Life Insurance

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 POlICY -PAY FACE VALUE TO BENFEFICIARY

Characteristics of an insurable risk?

-Loss must be due to chance -Must be definite, measurable, and predictable -IS NOT CATASTROPHIC

CAN-SPAM legislation requires that any commercial email must contain an opt out mechanism, how many days does a company have to cease their distribution?

10 BIZ DAYS

What age must the insured attain in order to receive the policy's face amount?

100

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing?

3 days

In order to qualify for conversion from a group life policy that has been terminated to an individual policy in the same coverage, a person must have been insured for how many years?

5 / FIVE

For variable products, underlying assets must be kept in

A SEPERATE ACCOUNT

What group cannot own group life insurance?

A group needing low-cost life insurance

When must insurable interest exist in a life insurance policy?

AT TIME OF APPLICATION

What documentation grants express authority to an agent?

Agents contract with THE PRINCIPAL.

The policy is owned by the company

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

Level term insurance =

Annual Renewable Term Insurance

What policy has the least expensive first-year premiums?

Annually Renewable Term

Universal Life Insurance policy is beset described as

Annually Renewable Term policy with a cash value account

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

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 is INCORRECT regarding a $100,000 20-year level term policy?

At the end of the 20-year, the policy's cash value will = $100,000.

Which is NOT to be considered an exception of the National Do Not Call List?

Calls based from OUTSIDE the U.S.

An employee has group life insurance through her employer. After a few years, they leave the company. How can she obtain an individual policy?

Can convert her group policy to an individual policy WITHOUT proof of insurability within 31 days of leaving group.

"Liquidity" in life insurance terms

Cash values can be borrowed at any time.

A person requests that an insurance company quit sending him e-mails. However the company sends him four more e-mails after 10 day time limit has expired. What happens to the company?

Company will be fined $250 for each email.

When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following?

Consideration

What is true about group life policy?

Cost of coverage is based on ratio of men and women in the group.

Individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy best suited?

DECREASING TERM

An individual applied for an insurance policy and paid the premium. Insurer issued a conditional receipt. Five days later the applicant had to submit a medical exam. If policy is issued, would would be it's effective date?

Date of medial exam

In increasing and decreasing term policies, what component fluctuates during the policy's term?

Death Benefit

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

Death benefit can be increased by providing evidence of insurability.

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

Employer is owner and beneficiary.

An insurance company assures its new policyholders that their premium costs will not increase for a period of atleast five years. However due to financial strain, they plan to raise premium costs for all insureds. What term describes this act?

FRAUD

All of the following violations may result in agent's imprisonment EXCEPT

Failing to report to the department a criminal prosecution taken against the agent in another jurisdiction.

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

Which of the following protects consumers against circulation of inaccurate or obsolete personal or financial info?

Fair Credit Reporting Act (personal and financial info)

Which term best describes the coverage provided by term policies, compared to any other form of protection?

GREATEST

The death benefit under the Universal Life Option B

Gradually increases each year by the amount of that the cash value increases

Annually Renewable Term policies provide a level death benefit that..

INCREASES ANNUALLY

A life insurance policy has a legal purpose if both of what elements exist?

Insurable Interest and consent

Medical Information Bureau (MIB) was created to protect

Insurance companies from adverse selection by high risk persons

Which statement regarding insurable risks is NOT correct?

Insureds cannot be randomly selected.

An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?

Insurer will pay the full death benefit from the group policy to the beneficiary.

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date prior to the policy issue.

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?

Itll increase because insured will be 5 years older.

Face amount is referred to as

LEVEL

Variable Whole Life insurance is based on what premium?

LEVEL FixED

Vacation Travel Expenses

Least likely to be considered a legitimate need that would be paid by insurance proceeds.

Which would be the best option that would help the surviving spouse of the insured to put child through daycare?

Life insurance proceeds

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

Limited pay whole life

What is the basis for a claim against an insurance policy?

Loss

Which of the following is NOT a characteristic of an insurable risk?

Loss must be catastrophic.

There is a requirement to prove insurability on the part of the participants

NOT A CHARACTERISTIC OF GROUP LIFE

Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance?

Only written statements can be considered fraud.

