Policy Replacement - Section 7 - Quiz

In the life insurance industry, the _____________ is the standard life insurance policy:

There is no standard life policies

Whose signatures is required on the application?

Applicant and the agent (Hint: The applicant and the agent must sign the application. If the applicant, policyowner are insured are different they all must sign including the agent)

An agent must submit all of the following to the insurer, except:

A copy of all printed communications used for the presentation (Hint: The insured does not need a copy of the presentation materials)

Which of the following concerning life settlements is incorrect?

A life settlement broker is a person who for a fee negotiates the purchase of a life policy between the policyowner and the buyer (Hint: A life settlement broker represents the policyowner who is the seller of the policy, not the purchaser)

Of the following, which is not required to be in insurance product illustrations?

A statement that the benefits in the illustration are guaranteed (Hint: The illustration must state the benefits that are not guaranteed)

A temporary insurance agreement is another term for a _____________.

Binding Receipt (Hint: A temporary insurance agreement is another term for binding receipt)

The premium for a variable annuity may be invested in any of the following during the free look period, except:

Balance funds (Hint: The exception is balance funds. The premium for a variable annuity may only be invested in fixed-income investments and money-market funds during the 30-day cancellation or free look period, unless the investor specifically request that the premium be invested in the mutual funds underlying the variable annuity contract)

All of the following relationships normally indicate the presence of insurance interest except:

Bank insuring the life of a customer in the amount of his savings account balance (Hint: The lender has an insurable interest in a borrower not a saver)

With regards to life insurance, insurable interest is not a requirement for a ____________________

Beneficiary (Hint: Insurable interest is not a requirement for a beneficiary, as they are just the ones who receive the proceeds in the even that the insured dies. Since the beneficiary isn't the one being insured, he/she does not have to show insurable interest for the policy to be purchased)

What must be received by the proposed insured no later than policy delivery?

Buyers guide and policy summary (Hint: C A buyer guide is a consumer publication that describes the policy being offered, and provides general information to help an applicant compare different policies and the policy summary shows the benefit to premium for the first 20 years and disclaimers)

All of the following are true statements except:

Clients under the age of 60 have at least 10 days for a free look on term conversions (Hint: This rule does not apply to term conversions or credit life policies)

All of the following items would appear on the first page of a life policy except:

Cost of insurance (Hint: Cost of insurance is not a requirement but the annual premium is. Cost of insurance is just one part of the total premium payment)

Which of the following would not be considered a replacement?

Customer cancelled a policy 3 months ago and now decides he wants a new policy (Hint: The purchase of a new individual life insurance or a new annuity contract which results in another policy or contract with another insurance company be surrendered, forfeited, converted to another type of policy, lapse, terminated or have the benefits reduced is known as replacement)

The premium for a variable annuity may only be invested in all of the following during the free look period except:

Individual stocks and bonds from low risk companies (Hint: The premium for a variable annuity may only be invested in fixed-income investments and money-market funds during the 30-day cancellation or free look period unless the investor specifically request the premium be invested in the mutual funds underlying the variable annuity contract)

Which is correct about the "notice regarding replacement of Life Insurance" that agents are required to deliver to life insurance applicants?

It must be signed prior to taking an application (Hint: The notice of replacement form is to signed by the applicant and the agent prior to taking an application. The applicant keeps their copy and the agent submits a copy along with the application to the replacing insurer)

What is the name of the second part of a life insurance application?

Medical information (Hint: Part 2 of the application (Medical) will contain information about the applicant's medical history, present condition, and any medical visits or surgeries in the past few years. Other information might include a family medical history and the causes of death of family members)

All of the following would be contained on the first page of the policy except:

Name, age, gender, and SS# of the insured (Hint: The social security number would not be on the first page of a life policy)

Which of the following Life Policies is the Standard Life Policy for the life insurance industry?

There is no standard life policy

Who are parties to the life insurance contract?

