Life & Health 1

What do individuals use to transfer their risk of loss to a larger group?

Insurance

Which of the following policies would have an IRS required corridor or gap between the cash value & the death benefit? -Universal Life - Option A -Universal Life - Option B -Equity Indexed Universal Life -Variable Universal Life

Universal Life - Option A

What report includes information regarding a person's credit, character, reputation, & habits?

Consumer Report

All of the following are duties & responsibilities of producers at the time of application except? -Change any incorrect statement on the application by personally initialing next to the corrected statement. -Explain the nature & type of any receipt the producer is giving to the applicant. -Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. -Check to make sure there are no unanswered questions on the application.

Change any incorrect statement on the application by personally initialing next to the corrected statement.

Which of the following is a risk classification used by underwriters for life insurance? -Poor -Normal -Excellent -Standard

Standard

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to

charge a higher premium.

What is the purpose of the buyer's guide?

To allow the consumer to compare the costs of different policies.

An individual has just borrowed $10,000 from his bank on a 5 year installment loan requiring monthly payments. What type of life insurance policy would be best suited for this situation?

Decreasing term

Contracts that are prepared by one party & submitted to another party on a "take it or leave it" basis are classified as

contracts of adhesion.

When Y applied for insurance & paid the initial premium on Aug 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 standard. Y was killed in an automobile accident on Aug 22, before the policy was issued. In this case, the insurance company will

issue the policy anyway & pay the face value to the beneficiary.

All of the following information about the applicant is identified in the General Information section of a life insurance application except? -Gender. -Occupation. -Education. -Age.

Education.

If an insurer issued a policy based on the application that had unanswered questions, which of the following will be true? -The policy will be void. -The insurer may deny coverage later, because of the information missing on the application. -The application will be interpreted as if the insurer waived its right to have an answer on the application. -The policy will be interpreted as if the insured did not have an answer to the question.

The application will be interpreted as if the insurer waived its right to have an answer on the application.

An agent tries to sell insurance over the phone to an applicant who appears to be confused, but is eventually able to give enough information for the application to be competed. After the policy was issued, the agent talked to the insured's family, & they explained that the insured was recovering from a surgery & might have been under the influence of medication at the time of application. What could happen?

The policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application.

The full premium was submitted with the application for life insurance, & the policy was issued 2 weeks later as requested. When does the policy coverage become effective?

As off the application date.

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

Buyer's Guide

The insured is also the policy owner of a whole life policy. What age must the insured attain in order to receive the policy's face amount?

100

The term "illustration" in a life insurance policy refers to:

A presentation of non-guaranteed elements of a policy.

If a change needs to be made to the application for insurance, the agent may do all of the following except? -Erase the incorrect answer & record the correct answer. -Draw a line through the first answer, record the correct answer, & have the applicant initial the change. -Note on the application the reason for the change. -Destroy the application & complete a new one.

Erase the incorrect answer & record the correct answer.

Who makes up the Medical Information Bureau?

Insurers

What is the term for the fee a policy owner must pay to the insurance company to maintain coverage?

Premium

What would help prevent a universal life policy from lapsing?

Target premium

Why should the producer personally delivery the policy when the first premium has already been paid?

To help the insured understand all aspects of the contract.

An agent & the applicant for a life insurance policy fill out & sign the application. However, the applicant does not wish to give the agent the initial premium, & no conditional receipt is issued. When will coverage begin?

When the agent delivers the policy, collects the initial premium, & the applicant completes an acceptable Statement of Good Health.

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act?

$2,500

In the underwriting process, it was determined that the applicant for life insurance is in poor health & has some dangerous habits. Which of the following is true concerning the policy premium? -The applicant's habits & health do not affect the premiums. -It will likely be lower because the applicant is a preferred risk. -It will likely be higher because the applicant is a substandard risk. -It will likely be the average premium issued to standard risks.

It will likely be higher because the applicant is a substandard risk.

Insurance is the transfer of

risk.

Which Universal Life option has a gradually increasing cash value & a level death benefit?

Option A

Upon policy delivery, the producer may be required to obtain any of the following except? -Payment of premium. -Delivery receipt. -Signed waiver of premium. -Statement of good health.

Signed waiver of premium.

An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin 2 years after the annuity was purchased. What type of annuity is it?

Deferred

A producer agent must do all of the following except? -Disclose commissions earned from the sale of the policy. -Explain the policy provisions, riders, & exclusions. -Collect any premium due. -Explain the rating procedures if the policy is rated differently than applied for.

Disclose commissions earned from the sale of the policy.

What is the primary source of information used for insurance underwriting?

The Application

When is the earliest a policy may go into effect?

When the application is signed & a check is given to the agent.

Which of the following would be considered a non-medical insurance application? -An application submitted with the Agent's Report. -Any application for life insurance. -An application on which the medical information is completed by the applicant & the agent only. -An application that does not ask any questions about the applicant's medical history.

An application on which the medical information is completed by the applicant & the agent only.

Which of the following information about the applicant is not included on Part 1 of the application for insurance? -Occupation -Marital status -Medical background -Gender

Medical background

During partial withdrawal from a universal life policy, which portion will be taxed?

Interest

What is a definition of a unilateral contract?

One-sided; only one party makes an enforceable promise.

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. What insurance principle has the insured violated?

Consideration

An insurer received a report regarding a potential insured that includes the insured's financial status, hobbies, & habits. What type of report is that?

Inspection Report

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.

What describes the specific information about a policy?

Policy Summary

If an applicant for a life insurance policy & person to be insured by the policy are 2 different people, the underwriter would be concerned about:

Whether an insurable interest exists between the individuals.