Life Insurance Basics
What is usually true of a participating life insurance policy?
It may pay dividends to policyowners
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT
Signed waiver of premium
What is not an example of insurable interest?
debtor and creditor
Person A has a insurable interest in Person B's life. A will be the policy beneficiary. Which is true?
Person B must consent to be insured in writing
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
If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to?
Charge a higher premium
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
Replacement rule
Which is the best reason to purchase life insurance rather than annuities?
to create an estate
Are insurance company underwriters allowed to discriminate?
Yes, but not unfairly
When an applicant purchased a life insurance policy, the agent dated the applicant 4 months prior l. When asked by the applicant, the agent said he was allowed to backdate policies up to 6 months of it would?
Lower the insured's premium
What describes the specific information about a policy?
Policy summary
An individual applied for an insurance policy and 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 l, what would be the policy's effective date?
The date of medical exam
What is the purpose of the buyers guide?
To allow the consumer to compare the costs of different policies
An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?
application
Another name for substandard risk classification is?
rated
The mode of premium payment
Is defined as the frequency and the amount of the premium payment.
During replacement of life insurance, a replacing insurer must do what?
Obtain a list of all life insurance policies that will be replaced
Which will be included in a policy summary?
Premium amounts and surrender values
An applicant wants to buy a policy that has a cash value element. Which type should she buy?
permanent
How are state Insurance Guaranty Associations funded?
By their members - authorized insurers
What is not included in the general information section of a life insurance application?
Education
Which of the following entities protects policyowners, insureds, and beneficiaries under insurance contracts when insurers fail to perform contractual obligations due to financial impairment?
Insurance Guaranty Association
What best describes the MIB
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will
Pay the policy proceeds only if it would have issued the policy.
What is not true of a key person insurance?
The plan is funded by permanent insurance only
Which applicant could the insurer charge a higher rate of premium and not violate regulations regarding unfair discrimination?
An applicant who is a smoker
An underwriter is reviewing the medical questions in the application and needs further information due to a medical situations the applicant had on the past. What will that underwriter require?
Attending Physician Statement
An underwriter may obtain information on a applicants hobbies, financial status and habits by ordering an?
Inspection report
Which methods of calculating the amount of life insurance needed takes into account the insureds wages, years until retirement and inflation?
Human Life value approach (HLVA)
General Information of the applicant includes what?
Name Age Address Birth date Gender Income Marital status Occupation
A policy that does not pay dividends to policy owners is a
Non-participating policy.
Which documents must be provided to the policyowner or applicant during policy replacement?
Notice regarding replacement
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?
When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
When must insurable interest exist in a life insurance policy?
At the time of application
What does liquidity refer to in a life insurance policy?
Cash values can be borrowed at any time
If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern?
The existence of insurable interest between the applicant and the insured
Which individuals must have insurable interest in the insured?
Policyowner
Who is the owner and who is the beneficiary on a key person life insurance policy?
the employer is the owner and beneficiary
Based on 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 is generally true regarding insureds who have been classified as preferred risks?
Their premiums are lower.
When is the earliest a policy may go into effect?
When the application is signed and a check is given to the agent
