Life Insurance-Basics

Regarding the taxation of Business Overhead policies,

Premiums are deductible, and benefits are taxed

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 true of key person insurance EXCEPT

The plan is funded by permanent insurance only

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium?

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

Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years?

A policy summary

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

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

Vanishing premium information

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 interpreted as if the insurer waived its right to have an answer on the application

What does "liquidity" refer to in a life insurance policy?

Cash values can be borrowed at any time

All of the following are requirements for life insurance illustrations EXCEPT

The must be part of the contract

What is the purpose of the buyer's guide?

To allow the consumer to compare the costs of different policies

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

A STOLI policy

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

Costs of training a replacement

Stranger originated life insurance policies are indirect opposition to the principle of

Insurable interest

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 a risk classification used by underwriters for life insurance?

Standard

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant

with the policy

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

Business continuation plan

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

To create an estate

Which if the following is NOT a type of Temporary Insuring Agreement?

Bridge Coverage Receipt

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

Which of the following premium modes would result in the highest annual cost for an insurance policy?

Monthly

Which of the following types of risk will result in the highest premium?

Substandard risk

All of the following are personal uses of life insurance EXCEPT

Buy-sell agreement

The mode of premium payment

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

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

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

needs approach

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

Liquidation

Which of the following best describes a non-medical application?

The medical portion of an application that asks for medical information but does not require a medical exam

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

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

Which of the following statements concerning buy-sell agreement is true?

Buy-sell agreements are normally funded with a life insurance policy

If an agent fails to obtain an applicants signature on the insurance application, the agent must?

Return the application to the applicant for a signature

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

Premiums are not tax deductible as a business expense

Which of the following would provide an underwriter with information concerning an applicants health history?

The Medical Information Bureau

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

Whole Life

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

To help the insured understand all aspects of the contract

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

Vacation travel expenses