WebCE Exam Tutor

Life insurance policies issued since 2009 must be based on the 2001 CSO mortality table, which presumes all people die by age: 66 95 100 120

120

Assuming no relation other than that stated, in which of the following situations does insurable interest exist? Debbie would like to take out a life insurance policy on her best friend. Debbie would like to take out a life insurance on the owner of her food delivery service. Debbie would like to take out a life insurance policy on her lawyer. Debbie would like to take out a life insurance policy on herself.

Debbie would like to take out a life insurance policy on herself

Assuming no relation other than that stated, insurable interest is presumed to exist between all of the following EXCEPT: Rhoda and her husband Sam and his son Dina and her fitness trainer Stan and his business partner

Dina and her fitness trainer

Assuming no relation other than that stated, insurable interest exists in all of the following situations EXCEPT: Pat on himself Paul on his father Pete on his son Peyton on his life coach

Peyton on his life coach

Sam and Mary both have group term life insurance. Sam's employer plan is a contributory plan, while Mary's is noncontributory. What is the difference? Sam's coverage must include pension benefits, while Mary's does not. Sam and his employer share premium payments, while Mary's employer pays the entire premium. Sam is obligated to participate in the plan, while Mary is not. Sam's employer contributes 100 percent to the plan; Mary's employer contributes 0 percent.

Sam and employer share premium payments, while Mary's employer pays the entire premium

All of the following are eligible to purchase a group life insurance policy EXCEPT: the Wonderful Widget Company, which employs more than 200 people the State Electrical Workers Union the Retailers Multiple Employer Trust, formed by two retailers to purchase insurance for their employees Stan and his neighbors, who form their own group to buy group coverage at a lower cost than their individual coverages

Stan and his neighbors are not eligible to purchase group life insurance because a group cannot be formed solely to obtain life insurance

While taking an insurance application, Betty recommends backdating it so that the proposed insured will appear to be a year younger on the form. Can Betty do this? Yes. Backdating is permitted if the application is backdated no more than 18 months. No. Backdating is illegal. Yes. Backdating is always permitted. Yes. Backdating is permitted if it is for six months or less and authorized by the insurer.

Yes. Backdating is permitted if it is for 6 months or less and authorized by the insurer

Which is a non-admitted insurance company? a foreign insurer with a certificate of authority a domestic insurer without a certificate of authority an alien insurer with a certificate of authority a domestic insurer with a certificate of authority

a domestic insurer without a certificate of authority

When holding insurance premiums and other funds, agents must act in what role? a trustee relationship a fiduciary capacity an agency capacity a trustor capacity

a fiduciary capacity

An agent who sells insurance for an insurance company that does not have a certificate of authority to operate in the state represents: an alien insurer a non-admitted insurer an unregistered insurer a limited lines insurer

a non-admitted insurer

Which person would not be considered competent to enter into an insurance contract? a 21-year-old man an adult who is not a U.S. citizen a person who is physically ill a person under the influence of alcohol

a person under the influence of alcohol

An innocent misstatement of age or sex on an insurance application would most likely result in: voiding of the policy adjustment of policy benefits suspension of the policy a fine

adjustment of policy benefits

Blackstone Insurers is incorporated in New York, where it also has a certificate of authority to transact insurance. What type of insurer is Blackstone in New York? certified insurer alien insurer foreign insurer admitted insurer

admitted insurer

When an insurer employs field agents, who is responsible for delivering a new policy to a policyholder? insurance company agency for which the agent works agent Department of Insurance

agent

An errors and omissions insurance policy protects the: agent or producer underwriter beneficiary policyowner

agent or producer

Which of the following describes an agent's fiduciary responsibilities? An agent must act only in the best interests of the appointing insurer. An agent must act only in the best interests of the insured or applicant. An agent must act in the best interests of insureds, applicants, and appointing insurers. An agent must act in the best interests of the State's insurance department.

an agent must act in the best interests of insureds, applicant, and appointing insurers

ABC Insurance Company fires Renee, a producer. She continues to interview prospects, make sales presentations with company materials, and collect premiums. When dealing with Renee, the prospects believe that she has what kind of authority from ABC? apparent actual implied express

apparent

How is increasing term life insurance normally sold? as a cost-of-living rider on a permanent life insurance policy as a permanent insurance policy as an endorsement as a modified endowment contract

as a cost of living rider on a permanent life insurance policy

An insurable risk is not: ascertainable catastrophic uncertain an economic hardship

catastrophic

An insurer sends a premium statement to a former policyowner. However, the policy has lapsed for non-payment of premiums. Believing that the policy is still in effect, the policyowner pays the premium, which the insurer accepts. The insured then suffers a loss and makes a claim on the policy. What legal doctrine prevents the insurer from denying the claim? twisting discrimination materiality estoppel

estoppel

Jerry's life insurance policy instructs him to pay the premium to the insurer's home office. However, he has sent his payments to his agent for many years, and the agent has forwarded them to the insurer. What legal principal will prevent the insurer from now requiring that Jerry send the premiums to the home office? estoppel waiver misrepresentation fraud

estoppel

Jim's policy expired due to nonpayment of premium. His agent sends him a statement the following month without noting the lapse. If Jim pays the premium and later suffers a loss for which he files a claim, what will prevent the insurer from denying the claim? estoppel utmost good faith reasonable expectations waiver

estoppel

Stacey is a captive agent for Best Rates Insurance Company. Her agency contract gives her permission to print and use business cards with the company's logo and submit applications for its policies. Which type of authority does Stacey have to take these actions? apparent express implied imputed

express

Suppose an agent's contract with the insurer gives the agent permission to sell and solicit business for the insurer. What kind of authority does the contract grant to the agent? implied apparent express anticipated

express

Jessica, age 25, buys a $100,00 life insurance policy. The initial premium is lower than straight whole life rates and increases each year for the first ten years of the policy period. After that, the premium levels off and remains at that amount for the life of the policy. What type of policy does Jessica own? indeterminate premium whole life single premium life graded premium whole life 20-pay life

graded premium whole life

Jessica, age 25, buys a $100,000 life insurance policy. The initial premium is lower than straight whole life rates and increases each year for the first ten years of the policy period. After that, the premium levels off and stays at that amount for the life of the policy. What type of policy does Jessica own? indeterminate premium whole life single premium life graded premium whole life 20-pay life

graded premium whole life

The premium that a policyowner pays for a periodic premium life insurance policy is called the: net single premium net level premium gross single premium gross level premium

gross level premium

Credit life insurance is most commonly based on which type of product? individual level term life insurance group level term life insurance individual decreasing term life insurance group decreasing term life insurance

group decreasing term life insurance

Ross collects a policy's first premium with an application for insurance. The next day he learns that the customer canceled the policy. What must Ross do with the premium? He should put it in his personal bank account immediately and try to earn a little interest. He should hold onto them until the end of the free-look period. He should hold onto them as long as possible to compensate for his time and inconvenience. He should see that the funds are remitted to the customer as soon as possible.

he should see that the funds are remitted to the customer as soon as possible

What is the result of Alice paying her life insurance premiums more frequently than once a year? lower annual premiums higher annual premiums to account for lost interest and additional insurer costs no effect higher annual premiums to account for the increased risk to the insurer

higher annual premiums to account for lost interest and additional insurer costs

Matt takes out a life insurance policy on himself to protect his family. Matt's insurance company may consider all of the following when underwriting his policy EXCEPT: his cholesterol level his blood pressure his race his family medical history

his race

With respect to a $75,000 ten-year level term policy, all the following statements are correct EXCEPT: If the insured lives beyond the ten-year period, the policy expires and no benefits are payable. During the ten-year term of coverage, neither the premium nor the death benefit will change. The policy gives a level $75,000 of coverage for ten years. If the insured dies after ten years, only the policy's cash value will be paid to the beneficiary.

if the insured dies after ten years, only the policy's cash value will be paid to the beneficiary

An agent acting on behalf of an insurance company even though these acts are not specified in the agent's contract with the company but are necessary to carry out the company's express authority, exercises what kind of authority? express apparent special implied

implied

Which one of the following types of insurance is issued with a lower introductory premium that may fluctuate but can never exceed a guaranteed maximum rate? indeterminate premium whole life graded premium whole life limited pay whole life modified premium whole life

indeterminate premium whole life

Eric is a single, self-employed young man of modest means who needs a small amount of life insurance, primarily as a burial fund. Which one of the following types of insurance is most designed for this need? industrial insurance ordinary insurance group insurance whole life insurance

industrial life insurance

In an insurance transaction, what does the applicant give to the insurer as consideration in exchange for the insurer's promise to cover the risk? initial premium promise to pay premiums during the entire policy period promise to be a careful policyowner promise to follow the terms of the insurance contract

initial premium

While meeting with her insurance customer, Ben, Ann sees that he is chain smoking. Yet he notes on his application that he is a nonsmoker. What should Ann do at this point in the application process? leave the meeting to avoid confronting him with the fact allow Ben to complete the application as he wishes, and then correct it later insist that Ben be truthful and avoid misrepresentation not say anything because her name is not on the application

insist that Ben be truthful and avoid misrepresentation

In a fixed life insurance policy, who assumes the risk of investing the premiums? policyowner someone named by the policyowner insurer state insurance commissioner

insurer

Which two parties form a contract for life insurance? agent and insurer agent and beneficiary insurer and beneficiary insurer and policyowner

insurer and policyowner

All of the following are prohibited insurer practices EXCEPT: accessing the MIB records on an applicant without the applicant's approval declining an application for life insurance based on genetic testing information obtained on the proposed insured. failing to notify a life insurance applicant that her application was declined because of information obtained in a credit report. investigating insurance applicants

investigating insurance applicants

Stranger-originated life insurance (STOLI) involves a third-party policy ownership arrangement between which of the following parties? investor group and a consumer insurer and a policyowner insured and a business partner agent and the insurer

investor group and a consumer

With respect to term life insurance, all of the following statements are true EXCEPT: It offers three variations: level, increasing, and decreasing. Coverage provides protection for a specific, limited time. It develops a cash value that is accessible while the insured is alive. Coverage terms can be defined in years or by the age of the insured.

it develops a cash value that is accessible while the insured is alive

Tim paid only the first premium for his health insurance policy before he was diagnosed with cancer. Nevertheless, the insurance company paid all of the expenses for his medical treatment. Which characteristic of an insurance policy resulted in the insurer paying much more than the premium it received? It is a unilateral contract. It is an aleatory contract. It is a personal contract. It is a contract of adhesion.

it is an aleatory contract

Actuaries calculate net single premiums based on which of the following? mortality and dividend assumptions morbidity and expense assumptions mortality and interest assumptions expense and mortality assumptions

mortality and interest assumptions

All life insurance premiums are based generally on which of the following? mortality charge, interest credit, and expense charge mortality charge, profit charge, and expense charge morbidity charge, interest credit, and expense charge morbidity charge, interest credit, and profit charge

mortality charge, interest credit, and expense charge

Which of the following best describes the premium tax insurance companies must pay when they receive premiums? It is imposed by the federal government. It is a federally mandated tax that is collected at the state level by all states. Most companies pass this tax on to their policyowners in some way, either directly or indirectly. Companies absorb these expenses and do not pass them along to policyowners.

most companies pass this tax on to their policyowners in some way, either directly or indirectly

A plan whereby a group of two or more employers from the same trade or industry join to sponsor a group insurance plan is called a(n): union plan multiple employer welfare arrangement insured group plan trade association arrangement

multiple employer welfare arrangement

When classifying insurance risks, insurance underwriters most often use the: numerical rating system judgment method adverse selection system risk assessment scale

numerical rating system

Regarding variable life insurance policy guarantees, which of the following statements is correct? Neither a minimum cash value nor a minimum death benefit is guaranteed. Only a minimum cash value is guaranteed. Only a minimum death benefit is guaranteed. Both a minimum cash value and a minimum death benefit are guaranteed.

only a minimum death benefit is guaranteed

All the following statements regarding about joint life insurance are correct, EXCEPT: It insures two persons under one policy. It pays the death benefit when the first insured dies. Only married couples may buy it. Its premium is less than the premium for two separate policies.

