Life and Health Insurance exam
K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit
Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated?
1070 Fair Credit Reporting Act
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term
What year was the McCarren-Ferguson Act enacted?
1945
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life
J is 35-years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20-pay life
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life
If X wants to buy $50,000 worth of permanent protection on his/her spouse and $25,000 worth of 10-year Term coverage on X under the same policy, the applicant should purchase
A Whole Life Policy with an Other Insured Rider
Which of these is an element of variable life policy
A fixed, level premium
Which statement is true regarding a variable whole life policy
A minimum guaranteed Death benefit is provided
How long does the covers normal remain on a limited pay life policy
Age 100
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
Aleatory
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained
Fair Credit Report
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the
Fair Credit Reporting Act
A whole life policy endows when the
Cash value equals the death benefit
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid.
Conditional Because certain future conditions or acts must occur before any claims can be paid, insurance contracts are known as conditional.
Which of these require an offer, acceptance, and consideration?
Contract
Insurance policies are offered on a "take it or leave it" basis which makes them
Contracts of Adhesion
When the policy owner exchanges a term policy for a whole life policy without providing proof of good health , which of these apply?
Conversion provision
The universal policy is called in and bundle of life policy because the policy holder can see the expense charges, the interest earned, and the
Cost of insurance
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term
A Family Income Policy is a combination of Whole Life and
Decreasing term insurance
K purchased a $10,000 Life Policy that will pay the face amount to her if she lives to age 65, or to her beneficiary if she dies before age 65. K purchased which of the following types of policies?
Endowment at Age 65
S is close to retiring and would like to purchase a policy that will yield greater gains than bonds, but will still protect the principal with a minimum level or risk. Which product would S be advised to purchase?
Equity index insurance
Which of these statements describe a modified endowment contract MEC
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to?
F
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death?
Face amount plus the policy's cash value
In regards to representations or warranties, which of these statements is TRUE?
If material to the risk, false representations will void a policy
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract. Insurable interest must only exist at the inception of the contract.
Insurance policies are considered aleatory contracts because
Insurance contracts are aleatory. This means there is an element of chance and potential for unequal exchange of value or consideration for both parties. An aleatory contract is conditioned upon the occurrence of an event. performance is conditioned upon a future occurrence
A renewal term policy is renewable at the option of the
Insured
A life insurance arrangement which circumvents insurable interest statutes is called
Investor-Originated Life Insurance
Which of these arrangements allows one to bypass insurable interest laws?
Investor-Originated Life Insurance
What type of life policy covers two lives in pays the face amount after the first one dies
Joint Life Policy
Stranger Originated Life Insurance has been found to be in violation of which if the following contractual elements?
Legal Purpose
D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?
Level term
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called
Limited pay life
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract
M purchases a $70,000 Life Insurance Policy with premium payments of $550 a year for the first 5 years. At the beginning of the sixth year, the premium will increase to $800 per year but will remain level thereafter. The face amount will remain at $70,000 throughout the life of the policy. The type of policy that M has purchased is
Modified Premium Life
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life
When a life policy extends its certain IRS values the result will create which of the following
Modified endowment contract
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor provision
Which if true considering a variable universal life policy
Policy owner controls where the investment will go and select the amount of the premium payment
Who benefits in Investor-Originated Life Insurance (IOLI) when the insured dies?
Policyowner
Which of these describes a participating life insurance policy?
Policyowners are entitled to receive dividends
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force
Which statements is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured's lifetime/coverage last until death of the insured
Which of these is not a type of agent authority?
Principal Agent authority is what an agent is authorized to do on behalf of his company. The three types of agent authority include express, implied, and apparent authority.
What is the consideration given by an insurer in the consideration clause of a life policy?
Promise to pay a death benefit to a named beneficiary
Statements made on an insurance application that are believed to be true to the best of an applicants knowledge are called
Representations
What type of life insurance are credit policies issued as?
Term. The type of insurance used is decreasing term, with the term matched to the length of the loan period (though usually limited to 10 years or less) and the decreasing insurance amount matched to the declining loan balance.
