Chapter: Life insurance basics

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 STOLI policy

When must insurable interest exist in a life insurance policy

At the time of application

The medical Information bureau (MIB) was created to protect

Insurance companies from adverse selection by high risk persons

An insured purchased an individual life insurance policy with a face amount of $15,000. He pays a premium each month. What type of policy is that

Ordinary life

If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should that person buy

Permanent

What is an example of liquidity in a life insurance contract

The cash value available to the policyowner

If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

Whether an insurable interest exists between the individuals

What is the purpose of a conditional receipt

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

What is NOT true concerning insurable interest as it applies to life insurance

A debtor has an insurable interest in the life of a lender

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

Buy-sell agreement

Which of the following best describes annual premium

Net premium plus expenses

Which of the following individuals must have insurable interest in the insured

Policyowner

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance

Replacement rule

Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called

Suitability

What is generally true regarding insureds who have been classified as preferred risks

Their premiums are lower

Why should the producer personally deliver the policy when the first premium has already been paid

To help the insured understand all aspects of the contract

What is the purpose of key person insurance

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