Ch2: Life Insurance: Life Insurance - Life Basics
The mortality rate is based on mortality tables which show life expectancy and the death rate per _______ people living in the U.S.
1,000 - Mortality tables show the death rate per 1,000, similar to how policy premiums are based on, a rate per $1,000 of coverage.
A typical life insurance application contains how many parts?
2 - A typical life insurance application contains two parts, part 1 is general information and part 2 is medical information.
The National Do Not Call Registry requires companies to update their list at least once every ______ days.
31 - The National Do Not Call Registry requires companies to update their list at least once every 31 days.
Which of the following policies is LEAST likely to keep pace with inflation? - Variable Universal Life - A fixed life policy - Variable life - Variable Whole Life
A fixed life policy - Since straight whole life is a fixed benefit policy, it is most likely to lose purchasing power over time.
Which of the following policies is LEAST likely to keep pace with inflation? - Variable Whole Life - Variable life - Variable Universal Life - A fixed life policy
A fixed life policy - Since straight whole life is a fixed benefit policy, it is most likely to lose purchasing power over time.
Of the following, which can a home office underwriter solely use to determine insurability of an applicant based on age, medical history, and amount of coverage? - A Consumer investigative report - An agent's report - A MIB report - A nonmedical application
A nonmedical application - A Nonmedical Application is used for a policy requested when the applicant's age, medical history or amount of coverage does not require a medical examination for underwriting. Health questions on the application are asked by the producer and are the only medical information required.
If a medical exam is required as part of the underwriting process, who normally conducts the exam?
A physician or nurse - Physicians, nurses, or paramedics are the ones who conduct medical exams which may include blood tests, urine tests, EKGs, and medical histories among other things.
A producer must include their name and address on which of the following?
A policy summary - Only a policy summary requires that the producer disclose their name and address.
A Consumer Investigative Report is not completed by ___________.
A producer - A Consumer Investigative Report. This can be completed by the insurer or a third-party provider.
An Errors & Omissions policy primarily covers the liability of:
A producer or agency - Errors & Omissions policies cover the liability of a producer or agency.
If a client chooses to pay premiums other than annually, what can he or she expect?
Additional charges to offset lost interest, earnings, and increased administrative costs - Additional charges are included in modes other than annual to offset the lost interest earnings and the increased administration costs.
Confidential information shared by the producer to the insurer and does not become part of the policy is the __________.
Agent's Report - An agent's report is a personal statement submitted by the producer to the insurer about information the agent would like to share with the insurer on a confidential basis that they may have learned during the application process while at the applicant's home or place of business.
All of the following are true regarding an Attending Physician's Statement (APS), except: - Applicants must sign a release in order for their physician to respond to an APS request - The insurer pays the physician for completing and forwarding the APS - An MIB report can be used in place of an APS - They are used in cases where the application or medical records reveal conditions that require further explanation
An MIB report can be used in place of an APS - An Attending Physician's Statement (APS) is used in cases in which the individual application and/or medical reports reveal conditions for which more information is required. An applicant must sign a written release to enable a release of the APS. The insurer pays for this.
The Attending Physician's Statement (APS) is completed by:
An applicant's physician to provide information about the applicant's medical history - An Attending Physician's Statement (APS) is used in cases where the individual application and/or medical reports reveal conditions for which more information is required. The treating physician will provide information regarding the medical history of the applicant. An applicant must sign a written release to enable a release of the APS. The insurer pays for this.
Which of the following is used by an insurer to collect information from the applicant/insured for underwriting purposes?
An application - A producer collects field underwriting information from the applicant/insured on an insurance application.
An insurable interest must exist between the _______ and the ________ at the time of application for life insurance to be valid.
Applicant/Insured - The insurable interest relationship must exist between the applicant and insured, at the time of application and policy issuance, in order for the contract to be valid.
In order for a life insurance policy to be valid, insurable interest must exist at time of _________.
Application - Unlike Property and Casualty insurance, for a life insurance policy to be valid, insurable interest need only exist at the time of application when the policy is issued.
