Chapter 7 Policy Issuance and Delivery Exam

Mailing a newly issued policy to an agent, who in turn will deliver it to the policyowner, is known as A) constructive delivery. B) binding receipt. C) backdating. D) interim coverage.

A

If a life insurance applicant is given a binding receipt, when does his or her coverage become effective? A) Date the policy is delivered. B) Date the applicant proves to be insurable. C) Date the policy is issued. D) Date the receipt is given.

D

Products that are exempt from replacement regulations include group and credit life insurance, replacement annuities, and most life policies issued in connection with a benefit plan qualifying for a tax-deductible premium.

z

When is a conditional receipt normally given to an applicant? A) At policy delivery. B) When the initial premium is paid. C) When coverage first becomes available. D) At the initial meeting.

B

Who must notify an insurer that its policy is in danger of being replaced? A) Agent. B) Insured. C) Broker. D) Replacing insurer.

D

Which of the following people must sign the Notice Regarding Replacement? A) Applicant and existing insurer. B) Producer and replacing insurer. C) Existing insurer and replacing insurer. D) Applicant and producer.

D

Except for direct response insurers, companies must deliver a Buyer's Guide to all prospective buyers: A) before the agent commences a sales presentation. B) before the signing of the application. C) at the time of policy delivery. D) before accepting an initial premium or premium deposit.

D Insurance companies must present the Buyer's Guide before accepting the applicant's initial premium or premium deposit. Direct response insurers must deliver the Buyer's Guide with or before the delivery of the policy.

All of the following are duties of the replacing producer when replacement is involved EXCEPT: A) providing sales proposals for the applicant. B) submitting copies of the sales proposals to the existing insurer. C) providing the applicant a signed copy of the comparative information form. D) providing the applicant with a Notice Regarding Replacement of Life Insurance.

B Don't have to submit the sales proposals to the existing insurer

Which of the following is the term that describes any attempt by an existing insurer to dissuade a policyowner from replacing existing life insurance? A) Policy warning. B) Existing disclosure. C) Conservation. D) Replacement.

C

Which of the following statements regarding the "Notice Regarding Replacement of Life Insurance" is CORRECT? A) It is presented to the applicant only on request. B) It must be presented to the applicant after the policy is issued. C) A copy of the notice must be signed by the applicant and submitted with the application. D) A copy of the notice must be reviewed and signed by the policy beneficiary.

C

Which of the following statements regarding the "Notice Regarding Replacement of Life Insurance" is CORRECT? A) It must be presented to all applicants, whether or not a policy is being replaced. B) It must be presented to the applicant no later than upon policy application. C) It need not be given to the applicant in the case of a direct response sale. D) It is not required if the face amount of the policy being replaced is less than $5,000.

B

Sam applied for a term life insurance policy, paid the initial premium, and received a conditional receipt on December 1. If the insurer issued the policy on January 1 and the agent delivered the policy on January 3, the policy effective date will be: A) January 3. B) when the policy is delivered and a statement of continued good health is obtained. C) December 1. D) January 1.

C

With regard to replacement, insurers require all of the following EXCEPT: A) a statement, signed by the applicant, reporting whether or not the transaction will involve replacement. B) a policy summary or ledger statement containing policy data, provided by the existing insurer. C) a statement, signed by the existing insurer, allowing the replacement. D) a statement, signed by the agent, certifying that he knows that replacement may be involved.

C

James signed an application for a $50,000 life insurance policy and paid the first premium on October 1. The agent issued an insurability receipt. A week later, James took the required medical examination and was found to be insurable. If he dies before the insurer approves the application: A) no coverage will be provided but James' premium will be refunded. B) the coverage will be retroactively effective but the policy will only pay $25,000. C) the coverage will be retroactively effective. D) no coverage will be provided.

C If James pays the premium, receives an insurability receipt, and proves to be insurable, coverage will be effective retroactively. As a result, his beneficiary will receive the $50,000 death benefit.

All of the following statements regarding policy replacement are correct EXCEPT: A) replacement involves convincing a policyholder to lapse or terminate an existing policy and to purchase another. B) interrupting one cash value insurance plan to begin another could cause serious financial problems for the policy owner. C) even if the customer wants to replace his or her existing policy, an agent can effect a policy replacement only by following the replacement regulations in his or her state. D) premiums for replacement policies are generally lower than premiums for the existing policies they replace.

D It will probably be more expensive because it will be at their new attained age.

When replacement is involved, each agent must: A) submit to the existing insurer a statement signed by the applicant as to whether replacement is involved. B) provide the applicant with a Notice Regarding Replacement of Life Insurance. C) notify the existing insurer of the replacement. D) provide the existing insurer with a Notice Regarding Replacement of Life Insurance.

B An agent involved in a replacement transaction must submit to the replacing insurer a statement signed by the applicant regarding any existing life insurance. This statement usually is part of the insurance application. Both the applicant and agent must sign a Notice Regarding Replacement of Life Insurance. The agent must submit a copy of the notice and all sales materials used to the replacing insurer and must also give the applicant copies of the sales materials used.

In situations where the sale of a life insurance policy will result in the replacement of an existing policy, the replacing agent is responsible for all the following activities EXCEPT: A) submitting to the insurer with the application copies of any proposal, sales illustration, and related sales material. B) notifying the existing policy's agent that a replacement is about to occur. C) submitting with the application a list of all policies to be replaced. D) obtaining the applicant's signature on the Notice Regarding Replacement of Life Insurance.

B It is the responsibility of the replacing insurer to directly notify the existing insurer that a replacement may occur.

