Life Insurance Basics Quiz

Agents may backdate policies up to 6 months in order to obtain a

Better premium rate for the insured

A producer agent must do all of the following when delivering a new policy to the insured EXCEPT: 1. Explain the policy provisions, riders, & exclusions 2. Collect any premium due & have the insured sign the statement of continued good health 3. Explain the rating procedures if the policy is rated differently than applied for 4. Disclose commissions earned from the sale of the policy

4

If an insurer neglects to provide a buyer's guide at the time of application, what will happen?

A free-look period of 15 days will be granted

Which method of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?

Human life value approach

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT: 1. Any type of insurance policy may be used 2. The policy is owned by the company 3. The employer pays a bonus to a selected employee to fund the policy 4. It is considered a nonqualified employee benefit

2

Any changes to information on an application must be initialed by the

Applicant

What is the time period called during which the surviving spouse of the insured does not receive Social Security income benefits?

Blackout period (begins when the youngest child reaches age 16, ends when surviving spouse qualifies for retirement benefits)

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

Executive owns the policy AND pays the premium, and the employer reimburses the executive for cost (or pays a bonus in the amount of the premium). Since the executive is receiving compensation, the amount paid by the employer would be considered taxable income.

If an applicant wants to buy a life insurance policy in which he can count on receiving the same benefits as stated in the contract, which type should he buy?

Fixed

Who makes up the Medical Information Bureau (MIB)?

Insurers

Y applied for insurance and paid the initial premium on August 14, then was issued a conditional receipt. During underwriting, the insurer found to reason to reject the applicant. Y was killed in a car 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

What type of life insurance policy will provide lifetime protection against premature death?

Permanent provides lifetime death protection, including premature death (it also has a savings or investment option)

The individuals in which risk classification qualify for lower premiums than those in other categories?

Preferred risks

When collecting the initial premium, the agent should issue the applicant a

Premium receipt

If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

Whether an insurable interest exists between the individuals