for
Rent
Signing and dating a delivery receipt for a life insurance policy helps to establish all of the following timeframes EXCEPT
The Grace Period
The title page of the policy provides a summary of the benefits and coverages provided by the policy. All of the following information is included in the title page EXCEPT
The insured's beneficiaries
When an insured receives a written binder,
The insured's coverage will be effective immediately
Which of the following is true regarding an application for a large amount of insurance
The insurer might require a medical examination by a professional
The responsibility of making certain that an application for insurance is filled out completely, correctly, and to the best of his or her knowledge is the responsibility of whom
The producer
2 Under what circumstances would a life insurance contract qualify as a "standard policy "
Under no circumstances
All of the following are personal uses of life insurance EXCEPT
Buy-sell agreement
Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount
Buy-sell agreement
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 of the following is NOT a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach
Estimated longevity
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation
Human life value approach (HLVA)
A life insurance policy can be delivered by all of the following means, EXCEPT
Priority mail
Which of the following best describes a non-medical application
The medical portion of an application that asks for medical information but does not require a medical exam
The process of "post-selection" refers to which of the following
An insurer is investigating the client's risk profile
Which of the following statements regarding Business Overhead Expense policies is NOT true
Benefits are usually limited to six months
Which of the following statements concerning buy-sell agreements is true
Buy-sell agreements are normally funded with a life insurance policy
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report
Must be informed of the source of the report
Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT
Other insurance coverages
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of AA STOLI policy
If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following EXCEPT
Loss of the owner's income
An applicant who receives a preferred risk classification qualifies for
Lower premiums than a person who receives a standard risk
Which of the following information about the applicant is NOT included in the General Information section of the application for insurance
Medical background
Which of the following premium modes would result in the highest annual cost for an insurance policy
Monthly
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy
Premiums are not tax deductible as a business expense
The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What must the insurer do with the application
Return to the applicant for completion
Which of the following would provide an underwriter with information concerning an applicant's health history
The Medical Information Bureau
Who is protected by a Temporary Insuring Agreement
The applicant and the insurer
Which of the following is an example of liquidity in a life insurance contract
The cash value available to the policyowner
Why should the producer personally deliver the policy when the first premium has already been paid
To help the insured understand all aspects of the contract
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE
The policy will be interpreted as if the insurer waived its right to have an answer on the application
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy
The employer is the owner and beneficiary
Which of the following would NOT fall into the category of costs associated with death
The expense of a vacation for surviving family members
Which of the following is NOT true of life settlements
The seller must be terminally ill
Which is generally true regarding insureds who have been classified as preferred risks
Their premiums are lower
All of the following are requirements for life insurance illustrations EXCEPT
They must be part of the contract
What is the purpose of the buyer's 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
What is the purpose of a disclosure statement in life insurance policies
To explain features and benefits of a proposed policy to the consumer
Which of the following would be least likely to be considered a legitimate need that would be paid by insurance proceeds
Vacation travel expenses
Which of the following is true regarding written binders
Binders prove that the insured has insurance coverage, even though the policy has not been issued yet
When the partners of a business develop an arrangement whereby should one of them die or become permanently disabled, the other partners would purchase the interest of the deceased or disabled partner at a predetermined price, this is called a/an
Business continuation plan
A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability
Business overhead expense policy
Each of the following factors are used in determining insurance rates EXCEPT
Dividends
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
