Life Insurance Policy Comparison and Underwriting 3rd ed
the level premium concept may be applied to all of the following policies except
annual renewable term insurance
when a 20-year term policy is issued, the annual premium will
be the same each year
what will an underwriter do with a substandard risk
charge an additional premium but accept the risk
an applicant may be rejected simply on the basis of an MIB report
false
which of the following settlement options may not be used to guarantee some for of lifetime benefit payments to a beneficiary
fixed amount
which of the following is not one of the reasons an insured might find flexible life insurance policies more attractive than traditional policies
flexible policies may offer better guaranteed rates than traditional policies
when underwriting a risk
hobbies and occupational activities are sometimes of greater concern to an underwriter than occupational exposures
which of the following information is usually not contained in the agent's statement that is submitted to an underwriter with an application for life insurance
information about the applicant's medical history and records
which of the following is least likely to be asked of an applicant for life insurance
information on the age and medical conditons of the spouse
premiums for whole life policies are
level and guaranteed for the life of the contract
charging a higher premium initially, which exceeds the amount needed to cover the cost of mortality, in order to offset the growing cost of mortality in later years, is a technique used to support which concept
level premiums
what type of term policy would best be used to provide a contingency fund of a specified size if the insured should die during the term period
level term life insurance
how does an insurance company determine it's loss ratio for a given year
loss experience divided by total premiums received
the primary disadvantage of annual renewable term is
prohibitively high premiums over time
which component of family protection policies are valid for most families today
small amounts of insurance to cover funeral expenses for children
premiums charged under a whole life policy
stay the same each year
the basic principle of the law of large numbers is that the greater the spead of risk, the more predictable losses become, and the greater the premium base
the more affordable the insurance becomes
which of the following statements about death rates is false
the mortality rate for males increases with age for every age between 0 and 100
in order to be eligible to take out a life insurance policy
the policyowner must have an insurable interest in the life of the insured
how would the premiums and cash values of a 20-pay life policy compare to a whole life policy
the premiums and cash values will be higher
under a graded benefit policy
the premiums stay the same but the benefits change
statistically the insurance industry assumes that the longest any individual will live is age
100
the maximum age shown in the commissioners standard ordinary table is
100
the exposure unit used to quote and apply life insurance rates is
1000 of insurance face value
the suicide exclusion is generally in place for
2 years
replacement transactions are
highly regulated but not illegal
today, more underwriting attention is focused on the applicant's
hobbies
whole life policies provide
a permanent and decreasing amount of insurance protection
which type of rider pays an additional benefit for accidental death and also pays full or partial benefit for loss of limbs and or sight
accidental death or dismemberment rider
the thing that distinguishes whole life policies from term policies is that only whole life products have
accumulating cash value
what type of insurance policy allows an insured to change the nature of protection from term coverage to whole life and to make changes in the amount of the premium and face value
adjustable life insurance
the tendency of those who have a greater risk of loss to apply for and obtain insurance is
adverse selection
the difference between the extended term payment and the reduced paid-up non-forfeiture option is that
an extended term option provides a temporary policy with the same face value as the original policy, while the reduced paid up option provides a permanent policy with a lesser face amount
a return of premium rider is actually
an increasing term policy added on to a whole life policy
living need riders provide benefits that
are designed to improve the quality of life for a terminally ill insured
the formulas that determine non-forfeiture values of life insurance
are determined by state law
pure endowments
are hardly ever sold
when might an agent be required to provide a notice of insurance information practices
as part of the application process
after carlos's application, the insurance company discovers that carlos has been diagnosed with a heart condition that makes him ineligible for insurance with that company. regardless, when the death claim is filed, the company pays the full death benefit, what sort of receipt did he receive
binding receipt
what type of receipt is used less frequently
binding receipt
the death benefit in life insurance
continues to play a major role in the life in life insurance sales presentations and purchase decisions
the type of policy that may be changed from term to permanent without evidence of insurability is
convertible term insurance
what type of policy would best be used to provide life insurance to cover time-sensitive obligations which are being partially satisfied each year that the insurer continues to live
decreasing term insurance
