CH 2: Life Insurance Basics
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT A Signed waiver of premium. B Statement of good health. C Payment of premium. D Delivery receipt.
A signed waiver of premium
When must insurable interest exist in a life insurance policy? A When there is a change of the beneficiary B At the time of loss C At the time of application D At the time of policy delivery
C at the time of application
If an insured changes his payment plan from monthly to annually, what happens to the total premium? A Doubles B Increases C Decreases D Stays the same
C Decreases
Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT A Alcohol and tobacco consumption. B Recent surgeries. C Other insurance coverages. D Family health history.
C Other Insurance coverages
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? A Term insurance only B Permanent insurance only C Universal life insurance only D Any form of life insurance
D any form of life insurance
The mode of premium payment A Is the factor that determines the amount of dividends in a policy. B Is the method used to compute the cash surrender value of the policy. C Does not affect the amount of premium paid. D Is defined as the frequency and the amount of the premium payment.
D is defined as the frequency and the amount of the premium payment
Once a viatical contract has been established, how long does the viator have to rescind the contract? A 3 business days B 10 business days C 15 calendar days D 30 calendar days
C 15 calendar days
In the event the key employee quits or is terminated, what provision allows the policyowner to transfer coverage to the replacement employee, provided the new employee provides evidence of insurability? A Consideration B Misstatement of age C Free look D Change of insured
D Change of insured
Which of the following is a risk classification used by underwriters for life insurance? A Poor B Normal C Excellent D Standard
D Standard
Which of the following is usually true of a participating life insurance policy? A It may be converted to a term life policy. B It pays dividends to stockholders. C It assesses premiums against stockholders. D It pays dividends to policyowners.
D it pays dividends to policyowners
A producer agent must do all of the following when delivering a new policy to the insured EXCEPT A Disclose commissions earned from the sale of the policy. B Explain the policy provisions, riders, and exclusions. C Collect any premium due. D Explain the rating procedures if the policy is rated differently than applied for.
A Disclose commissions earned from the sale of the policy
Which of the following best details the underwriting process for life insurance? A Selection, classification, and rating of risks B Solicitation, negotiation and sale of policies C Issuance of policies D Reporting and rejection of risks
A Selection, classification, and rating of risks
What is the purpose of a conditional receipt? A It is given only to applicants who fully prepay the premium. B It is intended to provide coverage on a date prior to the policy issue. C It guarantees that a policy will be issued in the amount applied for. D It serves as proof that the applicant has been determined insurable.
B It is intended to provide coverage on a date prior to the policy issue.
Which of the following is NOT true regarding the needs approach method of determining the value of an individual's life? A It must be assumed that the death of the insured will occur immediately. B Need is predicted using the number of years until the insured's retirement. C Coverage is based on the predicted needs of that family. D The death of an insured must be premature.
B Needs is predicted using the number of years until the insured's retirement
All of the following are personal uses of life insurance EXCEPT A Estate creation. B Cash accumulation. C Buy-sell agreement. D Survivor protection.
C buy-sell agreement
Which of the following is NOT an example of insurable interest? A Employer in employee B Child in parent C Debtor in creditor D Business partners in each other
C debtor in creditor
The insurance company underwriter could find information concerning the personal activities and character of an applicant from which of the following reports? A Insurance company who provided the prior coverage B Medical Information Bureau C Producer's report D Attending physician
C producer's report
Who negotiates viatical settlement contracts on behalf of a viator? A Viatical settlement consultant B Viatical settlement agent C Viatical settlement dealer D Viatical settlement broker
D Viatical settlement broker
Are insurance company underwriters allowed to discriminate? A No, higher risks pay higher premium B No, discrimination is an unfair practice C Yes, but only for gender D Yes, but not unfairly
D Yes, but not unfairly
Which of the following is NOT a characteristic of variable annuities? A The cash value is adjusted for inflation. B They offer guaranteed stock performance. C The contract owner bears the investment risk. D Benefits are dependent on the performance of securities.
B They offer guaranteed stock performance.
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation? A Lump-sum approach B Human life value approach (HLVA) C Needs approach D Blackout approach
B Human Life Value Approach (HLVA)
Which is generally true regarding insureds who have been classified as preferred risks? A They keep a higher percentage of any interest earned on their policies. B Their premiums are lower. C They can borrow higher amounts off of their policies. D They can decide when to pay their monthly premiums.
B Their premiums are lower
An applicant who receives a preferred risk classification qualifies for A Lower premiums than a person who receives a standard risk. B Dividends payable for lack of claims. C Higher premiums than a person who receives a sub-standard risk. D Higher premiums than a person who receives a standard risk.
A lower premiums than a person who receives a standard risk
A policyowner has sold his life insurance policy to a viatical settlement provider. How long does the provider have to inform the policyowner's insurer that his life policy has been viaticated? A 15 days B 20 days C 30 days D 90 days
B 20 days
A viatical settlement provider must have certain documents before completing the contract. Which of the following is NOT one of those documents? A A document giving the insured's consent to the tolling of the running of the policy's contestable period, if within 2 years of the policy issue B A copy of the insured's birth certificate C A witness document giving the insured's consent to the contract D A document giving the insured's consent to the release of medical records to the provider, broker, and insurance company
A copy of the insured's birth certificate
A person who gives money as consideration for a life insurance policy or interest in the death benefits of a life insurance policy is called a A Viatical settlement dealer. B Viatical settlement purchaser. C Viatical settlement broker. D Viatical settlement agent.
B Viatical settlement purchaser
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have? A Securities B Stock C Variable D Term
C Variable
Insurers must notify the Commissioner's office as to whether or not a life insurance policy will be marketed with illustrations. Certification of that notification must be provided annually within how many days of the anniversary of the original certification? A 10 days B 30 days C 60 days D 90 days
A 10 days
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n) A Aleatory contract. B Executive bonus. C Key person policy. D Fraternal association.
B executive bonus