only married couples may buy it

Actuaries base traditional life insurance premiums on all of the following factors, EXCEPT: mortality interest rates expenses policy dividends

policy dividends

Which of the following best describes how the insured's money is handled in a variable life insurance policy? Premiums are placed in the insurer's general account. Premiums are placed in investment subaccounts maintained in the insurer's separate account. Premiums are held in a cash account managed by the insurer. Premiums are held in a federally chartered savings institution.

premiums are placed in investment subaccounts maintained in the insurer's separate account

Insurance agents are often called: account executives managing general agents brokers producers

producers

Which of the following is NOT a standard category of life insurance? individual insurance industrial insurance qualified insurance participating insurance

qualified insurance

An agent assures an insurance applicant that she will be insured for a certain amount. If the coverage is denied and the applicant relied on the agent's assurance to her detriment, the insurer could be liable to the applicant on the basis of: reasonable expectations warranty evidence of insurability estoppel

reasonable expectations

To boost her sales at the end of the year, Agent Trudy started offering potential clients a $250 cash gift card in exchange for purchasing a life insurance policy. Which ethical sales practice has Agent Trudy violated? twisting false information rebating churning

rebating

Which entity spreads the cost of losses among its members by having each member pay a pro-rated share of the losses? risk retention group reciprocal insurer reinsurer self-insurer

reciprocal insurer

With interest-sensitive whole life insurance policies, insurers may change interest and premium rates after reviewing their investment experience. What is the process that insurers use to make these changes called? re-evaluation reconfiguration indexing redetermination

redetermination

The statements that an applicant makes in an application for an insurance policy are treated as: representations warranties conditional promises unconditional promises

representations

Which of the following is one of the key purposes of the USA PATRIOT Act? tighten the requirements for replacing one life insurance policy with another require all financial institutions to create, execute, and maintain anti-money laundering (AML) programs establish guidelines for determining the suitability of a producer's life insurance recommendation require producers who want to sell annuities to first take a special education course on annuities

require all financial institutions to create, execute, and maintain anti-money laundering (AML) programs

Which type of insurance company pays dividends to its stockholders? stock company mutual company fraternal benefit society reciprocal insurer

stock company

Allen's insurance agent thinks Allen's habits and personal character should be examined further than is possible through the application alone. He believes Allen might have left out information to get a more favorable rating. What would the agent use to explain his concerns to the underwriters? the credit report an e-mail to the underwriter the comments section of the application the Agent's Report

the Agent's Report

Which statement best describes an insurable interest? The applicant of a life insurance policy must expect to profit from the insured's death. The applicant of a life insurance policy must be designated as an heir in the insured's will. The applicant of a life insurance policy must expect to suffer a financial loss from the insured's death. The applicant of a life insurance policy must have known the insured for at least 10 years.

the applicant of a life insurance policy must expect to suffer a financial loss from the insured's death

An agent's apparent authority is defined by: the supervising agent's instructions the home office directives the customer's perceptions the agent's beliefs

the customer's perceptions

Stephanie is a policyowner who pays premiums monthly. How does her insurer cover the cost of sending her more frequent premium notices? The insurer charges a one-time lost-earnings fee. The insurer imposes policy loan restrictions. The insurer charges higher premiums. The insurer views the lost earnings as a cost of doing business.

the insurer charges higher premiums

Who is the policyholder under a group credit life insurance policy? the borrower the lender the state's insurance commissioner the insurer

the lender

Which one of the following statements about term life insurance is correct? It is permanent insurance. The policy pays a death benefit only if the insured dies during the term. Money accumulates in term policies. It is intended to cover the insured to age 120.

the policy pays a death benefit only if the insured dies during the term

Which statement about survivorship life insurance policies is NOT correct? They pay the death benefit only when the second insured dies. They insure two persons under one policy. The premiums are about the same as for two comparable single-life policies. They are also known as second-to-die policies.

the premiums are about the same as for two comparable single-life policies

When underwriting a group life insurance policy, which of the following does the underwriter looks at? the profile of the group as a whole the health status of specific members the health status of the group's older members only the health status of the group's most highly paid members only

the profile of the group as a whole

What is the purpose of the Notice of Information Practices on an insurance application? to ensure that the insurer follows proper procedure to inform the applicant that information on the application must be truthful to ensure that the agent follows proper procedure to inform the applicant about the practices that insurers use during the review and underwriting processes

to inform the applicant about the practices that insurers use during the review and underwriting process

Why would a business self-insure instead of buying an insurance policy? to avoid having to comply with state insurance laws to cover against an occasional high-severity loss to insure against frequent low-severity losses to reduce its tax liabilities

to insure against frequent low-severity losses

Which one of the following is the primary goal of the insurer's premium rate calculation process? to set a gross premium that can be charged equally to all applicants for that particular product to make sure the company collects enough money from each group of insureds to pay all of the benefits promised under the contract to give the insurer a good profit margin to give agents a minimum level of compensation

to make sure the company collects enough money from each group of insureds to pay all of the benefits promised under the contract

Which of the following is not a duty that an agent owes to an insurance applicant? to make suitable recommendations to suggest policy replacement when it is in the client's best interest to disclose pertinent information concerning a proposed policy to offer a rebate on the premium

to offer a rebate on the premium

What is the main difference between decreasing term insurance and level term insurance? Premiums decrease over the life of a decreasing term policy but stay the same for level term policies. The insured can renew decreasing term life insurance but not level term. Under decreasing term insurance, the death benefit decreases over the policy period while with a level term policy, the death benefit stays level over the policy period. Decreasing term life insurance can be converted to a permanent policy while level term cannot.

under decreasing term insurance, the death benefit decreases over the policy period while with a level term policy, the death benefit stays level over the policy period

The insurance company employee whose primary job is to review applications and determine if the requested policy is issued or declined is called a(n): producer underwriter actuary claim examiner

underwriter

Which of the following is a characteristic not usually found outside the context of insurance contracts? consideration legal purpose competent parties unilateral

unilateral

A type of permanent life insurance that lets the policyowner increase, reduce or even skip premium payments at will without the policy lapsing best describes: variable life insurance universal life insurance adjustable life insurance modified premium whole life insurance

universal life insurance

For which one of the following types of life insurance policies would flexible premium payments be permitted? whole life insurance term life insurance universal life insurance variable life insurance

universal life insurance

Alex sold an insurance policy before his license lapsed and earned a commission on the sale. Is he entitled to a commission if the policy is renewed? No, because only one commission can be paid on a policy sale. No, because he is no longer licensed. Yes, because his license was not revoked or suspended. Yes, because he was licensed when the policy was sold.

yes, because he was licensed when the policy was sold

Which statement about modified premium whole life insurance is NOT correct? It does not build cash value. It charges lower premiums in the early policy years. At the end of the initial period, the premium increases and stays at the new level for the life of the policy. It is good for people who want the guarantees of whole life insurance and lower early premiums.

It does not build a cash value

Ted owns a janitorial service business and applies for a life insurance policy on his key employee, Jim. The insurance company will consider all of the following factors when underwriting the policy EXCEPT: Jim's job duties Jim's outdoor hobbies Jim's use of alcohol and tobacco Jim's bank account balance

Jim's bank account balance

Which is not an example of a hazard? Ron forgets to wear his seat belt when he drives. Sue smokes a pack of cigarettes every day. John takes medication to control high blood pressure. Jane neglects to fix a broken sidewalk in front of her shop.

John takes medication to control high blood pressure

Which entity does not rate the solvency of insurance companies? A-M Best Duff and Phelps Lloyd's of London Standard and Poor

Lloyd's of London

Mary is applying for a life insurance policy on her son, Noah. Mary's husband, Nick, will be the beneficiary. An insurable interest must exist between which two parties? Mary and Nick Mary and Noah Noah and Nick Mary, Nick, and Noah

Mary and Noah

After it issues an insurance policy, how long does the insurance company have to void the policy due to fraud in the application? 6 months 12 months 18 months 24 months

24 months (2 years)

Assuming no relation other than that stated, in which of the following situations does insurable interest exist? Al would like to take out a life insurance policy on his wife. Al would like to take out a life insurance on his neighbor. Al would like to take out a life insurance policy on his doctor. Al would like to take out a life insurance policy on his night school teacher.

Al would like to take out a life insurance policy on his Wife

Bill owns an indeterminate premium whole life insurance policy. Which one of the following statements about his policy is most correct? Bill will pay a low fixed rate for most of the policy period. Bill's premium will never be higher than the maximum level that the insurer guaranteed when it issued his policy. Bill's premiums will be level for most of the policy period. Bill's premiums will be guaranteed for most of the policy period.

Bill's premium will never be higher than the maximum level that the insurer guaranteed when it issued his policy

Which of the following employees of ABC Computers could NOT convert their group life coverage to an individual policy? Paul, who retired this month Sue, who quit to work for a competitor Bill, who switched to part-time status Emily, who was laid off from her jobBill,

Bill, who switched to part-time status

Blackstone Insurance Company routinely uses MIB Group, Inc. (MIB) reports when underwriting life insurance applicants. Which action can Blackstone take if an MIB report reveals that an applicant suffered from skin cancer but did not reveal this information on the application? Blackstone must decline to issue the policy solely based on the MIB report. Blackstone must ignore the MIB report in underwriting the applicant. Blackstone is free to use the MIB report as it chooses, including declining coverage based solely on the report. Blackstone can use the MIB report as the basis for further investigation of the applicant, but cannot make an underwriting decision based solely on that report.

Blackstone can use the MIB report as the basis for further investigation of the applicant, but cannot make an underwriting decision based solely on that report

Federal law requires that businesses fairly and accurately report consumer information through what piece of legislation? Telemarketing Sales Rule CAN-SPAM Act Fraud and False Statements section Fair Credit Reporting Act

Fair Credit Reporting Act

Macy borrowed $100,000 from Falcon Loans, which added her to its credit life group insurance policy. Which party will receive the life insurance proceeds if Macy dies before repaying the entire amount of the loan? Macy's heirs Falcon Loans Macy's heirs and Falcon Loans, equally neither Macy's heirs nor Falcon Loans

Falcon Loans

Peril vs Hazard

Peril is the CAUSE of loss Hazard is a characteristic that increases the chance of a peril occurring

Tori has a health insurance policy from ABC Insurers. ABC denies a claim because Tori failed to notify it in a timely manner of the loss. Tori argues that the policy's instructions on filing claims are confusing. A court that reviews the policy's instructions will probably resolve any ambiguities in favor of: Tori Tori's beneficiary ABC Insurers neither Tori nor ABC Insurers

Tori

Tom, an agent for ABC Insurance Co., must use legal delivery if any conditions are attached to delivery of the policy. What does this mean? Tom must send the policy to the client by registered mail. Tom must ask the client to come into the office to review legal challenges to the application. Tom must personally deliver and explain the policy to the client. Tom must meet with the client's legal advisor to review terms of the policy.

Tom must personally deliver and explain the policy to the client

To help in the fight against terrorism, which of the following acts requires insurers to maintain an anti-money laundering education program for their producers? Bank Secrecy Act of 1970 RICO Act USA PATRIOT Act TARP Act

USA PATRIOT Act

Fran has an agency contract with ABC Insurance Company to represent the company. The contract gives her express authority to perform certain duties. Which is correct with respect to Fran's actions? She has unlimited authority to represent the company. When she acts within her authority, she binds the company by her actions. Only she is responsible for her actions. She should not act without first consulting with her supervisor.

When she acts within her authority, she binds the company by her actions

XYZ Company sponsors a group life insurance policy issued by Excalibur Life for the benefit of XYZ's employees. Who is the policyowner? a committee of the XYZ's employees and officers XYZ's employees Excalibur Life XYZ Company

XYZ company

While completing an application for a life insurance policy, Ken withholds information about his health history to avoid paying a higher premium. He has been in excellent health for the past five years. Has he committed fraud? No, because he is now in a lower risk category. No, because more than two years have passed since his last serious health issue. Yes, because he made a misstatement with the intent to deceive the insurance company. Yes, because he is trying to pay a lower premium than he should.

Yes because he made a misstatement with the intent to deceive the insurance company

If John buys a new life insurance policy or annuity that amends the coverage of his existing life insurance policy, the new policy will be considered which of the following? a renewal policy a reinsurance policy a layered policy a replacement policy

a replacement policy

Carl is a life insurance policyowner who wants to pay the policy premiums monthly, not annually. Is this possible, and if so, will the insurer make any adjustments to the premium to accommodate this? No, the premium must be paid annually. Yes, the insurer will add a fee to the annual premium and divide it by 12. Yes, the insurer simply divides the annual premium by 12. Yes, the insurer will discount the annual premium and divide it by 12.

