FL 2:15 Full Test Prep

In a reciprocal insurer structure, each policyholder insures the risk of the other policyholders. 1) True 2) False

1) True

The policyholder always retains the Right of Assignment. 1) True 2) False

2) False

Risk ___________ is when the chances of loss are lessened. 1) avoidance 2) reduction 3) retention 4) transfer

2) reduction

Florida law restricts an insurance company from charging a fixed rate higher than ____________ annually on policy loans. 1) 5% 2) 7% 3) 10% 4) 12%

3) 10%

________ belong to the insurer. _________ belongs to the policyowner. Words: Cash Value, Policy Reserves

Policy Reserves, Cash Value

Pays a portion of the death benefit if the insured is diagnosed with a terminal illness. 1) Accelerated benefit rider 2) Accidental death benefit rider 3) Additional insured rider 4) No-lapse guarantee rider 5) Children's insurance rider

1) Accelerated benefit rider

Unequal contingencies on the potential for profit or loss upon both parties in an insurance contract is a(n): 1) Aleatory contract 2) Contract of Adhesion 3) Unilateral contract

1) Aleatory contract

__________ authority is the authority that an agent has in writing in the contract with the insurer the agent represents. 1) Express 2) Implied 3) Apparent

1) Express

The front or initial part of the application which contains personal information about the applicant and proposed insured is: 1) PART I - General 2) PART II - Medical 3) PART III - Agent's Report

1) PART I - General

The method in which policy proceeds are dispersed equally to each beneficiary named in the policy is the _________ method. 1) Per Capita 2) Per Stirpes

1) Per Capita

Accelerated benefit provisions are standard in the most individual and group life insurance policies. 1) True 2) False

1) True

Adjustable life policies combine term and permanent insurance with whole life insurance as the base policy. 1) True 2) False

1) True

Agents are prohibited from negotiation insurance contract provisions. 1) True 2) False

1) True

An agent's records are subject to scrutiny by the Commission at any time deemed appropriate by the Commissioner. 1) True 2) False

1) True

As long as the equity remains in the policy and continues to accumulate the cash value remains tax free. 1) True 2) False

1) True

Both stock and mutual companies can write life, health, and property and casualty insurance. 1) True 2) False

1) True

Churning is also called "internal replacement" and is the practice of inducing a person to drop their existing policy to buy another policy with the same company. 1) True 2) False

1) True

Decreasing term policies fluctuate in face value. 1) True 2) False

1) True

Every applicant must receive and sign a written notice letting them know that the MIB may be consulted for more information during the underwriting process. 1) True 2) False

1) True

Health insurance is based on scientific principles, whereas life insurance is based on actuarial or mathematical principles. 1) True 2) False

1) True

If a beneficiary opts to receive interest only payments while the insurance company holds the policy proceeds, the insurer is restricted from paying a lower interest rate than the pre-established minimum rate. 1) True 2) False

1) True

If a policyowner fails to designate a beneficiary, the proceeds of the policy go to the insured's estate where they are no longer protected from creditors. 1) True 2) False

1) True

If an agent's company rejects an applicant based on the company's specific underwriting guidelines, the agent can pursue writing the business with another company for which he/she is not appointed. 1) True 2) False

1) True

If the policyowner has an insurable interest in the insured, legal purpose is validated in the contract. 1) True 2) False

1) True

In Florida, an insurer is required to deliver to the life insurance applicant a life insurance Buyer's Guide and a Policy Summary. 1) True 2) False

1) True

Indemnity contracts are also known as reimbursement contracts. 1) True 2) False

1) True

Level term policies do not fluctuate in face value. 1) True 2) False

1) True

NAIC has no legal power. 1) True 2) False

1) True

NAIFA is dedicated to supporting the life insurance industry, whereas NAHU is dedicated to supporting the health insurance industry. 1) True 2) False

1) True

No life or health insurance may be issued for delivery in Florida unless the application is taken by, and the policy delivered through, a licensed agent who will receive the usual and customary commission. 1) True 2) False

1) True

Ordinary insurance in the permanent life insurance category accumulated cash value. 1) True 2) False

1) True

Pure risk involves the possibility of loss only, whereas speculative risk involves the possibility of loss and gain. 1) True 2) False

1) True

Risk pooling is also known as loss sharing. 1) True 2) False

1) True

Risk retention groups are a form of mutual insurer. 1) True 2) False

1) True

The Rating-Up In Age method is no longer used predominantly. 1) True 2) False

1) True

The death benefit under an increasing term policy increases with time. 1) True 2) False

1) True

The delayed payment provision allows an insurer to postpone payment of a policy's cash surrender value for a period of six months. 1) True 2) False

1) True

The effective date of a policy is the date the insurer accepts an offer by the applicant "as written." 1) True 2) False

1) True

The formula used to compute the net single premium is Mortality Cost minus Interest. (Mortality Cost - Interest = Net Single Premium) 1) True 2) False

1) True

The policy holder assumes the investment risk in variable insurance products. 1) True 2) False

