Contract Law

In underwriting health and disability insurance, two major considerations that have the potential to affect the proposed insureds probability of experiencing a loss are what?

Probability of disability and average severity of disability

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicants what?

Ancestry

What do modified life and straight life policies have in common?

Accumulation of cash value

During the grace period, the policyowner can what?

Pay a late premium without penalty

What would be considered a non medical insurance application?

An application on which all of the questions, including medical history questions, do not need to be completed by medical professionals, and may be completed by the applicant and the agent

According to the Code, how many separate requirements should an insurance policy have?

6

A contract between an insured and an insurance company which agrees to pay the insured for loss caused by specific events is called what?

A policy

The term illustration in a life insurance policy refers to what?

A presentation of no guaranteed elements of a policy

Which of the following would describe a legal document which would dictate who can buy a deceased partners share of a business and for what amount?

Business Continuation agreement or Buy-Sell agreement

How is the premium in an insurance policy determined?

By multiplying the rate by the number of units of insurance purchased.

What does liquidity refer to in a life insurance policy?

Cash values can be borrowed at any time

What term best describes the act of withholding material information that would be crucial to an underwriting decision?

Concealment

What does Key Person insurance pay for?

Costs of running the business and replacing the employee

What is TRUE about credit life insurance?

Creditor is the policyowner

A life insurance policy has a legal purpose if both of which of the following elements exist?

Insurable interest and consent

What piece of information is NOT available on the title page?

Primary beneficiary

Who is the owner and who is the beneficiary on a Key Person Life insurance policy?

The employer is the owner AND beneficiary

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible?

The insured would need a written consent of the insurer

Which of the following does NOT need to be identified in an insurance policy?

The insurers financial rating

All of the following are true of key person insurance EXCEPT what?

The plan is funded by permanent insurance only

What is TRUE about an indeterminate premium whole life policy?

The premium can be raised up to a guaranteed maximum rate

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

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

What is a wrongful act or the violation of someone's right that leads to legal liability called?

Tort

In insurance policies, the insurer is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?

Unilateral

Kaylas husband died in a plane crash. She needs a new source of funding that will help put her child through daycare. What would be the best source?

Life insurance proceeds

What is NOT a feature of Indexed Universal Life?

Requirement of securities license to sell product

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT what?

The policy is owned by the employee

Which of the following types of insurance policies would perform the function of cash accumulation?

Whole life

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

Consideration

Which of the following is NOT true regarding the Needs Approach method of determining a value of an individual's life?

Need is predicted using the number of years until the insureds retirement

Attempting to determine ho much insurance an individual would require based upon their financial objectives is known as what?

Needs approach

The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?

Conditional

Since an insurance policy is a contract between the insurer and the insured, it must conform to the state laws governing contract which require all of the following elements except what?

Conditions- it's part of the policy structure

Every expressed warranty made at or before the execution of a policy must be what?

Contained in and referred to in the policy or other document and signed by the insured.

What is Family Income policy?

It combines decreasing term insurance with whole life insurance to provide the insureds family with a monthly income upon the death of he insured, while maintaining permanent coverage until the end of the income payments.

What must an agent receive in order to sell variable life insurance policies?

FINRA registration

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 is the purpose of a conditional receipt?

It is intended to provide coverage on a date earlier than the date of the issuance of the policy

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?

Standard risk is representative of the majority of people

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of what?

Stranger-originated life insurance (STOLI)

Define adjustable life policies

They allow for increases or decreases in the face amount or premium so long as the premium is sufficient to pay for the mortality, changing the premium paying period, or changing the period of protection. Any increase in face amount requires proof of insurability

All of the following are true except what?

They may be altered or withdrawn after the issuance of the policy

The least expensive first year premium payment is found in which term insurance?

Annually Renewable Term

Who has the right to convert the existing term coverage to permanent insurance?

Policy owner

What is included in a policy summary?

Premium amounts and surrender values

An intentional or unintentional concealment entitles the affected party to what?

Rescission of a contract

Upon policy delivery, the producer may be required to obtain any of he following EXCEPT what?

Signed waiver of premium

What is a risk classification used by underwriters for life insurance?

Standard

What is the purpose of a buyers guide?

To allow the consumer to compare the costs of different policies

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

To create an estate