L1 quiz

Which situations create insurable interest?

- an individual in his or her own life - a lender in the life of a borrower - a student on the life of the person providing financial support for college education Love, blood, or business relationships determine insurable interest

Applicant forms used for life insurance:

- express facts about the person applying - required to be submitted to begin process of acquiring life plan - represent request to insurer to provide insurance contract based on info contained in app

The applicant, policy owner and the insured of a life insurance policy may be

1. the same individual 2. three different individuals

Select incorrect choice about insurance app

Before insurer can issue policy, beneficiary must acknowledge any changes by providing his/her original initial

What is first step in personal financial planning process

Define objectives

When is insurable interest required to exist with life insurance policy?

at time policy written, but not at death

When one person applies for insurance policy on life of another the app must be signed by both the applicant and person whose life is to be insured. The insured's signature on app indicates that he/she

consents to issuance of insurance on his or her life that will be owned and controlled by someone else

Insurable interest in a life insurance policy

does not need to exist at the time of loss, only at the time policy is written

Is it true the measure of liability is the amount of insurable interest on the insured?

false

Which is not one of the common personal uses of life insurance

fund buy/sell agreement

The person whose life is covered by a life policy is the

insured

If individual dies and fails to leave a will, that person is said to have died

intestate

All are true of insurance except

it eliminates risk; it just manages risk and costs associated with it

which is true?

life insurance creates an immediate estate, annuities does not

Which is best definition of premium?

money the insured pays the insurer to obtain the benefits in the policy

A schedule illustrating possibilities of death each year for life insurance is called

mortality table

The only measure of liability is the amount

payable as provided in the policy; amount the insurer is obligated to pay out upon insured's death under life policy

Potential costs related with person's death

paying off a new car medical payments

A life insurance app is important for reasons, except

the beneficiary must sign the application before the insurer will issue the policy (beneficiary not a party to contract)

Insurance companies have an obligation to pay death benefits to

the beneficiary upon the death of the insured

Who is able to exercise the right of borrowing from cash value?

the policy owner

Loss retention is an effective risk management technique when all of following conditions exist, except

the probability of loss is unknown - losses are highly predictable - insured chooses to assume losses involved - worst possible loss is not serious

All are reasons for an individual to purchase personal life insurance, except

to cover a buy/sell agreement: these are used in business situations

What is the purpose of 'key person' insurance

to cover decreased business earnings due to death of key employee

The purchase of insurance policy by a consumer is the process of risk

transfer