Life Insurance Final

The practice of using misrepresentation to induce a policyholder to replace a policy issued by the insurer the producer represents is called:

Churning

LMO Insurer is incorporated in New Hampshire, conducts business in all of the eastern seaboard states and in Germany. How is LMO Insurer classified in New Hampshire?

Domestic

If a premium payment has not been given with the application, the policy becomes effective only when the producer delivers the policy and:

Explains its provisions, secures the initial premium, and a signed statement of continued good health

Which of the following is considered an unfair claims practice?

Failing to affirm or deny coverage within a reasonable time after receiving proof of loss

The time period during which children are young and financially dependent upon their parents is termed the:

Family Dependancy period

Which of the following correctly describes the penalty applied to a company for calling a person whose phone number is on the Do Not Call List?

Fine in the amount of $16,000

LMO Insurer is incorporated in New Hampshire, conducts business in all of the eastern seaboard states and in Germany. How is LMO Insurer classified in New York?

Foreign

According to the U.S. PATRIOT Act, which of the following is money laundering?

Fraudulent use of public funds, computer crimes, illegal exportation of controlled munitions.

Gerald has a chronic medical condition. What will his risk classification be? How will his premium be affected?

Gerald's risk classification will be substandard. His premium will be higher.

Level premium life insurance policies usually have ______ premiums in order to account for the greater risk of death with advancing age.

Higher

Which of the following is false regarding life insurance policy illustrations?

Illustrations are part of the insurance contract.

What is the term used to describe an insurer that cannot pay its claim obligations?

Insolvent

All of the following statements are true regarding warranties, EXCEPT:

Insureds are held to the principle of warranties.

Wesley fills out an application for a life insurance policy and submits it to the agent on January 5th. He does not include the first premium payment. Wesley undergoes the required medical examination on January 7th. The insurance company approves Wesley's application on January 15th. Wesley's agent delivers the policy to Wesley on January 17th. At this time, Wesley writes out a check for the initial premium. On what date is Wesley's policy effective?

January 17th

Sam submits an application with initial premium for a life insurance policy on July 6th. The agent issues Sam a conditional receipt at this time. Sam takes the required medical exam on July 10th. The insurer approves the policy on August 1st, and the agent delivers the policy to Sam on August 10th. Which day did Sam's coverage begin?

July 10th

Mary's Cosmetics purchases a life insurance policy on Samantha, the leading makeup salesperson in the nation. Which business continuation plan did Mary's Cosmetics buy?

Key person insurance

Another term for insurers' expense is:

Loading

Mutual insurers are also called:

Participating

What will the insurer do if the insured dies during the grace period of a life insurance policy?

Pay the death benefit, but deduct the amount of the overdue premium

Mutual insurers pay dividends to:

Policy owners

Of the following risk classifications, which one will have a discounted premium from the rates provided in the C.S.O. tables?

Preferred

Which of the following is the consideration an insured pays for insurance coverage?

Premium

In discussing a potentially lucrative group policy with a business owner who had purchased a business and just moved into the community, an established producer jokingly remarked, "Well, would it sweeten the pot if I could assure you membership in the country club?"The producer added, "I'm on the membership committee and while we're not accepting new application right now, I'm sure something could be worked out." These remarks constituted:

Rebating

All of the following acts are considered unfair trade practices, EXCEPT:

Replacement

Employer-paid premiums used to fund group life insurance for the benefit of employees are:

Tax-deductible as a business expense

Who completes field underwriting?

The agent

All of the following are part of the consideration element of an insurance contract, EXCEPT:

The applicant's promises

All of the following correctly demonstrate policy delivery, EXCEPT:

The application is approved by the underwriter

All of the following are involved in the collection of an applicant's medical history, EXCEPT:

The consumer report

All of the following statements regarding key person insurance are true, EXCEPT:

The key employee is the policyowner and pays the premiums; the company is the beneficiary.

