Chapter 2
Policyowner
The individual who has the ownership rights in a policy. The policyowner and insured are usually the same, but not necessarily. Any changes made to a policy must be approved by the policyowner in writing with his/her signature.
If after a policy has been issued and delivered, the insurer discovers unanswered questions on the application, what can the insurer legally do at this point? A Increase the policy's premium B Cancel the policy C Nothing, the insurer has waived its right to that information D Require the applicant/insured to answer the questions and re-underwrite the policy
C Nothing, the insurer has waived its right to that information
The burden of proof falls on the _________ to establish issued policies were in fact delivered to the applicant. A Insured B Policyowner C Insurer D Beneficiary
C Insurer
Martin is age 30 when he applies for life insurance. The underwriter classifies him the same as a person age 40 and his policy is issued with a premium for a person age 40. What substandard rating has been applied to Martin's policy? A Graded B Tabular C Rated-up Age D Flat
C Rated Up Age
In determining the proper amount of life insurance coverage for an insured, the ________ approach measures the projected future earnings and the value of the insured's services in the event of his or her premature death. A Needs Analysis B Capital Retention C Capital Liquidation D Human Life Value
Human Life Value
The income-earning ability lost to dependents by the insured's premature death is a way to evaluate an individual's insurance needs. This method is known as the: A Family Values Approach B Needs Analysis Approach C Human Life Value Approach D Future Earning Value Approach
Human Life Value Approach
Frieda wants coverage until she has paid back her business loan in 10 years. The ideal life insurance policy with the least expense would be: A Participating Permanent Life B Variable Universal Life C Universal Life D Decreasing Term Life
D Decreasing Term Life
In determining the proper amount of life insurance coverage for an insured, the ________ approach measures the projected future earnings and the value of the insured's services in the event of his or her premature death
Human Life Value
The income-earning ability lost to dependents by the insured's premature death is a way to evaluate an individual's insurance needs. This method is known as the: A Human Life Value Approach B Needs Analysis Approach C Family Values Approach D Future Earning Value Approach
Human Life Value Approach
A (an)_________ is used when the insured's age, medical history, or amount of coverage does not require a medical exam for underwriting purposes. A Agent's report B Nonmedical application C Short form D Inspection report
Nonmedical application
A (an)_________ is used when the insured's age, medical history, or amount of coverage does not require a medical exam for underwriting purposes. A Inspection report B Agent's report C Nonmedical application D Short form
Nonmedical application
Which of the following types of coverage is best used to protect the beneficiary, and to provide a living benefit for the policyowner? A Permanent B Nonparticipating C Term D Group
Permanent
When an individual qualifies for a lower premium or rate than standard risks, the insured is considered a: A Bad risk B Higher risk C Substandard risk D Preferred risk
Preferred risk
When an individual qualifies for a lower premium or rate than standard risks, the insured is considered a: A Substandard risk B Preferred risk C Higher risk D Bad risk
Preferred risk
The factors necessary for an insurer to calculate a Net Premium or are: A Rate of interest assumed and mortality rate B Mortality rate and expenses C Premiums paid plus interest earned D Expenses and rate of interest assumed
Rate of interest assumed and mortality rate
The burden of proof falls on the _________ to establish issued policies were in fact delivered to the applicant. A Insurer B Insured C Policyowner D Beneficiary
Insurer
A typical life insurance application contains how many parts? A 3 B 2 C 1 D 4
2
A typical life insurance application contains how many parts? A 4 B 3 C 2 D 1
2
Permanent
A life insurance policy that remains in force to age 100 or beyond. The premium is always higher than that on a term policy at issuance when the amount of coverage and underwriting factors are equal. This policy provides for living benefits for the policyowner or insured by way of its cash values. It also has many options available to the policyowner as will be described later in the text.
