NY Life Insurance Exam Review

Courts will interpret any ambiguity in an insurance contract A. Based on the prudent person rule B. In favor of the insured C. In favor of the insurer D. Through arbitration

B. In favor of the insured Insurance policies are contracts of adhesion. The insurer writes the contract and the insured accepts the contract as it is written. When ambiguities exist, courts generally rule in favor of the insured

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost? A. Reasonable expectations B. Indemnity C. Stop-loss D. Consideration

B. Indemnity The principle of indemnity stipulates that the insured can only collect for the amount of the loss even if the policy is written with greater benefit limits

An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority? A. Implied B. Assumed C. Apparent D. Express

C. Apparent An agent who accepts a premium after the end of the grace period appears to the client to have the authority to prevent the policy from lapsing. In fact, the agent has no such power

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

A. 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 a business uses of life insurance

A client's policy lapsed in 2010 without being renewed. In what year can the insurance company destroy the file on this policy? A. 2012 B. 2013 C. 2015 D. 2016

D. 2016 According to New York law, insurers must keep policy records for 6 years after the date the policy is no longer in effect, or until the filing of a review of the record, whichever is longer

All the following are true of key person insurance EXCEPT A. The plan is funded by permanent insurance only B. There is no limitation on the number of key employee plans in force at any one time C. The employer is the owner, payor and beneficiary of the policy D. The key employee is the insured

A. The plan is funded by permanent insurance only Key Person coverage may be funded by any type of life insurance

What does "level" refer to in level term insurance? A. Interest rate B. Face amount C. Premium D. Cash value

B. Face amount Level term policies maintain level death benefit (or face amount) throughout the term of the policy. In level term insurance, the premium also remains consistent over the years, unlike the premiums of many policies, which increase as the policyholder ages

In order to be a licensed life settlement broker, a person must complete which of the following requirements? A. Post a surety bond B. Submit to a drug test C. Submit fingerprints D. Have been a licensed life producer for at least 6 months

C. Submit fingerprints

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? A. As of the policy delivery date B. As of the first of the month after the policy issue C. As of the policy issue date D. As of the application date

D. As of the application date If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application

Which of the following will be included in the policy summary? A. Copies of illustrations and application B. Comparisons with similar policies C. Primary and secondary beneficiary designations D. Premium amounts and surrender values

D. Premium amounts and surrender values A policy summary must be delivered along with the policy and will provide the producer's name and address, the insurance company's home office address, the generic name of the policy issued, and premium, cash value, surrender value and death benefit figures for specific policy years

A tornado that destroys property would be an example of which of the following? A. A peril B. A pure risk C. A loss D. A physical hazard

A. A peril A peril is the cause of loss insured against in an insurance policy

Which of the following CANNOT be included along with illustrations used to sell life insurance? A. Original death benefit B. Vanishing premium information C. Name of the insurer D. Rating information

B. Vanishing premium information Illustrations used to sell life insurance cannot use the term "vanishing premium"— or any similar term— that implies the policy becomes paid up

An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy? A. $20,000 B. $25,000 C. $50,000 D. The face amount will be determined by the insurer

C. $50,000 The face of the term policy would be the same as the face amount provided under the whole life policy

Based on the 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

C. 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

A producer who fails to segregate premium monies from his own personal funds is guilty of A. Commingling B. Larceny C. Embezzlement D. Theft

A. Commingling It is illegal for insurance producers to comingle premiums collected from the applicants with their own personal funds

What type of life insurance is most commonly used for group rates? A. Decreasing term B. Annually renewable term C. Whole life D. Flexible premium whole life

B. Annually renewable term Group insurance is usually written for employee-employer groups as annually renewable term insurance

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

B. Buy-sell agreement

Which of the following insurance options would be considered a risk-sharing arrangement? A. Surplus lines B. Reciprocal C. Stock D. Mutual

B. Reciprocal When insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal

Which of the following applicants would NOT qualify for a Keogh Plan? A. Someone who works for a self-employed individual B. Someone who works 400 hours per year C. Someone who has been employed for more than 12 months D. Someone who is over 25 years of age

B. Someone who works 400 hours per year A person must have worked at least 1,000 hours per year to be eligible for a Keogh Plan

How long does a licensee have to notify the Superintendent of a change of address? A. 90 days B. Immediately C. 30 days D. 60 days

C. 30 days The Superintendent must be notified within 30 days upon any of a change of primary residence or business address

Which of the following best describes rescission? A. An insurer cancels a policy after an insured files a suspicious claim B. An insured agrees to cancel policy for the return of the most recent premium paid C. An insured allows a policy to lapse D. An insurer cancels a policy after it has been issued and refunds all paid premiums

