*****CA Life and Health chapter 3 Life Insurance Basics multiple choice

The price of insurance for each exposure unit is known as A) Rate B) Consideration C) Insurable interest D) Premium

A) Rate

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

A) Applicant's past income

If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? A) 7 days B) 10 days C) 3 days D) 5 days

D) 5 days

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) Buy-sell agreement

If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's A) Ancestry B) Credit history C) Habits D) Prior insurance

A) Ancestry

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? A) Revocation of license B) $2500 C) $1000 D) $100 per violation

B) $2500

Which is the primary source of information used for insurance underwriting? A) Medical records B) Private investigations C) Application D) Applicant interviews

C) Application

Which of the following is a risk classification used by underwriters for life insurance? A) Poor B) Normal C) Excellent D) Standard

D) Standard

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit is denied? A) Material misrepresentation B) Waiver C) Utmost Good Faith D) Estoppel

A) Material misrepresentation

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) The date of the medical exam

What is the purpose of a disclosure statement in life insurance policies? A) To explain features and benefits of a proposed policy to the consumer B) To obtain underwriting information from the applicant C) To help consumers compare policy prices D) To protect agents and insurers against lawsuits

A) To explain features and benefits of a proposed policy to the consumer

The title page of the policy provides a summary of the benefits and coverage provided by the policy. All of the following information is included in the title page EXCEPT A) The premium amount and model B) The effective date and the termination date of the policy C) The insured's beneficiaries D) Type of policy, amount of coverage provided

C) The insured's beneficiaries

Another name for a substandard risk classification is A) Controlled B) Declined C) Elevated D) Rated

D) Rated

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) Costs of training a replacement

Attempting to determine how much insurance an individual would require based on their financial objectives is known as A) Needs approach B) Human life value approach C) Estate planning D) Viatical approach

A) Needs approach

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of A) Third-party ownership B) A STOLI Policy C) A prearranged funeral plan D) A viatical settlement

B) A STOLI Policy

According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT A) Failure to pay off a loan B) Disputes regarding consumer report information C) Tax delinquencies D) Late payments

B) Disputes regarding consumer report information

The Federal Fair Credit Reporting Act A) Prevents money laundering B) Regulates consumer reports C) Protects consumer privacy D) Regulates telemarketing

B) Regulates consumer reports

If found a material for underwriting, a misrepresentation A) Does not affect either of the parties B) Must have been in writing to affect a contract C) Can void a contract d) May be withdrawn

C) Can avoid a contract

Which of the following must be disclosed in all advertisements and policies of term life insurance for individuals 55 years of age or older? A) MIB report B) Life insurance policy illustrations C) Insurance monetary value index D) Life insurance surrender cost index

C) Insurance monetary value index

The mode of premium payment A) Is the factor that determines the amount of dividends in a policy B) Is the method used to compute the cash surrender value of the policy C) Does not affect the amount of premium paid D) Is defined as the frequency and the amount of the premium payment

D) Is defined as the frequency and the amount of the premium payment

Which of the following is NOT required on an illustration used in the sale of insurance policy? A) Generic name of policy B) Name of insurer C) Underwriting or rating classification upon which the illustration is based D) The name of the primary and secondary beneficiaries

D) The name of the primary and secondary beneficiaries

What is the purpose of the buyer's guide? A) To provide the name and address of the agent/ producer issuing the policy B) To list all policy riders C) To provide information about the issued policy D) To allow the consumer to compare the costs of different policies

D) To allow the consumer to compare the costs of different policies

What describes the specific information about a policy? A) illustrations B) Buyer's guide C) Producer's report D) Policy summary

D) policy summary

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) Other insurance coverages

Which of the following would be covered by contract law? A) An employer suing an employee for spreading damaging rumors B) An insured suing the insurer for failure to provide promised benefits C) A consumer suing the manufacturer for a defective product D) Neighbors suing each other for trespassing

B) An insured suing the insurer for failure to provide promised benefits

Which of the following is NOT a type of Temporary Insuring Agreement? A) 30-day Interim Receipt B) Bridge Coverage Receipt C) Conditional Receipt D) Acceptance Form of Receipt

