Life Basics

Which of the following receipts states that coverage will begin immediately for a specific length of time, regardless of whether the applicant is ultimately approved for coverage by the insurer? A. Temporary insurance agreement B. Conditional receipt C. Acceptance approval receipt D. Trial receipt

A. If premium is paid, coverage will begin immediately for a specific length of time regardless of whether the applicant is ultimately approved by the insurer. This may also be referred to as a temporary insurance agreement or a binding receipt.

A generic brochure developed by the NAIC to provide consumers with descriptions of basic types of life insurance as well as the comparative costs of each is called the _______. A. Buyer's Guide B. Policy Summary C. Consumer Information Kit D. Sales Illustration

A. It is required that prospective life insurance buyers receive the NAIC Buyer's Guide to assist them in their life insurance purchase decision.

All life insurance HIV tests require what from the proposed insured? A. Payment in advance B. Informed consent C. A wavier D. An exclusion

B. All life insurance HIV tests require informed consent of the proposed insured and the results must remain confidential in accordance with privacy protection provisions.

Each agent who accepts an application for life insurance or annuity that involves replacement of any existing life or annuity policy must submit to the insurer: A. A Buyer's Guide B. A Notice Regarding Replacement C. All sales literature used during the solicitation D. A comparative summary of the two companies and polices involved in the transaction

B. Each agent who accepts an application for life insurance or annuity that involves replacement of any existing life or annuity policy must submit to the insurer a Notice Regarding Replacement.

What is the relationship that must exist between the applicant and insured, at the time of application and policy issuance, in order for the contract to be valid? A. They must be dating B. There must be an insurable interest C. They must be married D. They must work together

B. Insurable interest is the relationship that must exist between the applicant and insured, at the time of application and policy issuance, in order for the contract to be valid.

Which one of the following is the basic formula for determining premiums for life insurance? A. Expenses - Mortality + Interest B. Mortality - Interest + Expenses C. Mortality - Expenses + Interest D. Interest + Expenses - Mortality

B. Mortality - Interest + Expenses is the basic formula for determining life insurance premiums.

If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a: A. Notice of Conservation B. Notice of Replacement C. Statement of Release D. Cancellation of Service

B. Replacement rules require a Notice of Replacement.

The date on which insurance coverage is no longer in effect is referred to as the _________ date. A. Renewal B. Expiration C. Conversion D. Policy

B. The expiration date is when insurance coverage ends.

XYZ Insurer has decided to issue a policy to a particular applicant. What is the next step in this insurance transaction? A. The applicant will have to send a premium check to XYZ B. XYZ will notify the applicant by mail that a policy is on its way C. XYZ will send the policy to the producer for delivery to the insured D. XYZ will mail a certificate of insurance to the applicant

C. After a policy is issued, it must be sent to the producer, who will then deliver it to the insured.

Under California life insurance replacement legislation, conservation is defined as: A. Replacing an existing policy with a new policy in order to reduce premium B. An attempt on the part of the replacing insurer to have one of their policies replace 2 of the existing insurer's policies C. An attempt by the existing insurer or agent to keep a policy in force where replacement is contemplated D. Any transaction in which new life insurance is to be purchased and it is known to the agent that existing insurance will be forfeited, lapsed, or surrendered

C. As the term 'conservation' implies, it is an attempt on the part of the existing insurer or agent to keep an existing policy in force where replacement is contemplated.

Interest earned on premiums paid to an insurer helps to ________ the premiums charged. A. Standardize B. Stabilize C. Lower D. Increase

C. Interest earned on premiums assists in premium rate reduction.

What is it called if an agent or insurer recommends the replacement or conservation of an existing policy by use of a materially inaccurate presentation or comparison of an existing contract's premiums, benefits, dividends, and values? A. Competition B. Comparing C. Twisting D. Marketing

C. It is a violation of the replacement rules for an agent or insurer to recommend the replacement or conservation of an existing policy by use of materially inaccurate presentation or comparison of an existing contract's premiums, benefits, dividends, and values, commonly referred to as 'twisting' and is a misdemeanor.

Life insurance applications cannot contain questions about prior HIV testing unless the question is limited to prior testing for the purpose of obtaining: A. Employment B. A drivers license C. Insurance D. A gun permit

C. Life insurance applications cannot contain questions about prior HIV testing unless the question is limited to prior testing for the purpose of obtaining insurance.