J took out a life policy when he was 35. It had a conversion feature that he exercised at age 45. Age 45 is referred to as his ____ age.
Attained - Attained age is the insured's age at any point in time, typically used at renewal or conversion.
All of the following signatures would be required on a life insurance application for an adult, except that of the:
Beneficiary - Both the producer and the applicant / insured must sign the application. If the applicant is a minor, a guardian must sign the application.
Whose signature is not required on a life insurance application?
Beneficiary - The policyowner has the right to name and change beneficiaries. Beneficiaries do not sign on the application as beneficiaries.
A generic brochure developed by the NAIC to provide consumers with descriptions of basic types of life insurance as well as the comparative costs of each is called the _______.
Buyer's Guide - It is required that prospective life insurance buyers receive the NAIC Buyer's Guide to assist them in their life insurance purchase decision.
How does life insurance reduce financial loss upon the insured's death?
By transferring the risk to the insurer - For a premium, the applicant can transfer a specific dollar amount of risk to the insurer, thereby reducing but not eliminating the entire risk.
Which of the following personal uses of life insurance is specifically designed to provide benefits to the policyowner while the insured is still alive? - Estate conservation - Estate creation - Charitable bequests - Cash accumulation
Cash accumulation is the only choice given that will provide benefits while the insured is still alive. All of the other choices are available once the insured has died.
In order to receive a stock dividend, the policyowner must own ____________.
Common stock of the insurer - Stock dividends are paid to common stockholders when declared by the board of directors.
If a home office underwriter obtains MIB codes inconsistent with information provided on the application, what is the underwriter required to do?
Conduct further investigation to obtain more information prior to making a decision - When the home office underwriter receives MIB codes that are inconsistent with information provided on the application, the underwriter is required to conduct a further investigation to obtain more information prior to making an underwriting decision. Underwriting decisions cannot be based solely on MIB codes since there could be a reasonable explanation for the discrepancy.
A group plan is designed to insure all of the following, except: - Debtors - Creditors - Members - Employees
Creditors - A group plan can cover employees, debtors, and members. Creditors may be the owner of the plan, but not the insured.
A group plan is normally owned by any one of the following, except: - Employers - Creditors - Associations - Debtors
Debtors - A group insurance plan is normally owned by an employer, creditor, or association.
Upon receipt of all of the necessary information, the home office underwriters can issue the coverage applied for in all of the following ways, except: - Declined - Standard - Preferred - Substandard
Declined means that the policy would not be issued. The other choices indicate an acceptable risk at different pricing based on insurability.
An insurer has issued a new policy and mailed it to the producer. The producer should:
Deliver the policy to the insured in person and obtain a delivery receipt - Producers must make sure that policies are delivered to insureds, preferably in person.
In life insurance, the Buyer's Guide is required to be provided not later than at the time of policy ___________.
Delivery - In life insurance, the Buyer's Guide is required to be provided not later than at time of policy delivery.
All of the following are acceptable methods of policy delivery, except: - Registered mail with a signed receipt of delivery - Personal delivery with signed receipt of delivery - Certified mail with a signed receipt of delivery - Delivery to a neighbor with a signed receipt of delivery
Delivery to a neighbor with a signed receipt of delivery - Policy delivery will be accomplished by: personal delivery, with signed receipt of delivery, or registered or certified mail with a signed receipt of delivery, but never being left with a neighbor.
Insurance covering the liability of a producer or agency is called _______.
Errors and Omissions - Errors and Omissions insurance covers producers and agencies to protect them against complaints alleging inadequacy or negligence in carrying out their professional responsibilities.
What is the difference between net premium and gross premium?
Expense loading - Net premium plus expense loading equals gross premium.
When a producer personally delivers a life insurance policy, they are responsible for doing which of the following?
Explain the policy policy benefits - It is the producer's or agent's responsibility to deliver the policy, verify the insured has remained in good health (if the premium has not been paid), and explain the policy to be sure the insured understands the benefits, including endorsements and riders. A producer is not responsible for requesting a medical exam, explaining insurance laws, or collecting referrals.
