Chapter 3 - Legal Concepts of the Insurance Contract

Which of the following is called a "Second-to-die" policy? A. Family income B. Juvenile life C. Joint Life D. Survivorship Life

D. Survivorship Life Survivorship life (also referred to as "second-to-die" or "last survivor" policy) is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age

Which of the following statements concerning buy-sell agreements is true? A. Benefits recived are considered income taxable B. Buy-sell agreements pay in the event of a medical emergency C. Buy-sell agreements are normally funded with a life insurance policy D. Premiums paid are deducible as a business expense

C. Buy-sell agreements are normally funded with a life insurance policy A buy-sell agreement is simply a contract that establishes what will be done with a business in the event that an owner dies. Buy-sell agreements are normally funded with a life insurance policy.

Business entities must provide a list of all individual licensees authorized to represent it to _____. A. Any applicants for insurance B. The Governor C. All Policyholders D. The Commissioner

D. The Commissioner Business entities must provide the Commissioner a list of all individual licensees authorized to represent the business entity.

To legally transact insurance in this state, an insurer must obtain which of the following? A. Certificate of Insurance B. Certificate of Authority C. Power of Attorney D. Business entity license

B. Certificate of Authority A certificate of authority is required in order to transact insurance

Death benefits payable to a beneficiary under a life insurance policy are generally ____. A. Exempt from income taxation if under $10,000 B. Exempt from income taxation if over $10,000 C. Not subject to income taxation by the Federal Government D. Subject to income taxation by the Federal Government

C. Not subject to income taxation by the Federal Government When premiums are paid with after tax dollars, the death benefit is generally not subject to federal income taxation.

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy? A. It determines who receives policy benefits if the primary beneficiary is deceased B. It allows creditors to receive payment out of the proceeds. C. It ensures the policy proceeds will be split between the primary and contingent beneficiaries D. It requires that someone who is not the primary beneficiary handles the estate.

A. It determines who receives policy benefits if the primary beneficiary is deceased Naming a secondary beneficiary (also referred to as a contingent beneficiary) ensures that there is a beneficiary to receive policy proceeds if the primary beneficiary dies before the insured. If there is no secondary beneficiary, the policy benefits will go to the insured's estate.

No insurance policy form can be issued, delivered, or used unless it has been ______. A. Reviewed by the Commissioner and approved by the Governor B. Filed with and approved by the Commissioner. C. Developed by the commissioner D. Proofread by the Commissioner's staff and filed with the Superior court

B. Filed with and approved by the Commissioner.

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true? A. The contract B. The annuitant must be a natural person.

The annuitant must be a natural person.

What limits the amount that a policyowner may borrow from a whole life insurance policy? A. Premiums paid B. Amount stated in the policy C. Face amount D. Cash Value

D. Cash Value The amount available to the policyowner for a loan is the policy's cash value. If there are any outstanding loans, that amount will be reduced by the amount of the unpaid loans and interest.

Which nonforfeiture option has the highest amount of insurance protection? A. Conversion B. Decreasing Term C. Reduced Paid-ip D. Extended Term

D. Extended Term The Extended Term nonforfeiture option has the same face amount as the origional policy, but for a shorter period of time

Which of the following best describes annually renewable term insurance? A. It requires proof of the insurability at each renewal B. Neither the premium nor the death benefit is affected by the insured's age C. It provides an annually increasing death benefit D. It is level term insurance

D. It is level term insurance Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost

All of the following statements are correct regarding credit life insurance EXCEPT A. Benefits are paid to the borrower's beneficiary B. The amount of insurance permissible is limited per borrower C. Premiums are usually paid by the borrower D. Benefits are paid to the creditor

A. Benefits are paid to the borrower's beneficiary In credit life insurance, the creditor is the beneficiary for the amount of benefit equal to the outstanding balance of the loan

Who can request changes in premium payments, face value, loans, and policy plans? A. Policyowner B. Contingent beneficiary C. Beneficiary D. Producer

A. Policyowner Mandatory provision give these rights to the policy owner

Once a producer's appointment is filed, within how many days with the Commissioner verify the appointment (for eligible producers)? A. 3 Days B. 10 Days C. 15 Days D. 30 Days

C. 15 Days If the producer is eligible, the Commissioner will verify the appointment by electronic message within 15 days of receiving the notice from the insurer. However, if the producer is deemed ineligible, the Commissioner will notify the insurer within 10 days.

The mode of premium payment A. Is the method used to compute the cash surrender value of the policy B. Does not affect the amount of premium paid C. Is defined as the frequency and the amount of the premium payment. D. Is the factor that determines the amount of dividends in a policy

C. Is defined as the frequency and the amount of the premium payment.