Chapter 2 Practice Questions

upon policy delivery, the producer may be required to obtain any of the following EXCEPT

signed waiver of premium

In the Executive Bonus plan, who is the owner of the policy & who pays the premium?

Executive is the owner and the Executive pays the premium.

how often may a viatical settlement provider contact an insured regarding the insured's health status if the insured's life expectancy is more than one year?

Once every 3 months

During replacement of life insurance, a replacing insurer must do which of the following?

Obtain a list of all life insurance policies that will be replaced

An applicant wants to buy a policy that age a cash value element. Which type should she buy?

Permanent

if someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should that person buy?

Permanent

Which of the following will be included in a policy summary

Premium amounts and surrender values

Who effectuates viatical settlement contracts?

Viatical settlement providers

Which of the following statements regarding HIV testing for life insurance purposes is NOT true?

Insurers are barred from requesting HIV testing

if a viatical settlement provider transfers ownership of an insurance policy, how long does the insurer have to inform the insured of the change?

20 Days

Most agents try to collect the initial premium for submission with the application. When an agent collect the initial premium from the applicant, the agent should issue the applicant a

Premium receipt

all of the following are characteristics of group life insurance EXCEPT

Premiums are determined by the age, sex and occupation of each individual certificate holder.

which of the following is correct concerning the taxation of premiums in a key person life insurance policy?

Premiums are not tax deductible as a business expense.

which of the following is NOT true of life settlements?

The seller must be terminally ill

What process do insurance companies use to determine whether or not a particular applicant is insurable?

Underwriting

which of the following is NOT an example of insurable interest?

Debtor in Creditor

An applicant who receives a preferred risk classification qualifies for

Lower premiums than a person who receives a standard risk.

Violation of unfair discrimination law may result in all of the following EXCEPT

Fines up to $1000 for each act

What describes specific info about a policy?

Policy summary

which of the following statements is NOT true concerning insurable interest as it applies to life insurance?

A debtor has an insurable interest on the life of a lender

When J applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by

A paramedic or examining physician at the insurer's expense

Which of the following would be considered a non medical insurance application

An application on which the medical info is completed by the applicant and agent only

An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?

Application

An underwriter is reviewing the medical. questions in the application and needs further info due to medical situation in the past. What will the underwriter require?

Attending Physician Statement

Wyrbroke, Inc. specializes in viatical settlement contracts. Although the company is financially unstable, it has provided the state government with falsified financial statement that "prove" it's sound financial health. Which of the following terms best describes Wyrebroke's actions?

Fraudulent viatical settlement act

An underwriter may obtain info on an applicant's hobbies, financial status and habits by ordering a

Inspection report

The Medical Information Bureau was created to protect

Insurance companies from adverse selection by high risk persons.

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Notice regarding replacement

which of the following individuals may have insurable interest on the insured?

Policyowner

Another name for substandard risk classification

Rated

Which of the following best details the underwriting process for life insurance?

Selection, classification & rating of risks

Which of the following types of risk will result in the highest premium?

Substandard Risk

An individual wants to purchase a life insurance policy. His agent asks if the transaction will involve replacing any existing life insurance policies. If the customer replies, "yes," which of the following best describes the agents next step?

The agent must provide a replacement notice to applicant

An individual applied for an insurance policy & paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?

The date of Medical exam

When is the earliest a policy can go into effect?

When the application is signed and a check is give to the agent

What does "liquidity" referred to in a life insurance policy?

cash values can be borrowed at any time

all of the following are personal uses of life insurance EXCEPT

Buy-Sell Agreement

if an application for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

whether an insurable interest exist between the individuals

In order to become license to become a viatical settlement provider, an application must be made with

The Insurance Department

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?

human life value approach

attempting to determine how much insurance an individual would require based upon their financial objectives is known as

needs approach

An insured receives a monthly summary of his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?

Variable

When an employee offers to give an employee a wage increase in the amount of the premium on a new life insurance policy this is called a

Executive Bonus

Which of the following is a risk classification used by underwriters for life insurance?

Standard

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as

Survivor protection

A key person insurance policy can pay for which of the following?

Costs of training a replacement

once a viatical settlement contract has been completed how long does the viatical settlement provider have to notify the insurance company that the life policy has been viaticated?

20 days

If an insured changes his payment plan from monthly to annually, what happens to total premium?

Decreases

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

Any form of life insurance

Based on the human life value approach, which of the following is NOT used to calculate an individual's life value?

Predicted needs of the family after the insured's death

which of the following is the best reason to purchase life insurance rather than annuities?

to create an estate

According to the 2001, CSO Table, at what age will the terminal reserved be reached?

120

once a viatical contract has been established, how long does the viator have to rescind the contract?

15 calendar days

an insured under a life insurance policy has been diagnosed with a terminal illness and has six months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What action could the insured utilize?

Viatical settlement

In the underwriting process, it was determined that the applicant for life insurance is in poor health & has some dangerous habits Which of the following is true concerning the policy premium?

it will likely be higher because the applicant is a substandard risk

All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT

Education