Which of the following is included in Part II of a Life Insurance Application? - Marital status - Gender - Date of birth - Family member's age and cause of death
Family member's age and cause of death - Part II of the application contains questions pertaining to medical background, present health, any medical visits in recent years, medical status of family members and causes of death of deceased relatives.
Industrial insurance is also known as:
Home service - Industrial insurance is also known as Home Service.
All of the following activities could cause an insurance purchase to be treated as a STOLI, except: - Fill out the application for life insurance on behalf of the insured - Pay for the policy they acquire from the policyowner - Change the policy ownership and beneficiary designations - Keep paying policy premiums until the insured dies, and then file a claim
Fill out the application for life insurance on behalf of the insured - After the investors have paid for the policy, they will change the ownership and beneficiary designations. The investors will also have to pay premiums to keep the policy in force. Upon death of the insured the investors will file a claim for the death benefit.
All of the following activities could cause an insurance purchase to be treated as a STOLI, except: - Keep paying policy premiums until the insured dies, and then file a claim - Change the policy ownership and beneficiary designations - Pay for the policy they acquire from the policyowner - Fill out the application for life insurance on behalf of the insured
Fill out the application for life insurance on behalf of the insured - After the investors have paid for the policy, they will change the ownership and beneficiary designations. The investors will also have to pay premiums to keep the policy in force. Upon death of the insured the investors will file a claim for the death benefit.
To which of the following clients would a producer MOST likely recommend term life insurance? - Mary - a 26-year-old corporate lawyer with no children - Kathy - age 70 with two adult children, both of whom are married - George - in his second year of medical school; married with one child - Roger - a 62-year-old retired bachelor
George - in his second year of medical school; married with one child - Term insurance (particularly convertible term insurance) is suitable for people with a limited income and a high need for life insurance.
Which of the following statements correctly describes the difference between gross premium and net premium? - Gross premium is the total amount paid for the policy. Net premium does not include the insurance company's cost of doing business, such as paying commissions and other expenses - Gross premium is what the insured pays to the insurance company each month; Net premium is what the agent's commission is based on - The net premium is the cost per $1,000 of insurance, the gross premium excludes insurance company expenses - Net premium is the total paid to the insurance company each month; Gross premium is described in terms of the number of dollars per $1000 a person pays for his/her insurance
Gross premium is the total amount paid for the policy. Net premium does not include the insurance company's cost of doing business, such as paying commissions and other expenses - Gross premium is the total amount a person pays the insurer for his/her coverage. Net premium, sometimes called the "pure premium," does not include business expenses of the insurer.
Applicants must consent to be tested and be informed that testing for ________ may determine insurability.
HIV - Applicants must consent to be tested for HIV and be informed that testing for HIV may determine insurability.
The income-earning ability lost to dependents by the insured's premature death is a way to evaluate an individual's insurance needs. This method is known as the:
Human Life Value Approach - The objective of the Human Life Value Approach is to provide the proper amount of coverage as determined by the value of the insured individual to his/her dependents.
Under what circumstances should the producer obtain a Statement of Good Health?
If no premium was paid at time of application and the policy is now being delivered - The producer must also get a Statement of Good Health from the applicant/insured at the time of policy delivery that verifies that the insured has not suffered injury or illness, had any surgeries, or been admitted to a hospital since the application date.
If an applicant is a minor, who signs the application?
If the applicant is a minor, a guardian must sign the application.
The Needs Analysis Approach always assumes the death of the insured to be:
Immediate - The Needs Analysis Approach always assumes the death of the individual to be immediate, and assesses various factors to calculate all financial needs caused by an immediate death.
Debit life insurance is classified as which of the following? - Group - Industrial - Ordinary - Government
Industrial - Debit life insurance is classified as industrial life or home service life insurance.
A(n) ________ report is a general report of the applicant's finances, character, morals, work, hobbies, and other habits.
Inspection - An Inspection Report is a general report of the applicant's finances, character, morals, work, hobbies, and other habits.
