Life Insurance-Basics
Regarding the taxation of Business Overhead policies,
Premiums are deductible, and benefits are taxed
All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT
The policy is owned by the company
All of the following are true of key person insurance EXCEPT
The plan is funded by permanent insurance only
All of the following are personal uses of life insurance EXCEPT
Buy-sell agreement
In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium?
It will likely be higher because the applicant is a substandard risk
Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years?
A policy summary
The full premium was submitted with the application for life insurance and the policy was issued two weeks later as requested. When does the policy coverage become effective?
As of the application date
Which of the following CANNOT be included along with illustrations used to sell life insurance?
Vanishing premium information
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be true?
The policy will be interpreted as if the insurer waived its right to have an answer on the application
What does "liquidity" refer to in a life insurance policy?
Cash values can be borrowed at any time
All of the following are requirements for life insurance illustrations EXCEPT
The must be part of the contract
What is the purpose of the buyer's guide?
To allow the consumer to compare the costs of different policies
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of
A STOLI policy
A key person insurance policy can pay for which of the following?
Costs of training a replacement
Stranger originated life insurance policies are indirect opposition to the principle of
Insurable interest
What describes the specific information about a policy?
Policy summary
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?
Predicted needs of the family after the insured's death
Which of the following is a risk classification used by underwriters for life insurance?
Standard
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant
with the policy
When the partners of a business develop an arrangement whereby should one of them die or become permanently disabled, the other partners would purchase the interest of the deceased or disabled partner at a predetermined price, this is called a/an
Business continuation plan
Which of the following is the best reason to purchase life insurance rather than annuities?
To create an estate
Which if the following is NOT a type of Temporary Insuring Agreement?
Bridge Coverage Receipt
Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount?
Buy-sell agreement
Which of the following premium modes would result in the highest annual cost for an insurance policy?
Monthly
Which of the following types of risk will result in the highest premium?
Substandard risk
The mode of premium payment
Is defined as the frequency and the amount of the premium payment
In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?
Executive is the owner, and the executive pays the premium
Attempting to determine how much insurance an individual would require based upon their financial objectives is known as
needs approach
What is the term used when a person sells his assets as a way to gain money?
Liquidation
Which of the following best describes a non-medical application?
The medical portion of an application that asks for medical information but does not require a medical exam
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. when will coverage begin?
When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
Which of the following statements concerning buy-sell agreement is true?
Buy-sell agreements are normally funded with a life insurance policy
If an agent fails to obtain an applicants signature on the insurance application, the agent must?
Return the application to the applicant for a signature
Which of the following is correct concerning the taxation of premiums in a key person life insurance policy?
Premiums are not tax deductible as a business expense
Which of the following would provide an underwriter with information concerning an applicants health history?
The Medical Information Bureau
Which of the following types of insurance policies would perform the function of cash accumulation?
Whole Life
Why should the producer personally deliver the policy when the first premium has already been paid?
To help the insured understand all aspects of the contract
Which of the following would be least likely to be considered a legitimate need that would be paid by insurance proceeds?
Vacation travel expenses