Chapter: Life Insurance - Basics

When the partners of business develop an arrangement whereby should one of them die or become permanently disables, the other partners would purchase the interest of the deceased of disabled partner at predetermined price, this is called a/an

Business continuation plan

All of the following are personal uses of life insurance EXCEPT

Buy-sell agreement

Which of the following is a generic publication that explains life insurance in general terms in order to assist the applicant in the decision-making process?

Buyer's Guide

A corporation is the owner and the beneficiary of the key person life policy. If the corporation collects the policy benefit, then

The benefits is received tax free

All of the following are true of key person insurance EXCEPT

A plan is funded by permanent insurance only

The term "illustration" in life insurance policy refers to

A presentation of non-guaranteed elements of a policy

Partners in a business enter into buy-sell agreement to purchase life insurance, which states that should one of the die prematurely, the other would be financially able to buy the interest of the deceased partied. What type of insurance policy may be used to fund this agreement?

Any form of life insurance

Which of the following statements regarding Business Overhead Expense policies is NOT true?

Benefits are usually limited to six months.

Joe, Larry, and Curly own a small business. They have made a legal arrangement which states that if one of them dies or becomes disabled, the other two will be able to buy the partner's shares. Which term best describes this arrangement?

Business Continuation

A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability?

Business overhead expense policy

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" refer to in a life insurance policy?

Cash values can be borrowed at any time

A key persons insurance policy can pay for which of the following?

Costs of training a replacement

A producer agent must do all of the following when delivering a new policy to the insured EXCEPT

Disclose commissions earned from the sale of the policy

When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)

Executive bonus

In Executive Bonus Plan, who is the owner of the policy, and who pays the premium?

Executive is the owner, and the executive pays the premium

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirements, and inflation?

Human life value approach (HLVA)

Stranger-originated life insurance policies are in direst opposition to the principle of

Insurable intrest

Which of the following must be disclosed in all advertisements and policies of term life insurance for individuals 55 years of age or older?

Insurance monetary value index

What os the term used when a person sells his assets as a way to gain money?

Liquidation

If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following

Loss of the owner's income

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 years until the insured's retirement

Attempting to determine how much insurance a family would require based upon their financial objective is knowns as

Needs approach

What describes the specific information about a policy?

Policy summary

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?

Predicted needs of the family after the insured's death

Which of the following is correct concerning the taxation of premium in a key-person life insurance policy?

Premiums are not tax deductible as a business expense

In the event of a loss, business overhead insurance will pay for

Rent

Signing and dating a delivery receipt for a life insurance policy helps to establish all of the following timeframes EXCEPT

The Grace Period

Which of the following is an example of liquidity in a life insurance contract?

The cash value available to the policyowner

Which of the following would NOT fall into the category of costs associated with death?

The expense of vacation for surviving family members

The title page of the policy provides a summary of the benefits and coverages provided by the policy. All of the following information is included in the title page EXCEPT

The insured's beneficiaries

Which of the following is NOT required on an illustration used in the sale of a life insurance policy?

The name of primary and secondary beneficiaries

In regards to life insurance contracts, the temporary term is

The period of time during which a binding receipt covers a policyholder

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 are required for life insurance EXCEPT

They may be part of the contract

Which of the following is the best reason to purchase life insurance rather than annuities?

To create an estate

What is the purpose of a disclosure statement in life insurance policies?

To explain features and benefits of a proposed policy to the consumer

Which of the following CANNOT be included along illustrations used to sell life insurance?

Vanishing premium information

Which of the following would be least likely to be considered a legitimate need that would be paid by insurance proceeds?

vacation travel expenses

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 application date

The mode of premium payment

Is defined as the frequency and the amount of the premium payment

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issues. In this case, the insurance company will

Issue the policy anyway and pay the face value to the beneficiary

Which of the following will be included in a policy summary?

Premium amounts and surrender values

which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives?

Medical Information

Which of the following information about the applicant is NOT included in the General Information section of the application for insurance?

Medical background