Life Insurance Basics

Life Insurance

Coverage on human lives.

Minor

A person under the legal age.

All of the following are characteristics of group life insurance EXCEPT

Premiums are determined by the age, sex, and occupation of each individual certificate holder.

An insurer wants to obtain information from investigators regarding an application for insurance. What must the insurer do in order to legally acquire this information?

Present the insured with a Disclosure Authorization Notice.

Illustrations

Presentation or depiction of nonguarenteed elements of a life insurance policy.

Estate

A persons net worth.

Beneficiary

A person who receives the benefits of an insurance policy.

Which of the following is the basic source of information used by the company in the risk selection process?

Application.

Death Benefit

The amount paid upon the death of the insured in a life insurance policy.

Are insurance company underwriters allowed to discriminate?

Yes, but not unfairly.

All of the following are personal uses of life insurance EXCEPT

Buy-sell agreement.

Which of the following is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced?

Cost comparison methods.

Cash Value

Equity amount accumulated in permanent life insurance.

In the 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 statements regarding HIV testing for life insurance purposes is NOT true?

Insurers are barred from requesting HIV testing.

What is the purpose of a conditional reciept?

It is intended to provide coverage on a date prior to the policy issue.

All of the following are factors that an underwriter could use to select and classify risk EXPECT

National origin.

Lump-sum

Payment of the entire benefit in one sum.

Liquidation

Selling assets in order to raise capital.

An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?

The date of the medical exam.

The responsibility of the making certain that an application for insurance is filled out completely, correctly, and to the best of his or her knowledge is the responsibility of whom?

The producer.

What is the purpose of the buyer's guide?

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

Another name for a substandard risk classification is

Rated.

An agent wants to include an illustration written by his insurance company. Which of the following best describes the conditions under which she may use the illustration?

The illustration must stay exactly as it is.

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.

An agent uses an insurer's illustration. He obtains proper approval and does not change the illustration in any way. The illustration involves projected amounts, and the agent stipulates that the amount would not be guaranteed. Which of the following is true?

The agent must stipulate that the illustration is not part of the contract.

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

Inspection Report.

Solvency

Ability to meet financial obligations (an insurance company maintains enough assets to pay claims)

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.

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

Human life value approach.

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

To create an estate.