When replacing a policy, insurers require all of the following EXCEPT: A) the applicant's signed statement as to whether the transaction will involve replacement. B) a list of the applicant's existing life insurance policies to be replaced. C) the agent's signed statement certifying that he or she knows that replacement may be involved. D) the existing insurer's signed statement allowing the replacement.

D When replacement occurs, the existing insurer must provide the policyowner with a policy summary for the existing life insurance within ten days of receiving the written communication advising of the proposed replacement and the replacement notice.

If a premium payment has not been given with the application, the policy becomes effective only when the producer delivers the policy and: A) explains its provisions and leaves a receipt for policy delivery. B) explains its provisions and provides a conditional receipt. C) obtains a signed application and statement of continued good health. D) explains its provisions and obtains the initial premium and a signed statement of continued good health.

D

Which of the following statements pertaining to a temporary insurance agreement is CORRECT? A) It provides protection against death by accident, but not death from natural causes. B) It provides temporary coverage until an application is rejected or the policy is issued. C) It provides term insurance protection until the policy is converted to permanent insurance. D) Coverage begins when the application is signed and the premium is paid, assuming any required medical exam is scheduled within 3 days.

B A temporary insurance agreement is just that: temporary coverage until an application is rejected or the policy is issued.

Of the following, which is a situation that could result in the conditional receipt becoming void? A) The applicant dies after the policy is issued. B) The applicant is found to be a substandard risk. C) The applicant dies before the policy is issued. D) The applicant's policy is issued as applied for.

B

All of the following are duties of the agent regarding replacement EXCEPT: A) presenting to the applicant a Notice Regarding Replacement. B) obtaining a list of all existing life insurance. C) advising the existing insurer of the replacement. D) signing the Notice Regarding Replacement and submitting it to the insurer.

C It is the insurer's responsibility, not the agent's or the applicant's, to inform the existing insurer that its policy is being replaced.

Which of the following must a producer do when a new life insurance policy is sold? A) Send the insurer a statement, signed by the applicant, disclosing whether or not the new insurance will replace existing insurance. B) Provide the existing insurer with the "Notice Regarding Replacement". C) Provide a list of guaranteed dividends. D) Give the applicant a copy of the producer's certificate.

A

Susan applied for life insurance on November 1, but did not submit a premium payment with the application. She underwent a physical examination on November 10, which she passed, and the results of that exam were forwarded to the insurance company. The policy was issued by the company on November 15, and the agent delivered the policy to Susan on November 17, at which time she paid the first premium. When did Susan's coverage become effective? A) November 1. B) November 17. C) November 10. D) November 15.

B In situations where the applicant does not submit a premium with the application, the issuance of the policy (if he or she is found to be insurable) and its delivery to the applicant constitute the contractual offer. The applicant accepts the company's offer when the first premium is paid, and it is on that date that the contract becomes effective.

When replacement is involved in a transaction, producers MUST do which of the following? A) Send the existing insurer a notice regarding replacement, signed by the applicant. B) Send the existing insurer a list of insurance to be replaced. C) Leave with the applicant a notice regarding replacement and copies of all sales material prepared by the agent. D) Leave with the applicant a comparison between the guaranteed dividends for the old and the new policies.

C A producer involved in a replacement transaction must leave with the applicant a notice regarding replacement and all of the sales material used in the presentation. In addition, the producer is responsible for obtaining a list of all existing insurance. He or she also must send a copy of the signed replacement notice and the list of existing insurance to the replacing insurer. It is the replacing insurer's responsibility, not the producer's, to send the list of insurance and a policy summary of the new policy to the existing insurer.

Which of the following must a producer present to an applicant at the time of application when a life insurance policy is to be replaced? A) Insurer's Statement of Warranty. B) Report of the Department of Insurance. C) Important Notice Regarding Replacement of Life Insurance. D) Notice Concerning Alternatives.

C

When replacing one life insurance policy with another, an agent must: A) send the sales proposals used in the sale to the existing insurer instead of leaving them with the applicant. B) leave with the applicant a copy of a Dun & Bradstreet report that compares the relative financial condition of the replacing and existing insurers. C) leave with the applicant a copy of all sales proposals used in presenting and closing the sale. D) give notice to the agent who sold the policy being replaced.

C When replacing a life insurance policy, an agent must obtain a list of all life insurance to be replaced, give the applicant and the replacing insurer a copy of the "Notice of Replacement" signed by the applicant and the agent, leave a copy of all sales proposals used with the applicant, and send to the replacing insurer a copy of the application and any sales proposals used in the presentation.

Anna applied for a $2 million life insurance policy and paid the first premium but was later found to be uninsurable. The agent gave her a receipt that guarantees coverage until the insurer formally rejects her application. Which type of receipt did Anna receive? A) Insurability. B) Approval. C) Binding. D) Conditional.

C With a binding receipt, coverage is guaranteed, even if Anna is later found to be uninsurable, until the insurer formally rejects the application. However, because the underwriting process can take several weeks, this can place the insurer at considerable risk. Accordingly, binding receipts are often reserved only for an insurer's most experienced agents.

Replacing insurers must do all of the following EXCEPT: A) inform their field representatives about replacement regulations. B) receive a list of the applicant's insurance policies that are to be replaced. C) send each existing insurer a written communication advising of the proposed replacement. D) receive a check for the difference in premium between the existing policy and the new policy.

D Replacing insurers must receive a list of the applicant's life insurance policies to be replaced, inform their field representative about replacement regulations, and send the existing insurer a written notice advising of the proposed replacement. The replacing insurer is not required to receive a check for the difference in premium between the existing policy and the new policy.