Life Insurance Policy Comparison and Underwriting 3rd ed

the level premium concept may be applied to all of the following policies except

annual renewable term insurance

when a 20-year term policy is issued, the annual premium will

be the same each year

what will an underwriter do with a substandard risk

charge an additional premium but accept the risk

an applicant may be rejected simply on the basis of an MIB report

false

which of the following settlement options may not be used to guarantee some for of lifetime benefit payments to a beneficiary

fixed amount

which of the following is not one of the reasons an insured might find flexible life insurance policies more attractive than traditional policies

flexible policies may offer better guaranteed rates than traditional policies

when underwriting a risk

hobbies and occupational activities are sometimes of greater concern to an underwriter than occupational exposures

which of the following information is usually not contained in the agent's statement that is submitted to an underwriter with an application for life insurance

information about the applicant's medical history and records

which of the following is least likely to be asked of an applicant for life insurance

information on the age and medical conditons of the spouse

premiums for whole life policies are

level and guaranteed for the life of the contract

charging a higher premium initially, which exceeds the amount needed to cover the cost of mortality, in order to offset the growing cost of mortality in later years, is a technique used to support which concept

level premiums

what type of term policy would best be used to provide a contingency fund of a specified size if the insured should die during the term period

level term life insurance

how does an insurance company determine it's loss ratio for a given year

loss experience divided by total premiums received

the primary disadvantage of annual renewable term is

prohibitively high premiums over time

which component of family protection policies are valid for most families today

small amounts of insurance to cover funeral expenses for children

premiums charged under a whole life policy

stay the same each year

the basic principle of the law of large numbers is that the greater the spead of risk, the more predictable losses become, and the greater the premium base

the more affordable the insurance becomes

which of the following statements about death rates is false

the mortality rate for males increases with age for every age between 0 and 100

in order to be eligible to take out a life insurance policy

the policyowner must have an insurable interest in the life of the insured

how would the premiums and cash values of a 20-pay life policy compare to a whole life policy

the premiums and cash values will be higher

under a graded benefit policy

the premiums stay the same but the benefits change

statistically the insurance industry assumes that the longest any individual will live is age

100

the maximum age shown in the commissioners standard ordinary table is

100

the exposure unit used to quote and apply life insurance rates is

1000 of insurance face value

the suicide exclusion is generally in place for

2 years

replacement transactions are

highly regulated but not illegal

today, more underwriting attention is focused on the applicant's

hobbies

whole life policies provide

a permanent and decreasing amount of insurance protection

which type of rider pays an additional benefit for accidental death and also pays full or partial benefit for loss of limbs and or sight

accidental death or dismemberment rider

the thing that distinguishes whole life policies from term policies is that only whole life products have

accumulating cash value

what type of insurance policy allows an insured to change the nature of protection from term coverage to whole life and to make changes in the amount of the premium and face value

adjustable life insurance

the tendency of those who have a greater risk of loss to apply for and obtain insurance is

adverse selection

the difference between the extended term payment and the reduced paid-up non-forfeiture option is that

an extended term option provides a temporary policy with the same face value as the original policy, while the reduced paid up option provides a permanent policy with a lesser face amount

a return of premium rider is actually

an increasing term policy added on to a whole life policy

living need riders provide benefits that

are designed to improve the quality of life for a terminally ill insured

the formulas that determine non-forfeiture values of life insurance

are determined by state law

pure endowments

are hardly ever sold

when might an agent be required to provide a notice of insurance information practices

as part of the application process

after carlos's application, the insurance company discovers that carlos has been diagnosed with a heart condition that makes him ineligible for insurance with that company. regardless, when the death claim is filed, the company pays the full death benefit, what sort of receipt did he receive

binding receipt

what type of receipt is used less frequently

binding receipt

the death benefit in life insurance

continues to play a major role in the life in life insurance sales presentations and purchase decisions

the type of policy that may be changed from term to permanent without evidence of insurability is

convertible term insurance

what type of policy would best be used to provide life insurance to cover time-sensitive obligations which are being partially satisfied each year that the insurer continues to live

decreasing term insurance

which type of rider pays an additional death benefit if the insured's death is caused purely by accident

