Life Insurance basics

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

Gender Occupation Marital status D. Medical background

Which of the following best describes gross annual premium?

Net premium plus expenses

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) Is determined by the loss of income that would result with the death of the insured, making adjustments for expenses, Inflation, etc.

When a replacement is involved, a replacing insurance company is responsible for all of the following EXCEPT

Include a policy summary on the proposed life insurance in the communication with the existing company. Obtain from the producer a list of the applicant's life insurance or annuity contracts to be replaced. C. Provide a copy of the Important Notice Regarding Replacement of Life Insurance to the applicant. Send the existing insurance company a written notice of replacement.

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.

All of the following are factors that an underwriter could use to select and classify risk EXCEPT

Occupation. Avocation. C National origin. Morals.

All of the following information about the applicant is identified in the General Information section of life insurance application EXCEPT

Occupation. B Education. Age. Gender.

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 (whole) Unlike term insurance, permanent insurance provides lifetime death protection, including premature death, and a savings or investment option.

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

Permanent (whole) insurance provides lifetime death protection and a savings or cash value option.

What describes the specific information about a policy?

Policy summary

Where would the underwriter find relevant information not presented by the applicant but communicated by the producer?

Producer's report

Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?

Standard risk is representative of the majority of people.

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

Survivor protection.

What must happen when an individual policy or annuity has been personally delivered to the policyowner?

The policyowner must sign a delivery receipt.

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

Their premiums are lower.

Which of the following is the best reason to purchase life insurance rather than annuities?

To create an estate

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

An underwriter is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had in the past. What will the underwriter require?

attending physician statement

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

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

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

buy sell agreement

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 policy. What kind of policy does the insured have?

industrial life

The life and disability insurance guaranty fund protects insureds and policyholders if

insurers lack money to pay off claims

An insurer has just asked an applicant to take an HIV test. How long does the applicant have tordecide whether or not to sign a consent form?

only 10 days are provided.

Which of the following documents delivered to the policyowner includes information about premium amounts, cash value, surrenders values and death benefits for specific policy years?

policy summary

insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called

suitability

All the following are true of key person insurance expept

the plan is funded by permanent insurance only

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

vacation travel expenses

An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize?

viatical statement allows an insured with a life-threatening condition to sell the existing policy in order to receive benefits when they are most needed. Viators typically receive a percentage of the policy's face value from the person who purchases the policy.

What is the name of the insured who enters into a viatical settlement

viator

What is the name of the insured who enters into a viatical settlement?

viator

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

A STOLI policy.

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

Monthly

Which of the following is not true of life settlements?

The seller must be terminally ill

When an applicant purchased a life insurance policy, the agent dated the application 4 months prior. When asked by the applicant, the agent said he was allowed to backdate policies up to 6 months if it would

Lower the insured's premium.

When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by

A paramedic or examining physician at the insurer's expense. The applicant may be allowed to select the physician or paramedic facility to perform the examination. The insurer pays the cost of such an examination.

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

Are insurance company underwriters allowed to discriminate?

Yes, but not unfairly The 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 orígin in their underwriting.

All of the following are factors that an underwriter could use to select and classify risk Execpt

national origin

When is the earliest a policy may go into effect?

When the application is signed and a check is given to the agent

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

The Medical Information Bureau Only the MIB will provide information about an applicant's medical history.

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

The cash value available to the policyowner

Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?

The employer is the owner and beneficiary.

What is the purpose of the buyer's guide?

To allow the consumer to compare the costs of different policies

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

The employer pays a bonus to a selected employee to fund the policy. It is considered a nonqualified employee benefit. C. The policy is owned by the company. Any type of insurance policy may be used.

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered

An unfair trade practice.

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

Any form of life insurance may be used to fund a buy-sell agreement.

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

Application

What does "liquidity" refer to in a life insurance policy?

Cash values can be borrowed at any time.

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 would NOT fall into the category of costs associated with death?

Final medical expenses of the insured Day to day expenses of maintaining the family C. The expense of a vacation for surviving family members Funeral expenses

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

Insurable interest.

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?

Insured's annual expenses. Effect of inflation on income over time. C. Predicted needs of the family after the insured's death. Insured's current and future income.

All advertisements are the responsibility of the

Insurer.

The mode of premium payment

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

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.