AD Banker LA Chapter 2

A typical life insurance application contains how many parts?

2

The National Do Not Call Registry requires companies to update their list at least once every ______ days.

31

Under the Do Not Call Registry, telephone solicitation calls before _____ or after _____ are prohibited.

8:00 a.m. / 9:00 p.m.

Which of the following signatures would not be considered valid on an application for insurance?

A minor insured

Of the following, which can a home office underwriter solely use to determine insurability of an applicant based on age, medical history, and amount of coverage?

A nonmedical application

A personalized computer-generated illustration detailing premiums, cash values, interest rates, and surrender values is called __________.

A policy summary

A Consumer Investigative Report is not completed by ___________.

A producer

An Errors & Omissions policy primarily covers the liability of:

A producer or agency

Which of the following best describes a viatical settlement?

A terminally ill insured/owner sells his or her policy to a third party for much needed cash

______________ is governed under the rules and regulations dealing with Unfair Trade Practices with regard to how information can be communicated to the public.

Advertising

Confidential information shared by the producer to the insurer and does not become part of the policy is the __________.

Agent's Report

All of the following are true regarding an Attending Physician's Statement (APS), except:

An MIB report can be used in place of an APS

The Attending Physician's Statement (APS) is completed by:

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

Which of the following is used by an insurer to collect information from the applicant/insured for underwriting purposes?

An application

A person making application, for themselves or another, to be insured under an insurance policy is called the:

Applicant

The person offering him/herself or another person to be insured by the contract best defines the:

Applicant

The person who submits an application for insurance is always referred to as the _______.

Applicant

In order for a life insurance policy to be valid, insurable interest must exist at time of _________.

Application

The name used to indicate the insured's age at time of policy renewal is the ________ age.

Attained

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 _______.

Buyer's Guide

By what means does the client acknowledge that an insurer may use services and information provided by third parties to gather information during the underwriting process?

By signing the application

How does life insurance reduce financial loss upon the insured's death?

By transferring the risk to the insurer

If a home office underwriter obtains MIB codes inconsistent with information provided on the application, what is the underwriter required to do?

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

In a replacement transaction, all of the following are insurer duties and responsibilities, except:

Contact the client to assure that they understand the transaction

A group plan is designed to insure all of the following, except:

Creditors

Part 2 of the application consists of all of the following information, except:

Date of birth, gender

Industrial Life Insurance is also referred to as a:

Debit Policy

A group plan is normally owned by any one of the following, except:

Debtors

Upon receipt of all of the necessary information, the home office underwriters can issue the coverage applied for in all of the following ways, except:

Declined

In life insurance, the Buyer's Guide is required to be provided not later than at the time of policy ___________.

Delivery

All of the following are things a producer should do when meeting with the client after the policy has been issued, except:

Disclose the amount of commission earned on the sale

All of the following are underwriting criteria taken into account by the insurer in the underwriting of individual life insurance cases, except:

Education level completed

Insurance covering the liability of a producer or agency is called _______.

Errors and Omissions

The _______ date is the date on which the insurance coverage ends

Expiration

The _______ date is the date on which the insurance coverage ends.

Expiration

An insurance company must adhere to the __________ when gathering information about an applicant from third parties.

Fair Credit Reporting Act (FCRA)

The term 'mode' refers to the:

Frequency of premium payments

An insurance plan owned by an employer, creditor or association, providing coverage for the employees, debtors, or members, refers to which of the following?

Group Life Insurance

Applicants must consent to be tested and be informed that testing for ________ may determine insurability.

HIV

During the application process, a mistake is made by the applicant in answering one of the health questions and needs to be corrected. What is the best way to go about this?

Have the applicant initial the change or start over with a completely new application

All of the following are characteristics of Term Insurance, except:

High premium outlay in the early years

_______________ is the process of selection, classification and rating, and determining if someone is insurable.

Home office underwriting

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 event of his or her premature death.

Human Life Value

The income-earning ability lost to dependents by the insured's premature death is a way to evaluate an individual's insurance needs. This method is known as the:

Human Life Value Approach

Under what circumstances should the producer obtain a statement of good health?