The Medical Information Bureau (MIB) is formed by:
Insurance companies - The MIB is a member-owned corporation that operates on a not-for-profit basis in the United States and Canada. The MIB's Underwriting Services are used exclusively by MIB-member life and health insurance companies to assess an individual's risk and eligibility during the underwriting of life, health, disability income, critical illness, and long-term care insurance policies.
The cost of any required medical exams in the underwriting process is paid by the:
Insurer - Medical exams are done at the insurer's expense.
The MIB obtains its information from which of the following? - Physicians - Insurers - Hospitals - Producer's agencies
Insurers - The primary purpose of the Medical Information Bureau (MIB) is to collect adverse medical information about an applicant's health that is known to insurers to which the applicant has previously applied for coverage.
Which of the following would be considered a good result from an underwriter's action when an individual Life Insurance Policy is issued as applied for? - Issued rated-up - Issued with exclusions or limitations - Application is rejected - Issued standard
Issued standard - To be issued standard is the most favorable action listed, as the coverage requested is issued at the rate that was quoted.
Why have many states prohibited STOLI/IOLI transactions?
It is a violation of the insurable interest rule - The practice of STOLI and IOLI has resulted in fraudulent abuses causing many states to outlaw STOLI and IOLI policies due to a lack of insurable interest.
If a copy of the application, which led to a life insurance policy being issued, is attached to the policy:
It is considered part of the entire contract - If a copy of the application is attached to the policy it becomes part of the entire contract and information contained within or left out can be the basis upon which the insurance company can challenge a claim during the contestable period.
The _________ settlement industry has increased awareness of STOLI/IOLI.
Life - The life settlement industry has increased awareness of these terms.
Medical exams are requested in all of the following situations, except: - Low amount of premium - High amounts of coverage - Insured's advanced age - Past health history
Low amount of premium - Medical examinations are usually requested by the insurer after determining if the amount of coverage, age of applicant, or his/her health history warrants the examination. Premium has nothing to do with it.
Which of the following is most likely to pay the highest premium for a disability income policy, all other factors being equal?
Male, age 40, firefighter - All things being equal, males have a higher mortality risk. The male with the higher risk occupation will most likely pay the highest premium.
Part 1 of the application consists of all of the following information, except: - Occupation - Gender - Medical status of immediate family members, their ages and causes of death - Place of residence
Medical status of immediate family members, their ages and causes of death - Part 1 of the application consists of general questions about the applicant, such as gender, marital status, residence, date of birth, occupation, and past and present life insurance.
Mortality cost ______ interest (investment earnings) = equals the net premium.
Minus - Mortality cost minus interest (investment return) = net premium (pure rate).
Loading includes all of the following, except: - Medical exam costs - Mortality - Operating expenses - Producer commissions
Mortality - The mortality rate is used to determine net premium. Loading are additional charges to net premium to derive gross premium.
A generic brochure was developed by the ________ to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance and comparisons of their relative costs.
NAIC - A buyer's guide is a generic brochure developed by the NAIC to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance, as well as comparative costs of each type of plan.
Which of the following is included in Part I of a Life Insurance Application? - Family health history - Hospitalizations and surgeries - Name and Occupation - Present health
Name and Occupation - Part I of the application contains general questions about the applicant, such as gender, marital status, residence, date of birth, occupation, and past and present life insurance.
__________ insurance policies do not pay dividends to policyowners.
Nonparticipating - Participating policies pay dividends, a refund of excess premiums. Mutual companies may issue participating policies. Nonparticipating policies issued by Stock companies do not pay dividends to policyholders.
If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a:
Notice Regarding Replacement - Replacement rules require a Notice Regarding Replacement.
Generally speaking, straight whole life is classified as which of the following? - Ordinary - Group - Government - Industrial
Ordinary Life Insurance is any type of life insurance that is not group, industrial, or government insurance.
Which of the following is not a major source of underwriting information? - The application - Attending Physician's Statement - Medical exams - Past life insurance owned
Past life insurance owned - The sources of underwriting include the application, medical exams, an attending physician's statement, the medical information bureau, an inspection report, and the agent's report.