B) Bridge Coverage Receipt

In regard to life insurance contract, the temporary term is A) An initial policy put in effect until a permanent policy can be put into effect B) The period of time during which a binding receipt covers a policyholder C) The policy issed by a producer with a temporary license D) The short-term benefits policy

B) The period of time during which a binding receipt covers a policyholder

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 the beneficiary of the policy

B) The plan is funded by permanent insurance only

A policy available to business owners that provides payment for normal business expenses in the event that the owner is disabled is called A) Partial disability B) Recurrent disability C) business overhead expense D) credit accident and health coverage

C) business overhead expense

Which of the following is true regarding written binders? A) Both the applicant and insurer can write a binder B) Binders serve as a receipt that the insurer is processing the application. No coverage applies C) Binders prove that the insured has insurance coverage, even though the policy has not been issued yet D) Binders apply only to Life insurance

C) Binders prove that the insured has insurance coverage, even though the policy has not been issued yet

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to A) Lower its insurability standards B) Refuse to issue the policy C) Charge a higher premium D) Require a yearly medical examination

C) Charge a higher premium

Who makes up the Medical Information Bureau? A) Former insured B) Physicians and paramedics C) Insurers D) Hospitals

C) Insurers

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

C) Standard risk is representative of the majority of people

In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? A) They provide information about a customer's character and reputation B) The customer has no knowledge of this action C) The customer's associations, friends, and neighbors provide the report's data D) They provide additional information from an outside source about a particular risk

C) The customer's associations, friends, and neighbors provide the report's data

If an insurer requires a medical examination of an applicant in connection with the application of life insurance, who is responsible for paying the cost of the examination? A) The examiner B) The applicant C) The insurer D) The cost of the examination will be waived

C) The insurer

Under what circumstances would a life insurance contract qualify as a "standard policy"? A) When it conforms to the NAIC Model Illustration requirements B) When it contains ALL of the essential elements of an insurance contract, as described in the Model Insurance Code C) Under no circumstances D) When it meets the guidelines established by the Commissioner, as described in the Model Policy Article of the California Insurance Code

C) Under no circumstances

Insurance policy is A) A statements of insurable interest B) A verbal or written agreement between two parties to transfer risk C) Any method used to transfer or avoid catastrophic risk D) A written instrument in which a contract of insurance is set forth

D) A written instrument in which a contract of insurance is set forth

The process of "post-selection" refers to which of the following? A) An applicant is choosing an insurance company B) An agent is conducting a second interview with an applicant C) An agent is completing and submitting an application D) An insurer is investigating the client's risk profile

D) An insurer is investigating the client's risk profile

Which of the following would qualify as an implied warranty in an insurance contract? A) The applicant's signature B) Contract's legal purpose C) Statements in the policy D) An oral representation by the applicant

D) An oral representation by the applicant

An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information? A) Interviews B) State records C) Medical records D) Application

D) Application

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT A) Draw a line through the first answer, record the correct answer, and have the applicant initial the change B) Note on the application the reason for the change C) Destroy the application and complete a new one D) Erase the incorrect answer and record the correct answer

D) Erase the incorrect answer and record the correct answer

What is the advantage of the temporary Insuring Agreement to the applicant? A) It locks in the rate quoted by the agent B) It provides immediate coverage if no money was paid with the application C) It guarantees that the insurance company will issue the policy as applied for D) It gives the applicant immediate coverage

D) It gives the applicant immediate coverage

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in an consumer report A) Are entitled to obtain a copy of the report from the party who ordered it B) Must be advised that a copy of the report is available to anyone who requests it C) May sue the reporting agency in order to get inaccurate data corrected D) Must be informed of the source of the report

D) Must be informed of the source of the report

Which of the following is true regarding an application for a large amount of insurance? A) The insurer will accept a non-medical application B) The applicant must submit a statement of good health C) The agent, and not the applicant, will complete all of the medical information D) The agent might require a medical examination by a professional

D) The agent might require a medical examination by a professional

The responsibility of making certain that an application for insurance is filled out completely, correctly, and to the best of his or her knowledge is the responsibility of whom? A) The beneficiary of the applicant B) The insurance company C) The applicant D) The producer