If no premium was paid at time of application and the policy is now being delivered

When an insured decides to change her mode of premium payment from annually to monthly, the total premium due would:

Increase

A(n) ________ report is a general report of the applicant's finances, character, morals, work, hobbies, and other habits.

Inspection

The cost of any required medical exams in the underwriting process is paid by the:

Insurer

The MIB obtains its information from which of the following?

Insurers

Which of the following best describes 'Capital Retention/Conservation' in an effort to meet an income objective?

Investment earnings are paid out

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?

Issued standard

Why have many states prohibited STOLI/IOLI transactions?

It is a violation of the insurable interest rule

Which of the following best describes a Statement of Good Health?

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

All of the following are acceptable methods of policy delivery, except:

Leaving it with a neighbor if they are not at home at their scheduled delivery appointment time

The _________ settlement industry has increased awareness of STOLI/IOLI.

Life

Medical exams are requested in all of the following situations, except:

Low amount of premium

Which of the following medical reports cannot be used as the sole basis for rating or denying coverage to an applicant?

MIB

Which of the following is most likely to pay the highest premium for a disability income policy, all other factors being equal?

Male, age 40, firefighter

The results of the ________________ is the only document that might be copied and made part of the policy.

Medical Examination

Part 1 of the application consists of all of the following information, except:

Medical status of immediate family members, their ages and causes of death

All of the following are true regarding disclosures at the point of sale and issues relating to AIDS, except:

Much like illegal drugs and nicotine the applicant does not have to provide consent prior to insurer's testing for HIV

A generic brochure was developed by the ________ to assist prospective buyers of life insurance, which includes descriptions of all the basic types of life insurance and comparisons of their relative costs.

NAIC

Which of the following is included in Part I of a Life Insurance Application?

Name and Occupation

A (an)_________ is used when the insured's age, medical history, or amount of coverage does not require a medical exam for underwriting purposes.

Nonmedical application

__________ insurance policies do not pay dividends to policyowners.

Nonparticipating

If after a policy has been issued and delivered, the insurer discovers unanswered questions on the application, what can the insurer legally do at this point?

Nothing, the insurer has waived its right to that information

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:

Notice Regarding Replacement

Which of the following is standard industry practice for producers in order to prove that they delivered the policy mailed to them from the insurer?

Obtain a policy delivery receipt from the applicant whenever and wherever policy delivery takes place

When a producer receives an application for life insurance that is completed and signed, but without premium payment, when does coverage start?

On the date the policy is delivered and premium collected

B was 42 when the life insurance policy was issued. 42 is referred to as the ______ age of the policy.

Original

Which of the following types of policies is eligible for policy dividends?

Participating

Which of the following types of coverage is best used to protect the beneficiary, and to provide a living benefit for the policyowner?

Permanent

What should a producer do if the policy applied for is issued at a higher rate than was expected?

Personally deliver the policy, explain the rating, reinforce the value of the policy, and collect the additional premium

The individual who has the ownership rights of a policy is called the:

Policyowner

When an individual qualifies for a lower premium or rate than standard risks, the insured is considered a:

Preferred risk

When an applicant does not smoke, exercises regularly, seldom drinks, and eats moderately and is considered to be a better-than-average risk, they would likely qualify for:

Preferred status and pay a lower premium

Which of the following best describes 'Capital Liquidation' in an effort to meet an income objective?

Principal and earnings are paid out

The factors necessary for an insurer to calculate a Net Premium are:

Rate of interest assumed and mortality rate

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?

Rated-up Age

The needs analysis approach in determining the amount of coverage someone needs takes into consideration all of the following, except:

Receiving raises and bonuses by the insured over the years

In a replacement sale all of the following are producer responsibilities, except:

Reimburse the applicant for any surrender charges that may be incurred as a result of the transaction

Any transaction in which a new life policy or annuity is to be purchased, and the producer knows, or should know, that existing contract(s) will be: lapsed, forfeited, surrendered, terminated, reduced in value, amended with a reduction in benefit or term, have a reduced cash value, or is subjected to borrowing, is best known as a __________.