When an applicant completes the insurance application in its entirety and provides the producer with a premium check, what in effect has taken place? A The applicant is making an offer to the insurer B The applicant has given the producer the authority to negotiate the terms of the contract with the insurer C The applicant is accepting the producer's offer of coverage D The producer is making an offer of insurance to the applicant
A The applicant is making an offer to the insurer
Interest earned on premiums paid to an insurer helps to ________ the premiums charged. A Lower B Increase C Stabilize D Standardize
A Lower
Participating
A class of policy marketed by a mutually owned company. The word participating means a dividend may be paid to the policyowner when they are declared by the board of directors. The company is not required to issue only participating policies, but only participating policies will be eligible for dividends. Participating policy dividends are treated as a refund of premium for tax purposes initially. However, once all premiums have been recovered, any further dividends are taxable.
Buyer's Guide -
A generic brochure developed by the NAIC to assist prospective buyers of life insurance. Descriptions of all basic types of life insurance as well as comparative costs of each are included.
Which of the following signatures would not be considered valid on an application for insurance? A A guardian applicant B A minor insured C The policyowner D The licensed producer
A minor insured
Which of the following signatures would not be considered valid on an application for insurance? A The policyowner B A guardian applicant C A minor insured D The licensed producer
A minor insured
Applicant
A person making application for himself/herself or another to be insured under an insurance contract. The applicant may be the insured, the owner or both.
If a medical exam is required as part of the underwriting process, who normally conducts the exam? A A chiropractor B A physician or nurse C The producer D The producer's manager in the agency's office
A physician or nurse
If a medical exam is required as part of the underwriting process, who normally conducts the exam? A A chiropractor B A physician or nurse C The producer's manager in the agency's office D The producer
A physician or nurse
Variable
A policy introduced in the 1970s that uses separate account(s) for the cash value accumulation. The separate accounts are similar in nature to mutual funds, and a securities license and life license are required to sell this policy. The policyowner takes on the investment risk of the policy. The policy's overall death benefit can increase along with the cash values with positive investment performance coming from the separate accounts selected, however, there is no guarantee of return and down markets can cause significant loss of policy value.
Nonparticipating
A policy marketed by a stock insurer. A stock insurer is a company under the control of the stockholders who would receive a share of any profits in the form of a corporate dividend, as opposed to a policy dividend. Stock dividends are treated as ordinary income for tax purposes. A policyholder does not have to be a stockholder.
Third-Party Ownership
A policy owned by a person other than the insured.
To purchase the greatest amount of coverage, for the least amount of initial premium, a client would purchase which of the following? A A term policy B A participating policy C An ordinary life policy D A variable life policy
A term policy
To purchase the greatest amount of coverage, for the least amount of initial premium, a client would purchase which of the following? A A variable life policy B A participating policy C A term policy D An ordinary life policy
A term policy
Viatical Settlements
A terminally ill insured/owner selling his/her policy to a third party for less than the death benefit but more than the cash values in order to obtain funds when no other sources are readily available.
Pre-need plan
A type of coverage with a small face amount, typically purchased to pay the burial expenses of the insured.
Application
A written formal request by an applicant to an insurer requesting the insurer issue a policy based upon information contained in the application. It is the primary source of information used for underwriting purposes.
Cash accumulation
An amount of cash accessible to the policyowner from within permanent life insurance policies
The Attending Physician's Statement (APS) is completed by: A An applicant's physician to provide information about the applicant's medical history B A physician providing a required medical exam at the time of application C The Medical Information Bureau D The agent after the medical questions are answered by the applicant
An applicant's physician to provide information about the applicant's medical history
The Attending Physician's Statement (APS) is completed by: A The agent after the medical questions are answered by the applicant B An applicant's physician to provide information about the applicant's medical history C A physician providing a required medical exam at the time of application D The Medical Information Bureau
An applicant's physician to provide information about the applicant's medical history
Which of the following is used by an insurer to collect information from the applicant/insured for underwriting purposes? A An amendment B An application C A receipt D A rider
An application
Group
An insurance plan normally owned by an employer, creditor or association, under which coverage is provided for the employees, debtors or members. Group insurance generally provides protection for an employee's named beneficiary, typically their spouse if married. The coverage may be changed only in the Master policy. The coverage is normally written on a renewable term basis providing no cash value or living benefits as found in individual cash value policies. The amount of coverage can be limited to a fixed dollar amount such as $50,000 or a multiple of earnings, (for example, 2 times annual salary). Some group plans allow for the purchase of additional coverage which may be partially or fully underwritten. Upon retirement, group coverage can be converted to an individual permanent life insurance plan without having to prove insurability.
