Life Insurance= Review Missed Questions
#18. Martha claims to have injured her back at work. She tells the doctor that she cannot bend, lift, or even sit comfortably without great pain. Based on Martha's statements, the doctor certifies her disability and she begins to receive disability benefits from the insurer. If it can be shown that Martha did not suffer the injury she has claimed or that she is not suffering the effects she is claiming, she will be charged with a) Financial abuse of an insurer. b) Unfair claims practices. c) Insurance fraud. d) Medical misrepresentation.
C.) Insurance fraud This is an example of a person seeking an unlawful gain at the expense of an insurer, a fraud. (CIC 1971.4(a)(1))
#37. 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? a) Conditional b) Adhesion c) Personal d) Unilateral
a.) Conditional A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.
#23. Which of the following is TRUE about the 10-day free-look period in a Life Insurance policy? a) It begins when the policy is delivered. b) It begins when the application is signed. c) It applies only to term life insurance policies. d) It is optional on all life insurance policies.
a.) It begins when the policy is delivered The 10-day free-look provision is a mandatory provision that allows the insured to examine a policy, and if dissatisfied for any reason, return the policy for a full refund of any premiums paid.
9. Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life? a.) Coverage is based on the predicted needs of that family. b.) The death of an insured must be premature. c.) It must be assumed that the death of the insured will occur immediately. d.) Need is predicted using the number of years until the insured's retirement.
a.) Need is predicted using the number of years until the insured's retirement. In the needs approach method, need is determined by the predicted needs of the family the premature death of the insured, which must be assumed will happen immediately. The policy allows for benefits to be collected upon the insured's death.
13.) The policy owner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a.) The death benefit can be increased by providing evidence of insurability. b.) The death benefit cannot be increased. c.) The death benefit can be increased only when the policy has developed a cash value. d.) The death benefit can be increased only by exchanging the existing policy for a new one.
a.) The death benefit can be increased by providing evidence of insurability. The policy owner (insured) would need to prove insurability for the amount of the increase.
#21. An Internal Revenue Code provision that specifically provides for an individual retirement plan for public school teachers is a(n) a) SEP. b) 403(b) Plan (TSA). c) Keogh Plan. d) Roth IRA.
b.) 403(b) Plan (TSA) Under a 403(b) Plan, tax-sheltered annuities may be established for the employees of specified nonprofit charitable, educational, religious and other 501c(3) organizations, including teachers in public schools systems. Such plans generally are not available to other kinds of employees.
#30. Who is a third-party owner? a) An irrevocable beneficiary b) A policyowner who is not the insured c) An insurer who issues a policy for two people d) An employee in a group policy
b.) A policyowner who is not the insured. Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.
5. An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an a.) Self-insurer b.) Authorized insurer c.) Local insurer d.) Certified insurer
b.) Authorized insurer Insurers who meet the state's financial requirements and hold a Certificate of Authority to transact business in the state are considered authorized or admitted.
16.) Why is an equity indexed annuity considered to be a fixed annuity? a) It is not tied to an index like the S&P 500. b) It has a guaranteed minimum interest rate. c) It has modest investment potential. d) It has a fixed rate of return.
b.) It Has a guaranteed minimum interest rate. While equity indexed annuities earn higher interest rates than fixed annuities, both types of annuities guarantee a specific minimum interest rate.
#27. Which of the following settlement options in life insurance is known as straight life? a) Fixed amount b) Life income c) Single life d) Life with period certain
b.) Life Income The life-income option, also known as straight life, provides the recipient with an income that he or she cannot outlive. It pays the benefit while the beneficiary is alive; however, the payments stop at the beneficiary's death
#19. Which concept is associated with "exclusion ratio"? a) How exclusion riders affect an insurance premium b) Policy provisions c) Annuities payments d) Dividend distribution
c.) Annuities payments Some parts of an annuities payment are taxable, while others are not. The return of the principal paid in is nontaxable. The portion that is taxable is the actual amount of payment, less the expected return of the principal paid in. This relationship is called the "exclusion ratio".
#29. Graded-Premium Whole Life policy premiums are typically lower initially, but gradually increase for a period of 5 to 10 years. After the period of increase the premiums will a) Return to the initial premium amount. b) Decrease again. c) Be level thereafter. d) Continue to increase.
c.) Be level thereafter When a Graded-Premium Whole Life policy begins, the premium amounts are typically 50% lower than premiums for straight life policies. The premium then gradually increases each year for a period of usually 5 or 10 years and then remains level thereafter.
10.) How long will the beneficiary receive payments under the single life settlement option? a.) Until the insured's death b.) For a specified period of time c.) Until the insured's age 100 d.) Until the beneficiary's death
c.) Until the beneficiary's death The Single Life Option can provide a single beneficiary income for the rest of his/her life. Upon the death of the beneficiary, the payments stop.
#36. Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? a) Adhesion b) Subrogation c) Warranty d) Aleatory
d.) Aleatory An insurance contract is an aleatory contract in that it requires a relatively small amount of premium for a large risk.
12.) When would a misrepresentation on the insurance application be considered fraud? a.) Never: statements by the applicant are only representations. b.) When the application is incomplete c.) Any misrepresentation is considered fraud. d.) If it is intentional and material
d.) If it is intentional and material A misrepresentation would be considered fraud if it is intentional and material. Fraud would be grounds for voiding the contract.
11.) What is the official name for the Social Security program? a.) Old Age Survivors Disability Insurance b.) Social Insurance Program c.) Defined Benefit Retirement Insurance d.) Qualified Pension Plan
d.) Old Age Survivors Disability Insurance Social Security is formally called Old Age Survivors Disability Insurance- OASDI
#17. Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT a) Family health history. b) Alcohol and tobacco consumption. c) Recent surgeries. d) Other insurance coverages.
d.) Other insurance coverages Part 2 of the application contains questions regarding the applicants' health history. Part I of the application includes questions regarding current coverage being applied for as well as any other insurance coverage with the same or other insurers.
14.) A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father disabled, what will happen to the life insurance premiums? a) The premiums will become tax deductible until the insured's 18th birthday. b) Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. c) The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums. d) The insured's premiums will be waived until she is 21.
d.) The insured's premiums will be waived until she is 21. If the payor (usually a parent or guardian) becomes disabled for at least 6 months or dies, the insurer will waive the premiums until the minor reaches a certain age, such as 21.