1) True

The systematic selection of loss exposures is prohibited due to the rules of adverse selection. 1) True 2) False

1) True

There are two principles involved in the needs-based selling process: Fact-finding and Education. 1) True 2) False

1) True

Twisting is referred to as "external replacement" and is the practice of inducing a person to drop existing insurance to buy similar coverage with another producer or company. 1) True 2) False

1) True

With the joint life income option, the proceeds may be paid to two beneficiaries in equal monthly installments. 1) True 2) False

1) True

Most policies contain revocable beneficiary designations. 1) Ture 2) False

1) Ture

The true significance of insurance is to replace the unknown with: 1) a sense of security 2) financial success 3) a sense of caution 4) educational funding

1) a sense of security

Risk ___________ occurs when an individual eludes risk entirely. 1) avoidance 2) reduction 3) retention 4) transfer

1) avoidance

A main reason for purchasing industrial life insurance is to: 1) cover funeral expenses 2) provide for a college education 3) pay off loans

1) cover funeral expenses

A(n) _________ agent represents several insurers and their different insurance products. 1) independent 2) captive 3) career 4) personal producing general

1) independent

In insurance terms, "consideration" refers to: 1) premium payments 2) policy effective date 3) legal competency 4) face value

1) premium payments

In Florida, a child must be at least ________ years of age to sign a life insurance policy. 1) 18 2) 15 3) 12 4) 10

2) 15

Among the following, who would most likely pay a lower premium amount? 1) A standard risk client 2) A preferred risk client 3) A substandard risk client 4) A younger client

2) A preferred risk client

Pays a multiple of the death proceeds if the cause of death is a covered accidental event. 1) Accelerated benefit rider 2) Accidental death benefit rider 3) Additional insured rider 4) No-lapse guarantee rider 5) Children's insurance rider

2) Accidental death benefit rider

A new suicide exclusion goes into effect when a policy is reinstated. 1) True 2) False

2) False

An agent may intermingle premium payments with the agent's personal funds only if the funds are collected at a time when the agency is closed. 1) True 2) False

2) False

It is usually in the best interest of a policyholder to replace a life insurance policy with a new one. 1) True 2) False

2) False

Stock insurers are owned by policyholders, whereas mutual insurers are owned by stockholders. 1) True 2) False

2) False

There can be no more than three beneficiaries named in a life insurance policy. 1) True 2) False

2) False

Under the fixed period option, if the insurer's earnings from the premium payments throughout the years are large enough to permit paying excess interest, the interest ill be used to extend the payment period, not increase the scheduled payments. 1) True 2) False

2) False

__________ authority is the authority that is given not in writing but that is necessary for the agent to transact insurance. 1) Express 2) Implied 3) Apparent

2) Implied

___________ contains questions about the proposed insured's health, at present time and in the past. 1) PART I - General 2) PART II - Medical 3) PART III - Agent's Report

2) PART II - Medical

The ________ method is used to divide policy proceeds equally among children of a deceased beneficiary. 1) Per Capita 2) Per Stirpes

2) Per Stirpes

A ________ contract obligates only one party (the insurer) in the contract. 1) Aleatory 2) Unilateral

2) Unilateral

State guaranty associations are funded by insurance companies through: 1) federal income tax 2) assessments 3) agent salaries 4) insurer profits

2) assessments

A(n) _________ agent works for the only one insurer and sells only that insurer's products. 1) independent 2) captive 3) career 4) personal producing general

2) captive

The _____________ is the basic principle of insurance that the larger the number of individual risks combined into a group, the more certainty there is in predicting the degree or amount of loss that will be incurred in any given period. 1) pooling of risks 2) law of large numbers 3) concept of adverse selection

2) law of large numbers

Term life policy premiums are based on: 1) expenses and claims experience 2) mortality and loading 3) the CPI 4) underlying investment experience

2) mortality and loading

For life insurance policies for which the premiums are paid monthly, the grace period is: 1) no more than 14 days 2) no less than 30 days 3) no more than 31 days

2) no less than 30 days

Agency Law refers to the relationship between: 1) the insurer and the insured. 2) the agent and the company with whom the agent is affiliated. 3) the agent and the insured. 4) the policyowner and the policyholder

2) the agent and the company with whom the agent is affiliated.

The incontestable clause is typically __________ years. 1) one 2) two 3) three 4) four

2) two

The suicide provision typically stipulates a __________ period of time in which the policy's death benefit will not be paid if the insured commits suicide. 1) one-year 2) two-year 3) three-year 4) four-year

2) two-year

Florida law requires an additional lapse notice be sent for individual life contracts that have been in force for at least one year and that cover persons: 1) 60 years or older 2) 62 years or older 3) 64 years or older 4) 69 years or older

3) 64 years or older

Under the accelerated death benefits provision, usually up to _________ of the policy's face value can be withdrawn. 1) 25% 2) 50% 3) 75% 4) 100%

3) 75%

Provides a death benefit on the lives of family members. 1) Accelerated benefit rider 2) Accidental death benefit rider 3) Additional insured rider 4) No-lapse guarantee rider 5) Children's insurance rider