Which of these modes would result in the insured paying the least annual outlay for life insurance? Annual Semi-annual payroll deduction Monthly automatic bank draft Quarterly
Annual
Replacement
Any transaction in which a new life policy or annuity is to be purchased, and the producer knows, or should know, that existing contract(s) will be: Lapsed, forfeited, surrendered or terminated Reduced in value Amended with a reduction in benefit or term Reissued with a reduced cash value Subjected to borrowing
Ordinary Life Insurance
Any type of life insurance that is not group, industrial or government insurance. A large number of people are insured with an ordinary life policy making this the larger portion of the life insurance in force today.
The person offering him/herself or another person to be insured by the contract best defines the: A Insured B Applicant C Policyowner D Beneficiary
Applicant
Which underwriting source is primarily used when an application reveals conditions for which more medical information is required? A Attending Physician's Statement B Inspection Report C Agent's Report D Medical Information Bureau Report
Attending Physician's Statement
Which underwriting source is primarily used when an application reveals conditions for which more medical information is required? A Inspection Report B Medical Information Bureau Report C Agent's Report D Attending Physician's Statement
Attending Physician's Statement
Which of the following is used by an insurer to collect information from the applicant/insured for underwriting purposes? A A rider B An application C An amendment D A receipt
B An application
Which of the following personal uses of life insurance is specifically designed to provide benefits to the policyowner while the insured is still alive? A Estate creation B Cash accumulation C Charitable bequests D Estate conservation
B Cash accumulation
What is an insurer permitted to do if and when it discovers during the underwriting process that a proposed insured has AIDS? A The insurer can share information discovered during the underwriting process with the Center for Disease Control as well as state and local health authorities B Insurers may refuse to issue a policy to individuals based on positive HIV test results C Insurers can discriminate between individuals of the same class in underwriting for the risk of AIDS D Insurers can share the test results with the insured's immediate family members and any health professionals listed on the application
B Insurers may refuse to issue a policy to individuals based on positive HIV test results
Mortality cost ______ interest (investment earnings) = equals the pure rate. A Divided by B Minus C Plus D Multiplied by
B Minus
All of the following are true of the group life insurance classification, except: A Coverage may be changed only within the Master Contract held by the employer, creditor, or association B The coverage is usually written on a permanent basis providing a cash value as well as a death benefit C Upon separation of service from an employer plan, the employee has the right to convert to a permanent plan without evidence of insurability D The amount of coverage can be for a fixed amount or based on a multiple of earnings
B The coverage is usually written on a permanent basis providing a cash value as well as a death benefit
All of the following are factors that are taken into consideration when using the Human Life Value approach in determining the proper amount of life insurance coverage, except: A The insured's planned retirement age B The insured's educational background C The insured's annual income D An inflation assumption
B The insured's educational background
By properly naming the ________, life insurance proceeds will bypass the probate process. A Insured B Applicant C Policyowner D Beneficiary
Beneficiary
By properly naming the ________, life insurance proceeds will bypass the probate process. A Policyowner B Insured C Applicant D Beneficiary
Beneficiary
If a premium is collected with a life insurance application and coverage begins immediately for a specific length of time regardless of whether the applicant is ultimately approved by the insurer, the receipt given by the agent is called a(n): A Acceptance Receipt B Binding Receipt C Approval Receipt D Conditional Receipt
Binding Receipt
If a premium is collected with a life insurance application and coverage begins immediately for a specific length of time regardless of whether the applicant is ultimately approved by the insurer, the receipt given by the agent is called a(n): A Conditional Receipt B Acceptance Receipt C Approval Receipt D Binding Receipt
Binding Receipt
A generic brochure developed by the NAIC to provide consumers with descriptions of basic types of life insurance as well as the comparative costs of each is called the _______. A Sales Illustration B Consumer Information Kit C Policy Summary D Buyer's Guide
Buyer's Guide
How does life insurance reduce financial loss upon the insured's death? A By transferring the risk to the insurer B Through applicant risk retention strategies C By eliminating the risk D Through reinsurance risk techniques
By transferring the risk to the insurer
How does life insurance reduce financial loss upon the insured's death? A Through reinsurance risk techniques B By eliminating the risk C Through applicant risk retention strategies D By transferring the risk to the insurer