Yes, the insurer will add a fee to the annual premium and divide it by 12

If an employer/employee group offers group life insurance on a contributory basis, what percentage of the group must enroll? At least 25 percent of the group must enroll in the plan. At least 50 percent of the group must enroll in the plan. At least 75 percent of the group must enroll in the plan. Everyone-100 percent of the group-must enroll in the plan.

at least 75% of the group must enroll in the plan

What is the difference between a representation and a warranty in an insurance contract? A representation is believed to be true, while a warranty is guaranteed to be true. A representation is always part of a contract, while a warranty is never included in a contract. A representation is guaranteed to be true, while a warranty is guaranteed to be true under certain conditions. Insurance applicants can make representations, but only insurance companies can make warranties.

a representation is believed to be true, while a warranty is guaranteed to be true

All the following statements about term life insurance are correct EXCEPT: It offers protection for a specified, limited period. A small cash value gradually accumulates while the policy is in force. Upon issue, it is generally less expensive than permanent insurance of comparable face amount. It pays a benefit only if the insured dies during the specified period.

a small cash value gradually accumulates while the policy is in force

John buys a $1 million life insurance policy. He dies two years later and the insurer pays the $1 million benefit. Even though the premiums never came close to the benefit amount, the insurer pays the full benefit because the insurance policy is type of contract? an indemnity contract a valued contract a reimbursement contract an indemnification contract

a valued contract

Which statement is correct about representations and warranties in insurance contracts? A warranty is guaranteed to be true. A misrepresentation will void a contract. Insurers cannot void a contract for a material misrepresentation. A representation is guaranteed to be true.

a warranty is guaranteed to be true

Which action by an agent would legally bind the insurance company that the agent represents? all acts authorized acts all legal acts all acts that earn a commission

authorized acts

In an agency relationship between the agent and the insurance company, which of the following is not a type of authority granted to the agent? absolute authority apparent authority implied authority express authority

absolute authority

Which one of the following statements most correctly describes a universal life insurance feature that is NOT available with traditional whole life insurance? The policyowner cannot withdraw money from the policy's cash value. The policyowner can surrender the policy early without penalty. Accessing the cash value must be done through a partial surrender, not a loan. The policyowner can take loans from the policy.

accessing the cash value must be done through a partial surrender, not a loan

When taking an insurance application, what should an agent try to accomplish? risk assessment, pre-screening, and verification mortality, morbidity, and risk assessment accuracy, thoroughness, and clarity credit, character, and moral assessment

accuracy, thoroughness, and clarity

Which one of the following best describes what an agent's goals should be in completing an application for insurance? speed accuracy, thoroughness, and clarity getting the applicant's full medical history getting the applicant's signature as quickly as possible

accuracy, thoroughness, and clarity

All of the following statements about the regulation of the sale of variable products are correct, EXCEPT: Agents who only sell variable life products and do not sell fixed life products are not required to hold a life insurance license. Agents who sell variable life products are required to comply with all state laws and regulations dealing with the sale of life insurance. The sale of variable products is regulated by the Financial Industry Regulatory Authority (FINRA). Many states also require a state-issued variable life or variable producer's license.

agents who only sell variable life products and do not sell fixed life products are not required to hold a life insurance license

After paying the initial premium for a disability income policy, Suri was injured in an accident. She received disability income payments for the next 12 months. These payments were far more than the amount of the premium she paid. This is characteristic of contracts that are: adhesive aleatory conditional unilateral

aleatory

With respect to the uninsurable (declined) underwriting risk classification, which of the following statements is correct? This rating is assigned to applicants who represent anything below a standard risk. About 10 percent of applicants are declined as uninsurable. An underwriter's decision to decline an applicant or to apply a substandard rating is usually reviewed by another underwriter. Applicants who are deemed uninsurable are usually offered a policy with a smaller face amount.

an underwriter's decision to decline an applicant or to apply a substandard rating is usually reviewed by another underwriter

To avoid a modal premium fee, a life insurance policyowner should pay premiums: monthly quarterly semi-annually annually

annually

What is the type of insurance used most often in group life insurance plans? annually renewable term 20-year renewable term single-premium whole life 30-year renewable term

annually renewable term

Which of the following statements regarding both term life insurance and permanent life insurance is correct? Both types build a cash value over time. Both types are designed to provide coverage for the insured's entire life. Both types are noncancellable by the insurer except for nonpayment of premiums. Both types provide a 'living benefit.'

both types are noncancellable by the insurer except for nonpayment of premiums

At what point do insurers need to decide if insurable interest exists? when they issue a policy before the applicant submits an application before the insured dies before entering into the contract

before entering into the contract

Which is not a necessary element of a legally enforceable contract? offer acceptance exchange of consideration beneficiary

beneficiary

Variable universal life combines features of variable life and universal life. Variable universal life and universal life are alike in all of the following ways EXCEPT: The premium payments for both are flexible. Both types of policies let the policyowner choose a death benefit from two (or sometimes three) options. For both policies, the insurer deducts insurance and expenses monthly from the cash value. Both are considered securities products as well as life insurance.

both are considered securities products as well as life insurance

What is the actuary's first step in determining the premium to charge for a periodic premium life insurance policy? calculate the net level premium calculate policy expenses calculate the gross level premium calculate the level dividend schedule

calculate the net level premium

The interest rate that is credited to an indexed universal life policy is based on: whatever rate the insurer wishes to declare changes in an equity index like the S&P 500 the investment return of the subaccounts underlying the policy the current interest rate credited by 30-year Treasury bills

changes in an equity index like the S&P 500

What is not required to obtain an insurance producer's license? residency in state satisfaction of state prelicensing requirements character assessment intent to serve the general public

character assessment

As a field underwriter, what does an agent do for the insurance company? set the premium help actuaries assess a risk apply the law of large numbers collect information from an applicant

collect information from an applicant

Which of the following is NOT a life insurance premium? competitors' rates mortality charge interest credit expense charge

competitors' rates

A life insurance application asks Steven whether he has had heart problems. He does not answer the question even though he had heart surgery three years ago because he is afraid his application will be denied. Steven's failure to give his entire medical history is: an estoppel a concealment a waiver a breach of contract

concealment

The act of deliberately withholding material facts when applying for insurance is called: concealment collusion twisting waiver

concealment

An insurance company keeps a policy in force only if the policyowner pays the premium because the policy is what kind of a contract? unilateral personal aleatory conditional

conditional

William buys a $250,000 life insurance policy. He worries that he will not have coverage during the policy review and underwriting period. Which will cover William during this time? insurance waiver bridge loan paid-up term life rider conditional insurance receipt

conditional insurance receipt

Carol applies for a $250,000 life insurance policy. Her agent gives her a document that provides limited coverage during the underwriting period. What is this document? promissory note conditional receipt temporary waiver binding endorsement

conditional receipt

Which is not an element of all legal contracts? counteroffer offer consideration acceptance

counteroffer

As the insured continues to pay premiums for a whole life policy, what happens to the insurer's net amount at risk in that policy? It stays level. It increases. It decreases. It fluctuates based on the insured's health.

decreases because the cash value increases as premiums are continued to be paid, the net amount at risk decreases

Which of the following types of life insurance policies would most likely be used to insure the declining balance of a home mortgage? decreasing term level term increasing term renewable level term

decreasing term

Which of the following life insurance products is best suited for insuring a mortgage or other long-term loan with the least premium possible? increasing term life insurance level term life insurance decreasing term life insurance whole life insurance

decreasing term life insurance

When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed? defamation rebating unfair discrimination coercion

defamation

Which of the following arrangements best suits a life insurance applicant's goal of keeping the policy out of his or her estate? designate the insured's estate to be the owner of the policy designate the insured to be the owner of the policy designate the insurance company to be the owner of the policy designate an irrevocable trust to be the owner of the policy

designate an irrevocable trust to be the owner of the policy

Which statement is correct about the types of insurance sales systems? Captive agents may represent any number of insurance companies. Direct response companies sell insurance to consumers without the use of a licensed producer. General agencies sell insurance only through independent brokers. To sell for another insurer, independent brokers must get permission from the primary company they represent.

direct response companies sell insurance to consumers without the use of a licensed producer

A valid insurance contract does not require: consideration disinterested witnesses legal purpose competent parties

disinterested witnesses

Which of the following is not a factor in determining life insurance premiums? mortality interest expenses dividends

dividends

Which of the following terms categorize insurers by their location or domicile? domestic and international internal and external private, state, and national domestic, foreign, and alien

domestic, foreign, and alien

With respect to insurance underwriting, which of the following best describes the basic purpose of the Fair Credit Reporting Act (FCRA) of 1971? provide detailed steps an underwriter must follow when analyzing an application ensure the confidentiality, accuracy of reporting, and proper use of underwriting information identify applicants who are at a high risk of bankruptcy provide guidelines to help state insurance regulators oversee insurance companies' treatment of private consumer data

ensure the confidentiality, accuracy of reporting, and proper use of underwriting information

The Commissioner of Insurance cannot suspend or revoke an agent's license for which of the following reasons? failing to meet projected sales goals having a license denied or suspended in another state forging an individual's name on an insurance application accepting insurance from an unlicensed individual

failing to meet projected sales goals

Which of the following is NOT an unfair claims settlement practice if committed by an insurance company in Pennsylvania? failing to promptly acknowledge communications about claims failing to promptly settle a claim for which liability is uncertain offering to settle claims for less than due to encourage litigation raising policy defenses to reduce a claim

failing to promptly settle a claim for which liability is uncertain

Insurance premiums for traditional products reflect all of the following, EXCEPT: mortality interest insurer's expenses federal laws

federal laws

Variable life insurance policies may carry all of the following charges and fees EXCEPT: a fixed rate charged for policy loans a fee for expenses incurred by the separate investment accounts investment advisory fees fees for processing a policy loan

fees for processing a policy loan

Adam is an independent agent and solicits policies for several insurers. What kind of relationship does he have with each insurer? fiduciary dependent presumptive consultant

fiduciary

Variable life insurance policies offer all of the following EXCEPT: flexible premium payments a guaranteed minimum death benefit cash values a variety of subaccount investment choices

flexible premium payments

A life insurance underwriter may request an attending physician's statement (APS): for general information about any medical conditions not reported on the health section of the application to obtain the name of a doctor who knows how the medical condition in question is treated complete the APS for a sworn statement from the applicant about why the condition was left off the application for specific details from the applicant's physician about any medical conditions found in the health section of the application

for specific details from the applicant's physician about any medical conditions found in the health section of the application

Besides giving the producer the opportunity to explain policy benefits, terms, and riders, policy delivery begins which of the following periods? reinstatement period free-look period grace period policy cancellation period

free-look period

Sue, an applicant who is a preferred risk, can expect to pay a premium that is best described as which of the following? generally lower premiums than for standard risks generally the same premiums as for standard risks, but over a shorter period of time generally the same premiums as for standard risks generally higher premiums than for a standard risk

generally lower premiums than for standard risks

Agents must act in the best interests of applicants and insureds. What does this require them to do? inform applicants about competitors' insurance products avoid replacing insurance policies that applicants already own help applicants get rebates for buying policies give all important information about a proposed policy

give all important information about a proposed policy

An agent meets with a prospect and learns that he already owns a life insurance policy. He is interested in replacing it with a new policy. Which must the agent do? notify the Commissioner that replacement may occur obtain an affidavit from the applicant acknowledging that the new policy will cover all of his life insurance needs inform the applicant that he may return the recommended policy within 45 days of delivery for a full refund of premium give the applicant the 'Notice Regarding Replacement'

give the applicant a "notice regarding replacement"