3) Additional insured rider

__________ authority is authority a third party is led to believe and that the agent is given due to the agent's actions. 1) Express 2) Implied 3) Apparent

3) Apparent

___________ contains the agent's observations of the involved parties. 1) PART I - General 2) PART II - Medical 3) PART III - Agent's Report

3) PART III - Agent's Report

Which of the following is NOT required on an insurance application? 1) The agent's I.D. number 2) The name of the insurance company 3) The agent's mother's maiden name 4) The name of the soliciting agent

3) The agent's mother's maiden name

The _________ bears the burden of providing a policy replacement in the client's best interest. 1) insurer 2) insured 3) agent

3) agent

When a minor is The named beneficiary, the fiduciary responsibility lies with the: 1) trustee 2) policyowner 3) guardian 4) estate

3) guardian

Overstating promises and guarantees is a form of: 1) churning 2) twisting 3) misrepresentation 4) concealment

3) misrepresentation

When a stock life insurance company issues both participating and nonparticipating policies, it is referred to as a company doing business as a: 1) life insurer 2) health insurer 3) mixed plan

3) mixed plan

Risk ___________ occurs when an individual takes precautions for protection by allowing another party to maintain a portion of the risk. 1) avoidance 2) reduction 3) retention 4) transfer

3) retention

When a business is named as beneficiary, this type of transaction is referred to as a: 1) single party policy 2) unilateral policy 3) third-party policy 4) class policy

3) third-party policy

When a TRUST is The named beneficiary, the fiduciary responsibility lies with the: 1) estate 2) IRS 3) trustee 4) policy owner

3) trustee

A viatical settlement can be used when the insured is diagnosed with an illness or condition that is expected to end his/her life, usually within: 1) one year 2) 18 months 3) two years 4) three years

3) two years

The free look provision for life insurance policies is __________ days from policy delivery. 1) 5 2) 7 3) 10 4) 14

4) 14

Which of the following Section 1035 exchanges are NOT allowed? 1) A life insurance policy is exchanged for another life insurance policy, endowment policy or annuity contract 2) An endowment policy is exchanged for an annuity contract 3) An annuity contract is exchanged for another annuity contract 4) An annuity contract is exchanged for a life insurance contract

4) An annuity contract is exchanged for a life insurance contract

Which of the following questions would NOT be as legitimate concern for an underwriter? 1) Is the proposed insured a standard risk? 2) Is the proposed insured insurable? 3) Does insurable interest exist? 4) How much money does the proposed insured have in the bank?

4) How much money does the proposed insured have in the bank?

Guarantees a death benefit for life so the insured is covered even if premium payments lapse. 1) Accelerated benefit rider 2) Accidental death benefit rider 3) Additional insured rider 4) No-lapse guarantee rider 5) Children's insurance rider

4) No-lapse guarantee rider

The system of coverage that is designed to allow the insured immediate coverage and yet allows the insured to defer premium payments is known as: 1) the Conditional Receipt 2) the Binding Receipt 3) the Insurability Conditional Receipt 4) Preliminary Term for Interim Coverage

4) Preliminary Term for Interim Coverage

Among others, which of the following disclosures should be made when a policyowner applies for a life settlement transaction? 1) There are possible alternatives to the life settlement 2) The transaction may have tax implications and advice should be sought from a qualified tax advisor 3) the transaction may affect creditors' rights 4) all of the above

4) all of the above

The primary factors used as the basis for determining premium costs in life insurance are: 1) mortality and interest 2) interest and expenses 3) mortality and expenses 4) mortality, interest and expenses

4) mortality, interest and expenses

Risk _______________ occurs when an individual shifts the responsibility of covering the risk to another. 1) avoidance 2) reduction 3) retention 4) transfer

4) transfer

Extends a death benefit to the insured's child (up to age 25) 1) Accelerated benefit rider 2) Accidental death benefit rider 3) Additional insured rider 4) No-lapse guarantee rider 5) Children's insurance rider

5) Children's insurance rider

Premium payments can be made: 1) annually 2) semi-annually 3) quarterly 4) monthly 5) any of the above

5) any of the above

_____________ concerns the number of deaths that occur at a specific time, in a specific group, or from a specific cause. _________ concerns the presence of illness or disease. Words: Morbidity, Mortality

Mortality, Morbidity

_________ life insurance is the most common. __________ insurance policies offer alternative premium payment options. __________ life insurance provides smaller face values. _________ life insurance affords coverage for specific groups. Words: Group, Industrial, Limited-Pay and Single-Premium, Ordinary

Ordinary, Limited-Pay and Single-Premium, Industrial, Group

Brokers represent ____________; agents represent ____________. Words: insureds, insurers

insureds, insurers

A _______ is the cause of a risk. A _________ is the source of danger. Words: hazard, peril

peril, hazard

A bodily disease of endangerment, such as cancer, presents a _________ hazard. An unhealthy habit, such as smoking, presents a __________ hazard. A mental trait, such as road rage, presents a __________ hazard. Words: moral, morale, physical

physical, moral, morale