By transferring the risk to the insurer
Which of the following personal uses of life insurance is specifically designed to provide benefits to the policyowner while the insured is still alive? A Estate creation B Estate conservation C Cash accumulation D Charitable bequests
Cash accumulation
It is in the consumer's best interest for a producer to do which of the following if the consumer would like to obtain insurance coverage? A Collect the initial premium and a signed application B Collect the initial premium C Collect the initial premium and issue a signed receipt D Collect the initial premium and the signed application, and issue a signed receipt
Collect the initial premium and the signed application, and issue a signed receipt
The Producer's responsibilities include:
Completing a Notice Regarding Replacement which must be signed by the applicant and producer Obtain information regarding any existing policies, including the names of the existing insurers and policy numbers (this must be provided to the replacing insurer) Providing copies of the Notice Regarding Replacement and any sales proposals to the applicant and replacing insurer
If a home office underwriter obtains MIB codes inconsistent with information provided on the application, what is the underwriter required to do? A Conduct further investigation to obtain more information prior to making a decision B Automatically reject the application and order any premium paid refunded C Refer the case to the state Insurance Department for possible insurance fraud D Issue the policy at a higher premium due to the undisclosed higher risk
Conduct further investigation to obtain more information prior to making a decision
Which of the following best describes a Statement of Good Health? A It is the producer's authority to raise the rate if the insured does not appear to be in good health at the time of policy delivery B It is a sworn oral statement made by the insured at time of delivery which allows for coverage to come into effect C It is what comes along with the policy at the time of delivery confirming the underwriting class the insured falls into if the policy was issued standard or better D It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date
D It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date
Martin is age 30 when he applies for life insurance. The underwriter classifies him the same as a person age 40 and his policy is issued with a premium for a person age 40. What substandard rating has been applied to Martin's policy? A Tabular B Graded C Flat D Rated-up Age
D Rated-up Age
The person offering him/herself or another person to be insured by the contract best defines the: A Insured B Beneficiary C Policyowner D Applicant
D Applicant
Which of the following types of life insurance provides the largest portion of all coverage in force? A Variable B Industrial C Group D Ordinary
D Ordinary
All of the following are underwriting criteria taken into account by the insurer in the underwriting of individual life insurance cases, except: A Gender B Physical condition C Education level completed D Medical history
Education level completed
All of the following are underwriting criteria taken into account by the insurer in the underwriting of individual life insurance cases, except: A Physical condition B Education level completed C Medical history D Gender
Education level completed
Information from a third party collected by the insurance company in the application for insurance and during underwriting of the policy may be subject to the jurisdiction of the: Unfair Claims Practices Act Deceptive Trade Practices Act Fair Claims Reporting Act Fair Credit Reporting Act
Fair Credit reporting act
Insurance covering the liability of a producer or agency is called _______. A Errors and Omissions B Complaint Protection C Property and Casualty D Inadequacy and Negligence
Errors and Omissions
Insurance covering the liability of a producer or agency is called _______. A Inadequacy and Negligence B Complaint Protection C Errors and Omissions D Property and Casualty
Errors and Omissions
The date on which insurance coverage is no longer in effect is referred to as the _________ date. A Conversion B Policy C Renewal D Expiration
Expiration
When producer Pete delivers a policy, he should also do which of the following? A Collect any amounts due for postage and handling B Collect at least 3 referrals C Demand the balance of the annual premium D Explain the policy fully
Explain the policy fully
When producer Pete delivers a policy, he should also do which of the following? A Explain the policy fully B Collect any amounts due for postage and handling C Demand the balance of the annual premium D Collect at least 3 referrals
Explain the policy fully
The Do Not Call Registry and the Telemarketer Sales Rule were created by the _______. A Federal Trade Commission (FTC) B Securities and Exchange Commission (SEC) C Federal Insurance Office (FIO) D National Association of Insurance Commissioners (NAIC)
Federal Trade Commission (FTC)
The Do Not Call Registry and the Telemarketer Sales Rule were created by the _______. A Securities and Exchange Commission (SEC) B Federal Insurance Office (FIO) C Federal Trade Commission (FTC) D National Association of Insurance Commissioners (NAIC)
Federal Trade Commission (FTC)