What should a producer do if the policy applied for is issued at a higher rate than was expected?
Personally deliver the policy, explain the rating, reinforce the value of the policy, and collect the additional premium - By personally delivering the policy the producer can explain the rating, reinforce the value of the policy and obtain any home office requirements such as signatures and additional premium in order to put the policy in force.
A type of coverage with a small face amount, typically purchased to pay the burial expenses of the insured, is called a(n) _________ plan:
Pre-need - A type of coverage with a small face amount, typically purchased to pay the burial expenses of the insured is called pre-need insurance.
Which of the following is a policy not issued with a rating? - Tabular Rate - Lien Plan - Preferred Rate - Flat Rate
Preferred Rate - Individuals who meet certain requirements and qualify for lower premiums, such as ideal health, height, and weight, are issued at preferred rates. Substandard Risks (Higher Risk Exposure) Individuals who are not acceptable at standard or preferred rates because of health, habits, or occupation, and are issued 'rated policies.'
When an individual qualifies for a lower premium or rate than standard risks, the insured is considered a:
Preferred risk - The question defines a preferred risk.
When an applicant does not smoke, exercises regularly, seldom drinks, and eats moderately and is considered to be a better-than-average risk, they would likely qualify for:
Preferred status and pay a lower premium - Individuals who meet certain requirements (such as ideal health, height and weight, low occupational stress, etc.) are preferred risks.
The factors necessary for an insurer to calculate a Net Premium are:
Rate of interest assumed and mortality rate - Mortality Rate - Rate of Interest Assumed = Net Premium.
The needs analysis approach in determining the amount of coverage someone needs takes into consideration all of the following, except: - Providing a surviving spouse with a lifetime income - Paying off the mortgage - Providing education funds for the children - Receiving raises and bonuses by the insured over the years
Receiving raises and bonuses by the insured over the years - The needs analysis approach considers debts, medical bills, final expenses, spousal lifetime income, mortgage retirement, children's education funds, and possibly an emergency fund.
The needs analysis approach in determining the amount of coverage someone needs takes into consideration all of the following, except: - Providing education funds for the children - Receiving raises and bonuses by the insured over the years - Providing a surviving spouse with a lifetime income - Paying off the mortgage
Receiving raises and bonuses by the insured over the years - The needs analysis approach considers debts, medical bills, final expenses, spousal lifetime income, mortgage retirement, children's education funds, and possibly an emergency fund.
Any transaction in which a new life policy or annuity is to be purchased, and the producer knows, or should know, that existing contract(s) will be: lapsed, forfeited, surrendered, terminated, reduced in value, amended with a reduction in benefit or term, have a reduced cash value, or is subjected to borrowing, is best known as a __________.
Replacement - This is the definition of a replacement.
A ________ is usually treated as an insurance company liability.
Reserve - A reserve is an amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A reserve is usually treated as a liability.
Policy __________ are the net premiums paid plus interest earned and reflect potential insurance contract obligations.
Reserves - A reserve is maintained by an insurer in order to meet future potential obligations and is also required by State insurance laws.
If after meeting with a client, a producer returns to the agency office and notices that the application has unanswered questions, what is the best course of action for the producer to take?
Return the original application back to the applicant for completion prior to submission - Any unanswered questions need to be answered before the policy is issued. The producer should return the original to the applicant to complete before submitting the application to the insurer for underwriting.
If the producer discovers that the applicant is not in good health at time of a life insurance policy delivery. If the initial premium has not been paid, it is the producer's responsibility to:
Return the policy to the insurer for further underwriting - If the applicant is not in good health and the initial premium has not been paid, the policy should be returned to the insurer to further underwriting.
__________ life insurance is when an insured is induced into purchasing life insurance with the sole intent of selling that policy once issued to third party investors for an amount less than the death benefit, but greater than its cash values.
Stranger originated - When investors hope to gain off of the insured's induced purchase of a life insurance policy for later sale of their mortality for profit is referred to as Stranger Originated Life Insurance (STOLI).