which type of rider pays an additional death benefit if the insured's death is caused purely by accident
double indemnity rider
the option that gives the insured the right to purchase additional amounts of insurance in the future is the
guaranteed insurability option
if a beneficiary selects a settlement option and later wishes to withdraw a lump sum in excess of the regular scheduled payments
he or she will probably be able to make use of the withdrawal provision to make the withdrawal
if the beneficiary selects a settlement option and later wishes to withdraw a lump sum in excess of the regular scheduled payments
he or she will probably be able to make use of the withdrawal provision to make the withdrawal
ordinary life insurance includes
individual policies
waiver of premium benefits are usually
inexpensive
which of the following is not a component of general overhead expense loading that may be included in the expense portion of a life insurance rate
interest
when an agent is able to collect the initial premium with the application of insurance, the policy
is more likely to be accepted
policy delivery
is necessary to complete the life insurance application
when purchasing small amounts of insurance for other family members
it is often more advantageous to use riders rather than to purchase separate policies
which life insurance settlement option would be most appropriate for providing a guaranteed lifetime income for both a husband and wife that are retired
joint and survivor
which of the following is not part of the expense loading for term insurance
mortality costs
for term insurance, the components of a life insurance rate are
mortality expenses, company expenses and interest income
components of term insurance premiums include
mortality, loading for expenses and interest
waiver pf premium, disability income and dismemberment benefits are examples of
non-life insurance benefits
the exposure base used to reflect the life insurance mortality tables is the
number of deaths in 1,000 population
who has the authority to change an insurance policy
only the officer of the insurer
non-insurance elements would include all of the following except
policy proceeds
which type of rider pays an additional health benefit equal to the policy premiums paid before death
return of premium rider
whole life policies are one of the
safest forms of insurance protection
which of the following is a function of underwriting
selecting and classifying risks
if an insurance company has a combined ratio of 105% for a particular period of time, has that company earned a profit or suffered a loss
suffered a loss
mortality is the greatest factor in the rate for
term insurance
the primary sales proposal should focus on
the applicant's unmet needs
if a beneficiary wants to use a uniquely structured settlement option that hasn't been used before
the insurance company will probably allow it, as long as the special arrangement is the actuarial equivalent of the other options available
if an insured dies while a policy loan is outstanding under a whole life policy
the insurer will pay the policy proceeds until the loan and any outstanding interest is paid back
Diane has a participating life insurance policy and has elected to have her dividends accumulate and earn interest she decides she wants to withdraw all of the money the insurer has been holding in the dividend account, Diane will pay taxes on
the interest earned, but not the dividends themselves
when living benefits or long term care benefits are attached to a life insurance policy
the proceeds payable upon the death of the insured will be increased by the amount paid out in living need benefits
with a fixed index universal life insurance policy, which is not correct
the product is subject to SEC regulation
when a state consumer protection law is stricter than a federal law
the state law will supersede the federal law
which type of life insurance offers the option of having a level death benefit or a death benefit equal to the original face value plus the increasing amount
universal life insurance
life insurance never takes effect
until the initial premium has been paid
if you wished to purchase a life insurance policy that would keep pace with inflation by making use of equity investments, which contract would you purchase
variable life insurance
which life insurance products are subject to SEC and FINRA regulation as well as regulation by state insurance departments
variable life insurance
when are medical examinations likely to be required with an application for insurance
when the amount of the insurance is large
when are medical examinations usually not required with an application for insurance
when the amount of the insurance is small
when might a life insurance company require that the proceeds must be paid as a lump sum
when the benefits payable to any one person are less than a specified minimum amount
when might a life insurance company require that the proceeds must be paid as a lump sum
when the benefits payable to any one person are less than a specified minimum payment
the cost of insurance protection goes down
when the interest rate is taken into account
a policyowner must select a dividend option
when the policy is put in place and may change the option annually
when would a lump sum settlement not be appropriate option for life insurance policy proceeds
when the purpose of the insurance is to supplement living expenses for survivors over several years
under the interest only option, the interest rate paid to the beneficiary
will usually be no less than what is listed in the contract
which of the following is least likely to increase the premium paid for life insurance
working as a file clerk in an office