To renew a term life insurance policy at a lower rate than the guaranteed rate under the re-entry renewal method, what must the insured prove? he or she is still gainfully employed insurability an insurable interest still exists he or she has not purchased any other life insurance since the current term policy was issued

insurability

If the Alpha-Omega Corporation wants to provide life insurance for all its full-time employees, it will most likely buy which of the following? business life insurance whole life insurance group life insurance term life insurance

group life insurance

Variable life insurance offers all of the following EXCEPT: cash values that may exceed the projected amount at policy issue a minimum guaranteed death benefit guaranteed cash values a death benefit that may be higher than the amount at policy issue

guaranteed cash values

Anne, a life insurance applicant, wants to change an answer that she gave on the application. She should do which one of the following? erase the original entry and enter the correct information have the applicant cross out and initial the incorrect entry cover up the incorrect entry and enter the correct information over it do what is necessary to make the correct information clear to the underwriter

have the applicant cross out and initial the incorrect entry

Which is not among an agent's responsibilities to an applicant? recommending insurance products that are suitable for the customer's needs disclosing all important information about a proposed policy helping write an applicant's insurance policy replacing an insurance policy only when it benefits the applicant

helping write an applicant's insurance policy

Which of the following is not a remedy available to the Pennsylvania Commissioner of Insurance for committing an unfair method of competition? imprisonment cease and desist order suspension of license revocation of license

imprisonment

Persons who commit crimes of dishonesty while engaged in interstate insurance transactions can be sentenced to all of the following EXCEPT: a fine of up to $50,000 restitution imprisonment for up to 25 years a fine equal to the compensation received for the illegal act

imprisonment for up to 25 years

What type of contract are medical expense insurance policies? presumptive contracts valued contracts indemnity contracts bilateral contracts

indemnity policies

Which party makes the only enforceable promise in an insurance contract? insurance company insured beneficiary agent

insurance company

If the parties disagree over the meaning of an insurance contract's terms, courts will usually interpret these terms in favor of the: insurance company insured beneficiary agent

insured

Which of the following statements regarding a $100,000 level term-to-65 policy is correct? Its premiums increase each year until the insured reaches age 65. It may be renewed no more than once. It provides $100,000 of coverage until the insured reaches age 65 or the policy is paid up, whichever comes first. It provides $100,000 of coverage until the insured reaches age 65.

it provides $100,000 of coverage until the insured reaches age 65

ABC Supply, Inc. has applied for, owns, and is the beneficiary of a policy on one of its employees. What type of insurance is this generally called? deferred compensation split-dollar life insurance key person life insurance business overhead expense insurance

key person life insurance

An insurable interest must exist at all times between the policyowner and the insured person or property for all the following types of insurance EXCEPT: disability income insurance homeowner's insurance long-term care insurance life insurance

life insurance

Although most insurance policies are personal contracts between the insurer and the policyowner, which type is not a personal contract? life insurance homeowner's policy automobile policy professional malpractice insurance policy

life insurance the policyowner can do what they want with a life insurance policy, such as using it as collateral for a loan

With respect to insurance premium calculations, another name for expense charge is: profit factor commission factor field charge load factor

load factor

An applicant for a $500,000 whole life insurance policy pays the initial premium when submitting the application. By doing this, the applicant has: made an offer to the insurer made a counteroffer to the insurer accepted an offer from the insurer accepted a counteroffer from the insurer

made an offer to the insurer

Which of the following do variable life insurance premiums generally include to cover the cost of collecting and processing premiums? maintenance fee compensation fee premium surcharge quarterly administrative fee

maintenance fee

For a misrepresentation to affect the validity of an insurance policy, it must be: material written voluntary intentional

material

What kind of misrepresentation on an insurance application gives the insurer reason to terminate a policy? factual mistake material fact warranty undisclosed fact

material fact

Which information is not to be included in the first part of an insurance application? name and address occupation medical information beneficiary information

medical information

Placement, layering, and integration are steps in what kind of financial activity? annuitization capitalization funneling money laundering

money laundering

All other factors being equal, which of the following premium modes will have the highest premium over the course of a year? monthly quarterly semi-annual annual

monthly

When it comes to the frequency of paying life insurance premiums, what options are commonly available to policyowners? monthly or quarterly payments only monthly payments only monthly, quarterly, semi-annual, or annual payments only monthly or annual payments only

monthly, quarterly, semi-annual, or annual payments only

The amount of the benefit paid under an indemnity policy can never be: more than the face amount of the policy less than the face amount of the policy less than the actual loss the owner incurs more than the loss or the policy's face amount, whichever is less

more than the loss o the policy's face amount, whichever is less

The net single or net level premium of a life insurance policy reflects what two premium factors? mortality and interest interest and expenses morbidity and interest mortality and expenses

mortality and interest

An insured employee in a group plan is not the policyowner, but the employee does have certain rights. What are two of the most important rights? choose the amount of life insurance coverage and coverage period name a beneficiary and assign the death benefit change the amount of coverage and convert coverage to an individual policy at any time determine how much to contribute into the plan and choose between term or whole life coverage

name a beneficiary and assign a death benefit

All the following statements regarding insurable interest in a life insurance policy are true EXCEPT: People have insurable interest in themselves. Neighbors have insurable interest in each other. Spouses have insurable interest in each other. Dependent children have insurable interest in their parents or grandparents.

neighbors have insurable interest in each other

Sarah applies for a $1 million life insurance policy from ABC Insurance Company. ABC counters by offering to insure her for $200,000 and asks her for a written response. Sarah tells her agent that she accepts the counteroffer. Which statement is correct? The insurer must issue the $200,000 policy. The policy for $1,000,000 is replaced by a policy for $200,000. Sarah's intention to accept the counteroffer forms a binding contract. No binding contract is formed until ABC gets Sarah's written acceptance.

no binding contract is formed until AB gets Sarah's written acceptance

What rights, if any, does an insured person have in a policy when another person owns the policy? the right to review the policy the right to change the policy no rights the right to adjust the death benefit

no rights

While reviewing a life insurance policy issued by her home office, Angela notices that the premium is much higher than she quoted her client. The policy also has features that the client did not request. What should Angela do? present the policy to the client because it was generated by the home office not present the policy to the insured until the home office reviews the policy and recalculates the premium recalculate the premium herself advise the client to seek coverage from another insurer

not present the policy to the insured until the home office reviews he policy and recalculates the premium

Which of the following is the underwriting method most widely used by insurance companies today? judgment method numerical rating system statistical method age-based system

numerical rating system

With respect to the insurance contract, the insurance company and the applicant are, respectively, the: issuee and issuer promisor and promisee client and agent offeree and offeror

oferee and offeror

If an applicant submits the first premium payment with an application for life insurance, the agent may give the applicant a temporary insurance receipt that does which of the following? offers interim coverage while the insurer approves the application and formally issues the policy issues permanent coverage for the applicant guarantees that the insurer will accept the application states the insurer's refund policy

offers interim coverage while the insurer approves the application and formally issues the policy

Which is not a common source of underwriting information that an insurer uses? agent's report Medical Information Bureau (MIB) report inspection or consumer report peer references

peer references

Which characteristic about an insurance policy prevents the policyowner from transferring it to a third party without the insurer's consent? unilateral personal aleatory conditional

personal

When determining a life insurance applicant's eligibility for coverage, an underwriter may discriminate between individuals based on their: gender race personal hobbies physical defects

personal hobbies

A person who smokes heavily and drinks alcohol to excess exhibits what kind of an insurance risk? physical hazard moral hazard legal hazard planned hazard

physical hazard

While completing an application for a life insurance policy, Dan discloses his partial blindness. The insurer will treat this blindness as a: peril moral hazard morale hazard physical hazard

physical hazard

All of the following statements regarding life insurance or annuity replacement are correct EXCEPT: Policy replacement includes situations where a current policy is reduced in value though not surrendered. Producers are required to obtain a signed statement from every applicant stating whether or not the new policy will replace an existing policy. Policy replacement is illegal. Insurers must notify insurers whose policies are about to be replaced about the pending transaction.

policy replacement is illegal

Kyle applies for an individual life insurance policy. He is in excellent health, does not engage in any risky habits or hobbies, works in a low-risk job and has no history of cancer or other health problems in his family. How would Kyle likely be classified for underwriting purposes? standard substandard preferred uninsurable

preferred

Which of the following is not a power granted to the Pennsylvania Commissioner of Insurance? licensing producers and companies enforcing insurance laws issuing regulations to administer insurance laws prosecuting individuals for violating the insurance laws

prosecuting individuals for violating insurance laws

Which of the following most correctly describes the basic purpose for the MIB? uncover evidence of fraud provide details of an applicant's medical history make underwriting decisions for the insurer reduce adverse selection

reduce adverse selection

The Fair Credit Reporting Act is primarily intended to: allow insurers to create a clearinghouse of underwriting data collected on applicants with high risk factors provide a process by which insurers and their producers can request medical exams and lab tests on insurance applicants regulate the use and disclosure of consumer credit information list situations where an insurer may decline coverage based on an applicant's race, gender or sexual orientation

regulate the use and disclosure of consumer credit information

All the following are common characteristics of whole life insurance EXCEPT: renewability cash value accrual level death benefit endowment at age 120

renewability

Genevieve wants to renew her Pennsylvania insurance producer's license. Which of the following is not a condition for renewal? submission of a renewal form fulfillment of continuing education payment of the renewal fee report of insurance sales made in last two years

report of insurance sales made in the last two years

A client's answers on an application for insurance are considered to be: warranties representations assurances guarantees

representations

Emily postpones buying a life insurance policy, believing that her family will use its savings to pay her final expenses if she dies prematurely. Which method is she using to deal with risk? retention avoidance reduction transfer

retention

Robin falls while snow skiing and breaks a leg. She decides to never again attempt this activity. What method is she using to manage this risk of falling? risk retention risk avoidance risk reduction risk transfer

risk avoidance

Which does not rate the financial strength of insurance companies? A.M. Best Duff and Phelps Moody's Securities and Exchange Commission

securities and exchange commission

Johnson Industries funds its workers' compensation program. It will use these funds to pay employee's claims. What type of insurer is Johnson Industries? reciprocal insurer risk retention group self-insurer mutual insurer

self-insurer

The federal Risk Retention Act of 1986 applies to which businesses? self-insuring businesses re-insurers credit life insurance companies high-risk business insurers

self-insuring businesses

Which of the following types of whole life insurance is paid with one premium at the time the policy is bought? modified premium whole life limited pay life graded premium whole life single-premium life

single-premium life

The life insurance applicant who meets the insurer's guidelines as an acceptable risk with no special premium rate treatment is considered a: standard risk substandard risk preferred risk uninsurable risk

standard risk

A type of life insurance that covers two people and pays the death benefit only upon the second insured's death is called survivorship life family life spousal life joint life

survivorship life

All of the following are broad classifications of life insurance EXCEPT: taxable and tax-deferred insurance individual and group insurance permanent and term life insurance fixed and variable products

taxable and tax-deferred insurance

During the underwriting period, an insurance company can provide the applicant with limited, temporary coverage through either a conditional receipt or: an interim receipt a temporary insurance receipt a waiting period receipt a grace period receipt

temporary insurance receipt

Alan and his wife are expecting their first child. Alan wants the most death protection that he can get for the smallest amount of premium, at least while he's starting his family. Ideally, he would like to be able to upgrade his coverage to a whole life policy at some point. Which of the following products would you recommend? whole life insurance policy variable life insurance policy universal life policy ten-year convertible term life policy

ten-tear convertible term life policy

Bob's only goal is to provide a death benefit as inexpensively as possible to protect his family in case he dies while his children are young. What type of life insurance is best suited to this need? permanent life insurance group life insurance term life insurance whole life insurance

term life insurance

As it applies to life insurance, the insurable interest rule is based on the relationship between which two entities? the insurance company and the applicant the applicant and the beneficiary the agent and the applicant the applicant and the person whose life is to be insured

the applicant and the person whose life is to be insured

Which of the following statements about permanent life insurance cash values is NOT correct? As long as premiums are paid, the insurance stays in force, the cash values grow, and the policy is guaranteed to pay its death benefit. The policyowner owns the cash value in the policy and can access it. The beneficiary has full access to the cash value. Cash values grow over the life of the policy, designed to reach the face amount at the insured's age 120.

the beneficiary has full access to the cash value

Who normally owns life insurance used to meet business insurance needs? the business the insured employee the insured employees' beneficiaries a trust maintained on the insured employees' behalf

the business

Which of the following statements is correct about an indexed whole life insurance policy? The death benefit and premiums are most commonly tied to the Consumer Price Index. The policy's face amount may or may not increase over time. The insured must prove insurability each time the policy's face amount increases. Premiums are always set as level when the policy starts.

the death benefit and premiums are most commonly tied to the consumer price index

