Types of Insurance Compa

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All of these statements correctly describe an aleatory

Only one party makes any kind of legally enforceable offer.

When would evidence of insurability be required for a person already covered with a variable universal life policy?

When the death benefit is increased

At what point are death proceeds paid in a joint life insurance policy?

When the first insured dies

What is a juvenile life insurance policy?

a life policy that covers the life of a minor

Under the law of agency. The principal is considered to be

the producer

A material change in a modified endowment contract (MEC) results in

the seven pay test, adjusted for cash value, applies again

How does a continuous premium whole life policy differ from a limited payment whole life policy?

the time period in which premiums will be paid

Which of these is NOT a reason to buy a term life policy?

to accumulate savings

How long does protection normally extend under a limited pay whole life policy?

until age 100

An insurance policy that can also be classified as a securities product is called

variable life insurance

Which type of life insurance policy allows a policyowner the choice of investments along with flexible premium payments?

variable universal life

An insurance company's failure to enforce a contract's provision is called a(n)

waiver

Giving up a known right on a voluntary basis is called a(n)

waiver

During the application process a statement made by an applicant that becomes part the contract is considered to be a(n)

warranty

A contract is considered void in all the following situations except

when consideration is unequal

An insurance company can be liable for a producers unauthorized acts

when the agency contract is unclear concerning the authority given

Which statement regarding universal life insurance is correct?

Additional premiums may be required under certain conditions

A survivorship life insurance policy usually covers how many lives?

2

Which situation would not require the insured's consent when life insurance policy issued

A policy is purchased by a parent for a minor child

A producer working for insurance company may be personally liable for

Acts performed which are prohibited in the agency contract

Insurance is NOT characterized as which of the following

As the number of insureds increases the number of of losses decreases

Insurance is not characterized as which of the following

As the number of insureds increases the number of of losses decreases

Which of these statements regarding insurance is false

As the number of units increases, the number of losses decreases

Which of these is true regarding the exchange of consideration among parties involved in an insurance contract

Can be unequal

An insurance application requires an applicant to make a full accurate disclosure of the risk factor involved. Using this criteria, an insurance policy is considered what type of contract?

Contract of utmost good faith

Which of the following situations would an insurance agent need to guard against liability for professional errors and omissions

Making a recommendation to a potential insured to replace existing coverage

Which of the following relationships demonstrate insurable interest in the absence of economic interest

Marriage partners.

Greg applies for insurance and makes a false statement on the application that will influence whether or not the insurer will accept the risk gregs false statement is called a(n)

Material misrepresentation

Insurable interest involves what assumption

One person benefits from the continuation of another's life

According to the law of large numbers, how would losses be affected in the number of similar insured units increase

Predictability of losses will be improved

Which of the following outlines the authority given to the producer on behalf of the insurer

Producer contract.

Which of the following would NOT be a reason for purchasing life insurance on a child's life?

Provide benefits for the child if the parent dies

Which of these statements is NOT a characteristic of the law of large numbers

Rates can be calculated to compensate for losses

Ambiguities in insurance contracts are typically interpreted in favor of the insured. The rule is referred to as

Reasonable expectations

An insured is entitled to coverage under a policy that a prudent person would expect it to provide. The principle is called

Reasonable expectations

A(n) ___ insurer assumes risk from another insurance company

Reinsurance

An insurer has a contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual arrangement is this

Reinsurance

Statement made by an insured on an accident and health insurance application are consideration

Representations

What is the insurance responsible for when a producer is acting within the scope of authority granted in the agency contract

Responsible for acts by the producer that are authority only

A group-owned insurance company that is formed to assume and spread the liability risk of its members is known as a

Risk Retention Group

When a producer acts within the scope of his/her contractual authority, which of the following is legally responsible for these actions

The Insurer

Type of insurance policies

Type of insurance policies

An agent's authority to bind an insurer to an insurance contract may be granted in the

an agents contract and the insurance company's appointment

A reciprocal insurer typically has an administrator who manages the premiums collected from the group's members. The administrator is called A(n)

attorney-in-fact

Voluntarily terminating an insurance policy is also known

cancellation

A(n) ___ agent is an insurance agent who represents only one insurance company

captive

Which of the following types of insurers limits the exposures it writes to those of its owners

captive insurer

The payment of the first premium, the promise to pay a covered loss and the agreement to abide by policy conditions are all examples of

consideration

The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a(n)

contract of adhesion

An agreement is reached when an insurance contract is formed. Which of the following is not considered to be an element of an agreement

