chapter 6

Which of the following statements regarding developing a plan is (are) correct?I. Take the relevant information gathered from the fact finder and design a plan that reflects the prospect's needs, goals, and premium commitment.II. It is best to present only one solution because presenting more will confuse the prospect and probably make closing more difficult. (A) I only (B) II only (C) Both I and II (D) Neither I nor II

(A) I only

The major shortcoming of the net cost method of comparing life insurance policies is that (A) It does not consider interest and the value of when payments are made and received. (B) It represents the annual cost of $1000 of insurance if surrendered for its cash value. (C) It requires a computer to make the calculations. (D) It emphasizes buying term and investing the difference in tax-qualified plans.

(A) It does not consider interest and the value of when payments are made and received.

Which of the following statements is correct regarding policy illustrations? (A) They contain information regarding key values such as guaranteed premium, cash values and death benefits. (B) Company compliance departments and state regulators have instituted illustrations that are shorter and simpler than previously used with prospects/clients. (C) It is not necessary to show and explain the guarantees in a policy illustration. (D) Illustrations used by all companies should be similar because they all use the same assumptions regarding interest rate, mortality, and policy persistency.

(A) They contain information regarding key values such as guaranteed premium, cash values and death benefits.

Which of the following statements concerning methods for determining the cost of life insurance is correct? (A) The traditional net cost method uses the time value of money in its cost comparisons. (B) The surrender cost index takes into account premiums, dividends, and cash values. (C) The cost adjusted indices were developed by IMSA, the Insurance Marketplace Standards Association. (D) The net cost method is excellent for comparing policies.

(B) The surrender cost index takes into account premiums, dividends, and cash values.

Which of the following statements concerning the interest-adjusted indices is (are) correct?I. The surrender cost index represents the annual cost per $1000 of life insurance if a policy is surrendered for its cash value.II. The net payment index represents the annual cost per $1000 of life insurance and considers premiums paid, less dividends received, if any, but disregards cash value. (A) I only (B) II only (C) Both I and II (D) Neither I nor II

(C) Both I and II

Which of the following statements is (are) correct regarding life insurance illustrations?I. Illustration selling means using the numbers and values in the illustration to sell, rather than conducting a fundamental fact-finding process, discovering client needs.II. It is important to remember that an illustration is based on many assumptions that may or may not occur in the future. (A) I only (B) II only (C) Both I and II (D) Neither I nor II

(C) Both I and II

Which of the following best describes the best policy for your prospects? (A) the one with the highest rate of return (B) the one with the most flexibility (C) the one that best meets the needs of your prospect (D) the one with the most guarantees

(C) the one that best meets the needs of your prospect

Which of the following statements concerning the interest-adjusted indices is (are) correct?I. The net payment index is similar to the surrender cost index except it takes cash value at the end of the interval into consideration.II. The surrender cost index is useful in comparing costs when death benefit protection is emphasized. (A) I only (B) II only (C) Both I and II (D) Neither I nor II

(D) Neither I nor II

All of the following statements regarding the NAIC Insurance Illustrations Model Regulations are correct EXCEPT (A) Its purpose is to protect consumers and foster consumer education. (B) Its goals were to ensure that illustrations do not mislead consumers. (C) Its strategy was to clearly define what is guaranteed in the contract and what is not. (D) The Model regulation applies to all types of life insurance illustrations, regardless of size or type.

(D) The Model regulation applies to all types of life insurance illustrations, regardless of size or type.

The NAIC Model Illustration Regulation prohibits insurers and their advisors from all of the following activities EXCEPT (A) representing the policy as anything other than a life insurance policy (B) using or describing non-guaranteed elements in a manner that is misleading (C) using the term "vanish," "vanishing premium," or a similar term that implies the policy becomes paid up (D) using an illustration that is "self-supporting," having actuarial assumptions which expect it to be profitable and not require support

(D) using an illustration that is "self-supporting," having actuarial assumptions which expect it to be profitable and not require support