Which of the following statements correctly describes the difference between gross premium and net premium? The net premium is the cost per $1,000 of insurance, the gross premium excludes insurance company expenses Gross premium is what the insured pays to the insurance company each month; Net premium is what the agent's commission is based on Gross premium is the total amount paid for the policy. Net premium does not include the insurance company's cost of doing business, such as paying claims and other expenses, or the interest the company earns on invested policy reserves Net premium is the total paid to the insurance company each month; Gross premium is described in terms of the number of dollars per $1000 a person pays for his/her insurance
Gross premium is the total amount
During the application process, a mistake is made by the applicant in answering one of the health questions and needs to be corrected. What is the best way to go about this? A Submit the application as is and see if the insurance company catches the mistake B Have the applicant initial the change or start over with a completely new application C The producer should simply make a note in the agent report section of the application describing the error and what the true response was supposed to be D The licensed producer has the applicant's implied authority to make any necessary changes to the application on the applicant's behalf
Have the applicant initial the change or start over with a completely new application
All of the following are characteristics of Term Insurance, except: A Will expire at an attained age or after a specified period of time B High premium outlay in the early years C Can be written separately or with other types of insurance as a rider D No cash or loan value
High premium outlay in the early years
All of the following are characteristics of Term Insurance, except: A Will expire at an attained age or after a specified period of time B High premium outlay in the early years C No cash or loan value D Can be written separately or with other types of insurance as a rider
High premium outlay in the early years
Ultimately it is up to the _______ to determine if the proposed insured is an acceptable risk. A Home office actuary B Insured's primary care physician C Field underwriter D Home office underwriter
Home office underwriter
Ultimately it is up to the _______ to determine if the proposed insured is an acceptable risk. A Home office underwriter B Insured's primary care physician C Field underwriter D Home office actuary
Home office underwriter
The Needs Analysis Approach always assumes the death of the insured to be:
Immediate
The Needs Analysis Approach always assumes the death of the insured to be: A Within 10 years of the assessment B Within 20 years of the assessment C Immediate D At age 100
Immediate
Liquidity
Immediate funds available upon death to pay creditors, taxes and final expenses as well as cash values available for policy loans, withdrawals, and full surrenders
The Medical Information Bureau (MIB) is formed by: A Medical professionals B Insurance companies C The Government D Employers
Insurance companies
The Medical Information Bureau (MIB) is formed by: A The Government B Medical professionals C Insurance companies D Employers
Insurance companies
Attained Age
Insured's age at any point in time typically used at renewal or conversion
Issue (Original) Age
Insured's age on the policy issue date
What is an insurer permitted to do if and when it discovers during the underwriting process that a proposed insured has AIDS? A The insurer can share information discovered during the underwriting process with the Center for Disease Control as well as state and local health authorities B Insurers can share the test results with the insured's immediate family members and any health professionals listed on the application C Insurers may refuse to issue a policy to individuals based on positive HIV test results D Insurers can discriminate between individuals of the same class in underwriting for the risk of AIDS
Insurers may refuse to issue a policy to individuals based on positive HIV test results
Which of the following would be considered a good result from an underwriter's action when an individual Life Insurance Policy is issued as applied for? A Application is rejected B Issued with exclusions or limitations C Issued rated-up D Issued standard
Issued standard
Which of the following would be considered a good result from an underwriter's action when an individual Life Insurance Policy is issued as applied for? A Issued standard B Issued with exclusions or limitations C Application is rejected D Issued rated-up
Issued standard
Which of the following best describes a Statement of Good Health? A It is a sworn oral statement made by the insured at time of delivery which allows for coverage to come into effect B It is the producer's authority to raise the rate if the insured does not appear to be in good health at the time of policy delivery C It is what comes along with the policy at the time of delivery confirming the underwriting class the insured falls into if the policy was issued standard or better D It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date
It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date
Estate creation
Life insurance proceeds paid in a lump sum provide financial assets to create an immediate estate the insured can pass on to survivors.
