Ch 2 Selling and Buying Insurance

In establishing the rates to charge premium payers of life insurance, a company will use: a) Mortality, interest, claims rate b) Morbidity, interest, claims rate c) Mortality, interest, expenses d) Morbidity, interest, expenses

(C) Establishing life premiums consists of mortality, interest and expenses

If an individual dies and fails to leave a will to direct the disbursement of assets, that person is said to have died: a) Intestate b) Intervivos

(A) A will is called the "last will and testament;" so when one dies without one, they die intestate

Insurance companies expect agents and brokers to assist in the underwriting process and risk selection of applications they are submitting. a) True b) False

(A) The home office underwriting department has the final decision as to whether a policy will be issued

An insurer classifies the insured according to their "occupation." if the insured has more than one occupation, what will the insurance company typically do? a) Classify by either the job the insured he/she has worked at the longest, or spends the most number of hours doing each week b) Automatically classify per the lowest premium category c) Classify the insured at the occupation which reflects the highest hazard

(C) The most hazardous occupation will always be used as it only takes one incident to cause a loss

The purpose of an insurance company's underwriting department is to: a) Put a limit on the applications submitted by agents b) Provide assistance to insured in selecting coverage levels c) Select and classify risks d) Pay commissions to producers

(C) This describes the function

An agent has no duty to an insurer if the agent is part of the "field force." a) True b) False

(B) A field force is defined as the agents for a company. Agents have a duty to the insurer to act as the eyes and ears of the insurer.

Non-insurance sponsors do not sell insurance. a) True b) False

(B) Credit card companies and banks solicit for insurance on a regular basis

Insurers will not charge more than 25% of the annual premium if the current premiums are now paid quarterly a) True b) False

(B) People who pay premiums on a mode other than annually will be charged a financing charge

The Medical Information Bureau (MIB) is a source of information available to the underwriting departments of insurance companies. Along with other sources of information, it helps insurers in making decisions whether to insure or not. a) True b) False

(A) The MIB's sole purpose is to help underwriting departments assess risks so the company can decide if a policy should be issued or not

"Fiduciary Responsibility," as it pertains to an insurance agent, is BEST defined as: a) Prompt and timely forwarding of premium payments from the insured to the home office b) Prompt and timely handling of a claim form c) Frequent reviews of an insured's insurance coverage d) Assisting clients in the selecting of policies

(A) The term is always associated with the trustworthiness of the agent handling money

An agent legally represents the principal, can deliver payments to the principal, and can be assumed to have the knowledge of the principal. a) True b) False

(A) The word principal means "the company." once appointed by the company, the agent does all of the things listed

The company in which the policyholders receive dividends when there is a profit a/an a) Stock company b) Mutual company c) Service company d) Assessment company

(B) This is one of the characteristics of mutual company

A type of receipt stating that coverage begins on the date of the application, should the insurer declare the applicant is insurable according to the company's guidelines, is a: a) Temporary insurance agreement b) Conditional receipt c) Binding receipt

(B) This question is defining conditional receipts. Binding receipts are not used with Life Contracts

Which of the following are elements of "non-medical" applications? 1. No medical exam is needed regardless of the insurer's underwriting standards. 2. Answer to application questions could trigger a requirement to have a physical exam performed. 3. A medical exam may not be needed a) 1 and 2 b) 2 and 3 c) 1 and 3 d) None of the above are true

(B) Underwriting always reserves the right to ask any potential insured to take a physical

The mass marketing system that uses the mail as a method to reach people and promote interest in insurance products is: a) Franchise marketing b) Non-insurance sponsors c) Direct-response

(C) Mail used as a marketing system is always direct response

Select the answer from below which best describes an insurance sales situation closely connected to the direct response marketing system: a) Waiting by the phone to get calls from prospects with no effort being made to get these leads b) Seeing an old friend at the supermarket and hoping he will give you his personal life insurance business c) Purchasing travel accident insurances from a vending machine in an airport

(C) The insured buys directly from the company without the services of an agent

Which of the following is/are true statements? 1. Policy dividends will be larger for a participating policy as compared to a "non-par" policy. 2. Policy dividends are a stockholder's investment return. 3. Policy dividends are considered "return of excess premiums paid." a) 1 only is true b) 2 and 3 are true c) 1 and 3 are true d) 1, 2, and 3

(C) These are characteristics of participating policies

The purpose of an insurance company's underwriting department is to: a) Put a limit on the applications submitted by agents b) Assist insureds in selecting correct coverage c) Classify and select risks d) Perform accounting functions

(C) This is the definition of the purpose of the underwriting department

Which of the following is associated with the authority of agents: a) Express or actual b) Apparent c) Implied d) All of the above

(D) Once appointed by a company, the agent's written contract will outline what the agent can and can not do. It can't outline every authority the agent has, however, as some are apparent and some are implied.

The person whose life is covered by a life policy is the: a) Applicant b) Policy owner c) Beneficiary d) Insured

(D) The applicant and policy owner could be any number of people. The person who is covered is the insured. The insured can never be the beneficiary

Which of the following statements is/are true? 1. Life insurance can create an immediate estate. 2. Life insurance premiums can be paid in full or on a monthly basis. a) 1 only b) 2 only c) Neither 1 or 2 d) Both 1 and 2

(D) These are characteristics of life insurance