If a universal life insurance policyowner chooses death benefit option 1, which of the following correctly describes the death benefit? The death benefit equals the policy's specified amount plus its cash value. The death benefit increases as the cash value increases. The death benefit will change based on the policy's underlying investments. The death benefit will generally remain level but may vary based on the amount of premiums actually paid.

the death benefit will generally remain level but may vary based on the amount of premiums actually paid

With a key person life insurance policy, who is the owner of the policy? the employee the employee's beneficiary the employee's estate the employer

the employer

With respect to a policyowner's conversion of a term life insurance policy into a permanent life insurance policy, which one of the following statements is correct? The insured must prove insurability. The face amount of the new policy cannot exceed the amount of the term policy. The premiums for the new policy will be based on the insured's age when he or she applied for the original term policy. The premium of the new policy cannot exceed the premium of the term policy.

the face amount of the new policy cannot exceed the amount of the term policy

Who normally pays for medical exams or lab tests that insurance companies request? the producer the applicant the insurance company the MIB Group, Inc.

the insurance company

What happens if an insured stops paying premiums for an insurance policy? The insurance company will compel the insured to continue paying the premiums. The insured breaches the contract. The insurance company must return all premiums that have been paid if no claims have been made under the policy. The insurance company is released from its promise to pay benefits and the contract expires.

the insurance company is released from it promise to pay benefits and the contract expires

Which of the following statements regarding third-party ownership of a life insurance policy is correct? The insured has no rights in the policy. The insured can access the policy's cash value but cannot designate the beneficiary. The insured cannot access the policy's cash value but can designate the beneficiary. The insured can designate the beneficiary and access the cash value, but cannot assign the policy to another third-party owner

the insured has no rights in the policy

Jim's insurance company offers him the option to pay the premium annually or semi-annually. If Jim chooses to pay half of the premium now and the other half six months from now, how will the insurer cover the additional cost of processing his payments? The insurer accepts the loss as a cost of doing business. The insurer increases the interest charged on policy loans. The insurer reduces dividends on a participating policy. The insurer charges a modestly higher premium.

the insurer charges a modestly higher premium

Bob was covered by a $50,000 group life insurance policy when he decided to retire. If he chooses to convert the policy to an individual policy, which of the following statements is correct? He must first give evidence of insurability. The maximum amount of the new policy cannot be more than $50,000. He must apply for a conversion policy within 90 days of retiring. Bob must convert to a term policy.

the maximum amount of the new policy cannot be more than $50,000

Which of the following represents the insurer's estimated cost to provide a single premium life insurance policy's benefits without accounting for the insurer's expenses? the net level premium the net single premium the gross level premium the gross single premium

the net single premium

Andrea bought a $300,000 term-to-55 policy. Which of the following statements about the policy is NOT correct? The policy gives $300,000 of coverage until Andrea reaches age 55. The premium for the policy stays the same until the policy ends. If Andrea dies before age 55, the policy will pay a $300,000 death benefit. The policy will pay the entire death benefit only if Andrea lives beyond age 55.

the policy will pay the entire death benefit only if Andrea lives beyond 55

What happens when a whole life insurance policy matures (or endows)? The sum of premiums the owner has paid equals the policy's face amount. the sum of premiums the owner has paid equal the policy's cash value the policy's cash value equals the amount that is available for a policy loan the policy's cash value equals its face amount

the policy's cash value equals the face amount

Which of the following best describes a "level premium" payment plan? Level premiums are always used in life insurance. The premium may increase or decrease over the policy's term, depending on the performance of the policy. The policyowner has the choice of paying the premium on a level basis or a flexible basis. The policyowner pays the same amount each time the premium is due for the full duration of the premium-paying period.

the policyowner pays the same amount each time the premium is due for the full duration of the premium-paying period

Which of the following is not a potential consequence of replacing a life insurance policy? the need to prove insurability again the possibility of the new insurer cancelling the replacement policy after it is issued a new surrender charge period a new contestability period

the possibility of the new insurer cancelling the replacement policy after it was issued

Who completes an attending physician's statement (APS)? the proposed insured's doctor, who is familiar with how the medical condition is being treated a doctor assigned by the insurer in the state where the insurance is being written a local doctor, other than applicant's, who is familiar with how the medical condition is being treated a member of the Medical Information Bureau

the proposed insured's doctor, who is familiar with how the medical condition is being treated

Which of the following most correctly describes the underwriting process? the processing of applications the selection, classification, and rating of risks the issuance of policies the auditing of insurance producers

the selection, classification, and rating of risks

Life insurance company underwriters may request a medical exam or lab test based on any of the following criteria, EXCEPT: the type or amount of the proposed insurance the age of the applicant the health of the applicant the sex of the applicant

the sex of the applicant

Which of the following statements regarding participating life insurance policies is correct? They are issued only by stock insurance companies. They are eligible for policy dividends. They distribute dividends to the insurer's stockholders. They guarantee the payment of dividends.

they are eligible for policy dividends

In addition to Ken's application and an attending physician's statement (APS), insurers can use various other reports and public records. How do these documents help insurers? They help the underwriter judge the applicant's intent. They offer details that help the underwriter properly evaluate the risk that the proposed insured represents. They help insurers judge the applicant's character. They show the applicant's interest in purchasing life insurance.

they offer details that help the underwriter properly evaluate the risk that the proposed insured represents

In setting premiums for a new policy, actuaries assume which of the following about when those premiums will be paid? They will be paid monthly before the end of the grace period. They will be paid at the start of each month. They will be paid annually at the end of the policy year. They will be annually at the start of the policy year.

they will be paid annually at the start of the policy year

John owns a life insurance policy. The policy insures Mary, his wife. This is possible through which type of policy ownership? joint third-party common survivorship

third-party

Why does an insurance company issue a conditional receipt to a new policyowner? to show that the application was completed properly to cover the proposed insured before the policy is issued to confirm that the application was sent to the insurance company to confirm that the insurance company has made the required disclosures

to cover the proposed insured before the policy is issued

Which of the following is not a requirement for an insurance agent? to disclose to the client all pertinent information to request referrals from a client to disclose all pertinent information when handling a claim to solicit business on the insurer's behalf

to request referrals from a client

When comparing her insurance company's policies to those of Zenith Insurance, Melanie makes a misleading statement to convince an insurance prospect to terminate a policy with Zenith and buy one from Melanie's company. What practice has Melanie engaged in? twisting rebating unfair discrimination defamation

twisting

An insurable interest is presumed to exist in all of the following relationships EXCEPT: husband and wife two friends parent and child employer and a key employee

two friends

The requirement that insurable interest must exist when a life insurance policy is purchased is intended to prevent people from: over-insuring a person misusing life insurance for criminal purposes using life insurance for wagering or betting purposes using life insurance to fund future cash needs

using life insurance for wagering or betting purposes

Producers must inform consumers about the practices that insurance companies will use in their review and underwriting processes. Typically, these processes include all of the following, EXCEPT: getting an attending physician's statement (APS) using investigative agencies and credit agencies using the MIB using phone taps

using phone taps

All of the following are common payment modes for ordinary (straight) whole life insurance policy premiums EXCEPT: weekly annually monthly quarterly

weekly

Bob owns an ordinary whole life insurance policy. He likes to pay smaller premiums more frequently. An insurer would likely offer him the chance to pay premiums on all of the following schedules, EXCEPT: weekly monthly quarterly semi-annually

weekly only offered by industrial insurers

Life and health insurance can be classified as participating or non-participating. This classification determines which of the following? whether the policy accumulates cash value whether the policy pays dividends to its owner whether the insurance company contributes premium payments to keep the policy properly funded, if necessary whether the insurer is a member of the Life Insurance Council of America

whether the policy pays dividends to its owner

For which one of the following types of life insurance policies would a fixed premium payment plan be required? whole life insurance adjustable life insurance universal life insurance variable universal life insurance

whole life insurance

Harry and Constance want life insurance to provide death benefits in case either dies, as well as living benefits in the event of financial emergencies. Which of the following would this couple most likely buy? business life insurance group insurance term insurance whole life insurance

whole life insurance

Bob bought a $100,000 universal life insurance policy and chose an Option 2 increasing death benefit option. At his death ten years later, the policy's cash value had increased to $50,000. What will his beneficiary receive? $50,000 $100,000 $150,000 $200,000

$150,000 specified amount plus cash value

BBC Insurers filed premium rates for its new line of variable products on January 15. Within how many days must the Commissioner approve or disapprove the rates? 25 30 45 60

30 days

Jeff is a licensed insurance producer in both New York and Pennsylvania. He is charged with embezzlement in New York, and his first pretrial hearing is set for March 1. He must notify the Pennsylvania Commissioner of Insurance of this charge within how many days of the hearing? 7 days 10 days 14 days 30 days

30 days

ABC Insurance Company is domiciled in Delaware and does business in Ohio. Which of the following is correct about ABC? ABC is a domestic insurer in Delaware and an alien insurer in Ohio. ABC is a domestic insurer in Delaware and a foreign insurer in Ohio. ABC is a domestic insurer in Ohio. ABC is a foreign insurer in Delaware.

ABC is a domestic insurer in DE and a foreign insurer in OH

Which of the following best illustrates risk transfer? Anita buys health insurance to protect herself in case of serious illness. Abigail continues to rent her home because she thinks homeowners insurance is too expensive. Refusing to buy a home and insure it is an example of risk avoidance. Anne does not venture out after dark because she is afraid of being assaulted. Arlene decides not to purchase life insurance because she has no dependents and plenty of cash in her savings accounts to cover any final expenses.

Anita buys health insurance to protect herself in case of a serious illness

Larry, Brian, Susan, and Jennifer just started working for AllPro Insurance Company in Pennsylvania. Based on their job descriptions below, which of them is NOT acting as a producer? Larry, who receives insurance applications from the public Brian, who is a vice president in AllPro's human resources department and does not receive commissions Susan, who collects insurance premiums for AllPro Jennifer, who advertises insurance policies for AllPro

Brian, who is a vice president in AllPro's human resources department and does not receive commissions

Chris is a licensed life insurance agent. If he wants to sell variable life and annuity products, what else must he have? federal insurance license state securities registration limited lines license FINRA Series 6 or 7 registration

FINRA series 6 or 7 registration

Life and health insurance companies regulate themselves through each of the following entities or organizations EXCEPT: National Association of Life Underwriters American Society of Chartered Life Underwriters International Association of Health Underwriters Financial Industry Regulatory Authority

Financial Industry Regulatory Authority

Joan owns a variable universal life insurance policy that now has a $100,000 cash value and is beyond its surrender charge period. This year, she plans to withdraw $25,000 from her policy's cash value to buy a new car. Which one of the following statements is most correct? Joan must pay a penalty tax for taking an early withdrawal from her cash value. Joan's death benefit will be reduced by $25,000. Joan can make the withdrawal but will have to pay it back with interest. Joan can have access to her cash value only through a policy loan or a complete surrender of the policy.

Joan's death benefit will be reduced by $25,000

John has a $200,000, 20-year level term policy. Which statement is true? John's beneficiary will receive a $200,000 death benefit if John dies during the 20-year coverage period. John will receive the policy's cash value if he is alive at the end of the coverage term, and the premium will increase annually. John's beneficiary will receive a $200,000 death benefit if John dies during the 20-year coverage period. John will receive nothing from the policy if he is alive at the end of the coverage term, and the premium will increase annually. John's beneficiary will receive a $200,000 death benefit if John dies during the 20-year coverage period. John will receive the policy's cash value if he is alive at the end of the coverage term, and the premium will remain level for the full 20 year term. John's beneficiary will receive a $200,000 death benefit if John dies during the 20-year coverage period. John will receive nothing from the policy if he is alive at the end of the coverage term, and the premium will remain level for the full 20 year term.

John's beneficiaries will receive $200,000 death benefit if John dies during the 20-year coverage period. John will receive nothing from the policy if he is alive at the end of the coverage term, and the premium will remain level for the full 20 year term

Which of the following presents a situation of pure risk? Knowing that his family depends on his income, Franklin wants to insure his life. Wanting to increase his retirement savings, Saul invests his life savings in the stock market. Ralph takes a second mortgage on his house and uses the proceeds to gamble. Wanting better job security, Ron cashes in his life insurance policy to start a business.

