AD Banker Chapter 2 Exam Questions

Normally, when the insurer determines that the insured is an acceptable risk, the insurer will send the policy to the ____________. a. Producer b. Beneficiary c. Policyowner d. Insured

a .Producer

If a premium is collected with a life insurance application and coverage begins immediately for a specific length of time regardless of whether the applicant is ultimately approved by the insurer, the receipt give by the agent is called a(an): a. Binding Receipt b. Approval Receipt c. Acceptance Receipt d. Conditional Receipt

a. Binding Receipt

Which of the following personal uses of life insurance is specifically designed to provide benefits to the policyowner while the insured is still alive? a. Cash accumulation b. Estate conservation c. Estate creation d. Charitable bequests

a. Cash accumulation

All of the following are underwriting criteria taken into account by the insurer in the underwriting individual life insurance cases, except: a. Education level completed b. Physical condition c. Gender d. Medical history

a. Educational level completed

A(n) ___________________________ is used when the insured's age, medical history, or amount of coverage does not require a medical exam for underwriting purposes. a. Nonmedical application b. Agent's report c. Short form d. Inspection report

a. Nonmedical application

When an individual qualifies for a lower premium or rate than standard risks, the insured is considered a: a. Preferred risk b. Higher risk c. Substandard risk d. Bad risk

a. Preferred risk

Which of the follow is not a factor in premium determination? a. Reserves b. Interest c. Expesnes d. Mortality

a. Reserves

The process of calculating life insurance net premium requires consideration of all of the following, except: a. The morbidity rates to be used b. The insured's age c. The insured's gender d. The rate of interest assumed

a. The morbidity rates to be used

A __________________ settlement is when a terminally ill insured sells his or her life insurance policy to a third party other than an insurance company, for an amount less than the policy's death benefit, but greater than its cash values. a. Viatical b. Senior c. Stranger originated d. Investor originated

a. Viatical

Which of the following is used by an in insurer to collect information from the applicant/insured for underwriting purpose? a. A rider b. An application c. A receipt d. An amendment

b. An application

If a home officer underwriter obtains MIB codes inconsistent with the information provided onthe application, what is the underwriter required to do? a. Refer the case ti the state Insurance Department for possible insurance fraud b. Conduct further investigation to obtain more information prior to making decision c. Automatically reject the application and order any premium paid refunded d. Issue the policy at a higher premium due to the undisclosed higher risk

b. Conduct further investigation to obtain more information prior to making a decision

Insurance covering the liability of a producer or agency is called ________________. a. Inadequacy and Negligence b. Errors and Omissions c. Property and Casualty d. Complaint Protection

b. Errors and Omissions

The date on which insurance coverage is no longer in effect is referred to as the _________ date. a. Conversion b. Expiration c. Policy d. Renewal

b. Expiration

In determining the proper amount of life insurance coverage for an insured, the ______ approach measures the projected future earnings and the value of the insured's services in the even of his or her premature death. a. Capital Liquidation b. Hum Life Value c. Needs Analysis d. Capital Retention

b. Human Life Value

The burden of proof falls on the ______________ to establish issued policies were in fact delivered to the applicant. a. Beneficiary b. Insurer c. Policyowner d. Insured

b. Insurer

When an insurer accounts for the interest and mortality factors, then adds additional charges to meet all costs of a contract, it derives ____________. a. The dividends b. The gross premium c. The net premium d. The policy reserves

b. The gross premium

Which of the following signatures would not be considered valid on an application for insurance? a. The licensed producer b. A minor insured c. The policyowner d. A guardian applicant

b. The minor insured

When the soliciting insurance, producers are governed by state rules and regulations under the title of ___________. a. Fair Competition Rules b. Unfair Trade Practices c. Rules of Fair Practice d. Solicitation Rules

b. Unfair Trade Practices

The Attending Physician's Statement (APS) is complete by: a. The Medical Information Bureau b. The agent after the medical questions are answered by the applicant c. An applicant's physician to provide information about the applicant's medical history d. A physician providing a required medical exam at the time of application

c . An applicant's physician to provide information about the applicant's medical history

To purchase the greatest amount of coverage, for the least amount of initial premium ,a client would purchase which of the following? a. A variable life policy b. A participating policy c. A term policy d. An ordinary life policy

c. A term policy

A generic brochure developed by the NAIC to provide consumers with descriptions of basic types of life insurance as well as the comparative costs of each is called the ___________. a. Sales Illustration b. Consumer Information Kit c. Buyer's Guide d. Policy Summary

c. Buyer's Guide

Frieda wants coverage until she has paid back her business loan in 10 years. The ideal life insurance policy with the least expense would be: a. Variable Universal Life b. Participating Permanent Life c. Decreasing Term Life d. Universal Life

c. Decreasing Term Life

The Do Not Call Registry and the Telemarketer Sales Rule were created by the _________________. a. National Association of Insurance Commissioners (NAIC) b. Securities and Exchange Commission (SEC) c. Federal Trade Commission (FTC) d. Federal Insurance Office (FIO)

c. Federal Trade Commission (FTC)

