Life Insurance (Chapter 1-3)

Misrepresentation

A _________________________________ is a written or oral declaration that is stated to intentionally distract, deceive or mislead a party to a contract. If found material for underwriting, it can void a contract.

Legal Hazard

A set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred would be considered a(n):

Pure Risks

According to California Insurance Code, which of the following can be classified as an insurable event?

The Law of Large Numbers

According to what law, the larger a group becomes, the easier it is to predict losses. Insurers use this law in order to predict certain types of losses and set appropriate premiums?

The policy is owned by the company.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

A STOLI policy.

An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of

Pure Risks

Any event, whether past or future, which may damnify a person having an insurable interest, or create a liability against him/her, may be insured against. The more predictable a loss, the more insurable it becomes. Only pure risks are insurable. Speculative losses are uninsurable.

Larger

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

Can void a contract.

If found material for underwriting, a misrepresentation

The completed application is submitted.

In insurance, an offer is usually made when

The person must have at least completed secondary education.

In terms of parties to a contract, which of the following does NOT describe a competent party?

Loss

Insurance is a contract by which one seeks to protect another from

Implied warranties.

Representations in insurance contracts qualify as

Consideration

Something of value exchanged between the insurer and the insured is considered an

Insurable interest.

Stranger-originated life insurance policies are in direct opposition to the principle of

Perils

The causes of loss insured against in an insurance policy are known as

Conditional

The contract is formed on the basis that certain conditions are met.

Legal Hazard

The growing tendency of individuals to file lawsuits and to claim tremendous amounts for alleged damage is known as

Competent Party

The parties to a contract must be capable of entering into a contract in the eyes of the law. Generally, this requires that both parties be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol.

employee

The policy is owned by the _______________________.

Pure Risk and Spectulative

The risk of loss may be classified as

A presentation of nonguaranteed elements of a policy.

The term "illustration" in a life insurance policy refers to

Illustration

The term _____________________ means a presentation or depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years.

Morale Hazard

What arises from a state of mind that causes indifference to loss, such as carelessness?

Cash values can be borrowed at any time.

What does "liquidity" refer to in a life insurance policy?

Driving recklessly

What is considered a morale hazard?

Morale Hazard

What kind of hazard is someone who has an indifferent attitude towards an insurance company. He is careless or irresponsible because he knows his loss will be covered by insurance.

Contract Law

What law applies to voluntarily undertaken written agreements between parties?The insurer's failure to provide promised benefits to the insured would be in breach of contract, therefore, covered by ______________ law. All other scenarios illustrate tort law, which provides a remedy for civil, non-contractual wrong through legal action.

Pure Risks

What risk is involved with the probability or possibility of loss with no chance for gain and are generally insurable?

Speculative Risks

What risks involve uncertainty as to whether the final outcome will be gain or loss. and are generally uninsurable?

Conditional.

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is

Key Person insurance can...

A business can suffer a financial loss because of the premature death of a key employee that has specialized knowledge, skills or business contacts. A business can lessen the risk of such loss by the use of key person insurance.

Pure RIsk

A situation in which a person can only lose or have no change represents

When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health.

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?

The policy may be voided if it can be proven that the applicant was not capable of making a buying decision at the time of application.

An agent tries to sell insurance over the phone to an applicant who appears to be confused, but is eventually able to give enough information for the application to be completed. After the policy was issued, the agent talked to the insured's family, and they explained that the insured was recovering from a surgery and might have been under the influence of medication at the time of application. Which of the following is true?

Material misrepresentation

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?

Unilateral

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?

Legal Hazard

What hazard is defined as a set of legal or regulatory conditions that affect an insurer's ability to collect premiums commensurate with the level of risk incurred.

To lessen the risk of financial loss because of the death of a key employee

What is the purpose of key person insurance?

The risk of loss with other subscribers of that reciprocal.

When insurance is obtained through a reciprocal insurer, the insureds are sharing what risk?

Aleatory

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

The insurer's financial rating

Which of the following does NOT need to be identified in an insurance policy?

Race

Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance?

Medical background

Which of the following information about the applicant is NOT included on Part 1 of the application for insurance?

Reciprocal

Which of the following insurance options would be considered a risk-sharing arrangement?

Estimated longevity

Which of the following is NOT a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach?

Standard

Which of the following is a risk classification used by underwriters for life insurance?

The cash value available to the policyowner

Which of the following is an example of liquidity in a life insurance contract?

Premiums are not tax deductible as a business expense.

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

An insured suing the insurer for failure to provide promised benefits.

Which of the following would be covered by contract law?