D) The producer

Why should the producer personally deliver the policy when the first premium has already been paid? A) to ensure the producer gets paid commission B) to find out how the family has as been doing since true initial presentation C) to make sure the policy is not stolen or lost D) to help the insured understand all aspects of the contract

D) to help the insured understand all aspects of the contract

Which of the following types of insurance policies would perform the function of cash accumulation? A) Term life B) Credit life C) increasing term D) whole life

D) whole life

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium? A) It will likely be higher because the applicant is a substandard risk B) It will likely be the average premium issued to standard risks C) The applicant's habits and health do not affect the premiums D) It will likely be lower because the applicant is a preferred risk

A) It will likely be higher because the applicant is a substandard risk

Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives A) medical information B) inspection report C) agent's report D) general information

A) Medical information

Which of the following would be included in a policy summary? A) Premium amounts and surrender values B) Copies of illustrations and application C) Comparisons with similar policies D) Primary and secondary beneficiary designations

A) Premium amounts and surrender values

Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must A) Respond to the consumer's complaint B) Defend the report if the agency feels it is accurate C) Change the report D) Send an actual certified copy of the entire report to the consumer

A) Respond to the consumer's complaint

A producer agent must do all of the following when delivering a new policy 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) disclose commissions earned from the sale of the policy

Which of the following is the basic source of information used by the company in the risk selection process? A) Consumer report B) Application C) Agent's report D) Warranty

B) Application

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? A) Effect on 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) Predicted needs of the family after the insured's death

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? A) Agent's report B) Any federal report C) Consumer report D) Inspection report

C) Consumer report

If an insured changes his payment plan from monthly to annually, what happens to the total premium? A) Doubles B) Increases C) Decreases D) Stays the same

C) Decreases

Each of the following factors are used in determining insurance rates EXCEPT A) Mortality B) Expenses C) Dividends D) Interest

C) Dividends

All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT A) Gender B) Occupation C) Education D) Age

C) Education

An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company? A) Conditional receipt B) Disclosure rule C) Fair credit reporting act D) Consumer privacy act

C) Fair credit reporting act

What is the term used when a person sells his assets as a way to gain money? A) Commerce B) Transfer C) Liquidation D) Buy-sell

C) Liquidation

Which of the following is NOT a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach? A) Mortgages B) Expenses C) Estimated longevity D) Outstanding debt

C) estimated longevity

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation? A) Blackout approach B) Lump-sum approach C) Human life value approach D) Needs approach

C) Human life value approach

Which of the following CANNOT be included with illustrations used to sell life insurance? A) Vanishing premium information B) Name of the insurer C) Rating information D) Original death benefit

A) Vanishing premium information

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

B) The cash value available to the policyowner

Who is the owner and who is the beneficiary on a Key Person LIfe Insurance policy? A) The key employee is the owner and the employer is the beneficicary B) The employer is the owner and the beneficiary C) The employer is the owner and the key employee is the beneficiary D) The key employee is the owner and beneficiary

B) The employer is the owner and the beneficiary

What is the purpose of key person insurance? A) To maintain an account that insures the owner of a company remains solvent B) To lessen risk of financial loss because of the death of a key employee C) To provide health insurance to the families of key employees D) To insure retirement benefits are available to all key employees

B) To lessen risk of financial loss because of the death of a key employee

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? A) When the agent submits the application to the company and the company issues a conditional receipt B) When the 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) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health

In the event of a loss, business overhead insurance will pay for A) Salary of the business owner B) Medical bills of the business owner C) Rent D) Loss of profits

C) Rent

Written binders provide insurance before the policy is actually issued. The time period between the issuance of the binder and the policy's effective date is called A) Binding period B) Interim period C) Temporary term D) Grace period

C) Temporary term

An insurer's liability shall be limited to A) The amount of annual renewable term insurance that could have been purchased by the insured through the insurer with the available premium dollars B) The total amount of insurance coverage for which the licensed agent represented to the client on a policy illustration during the sales process C) The face amount of an individual insurance policy, subject to any exclusions and riders as applicable, minus any outstanding policy loans and interest payments due to the insurer D) The face amount of an individual insurance policy as written