The most important factor to consider when determining whether to convert term insurance at the insurance attained age or the insurance original age is
The cost
When applied to Whole Life insurance, the word "straight" denotes
The duration of premium payments
A policy of adhesion can only be modified by whom?
The insurance company. (A policy of adhesion is best described as a policy which only the insurance company can modify.)
If a contractor that he's in contains complicated language to whom would the interpretation be in favor of ?
The insured
The Consideration clause of an insurance contract includes
The schedule and amount of premium payments. (The Consideration clause of a Life or Health policy includes the schedule and amount of premium payments.)
Which of the following characteristics is correct about interest sensitive whole life
There is a flexible premium payment
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks, bonds
In an insurance contract the insurer is the only party who makes a legally enforceable promise. What kind of contract is this?
Unilateral
Life and health insurance policies are
Unilateral contracts. (Life and health insurance policies are considered unilateral contracts because one party makes a promise, and the other party can only accept by performance.)
Which of the following types of policies best identifies one in which the cash value may fluctuate to reflect changing assumptions regarding mortality cost, interest, and expense factors
Universal Life
At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act?
Upon completion of the application
A(n)___life policy offers the owner investment and products such as money market funds long-term bonds and equities
Variable
A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as
Variable Life
Variable Life products require a producer to
Variable Life products require a producer to hold a Life Insurance license and a Securities license.
Which of the following policies combines investment choices with a form of term coverage
Variable Universal Life
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life
The part of a life insurance policy guaranteed to be true is called a
Warranty Warranties are statements that are considered literally true. A warranty that is not literally true in every detail, even if made in error, is sufficient to render a policy void.
At what point does an informal contract begin binding?
When one party makes an offer and the other party except that offer
When most insurable interest be present in order for a life insurance policy to be valid?
When the application is made
When is the face amount of a Whole Life policy paid?
When the insured dies or at the policy's maturity date, whichever happens first
What kind of life policy either pays the face value upon the death of this insured or when the insured reaches age 100
Whole life
Q would like to purchase $100,000 of permanent protection on his wife and $50,000 of Term coverage on himself under the same policy. What kind of policy should Q purchase?
Whole life policy with other insured rider
Variable Whole Life Insurance can be described as
ariable Whole Life Insurance is both an insurance and securities product.
All of the following are considered to be typical characteristics describing the nature of an insurance contract except
bilateral
Additional coverage can be added to a Whole Life policy by adding a(n)
decreasing term rider
All of these are characteristics of an Adjustable Life policy EXCEPT
face amount can be adjusted using policy dividends
A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as:
fraternal benefit society
Taking receipt of premiums and holding them for the insurance company is an example of
fudiciary responsibility
Which of the following actions require a policy owner to provide proof of insurability in an adjustable life policy?
increase face amount
When third-party ownership is involved applicants who also happen to be the stated primary beneficiary are required to have
insurable interest in the proposed insured
A life insurance policy would be considered a wagering in contract without
insurable interest. Without insurable interest, a life insurance policy would be considered a wagering contract.
Who makes the legally enforceable promises in a unilateral contract?
insurance company
What is a warranty?
is a statement guaranteed to be true
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
level
What kind of premium does a Whole Life policy have?
level
Credit Life Insurance is
life insurance sold in conjunction with installment loans
Which of these is not considered to be an element of an insurance contract?
negotiation
Who elects the governing body of a mutual insurance company?
policy holders
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called
reserves
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a
risk retention group
The amount of coverage on a group credit life policy is limited to
the insured's total loan value
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
treaty
When is the face amount paid under a Joint Life and Survivor policy?
upon death of the last insured
A term life insurance policy matures
upon the insured's death during the term of the policy
Which of these is considered a statement that is assured to be true in every respect?
warranty
A life insurance policy that provides a policy owner with cash value along with a level face amount is called
whole life
What type of insurance offers permanent life coverage with premiums that are payable for life?
whole life
A policy that becomes a Modified Endowment Contract (MEC)
will lose many of its tax advantages