Knowing his family depends on his income, Franklin wants to insure his life

A policyowner repeatedly declines the opportunity to increase her disability income policy benefits through its benefit increase rider. She suffers a loss that would have been covered under the rider. May she sue the insurance company to increase the policy benefit? No, because the policyowner waived her right to exercise the rider benefit when the opportunity to do so was available to her. No, because more than 30 days have passed. Yes; the insurer is at fault for not forcing the insured to exercise the right. Yes; the loss must be covered under the policy.

No, because the policyowner waived her right to exercise the rider benefit when the opportunity to do so was available to her

Which statement is correct about insurance regulation? The federal government alone regulates the insurance industry. The federal government primarily regulates the insurance industry, and state governments regulate some aspects of it. State governments alone regulate the insurance industry. State governments primarily regulate the insurance industry, and the federal government regulates some aspects of it.

State governments primarily regulate the insurance industry, and the federal government regulates some aspect of it

With respect to the difference between variable life insurance (VLI) and variable universal life insurance (VUL), which of the following statements is correct? Variable life policies require a fixed premium payable for the life of the policy while variable universal life permits premium flexibility. Only variable life policies allow the policyowner to put funds in investment subaccounts. Only variable universal life policies offer a minimum death benefit. Only variable universal life is a securities product.

Variable life policies require a fixed premium payable for the life of the policy while variable universal life permits premium flexibility

The expense charge, or load factor, of a life insurance premium usually covers all the following EXCEPT: commissions and salaries safety margin to account for higher than expected mortality losses a charge to reflect the insured's risk of death contribution to profits

a charge to reflect the insured's risk of death

Which of the following jobs presents the highest life insurance underwriting risk?' a bank teller a coal miner a gift shop owner a real estate sales person

a coal miner

To qualify for an insurance producer's license, a person must have all of the following EXCEPT: a college degree a good reputation and character a licensing fee 18 years of age

a college degree

Agent Jill received a letter from the Department of Insurance asking her to submit verification of having completed the continuing education requirements for the previous licensing period. Three weeks later, the Department sent another letter. Which penalty may the Department impose if Jill still has not responded to its request one month later? a fine of up to $100 per day per violation a fine of up to $10,000 total termination of her agent's appointment up to six months' imprisonment

a fine of up to $100 per day per violation

Michael and his friends and family, who are tired of paying high premiums for their individual policies, decide to get together and buy a group life insurance policy. Why will their approach not work? Group policies are only available to employers. Family members cannot be covered under the same group policy. A group cannot be formed just for the purpose of obtaining insurance. None of the members in the group is a licensed agent.

a group cannot be formed just for the purpose of obtaining insurance

Which of the following presents the highest life insurance underwriting risk? a yoga enthusiast a hang-gliding enthusiast a painting enthusiast a gardening enthusiast

a hang-gliding enthusiast

Underwriters use their judgment to classify risk. In evaluating risk, insurers will also consider which of the following? the agent's personal relationship with applicants information agencies' reviews of applicants' job performance the claims department's statistical assessment of the risk a numerical rating system to evaluate the risk posed by proposed insureds

a numerical rating system to evaluate the risk posed by the proposed insureds

The convertibility provision of a term life policy lets the owner convert the term coverage into what type of policy? a convertible term policy a renewable term policy a permanent life insurance policy a paid-up whole life insurance policy

a permanent life insurance policy

Jennifer applied for a $500,000 whole life insurance policy. The insurer issued the policy but classified her as a substandard risk, which cost her a higher premium. Which type of policy delivery is recommended in this situation? constructive delivery implied delivery actual delivery interim delivery

actual delivery

To calculate the gross premium charged to life insurance policyowners, actuaries: subtract a mortality charge from the net premium add an interest factor to the net premium add an expense load to the net premium subtract an interest factor from the net premium

add an expense load to the net premium

Because an applicant for an insurance policy cannot negotiate the terms of the policy, the policy is what kind of contract? aleatory unilateral conditional adhesion

adhesion

Because the insurance company and the insurance applicant do not negotiate the terms of an insurance policy, the policy is what kind of contract? adhesion aleatory executory unilateral

adhesion take-it-or-leave-it

Jeremy has had an individual health insurance policy for many years because of his family's history of cancer. The tendency of someone like Jeremy to buy and maintain insurance is known as: implied selection adverse selection exposure reduction risk avoidance

adverse selection

Which of the following is NOT a requirement for employer-sponsored group life insurance? All eligible employees must be given the opportunity to participate. If employee contributions are required, then at least 75 percent of eligible employees must elect to participate. All employees must be insurable. Plans may be contributory or noncontributory.

all employees must be insurable

Which of the following is most likely to be considered a preferred underwriting risk? An applicant who has good health, works in construction and whose father died of heart disease at age 62. An applicant who takes a cholesterol-lowering medication, manages a restaurant and whose mother has diabetes. An applicant who looks exceptional 'on paper' but he has a record at the MIB indicating a serious medical condition he did not list on the current application. An applicant who has excellent health, works in a business office and whose family has a very good health history.

an applicant who has excellent health, works in a business office and whose family has a very good health history

Which of the following presents the lowest life insurance underwriting risk, all other factors being equal? an applicant who has never smoked an applicant who has early onset diabetes an applicant who is 75 pounds overweight an applicant who consumes an average of four alcoholic beverages daily

an applicant who has never smoked

An agent for ABC Insurance Company meets with a client. The agent shows the client ABC's sample policies, refers to the ABC rate book, and gives the client an ABC business card. The client assumes that ABC has appointed the agent to represent it. What kind of authority does the agent have? implied authority apparent authority express authority imputed authority

apparent authority

For a life insurance contract to be enforceable, which of the following must be legally competent to enter into the agreement? applicant insurer applicant and insurer applicant, insurer, and beneficiary

applicant and insurer

In forming the insurance contract, who gives something of value as consideration? applicant alone insurer alone applicant and insurer no one

applicant and insurer

Insurers use inspection reports to verify the information applicants provide to agents and examiners. Who is most likely to be the subject of an inspection report? business life insurance applicants who have already been issued high amounts of life insurance applicants whom the agent does not know well all applicants applicants who ask for very high amounts of life insurance or business insurance

applicant's who ask for very high amount of life insurance or business insurance

Which of the following statements about agent/producer responsibilities is NOT correct? To policyowners, the agent who sold them their insurance coverage represents the insurer. The manner in which the agent conducts business reflects the insurance company and directly impacts the agent's ultimate success. Agents must always act ethically and professionally in all dealings with policyowners and insurers. As long as the applicant understands the life insurance product being recommended, it is not necessary for the agent to be concerned with the product's suitability for the applicant.

as long as the applicant understands the life insurance product being recommended, it is not neccessary for the agent to be concerned with the product's suitability for the applicant

Sam's contract with the insurer he represents authorizes him to solicit insurance applications. Which of the following is implied by Sam's authority? authority to perform underwriting functions authority to contact prospective clients to arrange sales meetings authority to represent other insurance companies authority to set policy premiums

authority to contact prospective clients to arrange sales meetings

Variable universal life combines features of variable life and universal life. Variable universal life and universal life are alike in all the following ways EXCEPT: The premium payments for both are flexible. Both types of policies let the policyowner choose a death benefit from two (or sometimes three) options. For both policies, the insurer deducts insurance and expenses monthly from the cash value. Both are considered securities products as well as life insurance.

both are considered securities products as well ass life insurance

Which of the following statements about utmost good faith in insurance contracts is correct? Only the insurer must act in utmost good faith. Only the insured must act in utmost good faith. Both the insured and insurer must act in utmost good faith. Only the insured and the beneficiary must act in utmost good faith

both the insured and insurer must act in utmost good faith

Salvador takes an application for life insurance with the first premium. When the policy is ready for delivery, he personally delivers it to his insured. The next day, the insured decides she cannot afford it and rejects the policy. What should Salvador do? explain that once a policy has been delivered, it cannot be returned or rescinded file suit against the insured for deception cancel the policy but retain the premium because of the time and effort it took to personally deliver the policy cancel the policy and refund the premium because the policy is still in the free-look period

cancel the policy and refund the premium because the policy is still in the free-look period

Tom is a career agent of ABC Insurance Company. He sells insurance products only for ABC. Tom is a: broker captive agent independent agent wholesaler

captive agent

Abbott Computers offers a group life insurance plan issued by ABC Insurance for its employees and pays 80 percent of the premium for the group coverage. The employees pay the remaining 20 percent. This type of plan is called a: contributory plan non-contributory plan self-insured plan mandatory participation plan

contributory plan

An agent who recommends the replacement of an insurance policy with another is not required to discuss which of these with the prospect? the terms of the new policy Notice Regarding Replacement of life insurance cost of similar policies from competing insurers policy comparison statement

cost of similar policies from competing insurers

All types of whole life insurance have which of the following characteristics in common? level premiums for the entire policy period a cash value that increases at the same rate every year guaranteed premium rates for the entire policy period coverage that lasts for the insured's entire life

coverage that lasts for the insured's entire life

Premium rates will vary depending on the insurer's actual experience in which one of the following types of whole life insurance? current assumption whole life straight whole life limited pay whole life graded premium whole life

current assumption whole life

All of the following will affect the policy values of a variable life insurance policy EXCEPT: the value of the equities supporting the separate account the length of time the policy has been in force current interest rates the subaccounts selected by the policyowner

current interest rates

For universal life insurance, an insurer credits interest to a policy's cash value based on which of the following? current interest rates the performance of the underlying subaccount an equity index an interest index

current interest rates

In some states, employers can buy group life insurance for their employees through a Multiple Employer Trust (MET). All of the following statements about METs are correct EXCEPT: Each individual employer is issued a separate policy. A MET must have at least two employers and 100 employees. For contributory plans, 75 percent of the group must enroll. For non-contributory plans, 100 percent of the group must enroll.

each individual employer is issued a separate policy a MET is a trust formed by two or more employers to buy group life insurance for their employees. the trust owns the policy.

Protection from damages resulting from a lawsuit brought by an insurance customer against an insurance producer for breach of fiduciary duties would be covered under what kind of policy? reinsurance supplier insurance errors and omissions insurance self-insurance

errors and omissions insurance

From a life insurance regulatory perspective, the primary problem with stranger-originated life insurance (STOLI) is that it is: taking up too big a share of the insurance industry's market viewed negatively by the general public not properly regulated essentially wagering on a stranger's life

essentially wagering on a stranger's life

Which describes the type of relationship based on trust that exists between the insurer and its appointed agent? fiduciary consensual exclusive binding

fiduciary

Acme Insurance Company wants to employ Anthony as a producer. To do so, what action must Acme take? file a notice of appointment with the Department verify that Anthony is eligible for appointment have Anthony sign a noncompete and exclusive agency agreement submit a notice of appointment to the NAIC's national database

file a notice of appointment with the Department

The Commissioner of Insurance can examine the business transactions, accounts, and records of insurers and producers as often as necessary but must do so at least once in how many years? one four five ten

five

An insurance company with a home office in Wisconsin that does business in Illinois is a domestic company in Wisconsin. What kind of company is it in Illinois? regional branch divisional foreign

foreign

Which term applies to an insurance company domiciled in one state but operating in another, from the perspective of the state in which it operates? alien company foreign company unauthorized company domestic company

foreign company

A policyowner intentionally misstates material information on an insurance application to get coverage for a lower premium. This kind of deception is: fraud churning libel nondisclosure

fraud

An insurance company sends a proposed insurance policy to an applicant with instructions to accept the policy in writing by December 15 or it will be withdrawn. What must the applicant do to accept the policy? give verbal or written acceptance by December 15 give verbal acceptance before December 15 give written notice on or before December 15 give written notice within a reasonable time

give written notice on or before December 15

A whole life insurance policy that has premiums that start lower than comparable straight whole life and then increase gradually for a limited period of time is a: limited pay whole life graded premium whole life modified premium whole life single premium life

graded premium whole life

Sylvia owns a life insurance policy with a modest face amount that is designed primarily to pay her burial expenses. What type of policy does Sylvia most likely own? indexed life insurance variable life insurance industrial life insurance ordinary life insurance

industrial life insurance aka burial insurance

Patty is interested in buying a life insurance policy. Her agent asks if she has any existing policies. She does, and says that she would cancel her current policy if she bought the policy from the agent. What is the agent now obligated to do? inform Patty of the consequences of replacing the policy withdraw the policy from consideration because Patty already has life insurance ask to see the existing policies and then cancel them send copies of the existing policies to his insurance company so that the company can cancel the policies

inform Patty of the consequences of replacing the policy

What is insurable interest? With life insurance, insurable interest is the relationship between the person paying for the insurance and the designated beneficiary. Insurable interest is the relationship between the person applying for life insurance and the person whose life is to be insured. It is a necessary element in the issuing of a life insurance contract. Insurable interest represents the financial impact that would be incurred by the loss of the insured person or property. Without it, an insurance policy is a speculative investment and speculative risks are not insurable. Insurable interest is the length of the relationship between the person applying for insurance and the insured. For insurable interest to exist, the buyer must have known the insured for at least three years.

