Exam attempt 6

Which of the following must an insurer obtain in order to transact insurance within a given state?

Certificate of authority. All insurers (domestic, foreign, or alien) must obtain a certificate of authority before transacting insurance within a given state.

Which of the following is correct regarding credit life insurance?

It insures the life of a debtor. Credit life insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor.

All of the following are true of key person insurance EXCEPT a)There is no limitation on the number of key employee plans in force at any one time. b)The employer is the owner, payor and beneficiary of the policy .c)The key employee is the insured.d)The plan is funded by permanent insurance only.

Key Person coverage may be funded by any type of life insurance.

Which of the following individuals must have insurable interest in the insured?

Policyowner. The policyowner must have an insurable interest in the insured (his/her own life if the policyowner and the insured is the same person), or in the life of a family member or a business partner.

If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination?

The insurer. During the underwriting process, an insurer may require that an applicant receive a medical examination. The insurer is responsible for the associated costs of the examination.

Under an extended term nonforfeiture option, the policy cash value is converted to

The same face amount as in the whole life policy.

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive. When the reduced option is written as "joint and 2/3 survivor," the surviving beneficiary receives 2/3 of what was received when both beneficiaries were alive.

Which of the following settlement options in life insurance is known as straight life?

Life income. The life-income option, also known as straight life, provides the recipient with an income that he or she cannot outlive. It pays the benefit while the beneficiary is alive; however, the payments stop at the beneficiary's death.

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage. In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.

How soon from the termination of debt under a credit life insurance policy must a creditor provide notice to the insurer?

60 days. In the event a credit life insurance policy is terminated, a creditor must provide the insurer with a notice of termination of debt within 60 days of the payoff date.

If a policyowner surrenders his life insurance policy that has been in force for 5 years within 60 days after the premium due date, what will the insurer be required to pay?

A cash surrender value. A life insurance policy must ensure that upon surrender of the policy no later than 60 days after the due date of a premium payment, the company will pay a cash surrender value (instead of a paid-up nonforfeiture benefit) if the premiums have been paid for at least 3 full years for ordinary life insurance policies, or 5 years for industrial life insurance.

If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?

Lump sum. Upon the death of the insured, or endowment, the contract is designed to pay the proceeds in cash, called a lump sum, unless the recipient chooses an optional mode of settlement.

According to the state nonforfeiture law for life insurance policies, insurers must offer at least one of the following nonforfeiture options EXCEPT

Reduction oReduction of premium is not a nonforfeiture option (it's a dividend option). The other answer choices are the required nonforfeiture options in life insurance policies issued in this state.f premium.