test prep 11

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as a) Contracts of adhesion. b) Unilateral contracts. c) Aleatory contracts. d) Binding contracts.

Contracts of adhesion. Insurance policies are written by the insurer and submitted to the insured on a take- it-or-leave-it basis. The insured does not have any input into the contract, but simply adheres to the contract.

What must contain a notice of the graded death benefit in a life insurance policy with graded death benefits? a) The policy underwriting explanation b) The policy's provisions section c) The policy's exclusions section d) The policy application

The policy application The policy application must contain a notice of the graded death benefit.

Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as a) Defamation. b) Coercion. c) Rebating. d) Misleading advertising.

Coercion. These are all considered to be Unfair Trade Practices, which are major violations that can lead to heavy penalties. Coercion, for example, is when the bank won't give you an auto loan unless you agree to buy auto insurance from them.

In Missouri, it is illegal to receive a commission from the sale of insurance UNLESS a) The payee holds a valid insurance producer license. b) The payor holds a valid insurance producer license. c) The insured gives written consent allowing the commission to be split. d) The payor and payee both hold valid insurance producer licenses.

The payee holds a valid insurance producer license. Insurers do not maintain producer licenses; however, they may only pay commissions to licensed producers.

What is the purpose of the buyer's guide? a) To allow the consumer to compare the costs of different policies b) To provide the name and address of the agent/producer issuing the policy c) To list all policy riders d) To provide information about the issued policy

To allow the consumer to compare the costs of different policies The buyer's guide provides generic information about life insurance policies and allows the consumer to compare the costs of different policies. The policy summary provides specific information about the issued policy, as well as the insurer's information.

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? a) Mutual b) Reciprocal c) Nonprofit service organization d) Stock

Mutual Funds not paid out after paying claims and other operating costs are returned to the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid.

Who can request changes in premium payments, face value, loans, and policy plans? a) Contingent beneficiary b) Beneficiary c) Producer d) Policyowner

Policyowner Mandatory provisions give these rights to the policyowner.

An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen? a) The insurer will pay a reduced death benefit to the beneficiary. b) The insurer will pay the death benefit minus one month's premium. c) The insurer will pay nothing because the employee has terminated his group insurance and hasn't started the individual one. d) The insurer will pay the full death benefit from the group policy to the beneficiary.

The insurer will pay the full death benefit from the group policy to the beneficiary. The employee usually has a period of 31 days after terminating from the group in order to exercise the conversion option. During this time, the employee is still covered under the original group policy.

Annually renewable term policies provide a level death benefit for a premium that a) Remains level. b) Fluctuates. c) Increases annually. d) Decreases annually.

Increases annually. Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.

A domestic insurer issuing variable contracts must establish one or more a) General accounts. b) Separate accounts. c) Liability accounts. d) Annuity accounts.

Separate accounts. Any domestic insurer issuing variable contracts must establish one or more separate accounts. The insurer must maintain in each separate account assets with a value at least equal to the reserves and other contract liabilities connected to the account.

A banker is ready to close on a customer's loan. The bank is prepared to offer the loan but only if the customer purchases a life insurance policy from the bank in the amount of the loan. This is an example of a) Defamation. b) Twisting. c) Coercion. d) Loading.

Coercion. This is an example of the illegal practice of coercion.

What is the fine, per violation, when found guilty by the Director of unfair method of competition or an unfair or deceptive act or a prohibited practice? a) $25,000 b) $1,000 c) $250,000 d) $100,000

$1,000 If the Director determines, after a hearing, that a person is guilty of an unfair method of competition or an unfair or deceptive act or a prohibited practice, the guilty person will be ordered to pay a fine of not more than $1,000 for each violation but not to exceed $100,000 in any 12 month period, and/or have his/her license revoked or suspended.

An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? a) Nonforfeiture options b) Guaranteed insurability option c) Dividend options d) Guaranteed renewable option

Guaranteed insurability option The guaranteed insurability option allows the insured to purchase specific amounts of additional insurance at specific times without proving insurability.

If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back? a) The policy beneficiary takes over the loan payments. b) The policy is rendered null and void. c) The balance of the loan will be taken out of the death benefit. d) The policy beneficiary receives the full death benefit.

The balance of the loan will be taken out of the death benefit. If the loan and interest are not repaid and the insured dies, then it will be subtracted from the death benefit.