C) The face amount of an individual insurance policy, subject to any exclusions and riders as applicable, minus any outstanding policy loans and interest payments due to the insurer

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

C) The policy is owned by the company

Which of the following information about the applicant is NOT included in the General Information section of the application for insurance A) Gender B) Occupation C) Marital status D) Medical background

D) Medical background

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

D) Premiums are not tax deductible as a business expense

A life insurance policy can be delivered by all of the following means, EXCEPT A) First class mail with a delivery receipt B) Personal delivery by a trained employee of the insurer, with a delivery receipt C) Certified mail D) Priority mail

D) Priority mail

What is an injured entitled to receive if an intentional concealment is discovered? A) Nothing. Only intentional concealment is punishable B) No less than $500 and no more than $5,000 for compensatory damages C) $1000 for any compensatory damages D) Rescission of the policy

D) Rescission of the policy

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then A) The benefit is subject to the exclusionary rule B) IRS has no jurisdiction C) The benefit is received as taxable income D) The benefit is received tax free

D) The benefit is received tax free

Which of the following would be least likely to be considered a legitimate need that would be paid by insurance proceeds? A) Travel expenses for family to come to the funeral B) Debt cancellation C) Day care D) Vacation travel expenses

D) Vacation travel expenses

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

D) With the policy

Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? A) Unfair trade practices law B) the Guaranty Association C) consumer privacy act D) the fair credit reporting act

D) the fair credit reporting act

Joe, Larry, and Curly own a small business. They have made a legal arrangement which states that if one of them dies or becomes disabled, the other two will be able to buy the partner's shares. Which term best describes this arrangement? A) Buy-Up Distribution B) Business Continuation C) Shares Distribution D) Business Partner Disability Provision

B) Business Continuation

When the partners of a business develop an arrangement whereby should one of them die or become permanently disables, the other partners would purchase the interest of the deceased or disabled partner at a predetermined price, this is called a/an A) Executive bonus plan B) Business continuation plan C) Key person plan D) Business overhead expense plan

B) Business continuation plan

When an employer offers to give an employee a wage increase in the amount of premium on a new life insurance policy, this called: A) Aleatory contract B) Executive bonus C) Key person policy D) Fraternal association

B) Executive bonus

Harry has just received his life insurance policy. In reviewing the title page, Harry was able to ascertain the following information EXCEPT A) His total annual premium amount B) His spouse had been assigned the primary beneficiary C) His children have been covered by a child rider D) He had purchased a 20 year renewable term insurance policy in the face amount of $150,000

B) His spouse had been assigned the primary beneficiary

Stranger-originated life insurance policies are in direct opposition to the principles of A) Indemnity B) Insurable interest C) Law of large numbers D) Good faith

B) Insurable interest

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

B) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance

The Medical Information Bureau (MIB) was created to protect A) Insureds from unreasonable underwriting requirements by the insurance companies B) Medical examiners that perform insurance physical examinations C) Insurance companies from adverse selection by high risk persons D) Insurance departments from lawsuits by policyowners

C) Insurance companies from adverse selection by high risk persons

If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following EXCEPT A) Utilities B) Employee payroll C) Loss of the owner's income D) Rent

C) Loss of the owner's income

Which of the following is NOT the consideration in a policy? A) The application given to a prospective insured B) Something of value excahnged between parties C) The premium amount paid at the time of application D) The promise to pay covered losses

A) The application given to a prospective insured

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

C) Their premiums are lower

Which of the following statements regarding Business Overhead Expense policies is NOT true? A) Premiums paid for BOE are tax-deductible B) Any benefits received are taxable to the business C) Leased equipment expenses are covered by the plan D) Benefits are usually limited to six months

D) Benefits are usually limited to six months

A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability? A) Key person insurance B) Disability buy-sell agreement C) Business disability policy D) Business overhead expense policy

D) Business overhead expense policy

Kayla's husband died in a plane crash. She needs a new source of funding that will help put her child through daycare. Which of the following would be the best source? A) State education waiver B) viatical settlement C) Estate conservation D) Life insurance proceeds