Applicant and the insurer (Hint: The parties of a life insurance policy are the applicant and the insurance company. The beneficiary and the agent are not parties to the contract)

All of the following relationships present an example of insurable interest except:

Bank insuring the life of a customer in the amount of their savings account balance (Hint: This statement is FALSE. The life of a borrower can be insured for the loan balance but not for their checking or saving account balance)

Within the life insurance policy summary, all the following must be listed except:

Name of the insured and the beneficiaries (Hint: The policy summary must contain: premiums to be paid each year for the initial five-year policy period; cash values at the end of each year for the initial five-year policy period; dividends (if a participating policy) each year for the initial five-year period; and death benefit each year for the initial five-year period. In addition, the name and address of the insurance company must be listed, as well as the insurance policy's generic name)

Model state law of the NAIC requires that two interest adjusted cost indices must be illustrated within each life insurance policy issued:

Net payment index and surrender cost index (Hint: Model state law of the NAIC requires that two interest adjusted cost indices must be illustrated within each life insurance policy issued (1) net payments index and (2) surrender cost index)

The type of life insurance that does not require a medical exam and asks only very basic health-related questions on the application is called:

Non-medical issue (Hint: A non-medical issued insurance policy required no medical exam and only asks very basic health-related questions on the application. Usually this type of insurance is only available in low face amounts or issued to younger ages, to reduce the risk of adverse selection agains the company)

Which of the following is correct concerning a life insurance application:

Part 1 of the application contains questions concerning driving record, hobbies, and past and present life insurance (Hint: Part 1 contains general information, past and present life insurance, driving record, foreign travel and hobbies)

Identify that which constitutes the "entire contract" in a life insurance policy:

Policy, application, riders and any modifications (Hint: It provides that the policy itself and a copy of the application (Par I and Part II of app), if a copy is attached to the policy, riders, and any amendments legally constitute the entire contract between the parties)

An agent sells a life policy to a 60 year old client. Which of the following is true regarding a full refund?

Policyowner may return the policy within 1 day (Hint: The right of rescission for a full refund for a person 60 years of age or older must last for at least 30 days)

Prior to the signing of a life settlement contract by all parties the broker shall provide the policyowner and the insured the following disclosures in writing, except:

That the policyowner has 3 days to rescind the contract once the money is received for the sale of the policy (Hint: The policy has the right to rescind the life settlement contract within 30 days of the date it is executed by all parties and the policyowner has received all required disclosures or 15 days from receipt by the policyowner of the money whichever is sooner)

At the time of application, life settlement licensees are required to provide the following disclosures in writing that must be signed by the policyowner except:

That their consent to obtain their personal information needed to complete the transaction and it may be provided to the person who buys the policy or provides the funds for the original purchase. (Hint: The disclosure also states that the insured may be asked to renew their permission to share their personal information every two years)

The section of the life application that contains information about health of the applicant's relatives is:

The Medical Information section (Hint: This section contains information about relatives medical history and the cause of death for family members)

Any insurance company that violates the replacement laws may be fined:

The first fine is $10,000; thereafter the penalty is $30,000 to $300,000 (Hint: Any insurance company that violates these laws is liable for administrative penalties of $10,000 for the first offense and them between $30,000 to $300,000 each for the second or subsequent violations)

All of the following statements are true of replacement except:

The information and evidence must be retained for at least 24 months. (Hint: The information and evidence must be retained for no less than 3 years)

The interest adjusted cost method differs from the traditional net cost method of comparing the cost of life insurance in that the former takes into account:

The time value of money (Hint: The interest adjusted cost method also known as the surrender cost method takes into consideration if the premiums where invested and earned either 4 or 5% interest)

Which of the following describes a standard life policy?

There is no such thing as a standard life policy (Hint: Unlike fire and casualty policies, there are no standard life insurance policies)

The purpose of laws regarding the replacement of life and annuity contracts includes all of the following, except:

To protect the interests of life insurers and their agents (Hint: The main purpose of the replacement laws is to protect the consumer)