The HIV Consent Form specifies which types of individuals may receive __________.
The test results - The HIV Consent Form specifically addresses who may receive test results, most often it is the insured's doctor.
If a client is unsure about whether or not he/she can obtain coverage or how much it would cost, what can the producer suggest to see what the insurer can do without tying up any of the client's funds?
Submit a trial application - A trial application is one submitted without a premium. The policy would not take effect until the policy is issued by the insurer, delivered by the agent, and the premium is paid. It is used when insurability and pricing are in doubt.
Once the gross amount of dollars required to fund an insured's needs has been determined using the needs analysis approach, what is the next step?
Subtract any assets available to fund financial needs after death - The next step is to subtract any assets available to fund financial needs after death. This reduces the amount of life insurance required.
Which of the following best describes producer field underwriting? - Taking the time to probe beyond the stated questions on the application based upon the applicant's responses - Interviewing the applicant's neighbors about the applicant's morals and character - Conducting blood pressure readings, taking the applicant's pulse, and drawing blood - Obtaining the applicant's medical records, conducting a credit history check, and logging in to the MIB
Taking the time to probe beyond the stated questions on the application based upon the applicant's responses - Probing beyond the stated questions in the application based upon the applicant's responses is field underwriting. The producer does not engage in any of the other listed activities.
Which of the following receipts states that coverage will begin immediately for a specific length of time, regardless of whether the applicant is ultimately approved for coverage by the insurer? - Acceptance approval receipt - Trial receipt - Conditional receipt -Temporary insurance agreement
Temporary insurance agreement - If premium is paid, coverage will begin immediately for a specific length of time regardless of whether the applicant is ultimately approved by the insurer. This may also be referred to as a temporary insurance agreement or a binding receipt.
An applicant's signature on an application indicates what?
That their statements are true - The applicant is representing that statements on the application are true to the best of their knowledge and belief.
Which of the following is not true about life insurance applications? - Applications for life insurance are typically divided into two parts: General Information and Health History - The application may contain all the information underwriting needs to approve the insured - The application is confidential communication between the agent and the insurer
The application is confidential communication between the agent and the insurer - A copy of the application will be included as part of the policy, and is therefore not confidential.
Capital liquidation assumes:
The balance of the account will reduce over a period of time once payout begins - Capital liquidation assumes both principal (capital) and interest are liquidated over the relevant time period to provide the required income for the dependents. This will cause the balance to decrease and benefits are paid.
Which of the following parties does not sign an application for life insurance?
The beneficiary - The agent, the applicant/insured, and the owner, if different form the applicant/insured, must sign the application. The beneficiary does not sign the application.
A life insurance applicant pays the initial premium at the time of application and receives a Conditional Receipt. If coverage is issued as applied for, when did coverage go into effect?
The date of the application or upon the completion of any required medical exam (whichever is later) - In the case of a Conditional Receipt, the coverage is effective as of the date of the application or upon the completion of any required medical exam, unless it is declined within a stipulated period.
The date on which insurance coverage is no longer in effect is referred to as the _________ date.
The expiration date is when insurance coverage ends.
The _______ date is the date on which the insurance coverage ends.
The expiration date is when the coverage ends, the effective date is when it begins. Conversion and continuation allow it to remain in effect.
When an insurer accounts for the interest and mortality factors, then adds additional charges to meet all costs of a contract, it derives __________.
The gross premium - Insurer expenses (loading) are added to the net premium rate to enable an insurer to meet all costs under the contract, such as operating costs, commissions, medical examination costs, etc.
Which of the following statements about policy roles is TRUE? - The applicant, insured, and policyowner must approve any changes to a policy in writing - The insured and the policyowner are usually the same, but not necessarily - Any changes to a policy must be approved by both the insured and policyowner in writing - The insured and the policyowner are always the same
The insured and the policyowner are usually the same, but not necessarily - The applicant, insured, and owner might all be different parties. Policy changes are only required to be approved by the policyowner.
