Life Insurance Basics Questions
9: Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT A Other insurance coverages. B Family health history. C Alcohol and tobacco consumption. D Recent surgeries.
A Part 2 of the application contains questions regarding the applicants' health history. Part I of the application includes questions regarding current coverage being applied for as well as any other insurance coverage with the same or other insurers.
14: A key person insurance policy can pay for which of the following? A Workers compensation B Hospital bills of the key employee C Costs of training a replacement D Loss of personal income
C A key person insurance policy will pay for costs of running the business and replacing the employee.
Which of the following statements regarding deferred compensation funds is INCORRECT? A They can be made with cash deposits to an annuity. B They generally provide additional retirement benefits. C They are usually qualified plans. D They can be established by employers.
C Deferred Compensation Funding refers to any employer retirement, savings, or other deferred compensation plan that is not a qualified retirement plan. Funding involves a contractual commitment between the employer and employee to pay compensation in future years. These plans are typically made with selected employees to provide additional retirement benefits.
12: All of the following are business uses of life insurance EXCEPT A Compensating executives. B Funding against financial loss caused by the death of a key employee. C Funding business continuation agreements. D Funding against company's general financial loss.
D Both life and health insurance can be used for a variety of purposes in a business setting, including the funding of business continuation agreements, compensating executives, and protecting the firm against financial loss resulting from the death or disability of key employees.
13: To which of the following policies would the State regulations on illustrations NOT apply? A A whole life policy with a guaranteed death benefit of $20,000. B An individual term policy C A group life policy D An individual variable life policy
D The life insurance illustrations regulation applies to all individual and group policies except variable life insurance; individual and group annuity contracts; credit life insurance; group term life, or life insurance policies and certificates with guaranteed scheduled death benefit of $10,000 or less.
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 State Education Waiver B Viatical settlement C Estate conservation D Life insurance proceeds
D There are many legitimate need-based expenses that can be paid by life insurance proceeds, from groceries to retirement income. Daycare is considered to be among these expenses.
An applicant wants to buy a policy that has a cash value element. Which type should she buy? A Permanent B Stock C Investment D Term
A Unlike term insurance, permanent insurance provides lifetime death protection and a savings or cash value option.
5: An insured receives a monthly summary for 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? A Variable B Term C Securities D Stock
A Variable life policies vary in value, as the name suggests, because the value is based on the stocks that support the policy. If a policyholder wants a more stable, reliable value, he/she should invest in a fixed policy.
15: Stranger-originated life insurance policies are in direct opposition to the principle of A Indemnity. B Insurable interest. C Law of large numbers. D Good faith.
B Because the purchaser of a stranger-originated life insurance policy doesn't know the insured, or have any interest in the insured's longevity, STOLI policies violate the principle of insurable interest.
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 In the needs approach method, need is determined by the predicted needs of the family after the premature death of the insured, which must be assumed will happen immediately. The policy allows for benefits to be collected upon the insured's death.
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 Key Person coverage may be funded by any type of life insurance.