D) Life insurance proceeds

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

D) to create an estate

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) As of the application date

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will A) Pay the policy proceeds only if it would have issued the policy B) Pay the policy proceeds up to an established limit C) Not pay the policy proceeds under any circumstances D) Automatically pay the policy proceeds

A) Pay the policy proceeds only if it would have issued the policy

Who is protected by a Temporary Insuring Agreement? A) The applicant and the insurer B) The policy beneficiary C) Only the insurer D) Only the applicant

A) The applicant and the insurer

Every expressed warranty made at or before the execution of a policy must be A) Binding and specific for the initial policy period B) Contained in and referred to in the policy or other document and signed by the insured C) Considered implied by the insurer and covered in the policy D) Considered accepted by the insured upon delivery of the policy

B) Contained in and referred to in the policy or other document and signed by the insured

Which of the following best describes a non-medical application? A) A screening application that is issued before the medical application, assessing demographic and lifestyle factors B) An application that does not ask for a person's medical history or require a medical exam C) The medical portion of an application that asks for medical information but does not require a medical exam D) An application for a policy that only covers emergency care, not standard treatment for pre-existing or minor conditions

C) The medical portion of an application that asks for medical information but does not require a medical exam

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? A) Term insurance only B) Permanent insurance only C) Universal life insurance only D) Any form of life insurance

D) Any form of life insurance

All of the following are requirements for life insurance illustrations EXCEPT A) they may only be used as approved B) they must identify non guaranteed values C) they must differentiate between guaranteed and projected amounts D) they must be part of the contract

D) they must be part of the contract

Which of the following types of risk will results in the highest premium? A) Substandard risk B) Standard risk C) Preferred risk D) All risks pay equal premiums

A) Substandard risk

Which of the following would provide an underwriter with information concerning an applicant's health history A) The Medical Information Bureau B) A medical examination C) The agent's report D) The inspection report

A) The Medical Information Bureau

When an insured receives a written binder, A) The insured's coverage will be effective immediately B) The insured will be locked into a contract for at least 2 years C) The insured will be guaranteed premium rates for a specific amount of time D) The insured will not have to submit an application to the insurer

A) The insured's coverage will be effective immediately

Which of the following is NOT true of life settlements? A) The seller must be terminally ill B) They could be used for a key person coverage C) They could be sold for an amount greater than the current cash value D) They invoke insurance policies with large face amounts

A) The seller must be terminally ill

Which of the following best details the underwriting process for life insurance? A) Issuance of policies B) Reporting and rejection of risks C) Selection, classification, and rating of risks D) Solicitation, negotiation, and sale of policies

C) Selection, classification, and rating of risks

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium? A) Company is the owner, and the company pays the premium B) Executive is the owner, and the executive pays the premium C) Company is the owner, but the executive pays the premium D) Board of directors is the owner, and the board of directors pays the premium

B) Executive is the owner, and the executive pays the premium

If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? A) The insurer may deny coverage later, because of the information missing on the application B) The policy will be interpreted as if the insurer waived its right to have an answer on the application C) The policy will be interpreted as if the insured did not have an answer to the question D) The policy will be void

B) The policy will be interpreted as if the insurer waived its right to have an answer on the application

If only one party to an insurance contract has made a legally enforceable promise what kind of contract is it? A) A legal (but unethical) contract B) Unilateral C) Adhesion D) Conditional

B) Unilateral

An applicant who receives preferred risk calculation qualifies for A) Dividends payable for lack of claims B) Higher premiums than a person who receives a sub-standard risk C) Higher premiums than a person who receives a standard risk D) Lower premiums than a person who receives a standard risk

D) Lower premiums than a person who receives a standard risk

Within how many days of requesting investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? A) 3 days B) 5 days C) 10 days D) 14 days

A) 3 days

The term "illustration" in a life insurance policy refers to A) A presentation of nonguaranteed elements in a policy B) A depiction of policy benefits and guarantees C) Pictures accompanying a policy D) Charts and graphs