All of the following are true regarding purchase of personal life insurance for charity, EXCEPT:

The person purchasing life insurance for charity must have insurable interest in the lives of the charity's members.

In life and health insurance, a person's greatest asset is:

Their earning power

Which of the following best describes the process used to select and classify risks?

Underwriting

Ben applies for a life insurance policy on himself. How much insurable interest does Ben have in his own life?

Unlimited

When must insurable interest be shown for a life insurance policy?

Upon policy application

The third party that purchases a life insurance policy death benefit from a terminally ill insured is termed:

Viatical settlement provider

All of the following are true regarding viatical settlements, EXCEPT:

Viatical settlements are a type of life insurance contract.

Insurance agent Margaret receives life insurance applications from Tim and Tom, who are identical twins, and are each applying for the exact same type of policy with the same face amount. The insurance company issues the policies as applied for, but charges Tom a 15% higher premium. Which of the following best explains the higher premium charged to Tom?

Tom's risk classification

Mildred is age 58. She withdraws a sum of money from her qualified plan. What is the penalty?

10% tax penalty

Tim's Toy Shop has gone bankrupt and needs to terminate all employees. Tim informs all employees of their right of conversion under the employer-sponsored group life plan. How many days are Tim's employees allotted to convert their group life coverage to individual coverage?

31 days

How many months can a life insurance policy be backdated?

6 months

Conversion from a group policy to an individual policy must be made within a maximum of how many days of termination from the group coverage?

60

Joyce applies for a health insurance policy. When the agent delivers the policy to Joyce, an additional premium is required to account for Joyce's medical conditions. Joyce must agree to pay the additional premium before the policy is effective. The insurer has made:

A counter-offer

An example of an unfair claim settlement practice would include:

Advising a claimant of the possibility that, should the claimant reject a settlement offer, an arbitration award might be less than the offer

LMO Insurer is incorporated in New Hampshire, conducts business in all of the eastern seaboard states and in Germany. How is LMO Insurer classified in Germany?

Alien

What is business life insurance used for?

An employee benefit, a funding tool and , business interruption assistance.

A life insurance policy is considered replaced if:

An existing life insurance policy is lapsed, forfeited, surrendered or terminated, Converted to reduced paid-up insurance, and Reissued with a reduction in cash value

Defamation occurs when:

An individual or entity makes false, derogatory statements about an insurer's financial condition that are calculated to injure the insurer's business

An alien insurer is:

An insurance company conducting business in a foreign country

A foreign insurer is:

An insurance company conducting business in a state in which it wasn't incorporated

A domestic insurer is:

An insurance company conducting business in the state in which it is incorporated

Both the producer and the ___________ are required to sign the insurance application.

Applicant

Which of the following is the primary source of information used in underwriting an insurance policy?

Application

Anna applied for a $1 million life insurance policy and paid the first premium. Later she was declared uninsurable. Her agent gave her a receipt that guarantees coverage until the insurer formally rejects the application. Which type of receipt did Anna receive?

Binding

What type of group plan requires 75% participation?

contributory.

Saul wants to sell variable life insurance products. Which license(s) must he hold?

Life and variable products and securities licenses

Margaret makes a change to her health insurance application after completing it. Who must initial her change and sign the contract?

Margaret and the agent

Marge and Ben purchase a comprehensive major medical policy to cover their family. Who is required to sign the application?

Marge and Ben

Part II of the life insurance application includes:

Medical Info

Leo, a producer, sat down with a prospective client to discuss a long-term care policy. He used a computer program to outline and emphasize his remarks. The visual presentation contained the principal benefits of the policy he was trying to sell. Although he mentioned that it also had, the usual, conditions, he did not include those in his visual presentation or specify what they were. The producer was engaging in:

Misrepresentation

Which of the following is not used to calculate the premium for life insurance contracts?

Morbidity

Which of the following would not be used to determine the premium rate for a life insurance policy?

Morbidity

Net single premium is:

Mortality - Interest

Which of the following best describes the tool underwriters use to determine the rate at which a group of people die?