Interest earned on premiums paid to an insurer helps to ________ the premiums charged. A Increase B Lower C Standardize D Stabilize
Lower
Term
Lowest of initial premium outlay and designed for someone with a large insurance need but with limited cash flow. This coverage is often referred to as temporary, as it is usually written to cover a short time period. This policy does not build cash values and the benefit will either remain level, increase, or decrease depending on the type of policy. It is typically used to cover mortgages, short term obligations, or for younger couples with one or more children.
Mortality cost ______ interest (investment earnings) = equals the pure rate. A Divided by B Plus C Minus D Multiplied by
Minus
If after a policy has been issued and delivered, the insurer discovers unanswered questions on the application, what can the insurer legally do at this point? A Increase the policy's premium B Require the applicant/insured to answer the questions and re-underwrite the policy C Cancel the policy D Nothing, the insurer has waived its right to that information
Nothing, the insurer has waived its right to that information
If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a: A Cancellation of Service B Notice of Replacement C Notice of Conservation D Statement of Release
Notice of Replacement
Beneficiary
One or more "parties" named in the policy to receive the policy proceeds, or death benefits, if the insured dies while the contract is in force.
Which of the following types of life insurance provides the largest portion of all coverage in force? A Variable B Group C Industrial D Ordinary
Ordinary
Security
Peace of mind knowing that future insurability is not an issue, and benefits will be in place as long as the required premiums are paid.
Which of the following types of coverage is best used to protect the beneficiary, and to provide a living benefit for the policyowner? A Group B Permanent C Term D Nonparticipating
Permanent
Normally, when the insurer determines that the insured is an acceptable risk, the insurer will send the policy to the ____________. A Beneficiary B Policyowner C Producer D Insured
Producer
Advertising
Producers are governed under the rules and regulations (referred to as Unfair Trade Practices) with regard to what they can and cannot use or say when soliciting insurance.
Sales Presentation
Producers are required to provide all prospective buyers the following:
Privacy
Properly owned and named beneficiaries will allow for the payment of death benefits directly to the beneficiaries, bypassing the probate process.
Estate conservation
Provides money to pay any estate taxes or loans which must be satisfied upon the death of the estate owner, (the insured) preserving the insured's estate
Survivor protection
Providing funds for surviving spouses and dependents
Which of the following is not a factor in premium determination? A Expenses B Mortality C Reserves D Interest
Reserves
What should the producer do, if the insured is in the hospital with a heart condition pending surgery on the day the newly issued policy was to be delivered? A Return the policy to the insurer with a letter of explanation B Collect additional premium at the time of delivery to reflect the higher risk the insurer now faces C Hold onto the policy until the insured is discharged from the hospital and then deliver the policy D Deliver the policy to an immediate family member and collect any outstanding premium
Return the policy to the insurer with a letter of explanation
What should the producer do, if the insured is in the hospital with a heart condition pending surgery on the day the newly issued policy was to be delivered? A Return the policy to the insurer with a letter of explanation B Deliver the policy to an immediate family member and collect any outstanding premium C Hold onto the policy until the insured is discharged from the hospital and then deliver the policy D Collect additional premium at the time of delivery to reflect the higher risk the insurer now faces
Return the policy to the insurer with a letter of explanation
When the initial premium is not paid with the application, some insurers require that the producer or agent: A Send a transmittal notice verifying the date he/she received the premium B Issue a conditional receipt and collect additional funds to cover lost interest C Hold the policy for delivery until the insured pays the premium with cash D Hold the policy for delivery until the premium check clears the bank
Send a transmittal notice verifying the date he/she received the premium
Industrial (Home Service)
Synonymous with debit life insurance and makes up only about .03% of the life insurance today. These small policies, normally $250 to $1,000, were originally sold to pay funeral expenses.
