Unit 7

Except for direct response insurers, companies must deliver a Buyer's Guide to all prospective buyers: A) before the agent commences a sales presentation. B) before the signing of the application. C) before accepting an initial premium or premium deposit. D) at the time of policy delivery.

C) before accepting an initial premium or premium deposit.

Which of the following is the term that describes any attempt by an existing insurer to dissuade a policyowner from replacing existing life insurance? A) Conservation. B) Existing disclosure. C) Policy warning. D) Replacement.

A) Conservation.

When Lisa applied for a life insurance policy, the agent issued a receipt stating the coverage is effective as of the date of application, if the applicant is found to be insurable under the company's general underwriting rules. This type of receipt is known as: A) a binding receipt B) an inspection receipt C) an acceptance receipt D) a conditional receipt

D) a conditional receipt

If a life insurance applicant is given a binding receipt, when does his or her coverage become effective? A) Date the policy is issued. B) Date the applicant proves to be insurable. C) Date the receipt is given. D) Date the policy is delivered.

C) Date the receipt is given.

When a life insurance transaction involves replacement, the producer must do all of the following EXCEPT: A) leave with the applicant originals or copies of the communications used in the sales presentation. B) attach to each application a list of all existing life insurance to be replaced. C) give the applicant a "Notice Regarding Replacement" signed by the applicant and producer. D) submit a copy of the replacement notice to the Director.

D) submit a copy of the replacement notice to the Director.

When replacement is involved, a producer must do all of the following EXCEPT: A) give the applicant a notice regarding replacement of life insurance signed by the applicant and producer. B) make a list of the applicant's existing life insurance policies. C) notify the existing insurer when one of its subsidiaries will issue the replacing policy. D) obtain a signed statement from the applicant disclosing any existing insurance policies to be replaced.

C) notify the existing insurer when one of its subsidiaries will issue the replacing policy.

Anna applied for a $2 million life insurance policy and paid the first premium but was later found to be uninsurable. The agent gave her a receipt that guarantees coverage until the insurer formally rejects her application. Which type of receipt did Anna receive? A) Insurability. B) Conditional. C) Approval. D) Binding.

D) Binding. With a binding receipt, coverage is guaranteed, even if Anna is later found to be uninsurable, until the insurer formally rejects the application.

Which of the following statements pertaining to delivery of a life insurance policy is NOT correct? A) An insurer issues a policy (before the initial premium has been paid) and sends it to the agent with instructions not to deliver it unless the applicant is in good health. This is an example of constructive delivery. B) From a legal perspective, a policy may be delivered by mail instead of in person if all necessary conditions have been met. C) An insurer issues a policy (after the initial premium has been paid) and sends it to the agent for unconditional delivery, but the agent postpones delivery. This is an example of constructive delivery. D) An insurer issues a policy (after the initial premium has been paid) and sends it to the agent for unconditional delivery to the policyowner. This is an example of constructive delivery.

A) An insurer issues a policy (before the initial premium has been paid) and sends it to the agent with instructions not to deliver it unless the applicant is in good health. This is an example of constructive delivery. **If the insurer places a condition on the delivery, there is no constructive delivery.

Which of the following statements regarding a conditional receipt is CORRECT? A) It is given only if the initial premium has been submitted with the signed application. B) It is given pending acceptance by the applicant of additional riders. C) It is given at the time of policy delivery. D) It is given when the application is completed.

A) It is given only if the initial premium has been submitted with the signed application. The conditional receipt means that if the coverage is accepted as applied for and an initial premium is submitted with the application, the policy will be in force from the date the application is signed. The receipt is not provided simply by completing the application.

When replacement is involved in a transaction, producers MUST do which of the following? A) Leave with the applicant a comparison between the guaranteed dividends for the old and the new policies. B) Send the existing insurer a notice regarding replacement, signed by the applicant. C) Send the existing insurer a list of insurance to be replaced. D) Leave with the applicant a notice regarding replacement and copies of all sales material prepared by the agent.

D) Leave with the applicant a notice regarding replacement and copies of all sales material prepared by the agent.

It is a producer's responsibility to disclose information about the policy and the underwriting process to an applicant. Which of the following is the best way to do this? A) Review a disclosure letter during the presentation. B) Deliver, review, and obtain a receipt for the Buyer's Guide during the presentation. C) Mail a disclosure before the appointment. D) Deliver, review, and obtain a receipt for the Buyer's Guide at policy delivery.

A) Review a disclosure letter during the presentation. The Buyer's Guide, which contains general insurance information and underwriting information, should be provided during the presentation. The policy summary should also be provided at this time. The disclosure letter is mailed after the presentation. Disclosure information should be provided before the policy is delivered.

Which of the following statements best defines why an applicant would want to backdate an insurance application? A) To take advantage of higher interest rates in place at the earlier date. B) To move the policy issue date ahead of a disqualifying event, such as a diagnosis of a terminal disease. C) To have the policy's premium based on the insured's age at the earlier date. D) To create a larger cash value upon policy issue.

C) To have the policy's premium based on the insured's age at the earlier date.