All of the following are characteristics of Term Insurance, except: a. Will expire at an attained age or after a specified period of time b. No cash or loan value c. High premium outlay in the early years d. Can be written separately or with other types of insurance as a rider

c. High premium outlay in the early years

The Needs Analysis Approach always assumes the death of the insured to be: a. Within 10 years of the assessment b. Within 20 years of the assessment c. Immediate d. At age 100

c. Immediate

The Medical Information Bureau (MIB) is formed by: a. The Government b. Employers c. Insurance companies d. Medical professionals

c. Insurance companies

Which of the following would be considered a good result from an underwriter's action when an individual Life Insurance Policy is issued as applied for? a. Issued with exclusions or limitations b. Issued rated-up c. Issued standard d. Applicant is rejected

c. Issued standard

Mortality cost ______ interest (investment earnings) = pure rate. a. Plus b. Multiplied by c. Minus d. Divided by

c. Minus

The factors necessary for an insurer to calculate a Net Premium are: a. Expenses and rate of interest assumed b. Premiums paid plus interest earned c. Rate of interest assumed and mortality rate d. Mortality rate and expenses

c. Rate of interest assumed and mortality rate

What should the producer do, if the insured is in the hospital with a heart condition pending surgery on the day the newly issued policy was to be delivered and the initial premium collected? a. Collect additional premium at the time of delivery to reflect the higher risk the insurer now faces b. Hold onto the policy until the insured is discharged from the hospital and then deliver the policy c. Return the policy to the insurer with a letter of explanation d. Deliver the policy to an immediate family member and collect any outstanding premium

c. Return the policy to the insurer with a letter of explanation

Which of the following best describes producer field underwriting? a. Conducting blood pressure readings, taking the applicant's pulse, and drawing blood b. Obtain the applicant's medical records, conducting a credit history check, and logging in to the MIB c. Taking the time to probe beyond the stated questions on the application based upon the applicant's responses d. Interviewing the applicant's neighbors about the applicant's morals and character

c. Taking the time to probe beyond the stated questions on the application based upon the applicant's responses

A life insurance application pays the initial premium at the time of application and receives a Conditional Receipt. If coverage is issued as applied for, when did coverage go into effect? a. The day the check clears the bank b. The date the policy was delivered c. The date of the application or upon the completion of any required medical exam d. The date the policy was issued

c. The date of the application or upon the completion of any required medical exam

A typical life insurance application contains how many parts? a. 1 b. 4 c. 3 d. 2

d. 2

By properly naming the __________, life insurance proceeds will bypass the probate process. a. Applicant b. Insured c. Policyowner d. Beneficiary

d. Beneficiary

Which of the following best describes a Statement of Good Health? a. It is a sworn oral statement made by the insured at time of delivery which allows for coverage to come into effect. b. It is what comes along with the policy at the time of delivery confirming the underwriting class the insured falls into if the policy was issued standard or better c. It is the producer's authority to raise the rate if the insured does not appear to be in good health at the time of policy delivery. d. It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date

d. It verifies that the insured has not suffered a serious illness or injury requiring surgery or hospitalization since the application date

Interest earned on premiums paid to the insurer helps to ___________ the premiums charged. a. Standardize b. Stabilize c. Increase d. Lower

d. Lower

If it is known or should be known by the agent that an existing policy is going to be lapsed, forfeited, surrendered or terminated in favor of a new policy, the agent must submit a: a. Statement of Release b. Cancellation of Service c. Notice of Conversion d. Notice of Replacement

d. Notice of Replacement

Which of the following types of life insurance provides the largest portion of all coverage in force? a. Industrial b. Variable c. Group d. Ordinary

d. Ordinary

Martin is age 30 when he applies for life insurance. The underwriter classifies him the same as a person age 40 and his policy is issued with a premium for a person age 40. What substandard rating has been applied to Martin's policy? a. Tabular b. Graded c. Flat d. Rated-up Age

d. Rated-up Age

When an applicant completes the insurance application in its entirety and provides the producer with a premium check, what in effect has taken place? a. The applicant has give the producer the authority to negotiate the terms of the contract with the insurer b. The applicant is accepting the producer's offer of coverage c. The producer is making an offer of insurance to the applicant d. The applicant is making an offer to the insurer

d. The applicant is making an offer to the insurer