What is not true regarding group insurance

Participants in the policy each receive a policy.

What is NOT true regarding a decreasing term policy?

Payable premium amount steadily declines throughout duration of the contract.

What determines the cash value of a VARIABLE life policy?

Performance of the policy portfolio

What is true regarding a WHOLE LIFE policy?

Policyowner is entitled to policy loans

What is true regarding a whole life policy?

Policyowner is entitled to policy loans.

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

Predicted needs of family after insured's death

What is NOT a characteristic of group life insurance...

Premiums are determined by age,sex, and occupation of each individual certificate holder.

The Gramm-Leach-Billey Act was passed to

Protect private customer information filed with a financial institution.

Consumer report

Provides the underwriter with the information about an insurance applicant's credit.

An insurance option that is considered a risk-sharing arrangement...

Reciprocal

What best defines target premium in universal life policy?

Recommended amount to keep the policy in force throughout its lifetime.

The Federal Fair Credit Reporting Act

Regulates consumer reports

A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy

Required a premium increase each renewal.

Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must

Respond to the consumer's complaint.

In case of a loss, the indemnity provision in insurance policies....

Restores an insured person to the same financial state as before the loss.

To sell variable life insurance policies, an agent needs all of the following EXCEPT: - life insurance license - SEC registration - FINRA registration - Securities License

SEC registration

A domestic insurer issuing variable contracts must establish one or more

SEPERATE ACCOUNTS

What type of life insurance policy generates immediate cash value?

SINGLE PREMIUM

What is NOT a feature of Indexed Universal life

Sale of this product requires a securities license.

If an agent wishes to sell variable life policies, what license must the agent obtain?

Securities

What policy is classified as a traditional level premium contract?

Straight Life

Apparent Authority

The appearance or the assumption of authority based on the actions, words, or deeds of the principal or because of circumstances the principal created.

Which of the following would qualify as a competent party in an insurance contract?

The applicant has a prior felony conviction.

An offer is usually made when

The completed application, by the applicant, is submitted to the insurer.

Which is NOT a goal of risk retention?

To minimize the insured's level of liability in the event of loss.

Survivorship Life Insurance

Two or more insureds. Pays upon death of the last (similar to joint life)

What policy would have an IRS required corridor or gap between the cash value and death benefit?

Universal Life - Option A (Level Death Benefit)

Human Life Value Approach

Uses the insured's wages, years until retirement and inflation as calculations

Which of the following is a statement that is guarantied to be true, and if untrue, may break an insurance contract?

Warranty

In forming an insurance contract, when does acceptance usually occur?

When an insurer's underwriter approves coverage.

When is the earliest a policy may go into effect?

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

When would a 20-pay whole life policy endow?

When the insured reaches age 100

Premiums are not tax-deductible as a business expense

Which is correct concerning taxation of premiums in a KEY-PERSON life insurance policy?

Debtor in the life of the creditor

Which of the following is NOT an example of a valid insurable interest?

Option B

Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?

Federal law makes it illegal for any individual convicted of a crime involving dishonesty or breach of trust to work in the business of insurance affecting interstate commerce

Without receiving written consent from INSURANCE REGULATORY AUTHORITY.

A universal policy has two components:

an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

Term policies do not

develop cash values.

The cash value of a variable life policy

fluctuates based on the performance of the securities in the separate account

loss

is the reduction, decrease, or disappearance of the value of the person or property insured in a policy.

The premium of a survivorship life policy compared with that of a joint life policy would be

lower

Another name for a substandard risk classification is

rated

indemnity

reimbursement; a provision in an insurance policy

Which will help prevent a universal life policy from lapsing?

target premium

Annually Renewable Term

the death protection component of Universal Life Insurance is always this

The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as

the policy contains sufficient cash value to cover the cost of insurance.

Features of the Indexed Universal Life

- Flexible premium - Adjustable death benefit - Policy's cash value is dependent on performance of equity index.

The components of universal life policy are

- Insurance - Cash Account

Decreasing Term Policy

-Death benefit is $0 at the end of its term -Contract pays only in the event of death during the term and there is no cash value. -The face amount steadily declines throughout the duration of the contract.

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

-Executive is owner -Executive pays premium