Replacement

A ________ is usually treated as an insurance company liability.

Reserve

A ____________ account is an amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders.

Reserve

Policy __________ are the net premiums paid plus interest earned and reflect potential insurance contract obligations.

Reserves

Which of the following is not a factor in premium determination?

Reserves

If after meeting with a client, a producer returns to the agency office and notices that the application has unanswered questions, what is the best course of action for the producer to take?

Return the original application back to the applicant for completion prior to submission

In a STOLI/IOLI transaction, what are the insureds basically doing?

Selling their mortality to another for up-front cash

Which of the following listed policies has the least likelihood of keeping pace with inflation?

Straight Whole Life

__________ life insurance is when an insured is induced into purchasing life insurance with the sole intent of selling that policy once issued to third party investors for an amount less than the death benefit, but greater than its cash values.

Stranger originated

If a client is unsure about whether or not he/she can obtain coverage or how much it would cost, what can the producer suggest to see what the insurer can do without tying up any of the client's funds?

Submit a trial application

Once the gross amount of dollars required to fund an insured's needs has been determined using the needs analysis approach, what is the next step?

Subtract any assets available to fund financial needs after death

Which of the following receipts states that coverage will begin immediately for a specific length of time, regardless of whether the applicant is ultimately approved for coverage by the insurer?

Temporary insurance agreement

An applicant's signature on an application indicates what?

That their statements are true

When calculating premium of life insurance policies, insurers assume all of the following, except:

The actual life expectancy of each group of insured's

What happens if an applicant discovers that there has been inaccurate or incomplete information in any report used during the underwriting process for life insurance?

The applicant has the right to challenge the inaccurate or incomplete information

When an applicant completes the insurance application in its entirety and provides the producer with a premium check, what in effect has taken place?

The applicant is making an offer to the insurer

In order for an insurance company to determine if it will issue a policy, what document must always be submitted for review?

The application

All of the following are true of the group life insurance classification, except:

The coverage is usually written on a permanent basis providing a cash value as well as a death benefit

A life insurance applicant 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?

The date of the application or upon the completion of any required medical exam (whichever is later)

When an insurer accounts for the interest and mortality factors, then adds additional charges to meet all costs of a contract, it derives __________.

The gross premium

A producer provided a conditional receipt to an applicant who paid the first premium with the application. The applicant died before a policy was issued. If the insurer denies the claim, which party would have to prove the reasons for its actions if the claim was challenged?

The insurer

When an insurer requires that an insured be subjected to a medical examination, who pays for the medical exam?

The insurer

Which of the following is a type of rating that does not involve an extra premium being assessed?

The lien plan

Which rating classification is typically used in the senior marketplace so that policies can be issued without a medical exam?

The lien plan

The process of calculating life insurance net premium requires consideration of all of the following, except:

The morbidity rates to be used

If the producer discovers that the applicant is not in good health at time of policy delivery, what should the next step be?

The policy should be returned to the insurer, or the deliver the policy only after the insurer grants permission

When reviewing an application, the underwriter decides to reclassify the risk. What does that mean for the client?

The premium could increase or decrease

What information must appear on the policy summary provided to a life insurance client?

The producer's name and address

The HIV Consent Form specifies which types of individuals may receive __________.

The test results

If an applicant is a minor, who signs the application?

Their guardian

A producer submits a completed application to the insurer along with the premium check after giving the applicant a conditional receipt. If the applicant completes the required medical exam, but dies prior to the insurer issuing a policy as applied for, what is the insurer's responsibility?

To pay the claim in full as long as the conditions of the receipt were fully satisfied by the insurer

When soliciting insurance, producers are governed by state rules and regulations under the title of ___________.

Unfair Trade Practices

Expense loading ___________ from company to company.

Varies

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.

Viatical

When are Errors and Omissions claims filed?

When clients file a report or a complaint

Why should a producer collect a premium at the time the application is completed?

Without it, coverage cannot go into effect, as there would be a lack of consideration

XYZ Insurer has decided to issue a policy to a particular applicant. What is the next step in this insurance transaction?

XYZ will send the policy to the producer for delivery to the insured