The term 'mode' refers to the: A. Method used in policy delivery B. Rate the underwriters apply to the policy C. Frequency of premium payments D. Claims process

C. Mode refers to the frequency of premium payment, such as monthly or annually.

The factors necessary for an insurer to calculate a Net Premium are: A. Mortality rate and expenses B. Expenses and rate of interest assumed C. Rate of interest assumed and mortality rate D. Premiums paid plus interest earned

C. Mortality Rate - Rate of Interest Assumed = Net Premium.

The process of calculating life insurance net premium requires consideration of all of the following, except: A. The insured's age B. The insured's gender C. The morbidity rates to be used D. The rate of interest assumed

C. Net Premium for life insurance takes into account interest and mortality (not morbidity) factors only. The insured's age and gender are considered mortality factors.

Whenever an answer to a question on an application needs to be corrected, how is that best handled? A. By using correction fluid or tape to cover up the incorrect information and writing in the correct information B. The producer indicates the correct information in the comments section of the application C. The applicant or producer makes the correction and the applicant initials the change, or the producer can complete a new application D. Submit the application as is and see what the home office underwriters decide to do once they have had time to review it

C. Whenever an answer to a question on an application needs to be corrected, the applicant or producer makes the correction and the applicant initials the change, or the producer can complete a new application.

A group plan is normally owned by any one of the following, except: A. Creditors B. Associations C. Employers D. Debtors

D. A group insurance plan is normally owned by an employer, creditor, or association.

Applicants must consent to be tested and be informed that testing for ________ may determine insurability. A. Illegal drugs B. Blood alcohol C. Nicotine D. HIV

D. Applicants must consent to be tested for HIV and be informed that testing for HIV may determine insurability.

Geographic location or personal information such as occupation, marital status, and relationship of insured to beneficiary or known or suspected homosexuality or bisexuality cannot be used to require a(n): A. Eye exam B. Foot exam C. Dental exam D. HIV test

D. Geographic location or personal information such as occupation, marital status, and relationship of insured to beneficiary or known or suspected homosexuality or bisexuality cannot be used to require an HIV test.

What happens if a policy is issued with questions unanswered on the application submitted? A. The insurer must inform the Insurance Commissioner of the agent's lack of professionalism and attention to detail B. If discovered by the insurer within the first 2 years they have the right to increase the premium based on the failure to disclose C. This automatically extends the insurer's contestable period for an indefinite period of time D. It is assumed the information is immaterial to the issuance of the policy and the insurer waives its right to challenge a claim based on the incomplete application

D. If a policy is issued with questions unanswered, it is assumed the information is not material to the issuance and the insurer waives the right to challenge a claim based on the incomplete application.

Which of the following is a false statement regarding insurable interest? A. The insurable interest on one's own life is generally regarded as unlimited B. Insurable interest can be defined as the possibility of economic loss due to sickness or death C. With the exception of a parent purchasing insurance on a minor child, no one may purchase insurance on the life of another person without that person's consent D. In life insurance, insurable interest must be proven at the time loss or claim

D. In life insurance, insurable interest must exist or be proven at the time of the application, not at time of loss.

What should the producer do, if the insured is in the hospital with a heart condition pending surgery on the day the newly issued policy was to be delivered and initial premium collected? A. Hold onto the policy until the insured is discharged from the hospital and then deliver the policy B. Collect additional premium at the time of delivery to reflect the higher risk the insurer now faces C. Deliver the policy to an immediate family member and collect any outstanding premium D. Return the policy to the insurer with a letter of explanation

D. Producers must return the policy to the insurer if they know that the insured's health status has materially changed since the time of application.

In a replacement transaction, why should the existing policy not be terminated until the replacing policy is issued and delivered? A. Potential loss of earnings B. Potential loss of premiums C. Potential loss of cash values or dividends D. Potential of new evidence of insurability being required

D. Since new evidence of insurability may be required, the existing policy should not be terminated until the replacing policy is issued and delivered.

The MIB obtains its information from which of the following? A. Producer's agencies B. Hospitals C. Physicians D. Insurers

D. The primary purpose of the Medical Information Bureau (MIB) is to collect adverse medical information about an applicant's health that is known to insurers to which the applicant has previously applied for coverage.