Xcel Basic Principles of Life and Health Insurance Chapter 1

Which title can a life insurance agent use when conducting business? Financial planner Financial consultant Investment advisor Broker

Broker Insurance producers may be agents, who represent a particular company, or brokers, who are not tied to any particular company and can represent many insurers' products.

An agent is required to provide which of the following to the applicant when they make a proposal of insurance Buyer's guide Policy summary Buyer's guide and policy summary Financial history and stock information of insurer

Buyer's guide and policy summary

Which of the following is an insurer established by a parent company for the purpose of insuring the parent company's loss exposure? Participating insurer Fraternal insurer Captive insurer Mutual insurer

Captive insurer An insurer established and owned by a parent firm for the purpose of insuring the parent firm's loss exposure is known as a captive insurer.

Which of the following is NOT a benefit of insurance?

Losses due to fraud are eliminated

A participating company is also referred to as which type of insurer?

Mutual insurer

Who is considered the owner of a mutual insurance company?

Policyholders

What is the role of insurance?

Provide a solution for economic uncertainty and loss

Commercial Insurers

Sells insurance for profit

2 groups of Commercial Insurers

Stock and Mutual Insurers

What is a participating life insurance policy? Agreement that allows two or more beneficiaries to share in the death benefit Contract that gives beneficiaries the right to participate in any dividends Contract that allows the policyowner to receive a share of surplus in the form of policy dividends Agreement that insures two or more lives

Contract that allows the policyowner to receive a share of surplus in the form of policy dividends

Mutual insurers pay dividends to participating policyowners if the insurer has which of the following? Divisible surplus Reciprocal Dividend Agreement Certificate of Authority Participating clause

Divisible surplus By issuing participating policies that pay policy dividends, mutual insurers allow their policyowners to share in any company earnings.

Which law requires fair and accurate reporting of information about consumers? Financial Services Modernization Act Fair Credit Reporting Act McCarran-Ferguson Act Unfair Trade Practices Act

Fair Credit Reporting Act

All of the following are systems that support the sale of insurance through agents and brokers EXCEPT 1.Career Agency System 2.Fraternal Benefit Society System 3.Personal Producing General Agency System 4.Independent Agency System

Fraternal Benefit Society System

Which of the following is NOT a commercial insurer? Industrial Company Fraternal Company Stock Company Mutual Company

Fraternal Company

What type of agent may represent a number of insurance companies under separate contractual agreements Career agent Captive agent Company agent Independent agent

Independent agent

Which entity has as one of its objectives preserving state regulation of insurance? American Council of Life Insurance National Association of Life Underwriters National Committee to Preserve the Republic National Association of Insurance Commissioners

National Association of Insurance Commissioners One of the objectives of the NAIC is to preserve state regulation of the insurance business.

John has an insurance policy that gives him the right to share in the insurer's surplus. What kind of policy is this?

Participating

Which of the following statements regarding types of insurers is NOT correct? 1. Reinsurers usually deal with group policyowners. 2. Mutual insurance companies are "owned" by their policyowners. 3.Stock insurance companies seek a profit for their shareholders. 4.Fraternal benefit societies must be nonprofit organizations.

Reinsurers usually deal with group policyowners. Reinsurers make arrangements with other insurance companies to transfer a portion of their risk to the reinsurer. The company transferring the risk is called the ceding company and the company assuming the risk is the reinsurer.

What is the purpose of insurance? To replace the uncertainty of risk with guarantees To replace guarantees with the certainty of risk To remove the possibility of loss To remove the predictability of loss

To replace the uncertainty of risk with guarantees

A life insurance company that shares its suplus earnings with its insureds is known as a participating company a fraternal organization an association an admitted company

a participating company

Explain the difference between what a general agent does as compared to a PPGA?

PPGA's primarily sell. General agents primarily recruit, train, and manage

Which of the following is a type of insurance where an insurer transfers loss exposures from policies written for its insureds? Treaty insurance Reinsurance Mutual insurance Captive insurance

Reinsurance Reinsurance is an arrangement by which an insurance company transfers a portion of a risk it has assumed to another insurer.

Companies that sell more than one type of insurance are

multi-line insurers Multi-line insurers sell more than just one type of insurance, For example, an insurance company that sells life, health, and annuities would be considered a multi-line insurer.

Dividends from a stock company are paid to stockholders, whereas in a mutual company dividends are

paid to the policyowners

The State Guaranty Association guarantees

a claim will be paid if an insurer becomes insolvent If an insurance company is unable to pay its claims, the state guaranty association will step in and pay the outstanding claims.

Which of the following statements is correct when comparing participating policies with non-participating policies? Premiums for participating policies are usually higher than for non-participating policies Dividends from participating policies are treated as taxable income, but dividends from non-participating policies are not The dividends on participating policies increase the value of the policyholder's stock, but non-participating dividends do not The guaranteed cash values in a participating policy are greater than in a non-participating policy

Premiums for participating policies are usually higher than for non-participating policies

Dividends from a stock company are paid to

Stockholders

The major difference between participating and nonparticipating policies is the interest assumption premium payment method settlement options presence of policy dividends

presence of policy dividends

1970 Fair Credit Reporting Act

requires the fair and accurate reporting of information about consumers. Insurers must inform applicants about any investigations being made and if the report is used to deny coverage or charge higher rates, the insurer must provide the applicant the name of the credit reporting agency conducting the investigation.

Participating insurers allow their policyowners to share in any company earnings and receive a dividend receive preferred premium rates determine what type of insurance programs are offered skip premium payments without penalty

share in any company earnings and receive a dividend

All of the following methods support the sale of insurance through agents EXCEPT Independent agency Personal producing general agency Career agency Direct selling

Direct selling Direct selling systems allow insurance companies to deal directly with clients through vending machines, advertisements, or salaried sales reps. No agents or brokers are involved.

Which of the following is a contract that involves one party which indemnifies another when a loss arises from an unknown event? Insurance contract Indemnification arrangement Loss contract Warranty arrangement

Insurance contract An insurance contract is when one party promises to indemnify another against loss that arises from an unknown event.

All the following types of insurance companies may be approved to operate in nearly all states EXCEPT Fraternal insurance companies Mutual insurance companies Lloyds of London Stock insurance companies

Lloyds of London Contrary to popular belief, Lloyd's of London is not an insurer but rather an association of individuals and companies that individually underwrite insurance. Lloyd's can be compared to the New York Stock Exchange, which provides the arena and facilities for buying and selling public stock.

Nonparticipating insurers do not allow their policyowners to receive the following cash advances dividends preferred premium rates stock options

dividends

Stock Companies

incorporated companies owned by stockholders