PA Life Insurance Exam help

Insurable interest does NOT occur in which of the following relationships?

Business owner and business client

Fraternal Benefit Society has each of the following characteristics EXCEPT

Exist for profit (FBS is a non profit entity, it is incorporated, without capital stock, and exists for the benefit of its members)

A spouse and child can be added to the primary insureds coverage as what kind of rider?

Family term

A business will typically use which type of life insurance to cover their employees?

Group Policy

A life insurance rider that allows an individual to purchase insurance as they grow older, regardless of insurability is called a(n)

Guaranteed insurability rider

A ______ is considered to be an event or condition that increases the probability of an insureds loss?

Hazard

The power given to an individual produce that is not specifically addressed in their contract is considered what type of authority?

Implied authority

Which of the following protects a policy owner from a misrepresentation caused by an innocent mistake?

Incontestable clause

Who is responsible for assembling the policy forms for insureds?

Insurance carriers

Which of the following is present when an applicant stands to lose value if the insured dies?

insurable interest

Ambiguities in an insurance policy are always resolved in favor of the

insured

According to the principle of utmost good faith, the insured will answer questions on the application to the best of their knowledge and pay the required premium, while the insurer will deal fairly with the insured and

it's promises made

A life insurance policy written on one contract for two people in which it is payable upon the first death is called

joint

How do insurers predict the increase of individual risks?

law of large numbers

A limited payment whole life policy provides

lifetime protection

A permanent life insurance policy where the policyowner pays premiums for a specified number of years is called a(n)

limited pay policy

A life insurance policy that has premiums fully paid up within a stated time period is called

limited payment insurance

An insurer's ability to make unpredictable payouts to policyowners is called

liquidity

A guaranteed issue insurance policy has no

medical underwriting

What kind of life insurance policy covers two or more people with the death benefit payable upon the last persons death?

Last Survivor Life insurance

The authority granted to a licensed producer is provided via the

Law of Agency

Insurance companies determine risk exposure by doing what?

Law of Large Numbers (safety/predictability in large groups) and risk pooling

Which of these is not considered to be a common life insurance nonforfeiture option?

Life income annuity

A type of insurer that is owned by its policyowners is called

Mutual insurer

What makes an insurance policy a unilateral contract?

Only the insurer is legally bound

The automatic premium loan provision authorizes an insurer to withdraw from a policy's cash value the amount of

Past due premiums that have not be paid by the end of the grace period

What is an insurer required to do when faced with an error made under the misstatement of age provision?

Pay age-corrected benefits

What is an insurance policy's grace period?

Period of time after the premium is due but the policy remains in force

A whole life policy option where extended term insurance is selected is called a(n)

nonforfeiture option

A nonparticipating policy will

not pay dividends

An interest-sensitive life insurance policyowner may be able to withdraw the policy's cash value interest free. The provision that allows this is called

partial surrender

What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus?

participating life insurance policy (A mutual insurer issues life insurance policies that provide a return of divisible surplus.)

A rider that assures premiums will be paid on a juvenile policy until the child reaches a specific age is called a(n)

payor rider

The cause of a loss is called a

peril

What is known as the immediate specific event causing loss and giving rise to risk?

peril

What is the automatic continuance of insurance coverage referred to as?

renewal

An endorsement found in an insurance plan which modifies the provisions of the policy is called a(n)

rider

Term insurance is appropriate for someone who

seeks temporary protection and lower premiums

In an insurance contract, the applicants consideration is the

statements made in the application and the premium

A nonparticipating company is sometimes called a

stock insurer

The type of policy which pays on the death of the last person is called

survivorship life

Which of the following policies does not build cash value?

term

What types of life insurance are normally used for key employee indemnification?

term, whole, and universal life insurance

If an insured dies during the grace period with no premiums paid

the policy would be payable, minus the premium amount

Insurance represents the process of risk

transference

A securities license is required for a life insurance producer to sell

variable life insurance

Shawn, Mike, and Dave are brothers who have a $100,000 "first to die" joint life policy covering all three of their lives. If Mike dies first, the policy proceeds

will no longer provide insurance protection

Loans obtained by a policyowner against the cash value of a life insurance policy

would not be treated as taxable income

Give an example of a consideration

A paid premium

Which of the following is not considered advertising? A.) a rating from a rating service company such as A.M. best B.) an illustration C.) A sales presentation D.)Direct mailing from an agency

A.) a rating from a rating service company such as A.M. best

All of the following are examples of pure risk except? A.) Losing money at a casino B.) Injured while playing football C.) Falling and breaking a hip D.) Jewelry stolen during home robbery

A.) losing money at a casino, this is speculative risk

Which of these is considered to be a living benefit option in a life insurance policy?

