Chapter: Life insurance basics
An investor buys a life policy on an elderly person in order to sell it for a life settlement. This is an example of
A STOLI policy
When must insurable interest exist in a life insurance policy
At the time of application
The medical Information bureau (MIB) was created to protect
Insurance companies from adverse selection by high risk persons
An insured purchased an individual life insurance policy with a face amount of $15,000. He pays a premium each month. What type of policy is that
Ordinary life
If someone wants to buy a life insurance policy that will provide lifetime protection against premature death, what type of life insurance policy should that person buy
Permanent
What is an example of liquidity in a life insurance contract
The cash value available to the policyowner
If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about
Whether an insurable interest exists between the individuals
What is the purpose of a conditional receipt
It is intended to provide coverage on a date prior to the policy issue
What is NOT true concerning insurable interest as it applies to life insurance
A debtor has an insurable interest in the life of a lender
Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount
Buy-sell agreement
Which of the following best describes annual premium
Net premium plus expenses
Which of the following individuals must have insurable interest in the insured
Policyowner
Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance
Replacement rule
Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called
Suitability
What is generally true regarding insureds who have been classified as preferred risks
Their premiums are lower
Why should the producer personally deliver the policy when the first premium has already been paid
To help the insured understand all aspects of the contract
What is the purpose of key person insurance
To lessen the risk of financial loss because of the death of a key employee
