Life Insurance Chapter 3 Life Insurance Basics

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 A policy summary B A notice regarding replacement C A privacy notice D A buyer's guide

A policy summary - A policy summary usually includes all the listed information, and must be delivered along with a new policy.

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 A. Life planning B. Survivor-ship insurance C. Juvenile Protection provision D. Survivor ship protection

Survivor ship protection -

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? A Insurance Index B Policy Summary C Illustrations D Buyer's Guide

Buyer's Guide - The Buyer's Guide is a consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process. It is a generic guide that does not address the specific policy of the insurer, instead explaining life insurance in a way that the average consumer can understand.

Why should the producer personally deliver the policy when the first premium has already been paid? A To find out how the family has been doing since the initial presentation B To make sure the policy is not stolen or lost C To help the insured understand all aspects of the contract D To ensure the producer gets paid commission

To help the insured understand all aspects of the contract - It is the producer's responsibility to make sure that the policy is understood by the insured and all of their questions are satisfied, and the delivery receipt is signed.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT A Any type of insurance policy may be used. B The employer pays a bonus to a selected employee to fund the policy. C It is considered a nonqualified employee benefit. D The policy is owned by the company.

The policy is owned by the company. - The policy is owned by the employee

When is the earliest a policy may go into effect? A When the first premium is paid and the policy has been delivered B When the insurer approves the application C After the underwriter reviews the policy D When the application is signed and a check is given to the agent

When the application is signed and a check is given to the agent - The policy can be effective as early as the date of the application, if the premium is submitted with the application and the policy is issued as applied for.

What is the purpose of a conditional receipt? A It serves as proof that the applicant has been determined insurable. B It is given only to applicants who fully prepay the premium. C It is intended to provide coverage on a date prior to the policy issue. D It guarantees that a policy will be issued in the amount applied for.

It is intended to provide coverage on a date prior to the policy issue. - Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for.

Which of the following is NOT an example of insurable interest? A Employer in employee B Child in parent C Debtor in creditor D Business partners in each other

Debtor in creditor - The three recognized areas in which insurable interest exists are as follows: a policyowner insuring his or her own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to them. A debtor does not have an insurable interest in the creditor.

All advertisements are the responsibility of the A Advertising agency. B Department of Insurance. C Insurer. D Insured.

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

All of the following are personal uses of life insurance EXCEPT A Cash accumulation. B Buy-sell agreement. C Survivor protection. D Estate creation.

Buy-sell agreement. - Personal uses of life insurance include survivor protection, estate creation and conservation, cash accumulation, and liquidity. A buy-sell agreement is for business uses of life insurance.

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? A Insured's annual expenses. B Effect of inflation on income over time. C Predicted needs of the family after the insured's death. D Insured's current and future income.

Predicted needs of the family after the insured's death. -The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.

The mode of premium payment A Is the factor that determines the amount of dividends in a policy. B Is the method used to compute the cash surrender value of the policy. C Does not affect the amount of premium paid. D Is defined as the frequency and the amount of the premium payment.

Is defined as the frequency and the amount of the premium payment. - The mode refers to the frequency the policyowner pays the premium: monthly, quarterly, semiannually, or annually. The amount of premium will change accordingly.

Which of the following best details the underwriting process for life insurance? A Reporting and rejection of risks B Selection, classification, and rating of risks C Solicitation, negotiation and sale of policies D Issuance of policies

Selection, classification, and rating of risks - The underwriting process is accomplished by reviewing and evaluating information about an applicant and applying what is known of the individual against the insurer's standards and guidelines for insurability and premium rates.

Which of the following is an example of liquidity in a life insurance contract? A The death benefit paid to the beneficiary B The flexible premium C The money in a savings account D The cash value available to the policyowner

The cash value available to the policyowner - 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 used for immediate needs.

An insurer wants to obtain information from investigators regarding an applicant for insurance. What must the insurer do in order to legally acquire this information? A Receive a signed statement from the insured which authorizes the investigation B Sign a waiver that the information will be kept confidential C Present the insured with a Disclosure Authorization Notice D Receive written permission from the Department of Insurance

Present the insured with a Disclosure Authorization Notice - Before an insurer can obtain information from investigators regarding an applicant, it must first present the insured with a Disclosure Authorization Notice. This notice states the insurer's information collection practices and how the information will be used.

Which of the following statements regarding HIV testing for life insurance purposes is NOT true? A The testing practices must meet the criteria of the U.S. Department of Health and Human Services. B HIV testing is regulated at the state level. C Insurers are barred from requesting HIV testing. D Positive test results will be forwarded to the state's Department of Health if a physician is not selected by the applicant.

Insurers are barred from requesting HIV testing - It is common for insurers to require HIV testing when an applicant seeks a policy with a large face amount. The insurer must abide by a variety of rules created by its respective state.