Which of the following best describes producer field underwriting? A Interviewing the applicant's neighbors about the applicant's morals and character B Conducting blood pressure readings, taking the applicant's pulse, and drawing blood C Obtaining the applicant's medical records, conducting a credit history check, and logging in to the MIB D Taking the time to probe beyond the stated questions on the application based upon the applicant's responses
Taking the time to probe beyond the stated questions on the application based upon the applicant's responses
Which of the following best describes producer field underwriting? A Interviewing the applicant's neighbors about the applicant's morals and character B Obtaining the applicant's medical records, conducting a credit history check, and logging in to the MIB C Conducting blood pressure readings, taking the applicant's pulse, and drawing blood D Taking the time to probe beyond the stated questions on the application based upon the applicant's responses
Taking the time to probe beyond the stated questions on the application based upon the applicant's responses
Do Not Call Registry
The Federal Trade Commission amended the Telemarketing Sales Rule to give consumers a choice about whether they want to receive most telemarketing calls. It is prohibited under the Telephone Consumer Protection Act (TCPA) for most telemarketers or sellers to call a number listed on the National Do Not Call Registry. Companies must update their list at least once every 31 days.
Conservation -
The act of saving or keeping the existing policy and preventing it from being replaced
When an applicant completes the insurance application in its entirety and provides the producer with a premium check, what in effect has taken place? A The producer is making an offer of insurance to the applicant B The applicant has given the producer the authority to negotiate the terms of the contract with the insurer C The applicant is accepting the producer's offer of coverage D The applicant is making an offer to the insurer
The applicant is making an offer to the insurer
A life insurance applicant pays the initial premium at the time of application and receives a Conditional Receipt. If coverage is issued as applied for, when did coverage go into effect? A The day the check clears the bank B The date of the application or upon the completion of any required medical exam (whichever is later) C The date the policy was issued D The date the policy was delivered
The date of the application or upon the completion of any required medical exam (whichever is later)
Effective Date
The date when insurance coverage begins
Expiration Age
The date when which insurance coverage ends
Individual
The greatest difference between group and individual life insurance is the full latitude of ownership. Unlike group policies, individual policies may be of any classification or type of insurance. Individual life policies may also build or preserve an estate or provide a living benefit for the terminally ill. Unlike group insurance, which can end upon separation of service or the employer choosing to discontinue the plan, individually owned policies leave the decision of keeping the policy to the policyowner.
When an insurer accounts for the interest and mortality factors, then adds additional charges to meet all costs of a contract, it derives __________. A The gross premium B The dividends C The net premium D The policy reserves
The gross premium
When an insurer accounts for the interest and mortality factors, then adds additional charges to meet all costs of a contract, it derives __________. A The net premium B The gross premium C The dividends D The policy reserves
The gross premium
Which of the following is true? A The insured and the policyowner are always the same B Any changes to a policy must be approved by both the insured and policyowner in writing C The insured and the policyowner are usually the same, but not necessarily D The applicant, insured, and policyowner must approve any changes to a policy in writing
The insured and the policyowner are usually the same, but not necessarily
Which of the following is true? A The insured and the policyowner are usually the same, but not necessarily B The applicant, insured, and policyowner must approve any changes to a policy in writing C The insured and the policyowner are always the same D Any changes to a policy must be approved by both the insured and policyowner in writing
The insured and the policyowner are usually the same, but not necessarily
All of the following are factors that are taken into consideration when using the Human Life Value approach in determining the proper amount of life insurance coverage, except: A The insured's planned retirement age B An inflation assumption C The insured's annual income D The insured's educational background
The insured's educational background
Replacing Insurer
The insurer responsible for issuing the new policy
Existing Insurer
The insurer who issued the policy to be replaced
The process of calculating life insurance net premium requires consideration of all of the following, except: A The insured's age B The rate of interest assumed C The morbidity rates to be used D The insured's gender
The morbidity rates to be used
The process of calculating life insurance net premium requires consideration of all of the following, except: A The insured's gender B The morbidity rates to be used C The insured's age D The rate of interest assumed
The morbidity rates to be used
Fixed -
The policy has a fixed amount of coverage, benefits and premium. Without riders, future inflationary trends will cause the purchasing power of the policy's benefits to be reduced .