insurable interest is the relationship between the person applying for life insurance and the person whose life is to be insured. It is a necessary element in the issuing of a life insurance contract

Which of the following best describes the meaning of insurable interest? Insurable interest represents the financial impact on the policyowner by the loss of the insured person or property. Insurable interest represents the financial gain that a policyowner hopes to realize by the loss of the insured person or property. Insurable interest represents the financial obligation that a person has to protect the financial interests of a dependent. Insurable interest represents the amount of coverage that an insurance applicant is eligible to purchase.

insurable interest represents the financial impact on the policyowner by the loss of the insured person or property

All the following statements regarding conditional premium receipts are correct EXCEPT: A conditional receipt begins on the date of application or the date of a medical exam if required, whichever is later, and it is made on the condition that underwriting determines the insured is insurable. With a conditional receipt if the insured were to die after the date of the application (or medical exam) and the insurer would have issued the policy, the coverage is made effective as of the date of the application, and a death benefit would then be paid. With a conditional receipt, if the applicant proves to be uninsurable (or insurable only as substandard) as of the date of application (or medical exam), no coverage takes effect and the insurer refunds the premium payment. Insurers are required to provide the death benefit coverage applied for when issuing a conditional receipt.

insurers are required to provide the death benefit coverage applied for when issuing a conditional receipt

Which one of the following best describes the restrictions an insurer must operate under when using information from the Medical Information Bureau (MIB)? Insurers must rate or decline a life insurance risk based solely on MIB information. Insurers can rate, but cannot decline, a life insurance risk based solely on MIB information. Insurers cannot rate or decline a life insurance risk based solely on MIB information. Insurers cannot rate, but can decline, a life insurance risk based solely on MIB information.

insurers cannot rate or decline a life insurance risk based solely on MIB information

An applicant for an insurance policy submits an application without the first premium. By doing so, what has the applicant done? made an offer to the insurer invited the insurer to make an offer made an offer to the applicant prevented the insurer from making a counteroffer to the applicant

invited the insurer to make an offer

By submitting a life insurance application without the first premium, applicant Larry is doing which of the following? suggesting that the insurer should not issue the policy for some reason showing confidence that the insurance company will issue the policy inviting the insurer to make an offer making an offer to the insurer

inviting the insurer to make an offer

What happens to a signed life insurance application after the policy has been issued? It is destroyed. It becomes the insurer's property. It becomes part of the contract between the insurer and the policyowner. It becomes property of the state.

it becomes part of the contract between the insurer and the policyowner

Which of the following is not true about decreasing term insurance? It is used to cover needs that decrease over time. It is often used to provide for payment of mortgage balances. It can be converted to permanent insurance. It can be renewed.

it can be renewed

All of the following are acceptable reasons for a producer to deliver a new life insurance policy in person to a client, EXCEPT: it is an opportunity to sell the client some additional life insurance. It is the producer's responsibility to fully explain the policy. It is an opportunity to reaffirm the customer's reasons for purchasing the policy. It is an opportunity to strengthen the client relationship.

it is an opportunity to sell the client some additional life insurance

Which of the following statements about the net premium for a life insurance policy is NOT correct? It reflects two of the three premium factors: mortality and interest. It is the amount charged to the policyowner. For a single premium policy, the net premium is called the net single premium. For a flexible premium policy, the net premium is called the net level premium.

it is the amount charged to the policy owner

Regarding life insurance premium receipts, which of the following correctly describes how a temporary insurance agreement works? It makes the applied-for coverage effective immediately and guarantees that the policy will be issued. It makes the applied-for coverage effective immediately and guarantees the coverage through the underwriting process (when the coverage may then be terminated). It provides death benefit coverage (usually less than the applied-for amount and typically through term life insurance) for a specified term after the date of application while the application goes through underwriting. It makes the applied-for coverage effective immediately only if the applicant is found to be insurable as applied for.

it provides death benefit coverage (usually less than the applied-for amount and typically through term life insurance) for a specified term after the date of application while the application goes through underwriting

An insurer issues a new life insurance policy that has conditions attached to it, and instructs the producer to personally deliver it to the policyowner with an explanation of the conditions. This is an example of what kind of delivery? personal delivery special delivery legal delivery constructive delivery

legal delivery

The type of life insurance policy delivery that requires delivery to the client in-person by the producer and an explanation of the conditions to be met is called: legal delivery personal delivery constructive delivery free-look delivery

legal delivery

Which of the following usually offers credit life insurance in connection with a transaction? borrower investment company insurance company in conjunction with a policy loan lender

lender

What type of insurance does group life insurance most commonly consist of? variable life insurance whole life insurance decreasing term life insurance level term life insurance

level term life insurance

Which of the following statements is true with ALL types of life insurance? Premiums are invested in the insurer's general account, allowing policy values to be contractually guaranteed. Insurers return excess premiums to policyowners in the form of policy dividends. Life insurance policies are noncancellable by the insurer except for non-payment of premium. Life insurance policies feature a cash value that can be accessed while the insured is alive.

life insurance policies are noncancellable by the insurer except for non-payment of premium

Whole life insurance can also provide funds, through its cash value, that may be used during the insured's lifetime. What is that feature called? capital accumulation permanent values the money feature living benefits

living benefits

An insurance policy provides financial protection against: hazards risks losses caused by perils losses caused by hazards

losses cased by perils

An insurer may classify a life insurance applicant as a "substandard risk" for all of the following reasons, EXCEPT: poor health bad habits low-paying job high numbers of early major illnesses in the family

low-paying job

What is the main appeal of joint life insurance? higher death benefit lower cost renewal feature ability to cover an entire family

lower cost

Jana applies for a life insurance policy and submits the initial premium with her application to Acme Insurers. Acme offers her a modified policy at a higher premium. By doing so, Acme Insurers has: made an offer to Jana accepted an offer from Jana made a counteroffer to Jana accepted a counteroffer from Jana

made a counteroffer to Jana

In what form is impairment information sent to and from the MIB by insurance companies? secure e-mail messages private letter sent by certified mail letter sent by regular U.S. Mail numeric codes sent electronically

numeric codes sent electronically

For policyowners who do not pay premiums annually, insurance companies increase premiums to do which of the following? offset the insurer's cost of doing business offset the insurer's increased billing costs and lost earnings. decrease the insured's risk compensate for the insured's bad credit

offset the insurer's increased billing costs and lost earnings

Because they are aleatory contracts, insurance policies: make sure that each party receives a fair amount of consideration can be arbitrated by a third party often award disproportionately large benefits due to chance events involve a high degree of certainty

often award disproportionately large benefits due to chance events involve a high degree of certainty

At what point in a life insurance contract must insurable interest exist? only when the policy is purchased only at the time of loss for the entire term of the contract only when changing the beneficiary designation

only when the policy is purchased

Which of the following is not an example of a limited payment whole life policy? single premium whole life ordinary (straight) whole life 20-pay whole life life-paid-up-at-65

ordinary (straight) whole life

A prospective insured gives an agent a completed life insurance application with the first premium payment. What must the agent now give the applicant? copy of the application premium receipt temporary policy bridge policy

premium receipt

With respect to adjustable life insurance, which one of the following statements is correct? The policyowner stops making premium payments after the policy has been in force for a certain period. The policyowner can increase the death benefit without hurting the policy's cash value. Premiums can increase or decrease to suit the policyowner's changing needs. It offers five times higher cash value than whole life insurance.

premiums can increase or decrease to suit the policyowner's changing needs

In the calculation of life insurance premium rates, what effect will a higher interest rate assumption have on the premium rate? It will have no effect. Premiums will be lower. Premiums will be higher. The effect cannot be known without additional information.

premiums will be lower

The laws of agency govern the relationship between: agency and agent insurer and insured principal and agent insured and beneficiary

principal and agent

When an insurance company appoints an agent to represent it, who are the parties to the agency relationship? insurer and insured principal and agent producer and agent principal and participant

principal and agent

Which is not a means of regulating the insurance business? producer peer review state regulation federal regulation industry self-regulation

producer peer review

Which of the following transactions requires an insurance producer to have more than one insurance license? selling variable life insurance comparing insurance policies selling universal life insurance replacing life insurance

selling variable life insurance

Abby lives in Ohio, where she is licensed as an insurance producer. She wants to apply for a nonresident license in Pennsylvania. Which of the following conditions must she satisfy? She must move to Pennsylvania. She must surrender her Ohio license. She must be sponsored by a producer licensed in Pennsylvania. She must show her Ohio license is in good standing.

she must show her Ohio license is in good standing

Which of the following is the primary regulator of those who sell variable life insurance? state insurance departments only Financial Industry Regulatory Authority (FINRA) only state insurance departments and Financial Industry Regulatory Authority (FINRA) The Securities Exchange Commission (SEC)

state insurance departments and Financial Industry Regulatory Authority (FINRA)

Which of the following entities regulates variable insurance products? state insurance departments alone Securities and Exchange Commission alone state insurance departments and Securities and Exchange Commission U.S. Treasury Department

state insurance departments and Securities Echange Commission

The policy Kevin owns lasts for his entire lifetime or until age 120. As long as he pays the premiums, the insurance stays in force and is guaranteed to pay its death benefit. This may describe any of the following types of policy, EXCEPT: term life insurance variable life insurance ordinary life insurance whole life insurance

term life insurance

A life insurance policy that offers coverage for a specified, limited period with no cash value building up is called a: term life insurance policy whole life insurance policy graded premium whole life policy limited pay life insurance policy

term life insurance policy

In calculating their mortality charges, life insurers today generally use: the mortality rate of their state of domicile the 2001 CSO table the mortality experience of their past policyowners mortality rates mandated by each state's insurance regulator

the 2001 CSO table

For insurable interest to exist, which of the following is most correct? The applicant must be financially dependent upon the beneficiary. The applicant must be expected to suffer a financial loss when the insured dies. The applicant must reasonably expect a financial gain when the insured dies. The party buying the life insurance contract must never pay any of the premiums.

the applicant must be expected to suffer a financial loss when the insured dies

An insurance applicant submits a completed application with a check for the first premium to her agent. The insurance company accepts the application and issues the policy. Which describes this process? The agent offered the policy, and the applicant accepted it. The insurance company offered the policy, and the applicant accepted it. The applicant offered to buy the policy, and the insurance company accepted. The agent offered the policy, and the insurance company accepted the offer.

the applicant offered to buy the policy, and the insurance company accepted

All of the following can be used by a life insurance underwriter in making a decision to accept or decline a risk EXCEPT: the applicant's heritage based on his last name attending physician's statement (APS) inspection or consumer report agent's report

the applicant's heritage based on his last name

Part 2 of a life insurance application generally covers: the agent's contact information and history with the insurance company the applicant's explanation for why he or she is applying for life insurance the applicant's personal information the applicant's medical history

the applicant's medical history

Part 1 of a life insurance application generally contains: the agent's contact information and history with the insurance company the applicant's explanation for why he or she is applying for life insurance the applicant's personal information the applicant's medical history

the applicant's personal information

In underwriting an applicant for life insurance, an insurance company may consider all of the following factors EXCEPT: the applicant's tobacco use the applicant's height and weight the applicant's age the applicant's religion

the applicant's religion

As part of the underwriting process, a life insurance company may require an applicant to undergo a medical exam for all the following reasons EXCEPT: the large face amount of the policy being applied for the applicant's age the applicant's medical history the applicant's sexual orientation

the applicant's sexual orientation

The underwriter at the home office relies on many sources of information in deciding to accept, decline, or rate a risk. The most commonly used sources include all of the following, EXCEPT: the application a medical examination, if required an attending physician's statement (APS) the applicant's signed statement of intent

the applicant's signed statement of intent

Which of the following is the primary source of underwriting information? the application the MIB the producer credit reports

the application

According to the laws of agency, an insurance agent appointed by an insurance company acts on behalf of: the client the agency the state insurance department the appointing insurer

the appointing insurer

All the following are required to sign an application for life insurance EXCEPT: the policy owner the beneficiary the insured the producer

the beneficiary

Life insurance has been purchased by ABC Company on the lives of two partners, Hugh and Danny, and three key employees Eileen, Vern, and June. Which of the following would apply if Hugh and June were to leave the business? The company would have to drop its coverage for both Hugh and June within 30 days of their departures. The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not. The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there. The company can only retain its coverage on June because she is not a principal of the company.

