Life Insurance

An agent sells insurance over the phone. One of his applicants is heavily drunk when she applies for and then almost instantly receives her policy. Which of the following is true? a)The policy is legal; it would only be illegal if the agent had been drunk. b)The policy is legal; only mental retardation and psychiatric illness qualify as limiting factors. c)The policy is not legal if it can be proven that the applicant was drunk during the application process. d)The contract is legal, since the agent, acting on behalf of the insurer, granted her the policy.

c)The policy is not legal if it can be proven that the applicant was drunk during the application process. When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. Being heavily drunk impairs mental competency; therefore, if it can be proven that the applicant was drunk during the application and acceptance process, her policy would not be legal.

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 With insurance, the death benefit creates an immediate estate should the insured die.

What is the purpose of establishing the target premium for a universal life policy? a)To accumulate cash value faster b)To pay up the policy faster c)To cover all policy expenses d)To keep the policy in force

d)To keep the policy in force The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.