Life Insurance Basics

How many days does the viator have to recibe a contact after receiving the viatical settlement proceed?

15 Calendar days.

An individual insurance agent may operate as a viatical settlement broker without obtaining a separate license if the viatical settlement broker activities are incidental to the agents business transactions, and if the agent has been licensed for life insurance for at least what time period?

5 years.

What is the primary source of information used for insurance underwriting?

Application. (The application contains most of the info used for underwriting purposes. This is why completeness and accuracy is important.)

What is used to compare the cost of one life insurance policy against another in order to guide prospective purchasers to policies that are competitively priced?

Cost Comparison Method.

An applicant wants to buy a life insurance policy in which he can count on receiving the same benefits as stated in the contract. Which type should they have him buy?

Fixed. (Fix life insurance policies offer minimum guaranteed or fixed benefits stated in the contract. Variable life insurance or annuities are contracts in which the cash value accumulates based upon the specific portfolio of stocks without guarantees of performance.)

Which method of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?

Human Life Value Approach. (There is another approach, the needs approach, looks at specific needs of the surviving family.)

An insured has a life insurance policy with a face amount of $500. He pays a premium each week to the agent who sold him the policy. What kind of policy does the insured have?

Industrial Life. (Industrial life insurance is written on an individual basis in small amounts, usually with a face amount of less than $1000, with premium payable weekly or monthly.)

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies, and habits. What type of report is that?

Inspection Report. (Inspection reports cover moral and financial information regarding a potential insured, usually supplied by private investigators and credit agencies. Companies that use inspection reports are subject to the rules outlined in the fair credit reporting act.)

The MIB was created to protect...

Insurance companies from adverse selection by high risk persons.

All advertisements are the responsibility of the...

Insurer. (The insurer whose policies are advertised is responsible for all its advertisements, regardless of who wrote, created, presented, or distributed them.)

Which part of an insurance application would contain information regarding the cause of death of the applicants deceased relatives?

Medical information. (Medical info = prospective insured's medical background, present health, any medical visits in recent years, medical status of living relatives and causes of death of deceased relatives.)

All life insurance policy illustrations should include...

Name of insurer, generic policy name, company name, and form number, and initial death benefits. And name age and sex of proposed insured.

What best describes gross annual premium?

Net premium plus expenses.

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will...

Pay the policy proceeds only if it would've issued the policy. (The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, which ever occurs last, as long as the applicant is found to be insurable as a standard risk, and policy is issued exactly as applied for.)

An applicant wants to buy a policy that has a cash value element. What type should they buy?

Permanent. (unlike term insurance, permanent insurance provides lifetime death protection and a savings or cash value option.)

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. What risk is this?

Premium will likely be higher because the applicant is a substandard risk.

A producer is helping a married couple determine the financial needs of their children in the event they die prematurely. This is personal use of life insurance known as...

Survivor protection.

What is an example of liquidity in a life insurance contract?

The cash value available to the policy owner. (Liquidity in life insurance refers to availability of cash to the insured. Some life insurance policies offer cash values that can be borrowed at any time and use for immediate needs.)

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

Whether an insurable interest exists between the individuals. (An insurable interest must exist at the time the policy is issued. Some relationships are automatically presumed to qualify as an insurable interest, for example spouses, parents, children, and certain business relationships.)

What type of insurance policy would perform the function of cash accumulation?

Whole life.

Are underwriters allowed to discriminate?

Yes, but not unfairly. (The insurance company will discriminate in favor of good risks and not of poor risks; however, it cannot discriminate unfairly by using factors such as race or national origin.)