the company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there

Mark knowingly exceeds his actual authority when dealing with a client. His actions cause a loss to the insurance company he represents. Which statement is correct? Mark acted in good faith. Mark may be required to make full disclosure to the client. The insurer is not responsible for Mark's actions. The company may be liable for Mark's actions.

the company may be liable for Mark's actions

In a participating policy, the insurance company pays the policyowner a dividend out of which of the following? a fund maintained by each state's insurance department each whole life policy's cash values the company's divisible surplus set amounts prescribed in the policy

the company's divisible surplus

Sandra and David orally agree that she will pay him $25,000 to set fire to her ex-husband's house. Which statement is correct? The contract is unenforceable because it is not in writing. The contract is unenforceable because its purpose is illegal. David can void the contract if he changes his mind about setting fire to the house. The contract is unenforceable because the consideration will be paid after the act is performed.

the contract is unenforceable because its purpose is illegal

Why do courts interpret ambiguities in an insurance contract in favor of the policyowner? The policyowner must continue paying the premium. The policyowner must make enforceable promises to the insurer. Insurance contracts are unilateral. The contract's terms are drafted by the insurer and not negotiated with the policyowner.

the contract's terms are drafted by the insurer and not negotiated with the policyowner

Variable life insurers generally charge an annual maintenance fee that is primarily intended to cover which one of the following? interest earned by the policy state licensing charges the cost of managing the complex investment element of the contract the insurer's agent and employee compensation expenses

the cost of managing the complex investment element of the contract

All the following statements regarding the role of interest in life insurance premium calculations are correct EXCEPT Interest is the income the insurance company can expect to earn on premiums it receives. Policyowner premium payments are invested in the market to earn interest and grow. Because of the need for adequate financial safety margins, an insurer commonly assumes for purposes of developing traditional life insurance premiums that it will earn only 2 percent or 3 percent on the premiums it receives. The higher the interest rate assumed by the actuary in calculating premiums, the higher the premium is likely to be.

the higher the interest rate assumed by the actuary in calculating premiums, the higher the premium is likely to be has an inversely proportionate relationship

Which of the following statements is true for variable life insurance policies? The insurer bears the investment risk. Premiums are typically invested in the insurer's general account. The insurer does not guarantee the policy's cash value. Policyowners cannot choose how their contract premiums are invested.

the insurer does not guarantee the policy's cash value

When may an Insurance company call a consumer on the Do Not Call list? The DNC listing is in error. The insurer has an existing relationship with the consumer. The insurer has never sold a product to the consumer. The insurer did business with the consumer within the last two years.

the insurer has an existing relationship with the consumer

Which statement about apparent authority is correct? The agency contract between the insurer and agent creates the authority. The authority arises from the insurer's intent. The authority arises from a third party's reasonably belief based on the conduct of the agent and insurer. The insurer is responsible for an agent's conduct while acting with apparent authority.

the insurer is responsible for an agent's conduct while acting with apparent authority

When may an insurer cancel either whole life or term life insurance? The insurer may not cancel either type of life insurance policy under any circumstances. The insurer may cancel both types of policies only if the policyowner does not pay the premiums. The insurer may cancel either type of policy if the insured exhibits risky behavior or does not pay the premium. The insurer may cancel either type of policy without reason at any time.

the insurer may cancel both types of policies only if the policyowner does not pay the premiums

Policyowners who pay their premiums monthly pay more in one year than those who pay an annual premium at the start of the policy year because: Insurers prefer to bill annually. Monthly billing puts an added burden on the insurer. More-frequent billing is subject to a higher risk of processing errors. The insurer needs to account for lost interest and the administrative costs of processing more frequent payments.

the insurer needs to account for lost interest and the administrative costs of processing more frequent payments

Which of the following would not be considered when determining the expense factor (or load) in a life insurance premium? the insurer's operating costs a safety margin to account for higher than expected mortality losses the interest earned on the insurer's investments a contribution to company profits

the interest earned on the insurer's investments

Which condition must exist for a risk to be considered insurable? The potential loss must be catastrophic. The potential loss must be due to a force of nature. The potential loss must happen within six months of the policy's effective date. The loss must be ascertainable.

the loss must be ascertainable

What is the primary distinction between individual life insurance and group life insurance? the number of lives covered under the policy the amount of coverage that can be provided under the policy the number of policies used in providing the coverage. one type of coverage is cancellable by the insurer and the other is not cancellable by the insurer

the number of lives covered under the policy

Under group insurance coverage, one policy covers a number of people. Who owns these group polices? the organization that represents the group and which sponsors the coverage the insureds the insurance company who issues the policy representatives of the sponsoring companies

the organization that represents the group and which sponsors the coverage

Which of the following statements about participating whole life insurance policies and policy dividends is NOT correct? The insurance company pays the owner a dividend out of its divisible surplus. The owner can only take the dividend as cash. Participating policies are sold by mutual insurance companies. Policy dividends essentially represent a return of premiums that exceed all company expenses and liabilities.

the owner can only take the dividend as cash

If an individual employer offers group life insurance on a non-contributory basis, how much of the group must be covered? The plan must cover at least 25 percent of the group. The plan must cover at least 50 percent of the group. The plan must cover at least 75 percent of the group. The plan must cover 100 percent of the group.

the plan must cover 100% of the group

Margie owns a fixed life insurance policy. What type of death benefit is Margie guaranteed? The policy has no guaranteed death benefit. The amount depends on the number of premium payments Margie has made. The policy guarantees a fixed amount. The policy guarantees a variable death benefit amount.

the policy guarantees a fixed amount

Tim applies for a life insurance policy. His agent gives him a receipt conditioned on Tim's passing a physical exam to meet underwriting standards. Tim passes the physical exam but dies before the policy is issued. Which of the following is correct? The policy will pay the death benefit. The policy will not pay the death benefit. The policy will pay a fraction of the death benefit. The policy will be voided and any premiums Tim paid will be refunded to his estate.

the policy will pay the death benefit

Jason wants to buy life insurance and is considering two policies: a $250,000 modified premium whole life insurance policy and a $250,000 ordinary life policy. All other factors being equal, which of the following statements is NOT correct? The premium for the modified premium policy will be lower at first than the premium for the ordinary life policy. The modified premium policy will build cash value more slowly than the ordinary life policy during the initial policy period. Both types of policies give permanent insurance protection. The premium for the modified premium policy will be higher at first than the premium for the ordinary life policy but will then decrease for the remainder of the policy.

the premium for the modified premium policy will be higher at first than the premium for the ordinary life policy but will then decrease for the remainder of the policy

Gina owns a $200,000 five-year renewable term insurance policy and wants to renew the policy at the end of the term. In this case, which of the following statements is correct? Gina must prove insurability before the insurer can renew the policy. The insurer will base the premium for the renewal coverage on Gina's age when the policy was first issued. If Gina had become uninsurable during the initial coverage term, she would not be allowed to renew the policy. The premium for this policy is higher than it would be for a non-renewable term life policy of the same face amount.

the premium for this policy is higher than it would be for a non-renewable term life policy of the same face amount

Which is not correct about the agency contract between the insurance company and the agent it appoints to represent it? The principal gives the agent implied authority. The principal has express authority; the agent does not. The principal is bound only by the agent's authorized acts. The agent has legal authority to act on the company's behalf.

the principle has express authority; the agent does not

A married couple is insured under a joint life policy. The first spouse dies. What can the surviving spouse do with the policy? The surviving spouse can renew the policy. The surviving spouse can convert the policy if he or she proves insurability. The surviving spouse may convert the policy without proving insurability. The surviving spouse cannot convert the policy.

the surviving spouse can convert the policy if he or she proves insurability

With respect to group life conversion, which of the following statements is NOT correct? The terminating employee need not give evidence of insurability before buying an individual policy. The terminating employee must apply for a conversion policy within 31 days after being laid off. The terminating employee may convert to a whole life policy. The terminating employee's new policy will become effective after a 60 day waiting period following the date of termination.

the terminating employee's new policy will become effective after a 60 day waiting period following the date of termination

How do independent agents differ from captive agents? They earn higher commissions. They are bound by fewer rules. They can sell policies for several insurers. They can sell more types of insurance products.

they can sell policies for several insurers

Which of the following best describes the purpose for the laws of agency? to govern the relationships between agents to regulate an insurance agency's business transactions to regulate insurance agencies and their agents to govern the authority granted agents to represent insurers

to govern the authority granted agents to represent insurers

In calculating their life insurance premiums, which of the following statements generally guides insurance companies in determining the "loading" factor? Total loading from all policies should cover total operating costs, provide a safety margin, and contribute to profits or surplus. Expenses should be divided primarily among the company's most profitable plans and lowest mortality experience. The resulting net premiums should help the company maintain or improve its competitive position. Total loading from all policies should meet industry averages.

total loading from all policies should cover total operating costs, provide a safety margin, and contribute to profits surplus

Acme Insurance and Apogee Insurance agree to offer different premium rates for persons of equal risk within a particular class. They also agree to limit benefits paid to insureds within this class if the insureds live in certain counties of Pennsylvania. What are Acme and Apogee engaging in? acceptable marketing and underwriting practices unfair and prohibited business practices insurance fraud false advertising

unfair and prohibited business practices

Which one of the following types of life insurance lets the policyowner change the premium amount? universal life insurance whole life insurance term life insurance variable life insurance

universal life insurance

Under which of the following do the cash values and death benefits rise and fall on the basis of the policy's subaccount investment performance, and for which the insurer does not guarantee a rate of return on the cash value invested? variable life fixed life insurance term life insurance ordinary life insurance

variable life

All of the following are common types of term life insurance EXCEPT: decreasing term variable term increasing term level term

variable term does not exist

All of the following types of life insurance have a fixed premium that cannot be changed by the policyowner EXCEPT: whole life insurance variable life insurance term life insurance variable universal life insurance

variable universal life insurance

Jane asks her insurance agent to stop notifying her when her policy is due for renewal, and to notify her attorney instead. What has Jane done by giving up this right to get this notice? asked for a grace period asked for an estoppel waived a right declined coverage

waived a right

The term used to describe the voluntarily surrender of a known right is: estoppel waiver voidable conditional

waiver

All of the following are examples of an agent's responsibilities toward an applicant EXCEPT: waiving payment of the policy's first premium recommending suitable insurance disclosing all important information about a policy clearly representing the terms of a proposed policy

waiving payment of the policy's first premium

Which is not necessary to create a legal contract? consideration offer acceptance warranty

warranty

Alex owns a "home service" life insurance policy, which means he most likely pays his premiums in which of the following ways? annually by money order quarterly by cash or money order weekly or monthly by mail, automatic deduction from a bank account, or personally to the agent with a single premium payment

weekly or monthly by mail, automatic deduction from a bank account, or personally to the agent

Charlene owns a "home service" life insurance policy, which means she most likely pays her premiums in which of the following ways? annually by personal check quarterly by checking account debit weekly to her agent who comes to her home with a single premium payment

weekly to her agent who comes to her home

A life insurance policy matures or endows when its guaranteed cash value equals its face amount. With an endowment contract, when does the policy endow? when the insured dies at age 120 after age 120 well before age 120, usually at age 65

well before age 120, usually at age 65

Under a joint life insurance policy, when does the insurer pay the death benefit? when the first insured dies only when the surviving insured dies only when the older insured dies only when the younger insured dies

when the first insured dies

When does an insurance policy take effect? when the insured receives the policy when the insurance company sends the policy to the agent when the insured signs the application when the first premium is paid

when the first premium is paid