D. An insurer cancels a policy after it has been issued and refunds all paid premiums When an insurer rescinds a policy after is been issued and refunds all premiums paid, this is rescission

Which of the following would NOT be considered an insurance producer? A. An insurance broker B. A reinsurance intermediary C. An insurance agent D. An insurer's officer

D. An insurer's officer Insurance provider that means any person required to be licensed to sell, solicit or negotiate insurance—including agents, brokers in intermediaries. Officers are not required to be licensed

In insurance transactions, fiduciary responsibility means A. Maintaining a good credit record B. Being liable with respect to payments of claims C. Commingling premiums with agent's personal funds D. Handling insurer funds in a trust capacity

D. Handling insurer funds in a trust capacity An agent's fiduciary responsibility includes handling insurer funds in a trust capacity

Who might receive dividends from a mutual insurer? A. Subscribers B. Stockholders C. Agents D. Policyholders

D. Policyholders A mutual insurer has no stock, and is owned by the policyholders. Since they may receive a dividend (not guaranteed), such policies are known as participating policies. Dividends received by policyholders of a mutual insurer are not taxable

Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive? A. Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit B. There are no deductions taken from death benefits C. Penalty imposed for early withdrawal of the death benefit, plus the amount of earnings lost by the insurance company in interest income C. 10% federal death benefit income tax, plus the amount of the accelerated benefit

A. Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit If an insured withdraws a portion of the death benefit by the use of this rider, the benefit payable at death will be reduced by that amount, plus the amount of earnings lost by the insurance company in interest income

All of the following are business uses of life insurance EXCEPT A. Funding against financial loss caused by the death of a key employee B. Funding business continuation agreements C. Funding against general company financial loss D. Compensating executives

C. Funding against general company financial loss Both life and health insurance can be used for variety of purposes in a business setting, including the funding of business continuation agreements, compensating executives, and protecting the firm against financial loss resulting from the death or disability of key employees

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of report is that? A. Agent's Report B. Underwriter's Report C. Inspection Report D. Medical Information Bureau's report

C. Inspection Report inspection reports cover moral financial information regarding a potential insured, usually supplied by private investigators and credit agencies you

A perspective insured receives a conditional receipt but dies before the policy is issued. The insurer will A. Pay the policy proceeds up to an established a limit B. Not pay the policy proceeds under any circumstances C. Automatically pay the policy proceeds D. Pay the policy proceeds only if it would have issued the policy

D. Pay the policy proceeds only if it would have issued the policy The conditional receipt says that coverage will be effective either on the date of the application or the date of the medical exam, whichever occurs last

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits? A. Fixed amount B. Variable period C. Variable amount D. Fixed period

A. Fixed amount Under the installments for a fixed amount option, the annuitant selects the amount of each payment, and the insurer determines how long they will pay benefits. This option pays a specific amount until the funds are exhausted. There are no life contingencies

Which settlement option allows the insurer to retain the face amount but pay some income based on gain on the proceeds to the beneficiary at regular intervals? A. Interest only B. Life income C. Fixed amount D. Fixed period

A. Interest only Within the "interest only" option, the insurer retains policy proceeds and pays interest on the proceeds to the beneficiary at regular intervals. The insurer will usually guarantee an interest rate and even pay in excess of the rate quoted

Which of the following best describes the MIB? A. It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance B. it is a government agency that collects C. It is a member organization that protects insured against insolvent insurers D. It is a ranking organization for health insurance

A. It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance The Medical Information Bureau (MIB) is a nonprofit trade organization which receives adverse medical information from the insurance companies and maintains confidential medical impairment information on individuals

Which of the following is NOT a characteristic of an insurable risk? A. The loss must be catastrophic B. The loss must be do to chance C. The loss must be measurable D. The loss exposure must be large

A. The loss must be catastrophic In order to be characterized as pure risk, the loss must be due to chance, definite, measurable, and predictable, but not catastrophic

When must insurable interest exist in a life insurance policy? A. At the time of loss B. At the time of application C. At the time of policy delivery D. When there's a change of the beneficiary

B. At the time of application In life insurance, insurable interest must exist at the time of application

All of the following are examples of risk retention EXCEPT A. Self-insurance B. Premiums C. Deductibles D. Copayments

B. Premiums Retention is a planned assumption of risk, or acceptance of responsibility for the loss by an insured through the use of deductibles, copayments, or self-insurance

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? A. Term insurance only B. Permanent insurance only C. Universal life insurance only D. Any form of life insurance

