Life Insurance Basics / Life Insurance
tax free
A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then it is taxed how?
pay the policy proceeds only if it would have issued the policy
A prospective insured receives a conditional receipt but dies before the policy is issued, the insurer will do what?
the insured / terminally ill
A viatical settlement is arranged between a viatical company and who?
6 months
Agents may backdate polices up to how long?
insurer
All advertisements within the insurance company are the responsibility of who?
permanent
An applicant wants to buy a life insurance policy that has a cash value element. Which type should she buy?
industrial life
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?
ordinary life
An insured purchased an individual life insurance policy with a face amount of $4,000. He pays a premium each month. What type of policy is this?
variable
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?
a STOLI policy
An investor buys a life insurance policy on an elderly person in order to sell it for a life settlement. What is this an example of?
attending physician statement
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?
investigative consumer report
An underwriter may obtain information on an applicant's hobbies, financial status and habits by ordering what kind of report?
yes, but not unfairly
Are insurance company underwriters allowed to discriminate?
life insurance policy
Buy-sell agreements are normally funded by what?
No
Can insurers advertise protection by the Insurance Guaranty Association?
expenses
Gross annual premium is net premium plus what?
By their members - authorized insurers
How are state Insurance Guaranty Associations funded?
3 years after the policy terminated
How long must insurers keep a copy of a basic life policy illustration on file?
15 days
How many days does the viator have to rescind a contract after receiving the viatical settlement proceeds?
the producer must provide the applicant with a Notice Regarding Replacement
How must a replacing producer respond to an applicant wishing to replace existing life insurance?
selection, classification, and rating of risks
How the underwriting process for life insurance works?
with the policy delivery
If a policy includes a free look period of at least 10 days, the buyers guide may be delivered to the applicant no later than when?
will be found guilty of committing a deceptive business practice
If an agent neglects to provide with a policy summary, what will happen to the agent?
decreases
If an insured changes the premium payment mode from monthly to annually, what happens to the total premium?
The Guaranty Association
If an insurer becomes insolvent, what would pay benefits to policyholders?
permanent
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?
statement of policy cost and benefit information
In Ohio, the written statement that describes all relevant elements of the policy must be titled what?
the insured / terminally ill
In a viatical settlement, who is considered the viator?
blackout period
In terms of Social Security, what is the name for the time period after the youngest child of a family turns 16 and before the surviving spouse may start receiving retirement benefits?
executive is the owner and pay the preium
In the Executive Bonus Plan, who is the owner of the policy, and who pays the premium?
at the time of application
Insurable interest must exist when?
6 months
Insurers may only use a buyer's guide that has been approved by the NAIC no longer than what time period before use?
MIB report
Insures cannot refuse coverage solely on the basis of adverse information on what report?
premium receipt
Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a what?
dividends
Participating policies distribute what to policyowners?
policy summary
Premium amounts and surrender values are included in what?
preferred
Premiums are lower for what kind of risks?
insurable interest
Stranger-originated life insurance policies are in direct opposition to the principle of what?
adverse selection by high risk people
The MIB was created to protect insurance companies from what?
inflation
The cash value for a variable annuity is adjusted for what?
higher
The higher the risk, the premium is what?
the insured
The policyowner must have insurable interest in the life of who?
a presentation of non guaranteed elements of a policy
The term "illustration" in a life insurance policy refers to what?
to avoid an increase in premium rate for the insured
Under what circumstance may a life insurance agent deliver a policy that is dated up to 6 months before the application was taken?
a third party
Viaticals are funding by who?
Human life value approach
What approach is determined by the loss of income that would result with the death of the insured, after making adjustments for expenses and inflation?
mortality, interest, and expense
What are the three factors that determine the premium for a particular life insurance policy?
policy summary
What describes the specific information about a policy?
policy summary
What document delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years?
cash values that can be borrowed at any time
What does "liquidity" refer to in a life insurance policy?
generic information on various types of policies
What does a buyer's guide provide?
specific information on the policy being issued
What does a policy summary provide?
needs approach
What is a method of determining how much life insurance you need based on funds your family would require to maintain their lifestyle after your death?
mode of premium payment
What is defined as the frequency and the amount of the premium payment?
insurance application
What is the key source underwriters use for information about the applicant?
viator
What is the name for the owner of a life insurance policy who enters into a viatical settlement contract?
to provide coverage on a date prior to the policy issue
What is the purpose of a conditional receipt?
to explain features and benefits of a proposed policy to the consumer.
What is the purpose of a disclosure statement in life insurance policies?
to allow the consumer to compare the costs of different policies
What is the purpose of the buyer's guide?
conditional receipt
What means the applicant may be covered as early as the date of the application?
human life value approach
What method of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?
Part 1
What part of a life insurance application contains questions regarding current coverage being applied for as well as any other insurance coverage with the same or other insurers?
Part 2
What part of a life insurance application contains questions regarding the applicants' health history?
substandard risk
What type of risk will result in the highest premium?
life insurance proceeds
What 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?
buy-sell agreement
What would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount?
executive bonus
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 an what?
at the time of application
When must insurable interest exist in a life insurance policy?
30 days
When replacing a policy, a producer must provide the policyowner with a notice explaining the right to return the policy within how many days?
an attending physician at the insurers expense
When someone applies for a life insurance policy, the agent informs them that a medical exam would be required, who would complete and pay for this exam?
premiums are not tax-deductible as a business expense
Which of the following is correct concerning the taxation of premiums in a key person life insurance policy?
replacement rule
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance?
Medical Information Bureau (MIB)
Who is a nonprofit organization that maintains underwriting information on applicants for life and health insurance?
provider
Who is a person, other than a viator, that enters into a viatical settlement contract?
the life insurance producer
Who is the company's field underwriter?
the employer is the owner and beneficiary
Who is the owner and who is the beneficiary on a key person life insurance policy?
viatical settlement provider
Who is the person, other than a viator, that enters into or effectuates a viatical settlement contract?
insurers
Who makes up the Medical Information Bureau?
the director
Who must approve viatical settlements?
policyowner
Who must have insurable interest in the insured?
the policyowner
Who must have insurable interest in the insured?
to help the insured understand all aspects of the contract
Why should the producer personally deliver the policy when the first premium has already been paid?