When an insurer requires that an insured be subjected to a medical examination, who pays for the medical exam?
The insurer pays for any medical exam it orders.
Which rating classification is typically used in the senior marketplace so that policies can be issued without a medical exam?
The lien plan - With the lien plan, initially, only the premium would be refunded in case of death. The death benefit increases over time with the full face amount eventually payable. This is generally used with Senior Life Insurance plans to provide minimal benefits without a medical examination.
The process of calculating life insurance net premium requires consideration of all of the following, except: - The insured's age - The rate of interest assumed - The morbidity rates to be used - The insured's gender
The morbidity rates to be used - Net Premium for life insurance takes into account interest and mortality (not morbidity) factors only. The insured's age and gender are considered mortality factors.
The process of calculating life insurance net premium requires consideration of all of the following, except: - The insured's gender - The morbidity rates to be used - The rate of interest assumed - The insured's age
The morbidity rates to be used - Net Premium for life insurance takes into account interest and mortality (not morbidity) factors only. The insured's age and gender are considered mortality factors.
The human life value approach in determining the amount of life insurance someone needs takes into consideration all of the following, except: - Planned retirement age - Occupation - Personal and financial information - The number of cars the insured and family members own
The number of cars the insured and family members own - The human life value approach takes into consideration the individual's age and gender, the individual's occupation, the individual's annual wage and employment benefits, and the individual's planned retirement age.
The person who submits an application for insurance is always referred to as the _______.
The person who submits an application for insurance is always referred to as the applicant.
When reviewing an application, the underwriter decides to reclassify the risk. What does that mean for the client?
The premium could increase or decrease - When reviewing an application, if the underwriter decides to reclassify the risk, this could either increase or decrease the premium.
All of the following are true of a substandard risk, except: - The premium would be discounted - The insured may be rated as older than their actual age - The insured may have a flat additional premium added to their base premium - The coverage could be reduced for a period of time
The premium would be discounted - Individuals whose risk factors do not measure up to underwriting standards are usually issued rated policies.
What information must appear on the policy summary provided to a life insurance client?
The producer's name and address - The producer's name and address along with the address of the insurance company must appear on the policy summary.
In determining the proper amount of life insurance, the Needs Analysis Approach takes into consideration all of the following factors, except: - The payoff of any outstanding mortgage balance - The paying off of personal debts, medical bills, and final expenses - The projected future value of services provided by the insured - The creation of college funds for surviving children
The projected future value of services provided by the insured - The Needs Analysis Approach factors in paying off all bills, creating a lifetime stream of income for the surviving spouse, creating a college fund for surviving children, and paying off the mortgage. Once totaled, this amount is reduced by financial assets already in place.
A producer submits a completed application to the insurer along with the premium check after giving the applicant a conditional receipt. If the applicant completes the required medical exam, but dies prior to the insurer issuing a policy as applied for, what is the insurer's responsibility?
To pay the claim in full as long as the conditions of the receipt were fully satisfied by the insurer - Since all of the conditions of the receipt were satisfied is does not matter that the insured died prior to the policy being issued. Coverage was in effect as of the time the medical exam was completed.
Which of the following policies offers the least guarantees? - Variable Universal Life - 30 year Term Life - Straight Whole Life - Universal Life
Variable Universal Life has no guaranteed death benefit and no guaranteed cash values.
Expense loading ___________ from company to company.
Varies - Expense loading is a cost area that can vary from company to company based on its operations and efficiency. These factors are used by all insurers.
A ___________ settlement is when a terminally ill insured sells his or her life insurance policy to a third party other than an insurance company, for an amount less than the policy's death benefit, but greater than its cash values.
Viatical settlements are a way for a terminally ill insured to sell his or her policy for much needed cash when no other sources are readily available.
Why should a producer collect a premium at the time the application is completed?
Without it, coverage cannot go into effect, as there would be a lack of consideration - Collecting the premium at the time of application allows the producer to issue a conditional coverage receipt, which can bring coverage into effect as early as the date of the application, provided all the conditions have been satisfied.