Exemption from creditor claims/probate
The policy's values are normally exempt from any creditor claims, unless the policy was assigned as collateral for a loan that still exists at the time of the insured's death.
Policy Summary
The premiums (current and guaranteed) to be paid along with current and guaranteed interest rates. The guaranteed and non-guaranteed cash value and projected dividends, if any. The summary is not required to show the time value of money. The surrender values and other guaranteed data pertaining to the policy that is being shown. The producer's name and address, along with the address of the insurance compan
In determining the proper amount of life insurance, the Needs Analysis Approach takes into consideration all of the following factors, except: A The projected future value of services provided by the insured B The paying off of personal debts, medical bills, and final expenses C The creation of college funds for surviving children D The payoff of any outstanding mortgage balance
The projected future value of services provided by the insured
In determining the proper amount of life insurance, the Needs Analysis Approach takes into consideration all of the following factors, except: A The projected future value of services provided by the insured B The paying off of personal debts, medical bills, and final expenses C The payoff of any outstanding mortgage balance D The creation of college funds for surviving children
The projected future value of services provided by the insured
Insurable Interest
The relationship that must exist between the applicant and insured, at the time of application and policy issuance, in order for the contract to be valid. An individual has an insurable interest in his or her own self. Insurable interest also exists if a financial or economic loss by the owner results in the event that the insured dies. Examples of insurable interest include a policy taken out on a family member, business partner, or debtor of the policyowner.
Charities
To help fund favorite charitable organizations upon the insured's death
What is the purpose of determining the proper amount of life insurance needed for a prospective client? A To assure affordability B To prevent both over and under insuring C To prevent under insuring D To prevent over insuring
To prevent both over and under insuring
What is the purpose of determining the proper amount of life insurance needed for a prospective client? A To prevent both over and under insuring B To prevent under insuring C To assure affordability D To prevent over insuring
To prevent both over and under insuring
When soliciting insurance, producers are governed by state rules and regulations under the title of ___________. A Rules of Fair Practice B Solicitation Rules C Fair Competition Rules D Unfair Trade Practices
Unfair Trade Practices
When soliciting insurance, producers are governed by state rules and regulations under the title of ___________. A Unfair Trade Practices B Fair Competition Rules C Solicitation Rules D Rules of Fair Practice
Unfair Trade Practices
Flexible
Universal and Variable Universal Life policies have given the policyowner more flexibility in terms of premiums, investment objectives and other policy benefits. These policies assist the insured during inflationary periods with the changing needs of the policyowner and insured.
The Replacing Insurer's responsibilities include:
Upon receiving proper notification with the new application, the replacing insurer must notify the existing insurer of the planned replacement Maintaining copies of the information regarding replacement for a specified period of time See the state insurance chapter for additional state-specific information regarding replacement.
A ___________ settlement is when a terminally ill insured sells his or her life insurance policy to a third party other than an insurance company, for an amount less than the policy's death benefit, but greater than its cash values. A Investor originated B Viatical C Stranger originated D Senior
Viatical
Which of the following is not true about life insurance applications? The application more fully identifies the insured The application is confidential communication between the agent and the insurer The application may contain all the information underwriting needs to approve the insured Applications for life insurance are typically divided into two parts: General Information and Health History
the application is confidential communication between the agent and the insurer