Arkansas Life- Insurance Basics
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 polciy premium?
It will likely be higher because the applicant is a substandard risk
An applicant who recieves a preferred risk classification qualifies for
Lower premiums than a person who receives a standard risk
Which part of an insurance application would contain information regarding the cause of death of teh applicant's deceased relatives?
Medical Information
Which of the following premium modes would result in the highest annual cost for an insurance policy?
Monthly
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 yeats until the insured's retirement.
A prospective insured receicves a conditional receipt but dies before the policy is issued. The insurer will
Pay the policy proceeds only of it would have issued the policy
Based on Human Life Value approach, which of the following is NOT used to calculate an individuals life value?
Predicted needs of the family after the insured's death
Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a
Premium receipt
An insurer wants to obtain information from investigators regarding an applicant for insurance. What must the insurer do in order to legally acquire this information?
Present the insured with a Disclosure Authorization Notice
If an agent fails to obtain the applicant's signature on the insurance application, the agent must
Return the application to the applicant for a signature
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT
Signed waver of premium
Which of the following is a risk classification used by underwriters for life insurance?
Standard
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
Survivor Protection
Which of the following would provide an underwriter with information concerning an applicant's health history?
The Medical Information Bureau
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT
The policy is owned by the company
All of the following statements concerning the use of life insurance as an Executive Bonus is correct EXCEPT
The policy is owned by the company
Which is generally true regarding insureds who have been classified as preferred risks?
Their premiums are lower
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
What is the purpose of key person insurance?
To lessen the risk of financial loss because of the death of a key employee
Which of the following would least likely be considered a legitimate need that would be paid by insurance peoceeds?
Vacation travel expenses
An agent & the applicant for a life insurance policy fill out & sign the application. However, the applicant does not wish to give the agent the initial premium, & no conditional receipt is issued. When will coverage begin?
When the agent delivers the policy, collects the initial preimum, and the applicant completes an acceptable Statement of Good Health
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
Which of the following is NOT an example of a business use of Life Insurance
Workers Compensation
Another name for a substandard risk classification is
rated
All of the following are ture of Key Person insurance EXCEPT
the plan is funded by permanent insurance only
What is the purpose of a conditional receipt?
It is intended to provide coverage on a date prior to the policy
If a life insurance agent wants to affect a savings of premium rates by backdating an application for life insurance, what is the maximum time period that an application may be backdated?
6 months
The mode of premium payment
Is defined as the frequency and the amount of the premium payment.
As a field underwriter, an agent is responsible for all of the following tasks EXCEPT
Issue the policy that is requested
When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by
A paramedic or examining physician at the insurer's expense.
When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information?
Application
Which of the following is the basic source of information used ny the company in the risk selection process?
Application
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 policy delivery date
When must isnurable interest exist in a life insurance policy
At the time of the application
In terms of Social Security, what is the interval spanning between the day when the youngest child of a family turns 16 and before the surviving spouse may receive retirement benefits?
Blackout Period
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
What does liquidity mean in a life insurance policy?
Cash values can be borrowed at any time
All of the following are duties and responsibilities of producers at the time of application EXCEPT
Change any incorrect statement on the application by personally initialing next to the corrected statemement
Which of the following best describes the MIB
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance.
A producer must do all of the following when delivering a new policy to the insured EXCEPT
Disclose comissions earned from the sale of the policy.
If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT
Erase the incorrect answer and record the correct answer
in an executive bonus plan, who is the owner of the policy, and who pays the premium?
Executive is the owner, and executive pays the premium
All of the following are business uses of life insurance EXCEPT
Funding against company's general financial loss
The Medical Information Bearu (MIB) was created to protect
Insurance companies from adverse selection by high risk persons
Who makes up the Medical Information Bureau?
Insurers