Life Insurance Basics

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? A. as of the first of the month after the policy issue B. as of the policy issue date C. as of the application date D. as of the policy delivery date

C

Which is generally true regarding insureds who have been classified as preferred risks? A. they keep a higher percentage of any interest earned on their policies B. their premiums are lower C. they can borrow higher amounts off of their policies D. they can decide when to pay their monthly premiums

B -lower premiums

A key person insurance policy can pay for which of the following? A. costs of training a replacement B. loss of personal income C. workers compensation D. hospital bills of the key employee

A

Insurers must notify the Commissioner's office as to whether or not a life insurance policy will be marketed with illustrations. Certification of that notification must be provided annually within how many days of the anniversary of the original certification?

B

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles? A. standard risk is also known as high exposure risk B. standard risk is representative of the majority of people C. standard risk pays a higher premium than a substandard risk D. substandard risk requires extra rating

B

Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death? A. estate conservation B. life insurance proceeds C. state education waiver D. viatical settlement

B

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT A. any type of insurance policy may be used B. the employer pays a bonus to a selected employee to fund the policy C. its considered a nonqualified employee benefit D. the policy is owned by the company

D

When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n) A. executive bonus B. key person policy C. fraternal association D. aleatory contract

A

Which of the following is the best reason to purchase life insurance rather than annuities? A. liquidate a sum of money over a lifetime B. create an estate C. liquidate a sum of money over a period of years D. create regular income payments

B

What does "liquidity" refer to in a life insurance policy? A. the insured receives payments each month in retirement B. cash values can be borrowed at any time C. the death benefit replaces the assets that would have accumulated in the insured had not died D. the policyowner receives dividend checks each year

B

Which of the following statements concerning buy-sell agreements is true? A. buy-sell agreements pay in the event of medical emergency B. normally funded with LI policy C. premiums are deductible as business expense D. benefits received are considered income taxable

B

An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information? A. state records B. medical records C. application D. interviews

C

If an agent fails to obtain an applicant's signature on the application, the agent must A. sign the application for the applicant B. sign the application, stating it was by the agent C. send the application to the insurer with a note explaining the absence of the signature D. return the application to the applicant for a signature

D

Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount? A. key person agreement B. split dollar agreement C. buy-sell agreement D. profit and loss agreement

C

Are insurance company underwriters allowed to discriminate? A. yes, but not unfairly B. no, higher risks pay higher premium C. no, discrimination is an unfair practice D. yes, but only for gender

A

Which of the following premium modes would result in the highest annual cost for an insurance policy? A. monthly B. quarterly C. semi-annual D. annual

A - monthly if they choose to pay premium more frequently than annually, there is an additional charge because the company won't have the premium to invest for a full year, and the company will have additional expenses in billing the premium.

An insurer invests the money it receives from premiums paid by its insureds. Which of the following is TRUE regarding the interest earned on these investments? a. its used to fund executive bonuses b. its used to increase the death benefit c. its used to lower premiums d. its paid out as dividends

C - its used to lower premiums

Another name for a substandard risk classification is A. declined B. elevated C. rated D. controlled

C - rated

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, what would be the policy's effective date? A. the date of the medical exam B. the date of policy delivery C. the date of issue D. the date of application

A

At the time of licensing, what fee must a viatical settlement provider pay? A. 50 B. 100 C. 200 D. 300

300

A producer agent must do all of the following when delivering a new policy to the insured EXCEPT A. disclose commissions earned from the sale of the policy B. explain the policy provisions, riders, and exclusions C. collect any premium due D. explain the rating procedures if the policy is rated differently than applied for

A

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT A. erase the incorrect answer and record the correct answer B. draw a line through the first answer, record the correct answer, and have the applicant initial the change C. note on the application the reason for the change D. destroy the application and complete a new one.

A

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant A. with the policy B. upon issuance of the policy C. within 30 days after the first premium payment was collected D. prior to filling out an application for insurance

A if it doesn't have a free-look period, the guide must be delivered prior to accepting the initial premium.

Where would the underwriter find relevant info not presented by the applicant but communicated by the producer? A. policy summary B. application C. statement of continued good health D. conditional receipt

A - application the agent's report is part of the application to allow the agent to communicate with the underwriter and provide info on the applicant

According to the 2001 CSO Table, at what age will the terminal reserves be reached? A. 101 B. 120 C. 100 D. 99

B - 120

Bob sold his life insurance policy to a viatical settlement provider. How long does the provider now have to inform Bob's insurer that his life policy has been viaticated? A. 15 days B. 20 days C. 30 days D. 90 days

B - 20 days

Which of the following best describes the MIB? A. its a rating organization for health insurance B. its a nonprofit organization that maintains underwriting info on applicants for life and health insurance C. it is a government agency that collects medical info on the insured from the insurance companies D. it is a member organization that protects insured against insolvent insurers

B - its a nonprofit organization that maintains underwriting info on applicants for life and health insurance

Another name for a substandard risk classification is A. elevated B. rated C. controlled D. declined

B - rated since the policies could be issued with the premium rated-up, resulting in a higher premium.

Which of the following would be considered a nonmedical insurance application? A. an application submitted with agent's report B. any application for life insurance C. an application on which the medical info is completed by the applicant and agent only D. an application that doesn't ask any questions about the applicant's medical history

C questions don't need to be completed by medical professionals

Attempting to determine how much insurance an individual would require based upon their financial objectives is known as A. human life value approach B. estate planning C. viatical approach D. needs approach

D

Which of the following is an example of liquidity in a life insurance contract? A. the death benefit paid to the beneficiary B. the flexible premium C. the money in a savings account D. the cash value available to the policyowner

D - the cash value available to the policyowner Liquidity in LI refers to the availability of cash to the insured.

