Life Insurance Basics
An insurer has just asked an applicant to take an HIV test. How long does the applicant have to decide whether or not to sign a consent form?
10 days
Insurers are required to maintain copies of their policy summaries for at least
3 years
Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years?
A policy summary
Which of the following applicants could the insurer charge a higher rate of premium and not violate regulations regarding unfair discrimination?
An applicant who is a smoker
When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information?
Application
All of the following are personal uses of life insurance EXCEPT
Buy-sell agreement.
Which of the following statements concerning buy-sell agreements is true?
Buy-sell agreements are normally funded with a life insurance policy.
What does "liquidity" refer to in a life insurance policy?
Cash values can be borrowed at any time.
Which of the following would NOT be considered a deceptive act?
Comparing an insured's current policy with a potential replacement policy
Who makes up the Medical Information Bureau?
Insurers
Which of the following best describes gross annual premium?
Net premium plus expenses.
Which of the following is NOT true of life settlements?
The seller must be terminally ill.
What is the purpose of the buyer's guide?
To allow the consumer to compare the costs of different policies
Which of the following is the best reason to purchase life insurance rather than an annuity?
To create an estate
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 name of the insured who enters into a viatical settlement?
Viator
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than
With the policy.
Are insurance company underwriters allowed to discriminate?
Yes, but not unfairly
Partners in a business enter into buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially to buy the interest of the decreased partner. What type of insurance policy may be used to fund this agreement?
Any form of life insurance
Which of the following best describes the MIB?
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance.
All of the following are true of key person insurance EXCEPT
The plan is funded by permanent insurance only.
What must happen when an individual policy or annuity has been personally delivered to the policyowner?
The policyowner must sign a delivery receipt.
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?
As of the application date
An underwriter is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had int he past. What will the underwriter require?
Attending Physician Statement
When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will
Issue the policy anyway and pay the face value tot he beneficiary.
An applicant wants to buy a policy that has a cash value element. Which type should she buy?
Permanent
A corporation is the owner and beneficiary of the key personal life policy. If the corporation collects the policy benefit, then
The benefit is received tax free.
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?
The employer is the owner and beneficiary.
Which of the following is usually true of a participating life insurance policy?
It pays dividends to policyowners.
Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death?
Life insurance proceeds
Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives?
Medical Information
All of the following are factors that an underwriter could use to select and classify risk EXCEPT
National origin.
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
Which of the following will be included in a policy summary?
Premium amounts and surrender values
Where would the underwriter find relevant information not presented by the applicant on the insurance application but communicated by the producer?
Producer's report
Another name for a substandard risk classification is
Rated
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
Suvivor protection.
Which of the following would provide an underwriter with information concerning an applicant's health history?
The Medical Information Bureau
If an insured changes the premium payment mode from monthly to annually, what happens to the total premium?
Decreases
All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT
Education.
Which of the following is NOT among the accounts that the Life and Disability Insurance Guaranty Fund maintains?
Group insurance account
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?
Human life value approach (HLVA)
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that?
Inspection Report
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)
Inspection report.
Stranger-originated life insurance policies are in direct opposition to the principle of
Insurable interest.
The Life and Disability Insurance Guaranty Fund protects insureds and policyholders if
Insurers lack money to pay off claims.
The mode of premium payment
Is defined as the frequency and the amount of the premium payment.