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

All of the following are duties and responsibilities of producers at the time of application EXCEPT A. Change any incorrect statement on the application by personally initialing next to the corrected statement B. Explain the nature and type of any receipt the producer is giving to the applicant C. Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information D. Check to make sure that there are no unanswered questions on the application

A. Change any incorrect statement on the application by personally initialing next to the corrected statement Any changes to information on the application must be initialed by the applicant

Which of the following statements about the reinstatement provision is true? A. It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated B. It permits reinstatement within 10 years after a policy has lapsed C. It provides for reinstatement of a policy regardless of the insured's health D. It guarantees the reinstatement of a policy that has been surrendered for cash

A. It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated Upon policy reinstatement, the policyowner will be required to pay all back premiums plus interest, and may be required to repay any outstanding loans and interest

An employee is joining a group insurance plan. In order to avoid having to prove insurability, what must the employee do? A. Join during the open enrollment period B. Provide medical records to the insurer C. Sign a statement of contributed good health D. Nothing: proof of insurability is never required in group policies

A. Join during the open enrollment period If one applies for coverage after the open enrollment period, proof of insurability may be required in order to avoid adverse selection

Which of the following is NOT true regarding the Needs Approach method of determining the value of an individual's life? A. Need is predicted using the number of years until the insured's retirement B. Coverage is based on the predicted needs of that family C. The death of an insured must be premature D. It must be assumed that the death of the insured will occur immediately

A. Need is predicted using the number of years until the insured's retirement In the Needs Approach method, need is determined by the predicted needs of the family after the premature death of the insured, which must be assumed will happen immediately. The policy allows for benefits to be collected upon the insured's death

Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called A. Suitability B. Client protection C. Approval D. Underwriting

A. Suitability insurance producers must adhere to the concept of suitability by ensuring that, to the best of their belief, the purchase, sale or exchange of a policy is in the best interest of the insured

An insured wants to transfer his personal insurance policy to a friend. Under what conditions with this be possible? A. The insured will need a written consent of the insurer B. It is impossible to transfer a policy C. The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it D. The insured can transfer the policy to his friend and then notify the insurer of the change

A. The insured will need a written consent of the insurer A personal insurance contract is written between an insurance company and an individual, and the company has a right to decide with whom it will and will not do business. An insured can transfer an insurance contract to another person, but he or she must first obtain the written consent of the insurer

Can the Superintendent investigate fraudulent claims if they occurred outside of the resident's state according to the Insurance Fraud Prevention Act? A. Yes. The Superintendent has the power to make an investigation within this state or outside of the state B. Yes, but only if it is a violation of another state's insurance law C. No. Because insurance is regulated by the state, all claims must occur within state boundaries D. No. If fraudulent acts are believed to have been committed, the Superintendent must notify the state's Superintendent or Commissioner. It will then become a federal matter

A. Yes. The Superintendent has the power to make an investigation within this state or outside of the state If the insurance frauds bureau has reason to believe that a person is engaged or is about to engage in a fraudulent act, the Superintendent has the power to make an investigation within this state or outside the state

Which of the following individuals must pass a written examination to be licensed as agents? A. An applicant who has a Chartered Life Underwriter (CLU) designation B. A resident of New York wishing to transact business in New York C. A nonresident licensee D. A licensee who was licensed on July 1, 1987, to represent any assessment corporation

B. A resident of New York wishing to transact business in New York None of the above listed individuals must take and pass a written examination in New York to be licensed as an agent, except a New York resident wishing to act as an agent

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as A. Binding contracts B. Contracts of adhesion C. Unilateral contracts D. Aleatory contacts

B. Contracts of adhesion Insurance policies are written by the insurer and submitted to the insured on a take-it-or-leave-it basis. The insured does not have any input into the contract, but simply adheres the contract

Which of the following best describes the aleatory nature of an insurance contract? A. Policies are submitted to the insurer on a take-it-or-leave-it basis B. Exchange of unequal values C. Only one of the parties being legally bound by the contract D. Ambiguities are interpreted in favor of the insured

B. Exchange of unequal values An aleatory contract is a contract in which unequal amounts or values are exchanged. The amount of premium the insured pays is much less than the potential loss assumed by the insurer

What is the purpose of a conditional receipt? A. It is given by the agent only to applicants who fully prepay all scheduled premiums in advance of policy issue B. It is intended to provide coverage on a date earlier than the date of the insurance of the policy C. It guarantees the applicant that a policy will be issued in the amount applied for in the application D. It serves as proof that the agent has determined the applicant to be fully insurable for coverage by the insurance company