double indemnity rider

the option that gives the insured the right to purchase additional amounts of insurance in the future is the

guaranteed insurability option

if a beneficiary selects a settlement option and later wishes to withdraw a lump sum in excess of the regular scheduled payments

he or she will probably be able to make use of the withdrawal provision to make the withdrawal

if the beneficiary selects a settlement option and later wishes to withdraw a lump sum in excess of the regular scheduled payments

he or she will probably be able to make use of the withdrawal provision to make the withdrawal

ordinary life insurance includes

individual policies

waiver of premium benefits are usually

inexpensive

which of the following is not a component of general overhead expense loading that may be included in the expense portion of a life insurance rate

interest

when an agent is able to collect the initial premium with the application of insurance, the policy

is more likely to be accepted

policy delivery

is necessary to complete the life insurance application

when purchasing small amounts of insurance for other family members

it is often more advantageous to use riders rather than to purchase separate policies

which life insurance settlement option would be most appropriate for providing a guaranteed lifetime income for both a husband and wife that are retired

joint and survivor

which of the following is not part of the expense loading for term insurance

mortality costs

for term insurance, the components of a life insurance rate are

mortality expenses, company expenses and interest income

components of term insurance premiums include

mortality, loading for expenses and interest

waiver pf premium, disability income and dismemberment benefits are examples of

non-life insurance benefits

the exposure base used to reflect the life insurance mortality tables is the

number of deaths in 1,000 population

who has the authority to change an insurance policy

only the officer of the insurer

non-insurance elements would include all of the following except

policy proceeds

which type of rider pays an additional health benefit equal to the policy premiums paid before death

return of premium rider

whole life policies are one of the

safest forms of insurance protection

which of the following is a function of underwriting

selecting and classifying risks

if an insurance company has a combined ratio of 105% for a particular period of time, has that company earned a profit or suffered a loss

suffered a loss

mortality is the greatest factor in the rate for

term insurance

the primary sales proposal should focus on

the applicant's unmet needs

if a beneficiary wants to use a uniquely structured settlement option that hasn't been used before

the insurance company will probably allow it, as long as the special arrangement is the actuarial equivalent of the other options available

if an insured dies while a policy loan is outstanding under a whole life policy

the insurer will pay the policy proceeds until the loan and any outstanding interest is paid back

Diane has a participating life insurance policy and has elected to have her dividends accumulate and earn interest she decides she wants to withdraw all of the money the insurer has been holding in the dividend account, Diane will pay taxes on

the interest earned, but not the dividends themselves

when living benefits or long term care benefits are attached to a life insurance policy

the proceeds payable upon the death of the insured will be increased by the amount paid out in living need benefits

with a fixed index universal life insurance policy, which is not correct

the product is subject to SEC regulation

when a state consumer protection law is stricter than a federal law

the state law will supersede the federal law

which type of life insurance offers the option of having a level death benefit or a death benefit equal to the original face value plus the increasing amount

universal life insurance

life insurance never takes effect

until the initial premium has been paid

if you wished to purchase a life insurance policy that would keep pace with inflation by making use of equity investments, which contract would you purchase

variable life insurance

which life insurance products are subject to SEC and FINRA regulation as well as regulation by state insurance departments

variable life insurance

when are medical examinations likely to be required with an application for insurance

when the amount of the insurance is large

when are medical examinations usually not required with an application for insurance

when the amount of the insurance is small

when might a life insurance company require that the proceeds must be paid as a lump sum

when the benefits payable to any one person are less than a specified minimum amount

when might a life insurance company require that the proceeds must be paid as a lump sum

when the benefits payable to any one person are less than a specified minimum payment

the cost of insurance protection goes down

when the interest rate is taken into account

a policyowner must select a dividend option

when the policy is put in place and may change the option annually

when would a lump sum settlement not be appropriate option for life insurance policy proceeds

when the purpose of the insurance is to supplement living expenses for survivors over several years

under the interest only option, the interest rate paid to the beneficiary

will usually be no less than what is listed in the contract

which of the following is least likely to increase the premium paid for life insurance

working as a file clerk in an office