Life insurance-Basics

2 What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act

$2,500

In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT

Applicant's past income

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

Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process

Buyer's Guide

If an insured changes his payment plan from monthly to annually, what happens to the total premium

Decreases

A producer agent must do all of the following when delivering a new policy to the insured EXCEPT

Disclose commissions earned from the sale of the policy

When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)

Executive bonus

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium

Executive is the owner, and the executive pays the premium

An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company

Fair Credit Reporting Act

Harry has just received his life insurance policy. In reviewing the title page, Harry was able to ascertain the following information EXCEPT

His spouse had been assigned the primary beneficiary

Stranger-originated life insurance policies are in direct opposition to the principle of

Insurable interest

The mode of premium payment

Is defined as the frequency and the amount of the premium payment

What is an advantage of the Temporary Insuring Agreement to the applicant

It gives the applicant immediate coverage

Which of the following best describes the MIB

It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium

It will likely be higher because the applicant is a substandard risk

Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life

Need is predicted using the number of years until the insured's retirement

Attempting to determine how much insurance a family would require based upon their financial objectives is known as

Needs approach

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 have issued the policy

What describes the specific information about a policy

Policy summary

The Federal Fair Credit Reporting Act

Regulates consumer reports

In the event of a loss, business overhead insurance will pay for

Rent

Signing and dating a delivery receipt for a life insurance policy helps to establish all of the following timeframes EXCEPT

The Grace Period

The title page of the policy provides a summary of the benefits and coverages provided by the policy. All of the following information is included in the title page EXCEPT

The insured's beneficiaries

When an insured receives a written binder,

The insured's coverage will be effective immediately

Which of the following is true regarding an application for a large amount of insurance

The insurer might require a medical examination by a professional

The responsibility of making certain that an application for insurance is filled out completely, correctly, and to the best of his or her knowledge is the responsibility of whom

The producer

2 Under what circumstances would a life insurance contract qualify as a "standard policy "

Under no circumstances

All of the following are personal uses of life insurance EXCEPT

Buy-sell agreement

Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount

Buy-sell agreement

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to

Charge a higher premium

Which of the following is NOT a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach

Estimated longevity

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)

A life insurance policy can be delivered by all of the following means, EXCEPT

Priority mail

Which of the following best describes a non-medical application

The medical portion of an application that asks for medical information but does not require a medical exam

The process of "post-selection" refers to which of the following

An insurer is investigating the client's risk profile

Which of the following statements regarding Business Overhead Expense policies is NOT true

Benefits are usually limited to six months

Which of the following statements concerning buy-sell agreements is true

Buy-sell agreements are normally funded with a life insurance policy

Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report

Must be informed of the source of the report

Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT

Other insurance coverages

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of AA STOLI policy

If a business owner becomes totally disabled, a Business Overhead Expense policy will pay all of the following EXCEPT

Loss of the owner's income

An applicant who receives a preferred risk classification qualifies for

Lower premiums than a person who receives a standard risk

Which of the following information about the applicant is NOT included in the General Information section of the application for insurance

Medical background

Which of the following premium modes would result in the highest annual cost for an insurance policy

Monthly

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy

Premiums are not tax deductible as a business expense

The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What must the insurer do with the application

Return to the applicant for completion

Which of the following would provide an underwriter with information concerning an applicant's health history

The Medical Information Bureau

Who is protected by a Temporary Insuring Agreement

The applicant and the insurer

Which of the following is an example of liquidity in a life insurance contract

The cash value available to the policyowner

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

If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE

The policy will be interpreted as if the insurer waived its right to have an answer on the application

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 would NOT fall into the category of costs associated with death

The expense of a vacation for surviving family members

Which of the following is NOT true of life settlements

The seller must be terminally ill

Which is generally true regarding insureds who have been classified as preferred risks

Their premiums are lower

All of the following are requirements for life insurance illustrations EXCEPT

They must be part of the contract

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 annuities

To create an estate

What is the purpose of a disclosure statement in life insurance policies

To explain features and benefits of a proposed policy to the consumer

Which of the following would be least likely to be considered a legitimate need that would be paid by insurance proceeds

Vacation travel expenses

Which of the following is true regarding written binders

Binders prove that the insured has insurance coverage, even though the policy has not been issued yet

When the partners of a business develop an arrangement whereby should one of them die or become permanently disabled, the other partners would purchase the interest of the deceased or disabled partner at a predetermined price, this is called a/an

Business continuation plan

A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability

Business overhead expense policy

Each of the following factors are used in determining insurance rates EXCEPT

Dividends

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 to the beneficiary