Accelerated death benefit

Of the following dividend options, which of these is taxable?

Accumulation at interest

A policy owner may change two policy features on what type of life insurance?

Adjustable Life

According to life insurance contract law, insurable interest exists

At the time of application

All of these statements concerning whole life insurance are false except

When a whole life policy is surrendered, income taxes may be owed

A Renewable Term Life insurance policy can be renewed

at a predetermined date or age, regardless of the insured's health

All of the following are elements of an insurance policy except

claim forms

A provision that allows a policy owner to temporarily give up ownership rights to secure a loan is called a(n)

collateral assignment

In an insurance contract, the element that shows each party is giving something of value is called

consideration

In order for a contract to be valid, it must

contain an offer and acceptance, consideration, legal purpose, and competent parties

Which of these is not subject to income taxation under a modified endowment contract (MEC)?

death benefit

All of these are standard exclusions found in a life insurance policy EXCEPT

disability

Level premium permanent insurance accumulates a reserve that will eventually

equal the face amount of the policy

A life insurance policy normally contains a provision that restricts coverage in the event of death under all of the following situations except

fare-paying passenger

Index whole life insurance contains a securities component that acts as a(n)

hedge against inflation

Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this?

$10,000 or up to one year in jail

What contract element is insurable interest a component of - Competent parties - Offer and acceptance -Consideration - Legal Purpose

- Legal Purpose

Which policy feature makes a universal life policy different from a whole life policy?

A flexible premium schedule

Donald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider?

Can be converted to permanent coverage without evidence of insurability

Intentional withholding of material facts that would affect an insurance policy's validity is called

Concealment

Which type of clause describes the following statement: "We have issued the policy in consideration of the representations in your applications and payment of the first-term premium".

Consideration clause

Julie has a $100,000 30-year mortgage on her new home. What type of life insurance could she purchase that is designed to pay off the loan balance if she dies within the 30-year period?

Decreasing term insurance

A life insurance policy owner was injured in an automobile accident which results in a total and permanent disability. Which rider would pay a monthly amount because of this disability?

Disability income rider

An example of risk sharing would be

Doctors pooling their money to cover malpractice exposures

Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?

Endowment policy

Pete has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this?

Equity index whole life

A professional liability for which producers can be sued for mistakes of putting s policy into effect is called

Errors and omissions

Which of these describes the result of a modified endowment contract that failed to meet the seven-pay test?

Pre-death distributions are typically taxable

Under a Modified Endowment Contract, what are the likely tax consequences?

Pre-death distributions will become taxable

What is considered to be the primary reason for buying life insurance?

Provide death benefits

How are survivorship life insurance policies helpful in estate planning?

Provide funds to help pay taxes

An individual who removes the risk of losing money in the stock market by never purchasing stock is said to be engaging in

Risk avoidance

Which of the following are the premium payments for a universal life policy not used for

Separate account investments

An insurer's claim settlement practices are regulated by the

State insurance departments

The type of multiple protection coverage that pays on the death of the last person is called a(n)

Survivorship life policy

James is the insured on a life insurance policy where his age was misstated on the application. Which of the following is CORRECT regarding the death benefit amount?

The death benefit paid will be what the premium would have purchased at the correct age

What is a corridor in relation to a Universal Life insurance policy?

The gap between the total death benefit and the policy's cash value

Under a life insurance policy, what does the insuring clause state?

The insurer's obligation to pay a death benefit upon an approved death claim

Pat owns a 20-pay life policy with a paid-up dividend option. Which of the following statements is true?

The policy may be paid up early by using policy dividends

A life insurance policy that contains a guaranteed interest rate with the chance to earn a rate that is higher than the guaranteed rate is called

Universal Life

A life insurance policy that is subject to a contract interest rate is referred to as

Universal Life

Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy's face amount has become $600,000. Which type of life insurance policy is this?

Universal Life

Which type of policy combines the flexibility of a universal life policy with investment choices?

Variable universal life policy

Which type of life insurance offers flexible premiums, a flexible death benefit, and the choice of how the cash value will be invested?

Variable universal policy

Which of these would be the best example of a limited pay life insurance policy?

Whole life policy with premiums paid up after 20 years

A single premium cash value policy can be described as

a policy that is paid up after only one payment

All of these are common exclusions to a life insurance policy except

accidental death

People with higher loss exposure have the tendency to purchase insurance more often than those at average risk. This is called

adverse selection

The deeds and actions of a producer indicate what kind of authority?

apparent authority