Mortality Table

What type of group plan requires 75% participation?

Must have 100% participation

Contributory plans:

Must have 75% participation

The ____________ approach calculates the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities.

Needs

What type of group plan requires 100% participation?

Noncontributary

Stock insurers are also called:

Nonparticipating

Which of the following best describes the MIB?

Nonprofit trade organization that supplies insurability information to member companies

All of the following are the insurance producer's duties with respect to life insurance policy replacement, EXCEPT:

Notify insurers of policies to be replaced, and if requested, provide insurers with the policy comparison statement

What are the basic elements of a legal contract?

Offer, acceptance, consideration, competent parties and legal purpose

Martin pays his policy premiums on a monthly basis. Which of the following terms best describes the frequency that Martin pays his premiums?

Premium payment mode

In the underwriting of insurance policies, some amount of discrimination is:

Present in many cases, because of differing levels of risk

Which of the following is NOT considered to be an unfair claims settlement practice?

Replacing one insurance policy with another

Which of the following terms best describes the applicant's statements on an insurance application?

Representations

All of the following, if performed frequently enough to indicate a general business practice, are unfair claims settlement practices, EXCEPT:

Requiring submission of preliminary claim report or a formal proof of loss before paying a claim.

Insurable interest requires that an individual have a valid concern for the well being of the person insured. In a life policy insurable interest can be present in all of the following, EXCEPT:

Second cousins

Serena dies 15 days after her group life insurance coverage is terminated. She did not apply for individual coverage. Which of the following is true?

Serena's beneficiary will receive the full death benefit.

Rates for insurance policies are based on:

Sex and age

Stock insurers pay dividends to:

Shareholders

Which of the following best describes a life insurance policy in which the proposed insured is not required to undergo a medical examination?

Simplified issue

Reinsurance is defined as:

Spreading risk from one insurer to another

The agent may be required to collect a _______ from the policyowner upon policy delivery.

Statement of good health

This employee of the insurer assigns risk categories to applicants

The Underwriter

What must an insurer have to be admitted?

Certificate of authority

All parties to a contract must be of a legal age, mentally capable of understanding the terms of the contract, and not influenced by drugs or alcohol. Which of the following elements of a legal contract is described?

Competent Parties

What type contract is said to be, if...then?

Conditional

Which of the following statements is false regarding the conversion option for group life insurance policies?

Converted coverage may be term or whole life, depending on the needs of the insured.

Judith is injured in a car accident. She incurs a covered loss of $50,000. She is required to pay $3,000 before the insurer will cover 80% of the covered loss. Which of the following terms best describes the $3,000 Judith must pay?

Deductable

In life insurance the risk of death increases with age, so premiums must be ______ in ______ years to account for this risk.

Higher; Later

David signs an application for a $50,000 life policy, pays the initial premium, and receives a conditional receipt. If he were killed in an automobile accident one day later:

His beneficiary would receive $50,000, if the application qualified him for the policy for which he applied.

The ___________ approach calculates the amount of money a person is expected to earn over their lifetime to determine the face amount of life insurance needed, thereby placing a dollar value on the life of an individual.

Human life value

Insurance contracts are conditional. Which of the following would be a characteristic of a conditional contract?

If a loss occurs, then the insurance company will pay benefits.

Which document contains information about the nonguaranteed elements of a life insurance policy?

Illustrations

Which of the following is not included in a policy summary for life insurance?

Illustrations

Coverage begins on the application date or date of medical exam for which of the following?

Insurability receipt

Which of the following correctly describes the law of large numbers?

It states that as a group's size increases, it is easier to predict the number of future losses over a specific time period.

Jacob has been insured under his employer-sponsored group life insurance plan for seven years. He becomes totally disabled upon termination of his group coverage. Which of the following is true?

Jacob must be permitted to continue group coverage for six months.

In order to be valid, a contract must have:

Legal Purpose