B. It is intended to provide coverage on a date earlier than the date of the insurance of the policy 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

Attempting to determine how much insurance an individual would require based on their financial objectives is known as A. Viatical Approach B. Needs Approach C. Human Life Value Approach D. Estate Planning

B. Needs Approach Needs method determines how much benefit would be necessary to replace the loss income and increased expense should the insured die prematurely

Which of the following riders will NOT cause the Death Benefit to increase? A. Accidental Death Rider B. Payor Benefit Rider C. Guaranteed Insurability Rider D. Cost of Living Rider

B. Payor Benefit Rider Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount

All of the following are true of key person insurance EXCEPT A. The key employee is the insured B. The plan is funded by permanent insurance only C. There is no limitation on the number of key employee plans in force at any one time D. The employer is the owner, payor and beneficiary of the policy

B. The plan is funded by permanent insurance only Key person coverage may be funded by any type of life insurance

An individual applies for a life policy. Two years ago he suffered a head injury from an accident, so he cannot remember parts of his past, but is otherwise conpetent. He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of this history one year later. What will probably happen? A. Because the insured is currently not a drug user, his policy will not be affected B. The policy will not be affected C. The policy will be voided D. The insurer will sue the insured for committing fraud

B. The policy will not be affected In insurance, fraud is the intentional misrepresentation of material information that is crucial when deciding whether or not to write a contract for the applicant. If an insurer finds that an applicant has committed fraud, it can void the contract, provided that discovery occurs within the first two years of the effective policy date. In this particular instance the applicant did not commit intentional fraud

Which of the following is NOT required for producer to tell a prospect? A. An explanation of products that the insurer is selling B. What requirements the producer needed to meet to obtain the insurance license C. From what outside sources the insurer would seek information regarding the insured D. How the insurer would use any outside information regarding the applicant

B. What requirements the producer needed to meet to obtain the insurance license Agents are required to inform prospects of the products that they are selling, as well as their information collecting practices

Which of the following is the closest term to an authorized insurer? A. Licensed B. Legal C. Admitted D. Certified

C. Admitted Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer

Which of the following is the closest term to an authorized insurer? A. Licensed B. Legal C. Admitted D. Certified

C. Admitted Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer

An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? A. Adhesion B. Conditional C. Aleatory D. Good health

C. Aleatory In an aleatory contract, unequal amounts are exchanged between payments and benefits. In this instance, the insured receives a large benefit for a small price

Joe, Larry, and Curly own a small business. They have made a legal arrangement which states that if one of them dies or becomes disabled, the other two will be able to buy the partner's shares. Which term best describes this arrangement? A. Business Partner Disability Provision B. Buy-up Distribution C. Business Continuation D. Shares Distribution

C. Business Continuation In a Business Continuation arrangement, the partners of a business can buy shares belonging to recently deceased or disabled partner

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? A. Agent's Report B. Underwriter's Report C. Inspection Report D. Medical Information Bureau's report

C. Inspection Report Inspection reports cover moral and financial information regarding a potential insured, usually supplied by private investigators and credit agencies. Companies that use inspection reports are subject to the rules outlined in the Fair Credit Reporting Act

An insured purchased an insurance policy 5 years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? A. Nonprofit service organization B. Stock C. Mutual D. Reciprocal

C. Mutual Funds not paid out after paying claims and other operating costs are returned the policyowners in the form of a dividend. If all funds are paid out, no dividends are paid

In case of a loss, the indemnity provision in insurance policies A. Pays the insured a percentage of the loss above and beyond the loss B. Pays the insured as much as 95% of the loss C. Restores an insured person to the same financial state as before the loss D. Allows insured to collect 20% more than the actual loss

C. Restores an insured person to the same financial state as before the loss Indemnity (sometimes referred to as reimbursement) is a provision in an insurance policy that states that in the event of a loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the existence of an insurance contract

Which of the following is NOT required on an illustration used in the sale of a life insurance policy? A. Name of insurer B. Underwriting or rating classification upon which the illustration is based C. The name of the primary and secondary beneficiaries D. Generic name of policy

C. The name of the primary and secondary beneficiaries Other required items include the name and business address of producer or insurer's authorized representative; the name, age and sex of proposed insured; underwriting or rating classification upon which the illustration is based; and the initial death benefit

Which of the following is NOT a goal of risk retention? A. To increase control of claim reserving and claim settlements B. To fund losses that cannot be insured C. To minimize the insured's level of liability in the event of a loss D. To reduce expenses and improve cash flow

