Parte 3 LIFE INSURANCE class5 Producer Responsibilities

Which of the following statements about agent/producer responsibilities is correct?

Agents must always act ethically and professionally in all dealings with policyowners and future policyowners Because Agents must always act ethically and professionally in all dealings with policyowners and future policyowners.

All the following statements regarding life insurance cost comparison methods are correct EXCEPT: CORRECT: There are two common cost indexes in use today. Cost indexes are used to compare the cost of two or more life insurance policies. Cost indexes calculate the cost of pure insurance protection over a specified period of time.

All cost comparison methods recognize the role of the cash value in projecting future costs of coverage. Because The traditional net cost method does not recognize the important role of interest in the ultimate funding of a policy. For that reason, its use is diminishing today.

Anne, a life insurance applicant, wants to change an answer that she gave on the application. She should do which of the following?

Cross out and initial the incorrect entry, and enter the correct information next to it. Because If an applicant wants to change an answer on the application, then he or she should cross out and initial the incorrect entry and write the correct information next to it.

Key Point Replacement is not illegal. Convincing a prospective customer to replace an existing policy through any sort of misrepresentation is illegal.

Example Ben, age 32, met with his agent on July 1 to purchase a life insurance policy. His birthday is March 2. Had he applied for the policy prior to March 2, he would be one year younger, and his premium would be less than it will be today at age 32. The insurance company Ben is applying to allows policy applications to be backdated up to six months. Taking advantage of this, Ben's application is backdated to March 1. He must pay premiums from March 1 through July 1, but the premium will be less than if the application had been dated July 1.

For Your Review Because it accounts for the cash value and policy dividends, the interest-adjusted net cost method is more widely used today than the traditional net cost method. Policy replacement is not illegal as long as it is in the customer's best interest and no misrepresentations are made by the producer. If a life insurance or annuity transaction will include replacement, the producer or insurer has a duty to inform the applicant of the potential consequences of replacing the policy. The activities a producer performs when seeking applications for insurance are called field underwriting.

The application for insurance is the insurer's single most important source of information about the proposed insured. There are two common types of premium receipts: conditional and binding (or temporary insurance agreement). Every party to a life insurance policy must sign the application. Beneficiaries are not parties to the contract and do not sign the application. Producers may not, under any circumstances, change an entry made by the applicant on the application. Transactions involving the purchase of permanent ("cash value") life insurance were found to be an important target of money laundering activity.

Replacement occurs if a life insurance policy is purchased and, in conjunction, any of the following happen EXCEPT: HAPPEN: The existing policy is surrendered. The existing policy is amended with a reduction in benefits. The existing policy is converted to reduced paid-up insurance.

The existing policy's beneficiary designation is changed. Because As long as the existing policy remains fully intact, a replacement does not occur merely because the beneficiary designation is changed.

Which of the following statements regarding the practice of backdating a life insurance application is correct?

The policy premium is lower than it would be if the policy was issued with the actual date the application was signed. Because

Which of the following statements regarding life insurance policy cost comparison methods is correct?

There are two types, the traditional net cost method and the interest-adjusted net cost method, and the interest-adjusted net cost method is most commonly used today. Because it accounts for the cash value and policy dividends, the interest-adjusted net cost method is most commonly used today to compare permanent life policies.

All of the following statements about binding receipts are correct EXCEPT: CORRECT: If underwriters determine the applicant is uninsurable, then a binding receipt terminates coverage when that determination is made. A binding receipt guarantees coverage from the time the applicant completes the application through the underwriting process, even if the applicant is found to be uninsurable. An alternative to a binding receipt is the temporary insurance agreement.

Binding receipts are the most common type of premium receipt used with life insurance sales. Why is incorrect

Key Point A producer may never, under any circumstances, change an entry made by the applicant on the application. If the producer realizes an error has been made on an application, he or she must meet with the applicant to make and initial any changes.

Key Point A statement of continued good health is not required if the initial premium accompanied the application.

The activities a producer performs to support the insurance company in learning all it can about the applicant when seeking applications for insurance are generally called:

field underwriting Because Field underwriting is the general term used to describe the activities a producer performs to support the insurance company in learning all it can about the applicant during the application process.

When Tom, an agent for ABC Insurance, receives an approved policy, he MUST do all of the following, EXCEPT: MUST DO: review it to make sure that it is what the applicant applied for and expected verify that any applied-for benefit riders have been added verify that any requested backdating has been done

mail the policy to the applicant by certified mail and set up a time for the policyowner to meet with Tom to review it Because While Tom can simply mail the policy to the policyowner, it is recommended that policy delivery be made in person. If mailed, it is not necessary to send it by certified mail.

Which of the following statements regarding the replacement of a life insurance policy is correct?

replacing a policy will require the insured to go through a new contestability period Because All life insurance policies include a contestability period (usually two years) following their issuance, even if they are replacement policies.

In-person delivery of a whole life insurance policy gives the producer the opportunity to do all of the following, EXCEPT: TO DO ALL: explain policy benefits, terms, and riders explain that the free-look period begins at that moment, giving the policyowner ten days (in most states) to return the policy for a full premium refund get any required delivery forms, discuss any exclusions, and explain any substandard ratings

review coverage to determine if the policyowner wants to increase the policy's face amount Because

The insurance coverage provided under a temporary insurance agreement (or receipt) is:

term insurance Because