equity

The powers directly given to a producer in an agency contract are called

express

An appointed producer implied authority is derived from

express authority

When a ceding insurer transfers a portion of its risk to an assuming insurer on a case basis, this process is referred to as

facultative reinsurance

The unwritten authority given to a producer to carry out necessary incidental acts of the agency agreement is called

implied authority

XYZ insurance company gives a direct authority to its producers to sell insurance through an agency contract, but nothing is stated regarding the collection of premiums. Which authority grants the producer the right to collect premiums

implied authority

When must insurable interest exist for a life insurance contract to be valid

inception of the contract

A(n) ___ agent may represent several insurers

independent

legal concepts

legal concepts

Risk __ is the process of analyzing exposures that create risk and designing programs to handle them

management

An insurance contract may be voided if a misrepresentation found on the application is determined to be

material

An agent whose actions exceed the authority granted by contract is

not backed by the insurer

Which of the following is NOT an example of risk retention

not doing a business deal after deciding it would be too risky

Which of the following is an unincorporated association whose members provide coverage for one another

reciprocal

Which of the following describes the act of insuring a risk against possible loss

risk transfer

Assets that back the non-guaranteed values of variable life insurance products are held in which account?

separate account set up by the insurer

Dividends from a stock insurance company are normally sent to

shareholders

A stock insurance is owned by its

shareholders.

Which of these policies is considered a whole life policy?

single premium life

Which of the following would not have a restricted ability to enter into a contract

small employees

What type of risk involves the potential for loss AND the possibility for gain?

speculative risk

Which one of these is NOT considered to be an element of insurable risk

speculative risk

Which statement concerning adjustable life insurance is accurate?

the face amount and premiums can be changed simultaneously by the policyowner

all of these statement concerning group credit life insurance are false except

the face amount is based on the outstanding loan balance

What would be considered an advantage of purchasing term life insurance

the initial premium is lower compared to an equivalent amount of whole life coverage

A business becoming incorporated is an example of risk

transfer

A hold-harmless claude is an example of

transfer

Which of the following involves sharing an uncertain risk within another similar group

transfer

Purchasing insurance is an example of risk

transference

Which reinsurance contract between two insurers involves an automatic sharing of the risk assumed

treaty reinsurance

Which statement concerning a decreasing term life policy is accurate?

Face amount decreases over the policy period

What type of risk involves the potential for loss with no possibility for gain

pure

Which of the following types of risk is insurable

pure

ABC company is attempting to minimize the severity of potential losses within its company. The company is engaged in risk

reduction

Which of the following is not an objective of the National association of insurance commissioners

regulate state insurance commissioners.

How can an insurance company minimize exposure to loss?

reinsuring risk

What is the accounting measurement of an insurance company's future obligations to it policyowners

reserves

Which statement regarding whole life insurance is accurate?

Insurance coverage can continue for life

Which of the following statements about universal life insurance is NOT true?

Universal life insurance normally has a minimum guaranteed cash value for duration of the policy

A nonparticipating whole life insurance policy was surrendered for its $20,000 cash value. The total premiums paid had totaled $16,000. What were the federal income tax consequences to the policy owner on receipt of the cash value?

$16,000 was received tax-free and $4,000 as ordinary income

A "premature" distribution from a modified endowment contract (MEC) incurs a penalty tax of

10%

John received a one-time distribution of $50,000 from his modified endowment contract (MEC). Prior to that, the contract's cash value was $150,000, the contract investment amount was $100,000, and the death benefit was $500,000. What percentage of the $50,000 distribution was taxable as ordinary income?

100%

Which type of life insurance policy is best suited for paying off the outstanding balance of a 30-year mortgage in the event of the insured's death?

30 year decreasing term

Which of these is NOT an advantage of term life insurance?

A cash benefit will be produced if the insured is alive at the end of the policy period

Which is an accurate description of the premium in a grade premium life insurance policy?

Annual increases in premium for a stated number of years then remains level.

the following are all elements of valid contract except

Answer written evidence

When does the insured stop making payments under a thirty-payment whole life policy?

At the time of death or 30 years after the policy's inception, whichever comes first

Which statement regarding universal life insurance is correct?

Cash value accumulations have a guaranteed minimum interest rate

What kind of life policy typically offers mortgage protection?

Decreasing term

Which of these is NOT considered a type of limited payment whole life insurance?

Endowment at age 70

Rick owns a variable universal life policy and chooses a variable death benefit option. What will typically happen to the death benefit as a result of this selection?