A) A presentation of nonguaranteed elements in a policy

Factual statements about the insured or the risk in an insurance policy are considered A) Express warranty B) Representations C) Implied warranty D) Material representations

A) Express warranty

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

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 automobile accident on August 22, before the policy was issued. In this case, the insurance will A) Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued B) Issue the policy anyway and pay the face value to the beneficiary C) Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved D) Return the premium to Y's estate, since it has no obligation to pay the death claim

B) Issue the policy anyway and pay the face value to the beneficiary

What is the purpose of a conditional receipt? A) It is given to applicants who fully prepay the premium B) It is intended to provide coverage on a date prior to the policy issue C) It guarantees that a policy will be issued in the amount applied for D) It serves as proof that the applicant has been determined insurable

B) It is intended to provide coverage on a date prior to the policy issue

Which of the following documents delivered to the policyowner includes information about premium accounts, cash values, surrender values and death benefits for specific policy years? A) A privacy notice B) A buyer's guide C) A policy summary D) A notice regarding replacement

C) A policy summary

During a pre-selection interview, an agent is allowed to do all of the following EXCEPT A) Inquire about specific details of the applicant's health history B) Terminate the interview and reject the applicant C) Ask questions that are not on the application but that are important for underwriting D) Provide the applicants with negative regarding their risk

C) Ask questions that are not on the application but that are important for underwriting

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) Buy-sell agreement

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

C) Buy-sell agreements are normally funded with a life insurance policy

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

C) Cash values can be borrowed at any time

Which of the following includes information regarding a person's credit, character, reputation, and habits? A) Insurability report B) Agent's report C) Consumer report D) Consumer history

C) Consumer report

If an agent fails to obtain an applicant's signature on the application, the agent must A) Sign the application, stating it was by the agent B) Send the application to the insurer with a note explaining the abscence of signature C) Return the application to the applicant for a signature D) Sign the application for the applicant

C) Return the application to the applicant for a signature

The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What should the insurer do with the application? A) Acknowledge the missed questions with a signature and continue the policy issue process B) Proceed with issuing a policy C) Return to the applicant for completion D) Answer the missed questions for the applicant

C) Return to the applicant for completion

All of the following are duties and responsibilities of producers at the time of application EXCEPT A) Explain the nature and type of any receipt the producer is giving to the applicant B) Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information C) Check to make sure that there are no unanswered questions on the application D) Change any incorrect statement on the application by personally initialing next to the corrected statement

D) Change any incorrect statement on the application by personally initialing next to the corrected statement

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

A) Need is predicted using the number of years until the insured's retirement

In forming an insurance contract, when does acceptance usually occur? A) When an insurer's underwriter approves coverage B) When an insurer delivers the policy C) When an insurer received an application D) When an insured submits an application

A) When an insurer's underwriter approves coverage

Regarding the taxation of Business Overhead policies, A) Premiums are not deductible, but expenses paid are deductible B) Premiums are deductible, and benefits are taxed C) Premiums are not deductible, and benefits are taxed D) Premiums are not deductible, but benefits are deductible

B) Premiums are deductible, and benefits are taxed

Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the deicision-making process? A) Insurance index B) Policy summary C) Illustrations D) Buyer's guide

D) Buyer's guide

Which of the following would NOT fall into the category of costs associated with death? A) Day to day expenses of maintaining the family B) The expense of a vacation for surviving family members C) Funeral expenses D) Final medical expenses of the insured

B) The expense of a vacation for surviving family members

Upon a policy delivery, the producer may be required to obtain any of the following EXCEPT A) Signed waiver of premium B) Statement of good health C) Payment of Premium D) Delivery receipt

A) Signed waiver of premium

Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application? A) Fill in the blanks to the best of the insurer's knowledge B) Return the application to the applicant for completion. C) Issue a policy anyways since the application has been submitted D) Ask the producer who solicited the policy to complete and resign the application

B) Return the application to the applicant for completion.

Signing and dating a delivery receipt for a life insurance policy helps to establish all of the following timeframes EXCEPT A) The Right of Rescission B) The Grace Period C) The Incontestability Period D) The Free-Look Period

B) The Grace Period