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? A. effect of inflation on income over time B. predicted needs of the family after the insured's death C. insured's current and future income D. insured's annual expenses

B

Which of the following statements is true concerning the creditors of the deceased insured? A. the creditors of the deceased insured have no rights to the proceeds of life insurance under any circumstances B. the creditors have rights to the proceeds if they can show evidence of valid assignment C. anyone may put a lien against the proceeds of a life insurance policy D. none of the above is true

B - credits have rights to proceeds if they can show evidence of valid assignment

Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life? A. it must be assumed that the death of the insured will occur immediately B. need is predicted using the number of years until the insured's retirement C. coverage is based on the predicted needs of that family D. the death of an insured must be premature

B- need is predicted using the number of years until the insured's retirement

All of the following are factors that an underwriter could use to select and classify risk EXCEPT A. occupation B. avocation C. national origin D. morals

C

All of the following are personal uses of life insurance EXCEPT A. estate creation B. cash accumulation C. buy-sell agreement D. survivor protection

C

In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT A. applicant's present physical condition B. applicant's present occupation C. applicant's past income D. applicant's past medical history

C

Which circumstance describes someone who is terminally ill? A. a patient whose liver cancer has spread B. a patient whose illness cannot be cured and is unable to complete at least 3 activities of daily living C. a patient who, because of an illness, is expected to live no longer than 24 months D. an accident victim who sustains a brain injury and is expected to never emerge from a persistent vegetative state

C

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? A. agent's report B. underwriter's report C. inspection report D. medical information bureau's report

C - inspection report

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? A. permanent B. an annuity C. a modified endowment contact D. term

A - permanent it provides lifetime death protection, including premature death, and a savings or investment option

Who negotiates viatical settlement contracts on behalf of the viator? A. viatical settlement dealer B. viatical settlement broker C. viatical settlement consultant D. viatical settlement agent

B

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will

B

Which of the following statements regarding HIV testing for life insurance purposes is NOT true? A. HIV testing is regulated at the state level B. insurers are barred from requesting HIV testing C. positive test results will be forwarded to the state's Department of Health if a physician is not selected by the applicant D. the testing practices must meet the criteria of the US Department of Health and Human Services

B - insurers are barred from requesting HIV testing

In order to become licensed to become a viatical settlement provider, an application must be made with A. governor's office B. NAIC C. insurance department D. viatical settlement association

C

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? A. premiums are not tax deductible as a business expense B. premiums are tax deductible by the key employee C. premiums are tax deductible as a business expense D. premiums are taxable to the employee

A - premiums aren't tax deductible as a business expense

Who effectuates viatical settlement contracts? A. viatical settlement providers B. lending institutions C. physicians D. viatical settlement brokers

A - viatical settlement providers are the people who enter into or effectuate a viatical settlement contract, other than the viator. The viator is the person who sells the insurance policy to the provider.

Which of the following best describes a "viatical settlement purchaser"? A. someone who represents the viator and negatiates the terms of a viatical settlement contract B. someone who gives money as consideration for a life insurance policy C. someone who sells his or her life insurance policy in order to pay medical bills D. someone who procures viatical settlement applications on behalf of a viatical settlement provider

B

All of the following are true of key person insurance EXCEPT A. the key employee is the insured B. the plan is funded by permanent insurance only C. there is no limitation on the number of key employee plans in force at any one time D. the employer is the owner, payor and beneficiary of the policy

B can be funded by any type of life insurance

Which of the following statements concerning buy-sell agreements is true? A. buy-sell agreements pay in the event of a medical emergency B. buy-sell agreements are normally funded with a life insurance policy C. premiums paid are deductible as a business expense D. benefits received are considered income taxable

B - normally funded with a life insurance policy

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

15 calendar days

Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called A. suitability B. client protection C. approval D. underwriting

A

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant doesn't wish to give the agent the initial premium, and no conditional receipt is issued. When will the coverage begin? A. when agent submits application to the company and the company issues a conditional receipt B. when agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health C. on the designated effective date D. on the application date

B

Why should the producer personally deliver the policy when the first premium has already been paid? A. to find out how the family has been doing since the initial presentation. B. to make sure the policy isn't stolen or lost c. to help the insured understand all aspects of the contract D. to ensure the producer gets paid commission

C

Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT A. alcohol and tobacco consumption B. recent surgeries C. other insurance coverages D. family health history

C part 2 regards health history, part 1 regards current coverage

Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life? a. coverage based on predicted needs of the family b. the death of an insured must be premature c. must be assumed that the death will occur immediately d. need is predicted using hte number of years until the insured's retirement

D

A policyowner of a life insurance policy who is also the insured is diagnosed with a terminal illness, so he sells the policy to a viatical company in order to pay medical bills. what term best describes the policyowner's role in this transaction? A. ceding party B. viatical settlement purchaser C. viatical settlement broker D. viator

D - viator

When is the earliest a policy may go into effect? A. when the first premium is paid and the policy has been delivered B. when the insurer approves the application C. after the underwriter reviews the policy D. when the application is signed and a check is given to the agent

D - when the application is signed and a check is given to the agent.

Once a mail-order soliciation has been filed, how long may it be used? A. 4 years, or until next regular examination B. 2 years, or until next regular examination C. 2 years D. 4 years

C

In event the key employee quits or is terminated, what provision provides for the owner of a policy to transfer coverage to the replacement employee, provided the new employee provides evidence of insurability? A. change of insured B. consideration C. misstatement of age D. free look

A

The insurance company underwriter could find information concerning the personal activities and character of an applicant from which of the following reports? A. producers report B. attending physician C. insurance company who provided the coverage D. medical info bureau

A