Fluctuate with changes in the cash account

How long does one premium payment cover in a single premium whole life policy?

Full life of the policy

Which of the following is a TRUE statement regarding universal life insurance?

Policy indicates how much of each premium is used toward company expenses

Which statement regarding an adjustable life insurance policy is NOT true?

Policy loans are not permitted

Straight whole life insurance can be accurately described in all of these statements EXCEPT

Policy protection normally expires at age 65

Which of the following could be a future use of the cash value that builds in a recently-purchased whole life insurance policy?

Provide supplemental income in 35 years

How does the cost for a survivorship life policy compare to the cost of combining two separate life insurance policies?

Survivorship life policy is lower

Which of these must be disclosed in a universal life policy?

The policy's surrender charges

What is the face amount of a $50,000 graded death benefit life insurance policy when the policy is issued?

Under $50,000 initially, but increases over time

An individual who purchases a modified life insurance policy expects

an improvement in future income

what qualifies as acceptance of an insurance contract offer

an issued policy

Use of XYZ insurance company brochures, business cards and rating guides is an example of

apparent authority

Who normally pays the premiums for group credit life insurance?

borrower

Which of the following is generally a form of group credit life insurance?

decreasing term insurance

Which of these life insurance policies does NOT contain a cash value provision?

decreasing term life

Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This attached agreements is called a(n)

endorsement

Which statement concerning an adjustable life insurance policy is FALSE?

evidence of insurability is required when there is a change in premium

Which of these may NOT be deducted from premium payments or the cash value of a variable insurance policy?

federal premium taxes

Which of the following combinations best describe a universal life insurance policy?

flexible premium deposit fund and a monthly renewable term insurance policy

A condition that increases the possibility of financial loss is called a(n)

hazard

For insurance purposes, similar objects which are exposed to the same group of perils are referred to as

homogeneous exposure units

A policy owner has just borrowed from a life insurance policy's cash value. Which of these statements is true?

in the event of death, the loan amount is deducted from the policy proceeds

What happens when an initial offer is answered with a counteroffer

initial offer is voided

In what way are insurance policies said to be aletory

involves the potential for the unequal exchange of value

What type of life insurance policy covers two or more persons and pays the face amount upon the death of the first insured?

joint

The death proceeds of a credit life insurance policy are typically paid to the

lender

What is the guaranteed cash value of a whole life insurance policy when the insured turns 65 years old?

less than the policy's face amount

What type of premiums are associated with individual mortgage protection life insurance policies?

level premiums

Laura added a children's rider to her life insurance policy. What type of coverage was added?

level term

Which of the following financial products creates an instant estate, no matter when the date of death.

life insurance

which of the following is a syndicate established by a group of insurers to share underwriting duties

lloyds organization

Which of these do not indicate the presence of insurable interest in a life insurance contract

long-life friendship

A life policy that has premiums that are lower than normal during the early years is called

modified life

The insurer's obligation to pay a claim depends on whether the insured or beneficiary has complied with all the policy conditions. This makes the policy a(n)

offer

Which element of a contract constitutes a definite and unqualified proposal by one party to another?

offer

These are accurate statements regarding universal life insurance

policy are not permitted

Which of these statements accurately portrays an adjustable life insurance policy?

policy can alternate between form of term and whole life insurance

Which action will trigger a penalty tax on premature distributions from a modified endowment contract (MEC)?

policy loans

Dividends from a mutual insurance company are paid to whom

policyholders

Which of the following can be accurately described as participating insurance policy

policyowners may be entitled to receive dividends

What typically changes at the re-entry option date found in some term life policies?

premium

How are level term policies able to provide level premiums?

premium are average over the term of the policy

which of the following can be defined as the potential for loss

risk

Which term describes the elimination of a hazard?

risk avoidance

Who regulates an insurer's claim settlement practices?

state insurance department

Which group is the DO NOT call registry designed to protect against

telemarketing calls

When a ten year renewable term life insurance policy issued at age 45 is renewed, the premium rate will be the current rate for

ten year term insurance for a person aged 55

An insurable risk requires

that the chance of loss be calculable

Taxable income may be the result from all of these modified endowment contract (MEC) transactions EXCEPT for

the Policy is surrendered for less than what was paid into it

An arrangement where an individual is authorized to act on behalf of another person or company is established through

the law of agency

Under an adjustable life insurance policy, which of the following may NOT be changed without further underwriting?

the person insured

An advantage of owning a flexible premium life insurance policy would be

the policy owner can make policy changes without difficulty


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