C. To minimize the insured's level of liability in the event of a loss Retention usually results from the three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claim settlements, and to fund losses that cannot be insured

Which of the following is NOT a goal of risk retention? A. To increase control of claim reserving claim settlements B. To fund losses that cannot be insured C. To minimize the insured's level of liability in the event of loss D. To reduce expenses and improve cash flow

C. To minimize the insured's level of liability in the event of loss Retention usually results from three basic desires of the insured: to reduce expenses and improve cash flow, to increase control of claim reserving and claim settlements, and to fund losses that cannot be insured

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A. Indemnity B. Representation C. Warranty D. Concealment

C. Warranty A warranty in insurance is a statement guaranteed to be true. When an applicant is applying for insurance contract, the statements he or she makes are generally not warranties but representations. Representations are statements that are true to the best of the applicant's knowledge

If an insured changes his payment plan from monthly to annually, what happens to the total premium? A. Stays the same B. Doubles C. Increases D. Decreases

D. Decreases Because the insurer would have the entire premium to invest for a full year, they would reduce the premium amount

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits? A. Variable annuity B. Flexible payment annuity C. Deferred interest annuity D. Immediate annuity

D. Immediate annuity An annuity purchased with a single lump-sum payment, with a 25-year fixed-period distribution will be most suitable for this arrangement

Which of the following is NOT a type of whole life insurance? A. Single premium B. Straight life C. Limited payment D. Increasing term

D. Increasing term There are several types of whole life policies. The first three, Straight Life, Limited Payment, and Single Premium, are the basic forms of whole life. Increasing term is a type of term insurance

Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, in insured may only receive benefits for the amount lost? A. Stop-loss B. Consideration C. Reasonable expectations D. Indemnity

D. Indemnity The principle of indemnity stimulates that the insured can only collect for the amount of the loss even if the policy is written with greater benefit limits

Who makes up the Medical Information Bureau? A. Hospitals B. Former insured C. Physicians and paramedics D. Insurers

D. Insurers The Medical Information Bureau is made up of insurers so the companies can compare the information they have collected on a potential insured with information other insurers may have discovered

An insurer invests the money it receives from premiums paid by its insureds. Which of the following is TRUE regarding the interest earned on these investment? A. It is paid out as dividends B. It is used to fund executive bonuses C. It is used to increase the death benefit D. It is used to lower premiums

D. It is used to lower premiums Because insurers receive premiums before they must pay out benefits, they can invest the premium money and use the interest to lower premium amounts charged to insureds

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 A. Shorten the contestability period B. Eliminate pre-existing conditions C. Help him meet a sales quota for that period D. Lower the insured's premium

D. Lower the insured's premium An agent may backdate the application for up to 6 months to accomplish a lower premium rate for the insured

Attempting to determine how much insurance an individual would require based on their financial objectives is known as A. Human Life Value Approach B. Estate Planning C. Viatical Approach D. Needs Approach

D. Needs Approach Needs method determines how much benefit would be necessary to replace the loss income and increased expense should the insured die prematurely

The causes of loss insured against in an insurance policy are known as A. Losses B. Risks C. Hazards D. Perils

D. Perils Perils are the causes of loss insured against in an insurance policy

Another name for a substandard risk classification is A. Controlled B. Declined C. Elevated D. Rated

D. Rated Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium

Which of the following statements concerning a Simplified Employee Pension plan (SEP) in INCORRECT? A. SEPs allow the employer to make annual tax deductible contributions up to 25% of an employee's earned income B. SEPs have a higher tax deductible contribution limit than an IRA C. Employer contributions are not included int he employee's gross income D. SEPs are suitable for large companies

D. SEPs are suitable for large companies

Which of the following is an example of apparent authority of an agent appointed by an insurer? A. The agent accepts a premium payment during the grace period B. The agent has business cards and stationery printed C. The agent puts up a sign with the insurer's logo without express permission D. The agent accepts a premium payment after the end of the grace period

D. The agent accepts a premium payment after the end of the grace period An agent who accepts a premium after the end of the grace period appears to the client to have the authority to prevent the policy from lapsing. In fact, the agent has no such power. The power to use business cards, stationary and signage may be either express (written) or implied (not written), but in either case it is allowed

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy? A. The policy's cash value B. A refund of premiums C. Nothing, since the insured was killed as a result of war D. The full death benefit

D. The full death benefit War or Military Service Clause specifically excludes or limits the insurer's liability for losses caused by war or active military service. If a life insurance policy does not have that exclusion, the benefits are paid to the beneficiary, as if the insured died of any other cause

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

D. 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