ct 3

If a group life insurance plan sponsor pays 100 percent of the premiums, what percentage of the group's eligible members must participate in the plan? 75 percent of the group 100 percent of the group 50 percent of the group 25 percent of the group

100 percent of the group

Which of the following statements regarding association group life is correct? The association must pay all of the premiums. There must be a minimum of ten association members enrolled in the plan. The association and its members must share premiums. The insured members are the policyowners.

There must be a minimum of ten association members enrolled in the plan.

What type of insurance is most commonly used in group life insurance plans? 30-year renewable term 20-year renewable term annually renewable term single-premium whole life

annually renewable term

Bob's insurance goal is to provide additional death benefit protection for his family in case he dies while his children are young. What type of life insurance is best suited to this need? whole life insurance term life insurance business life insurance group life insurance

term life insurance

A life insurance application's main purpose is to provide underwriters with information regarding: the applicant's personal risk data and health the type of policy being applied for the applicant's wealth the reason for the requested coverage

the applicant's personal risk data and health

During the underwriting process, a life insurance company may request a medical exam based on any of the following criteria, EXCEPT: how the applicant answered health questions on the application the type or amount of the proposed insurance the age of the applicant the applicant's race

the applicant's race

In a participating life insurance policy, the insurance company pays the policyowner a dividend out of which of the following? the company's cash reserves the policyowner's life insurance policy cash value set amounts prescribed in the policy the insurer's divisible surplus

the insurer's divisible surplus

By submitting an application for life insurance without the first premium, Larry is doing which of the following? suggesting that the insurer should not issue the policy for some reason negotiating for lower premiums inviting the insurer to make an offer making the policy's effective date earlier than it would be if the initial premium was paid with the application.

inviting the insurer to make an offer

Which of the following types of insurance is typically used for credit life insurance? whole life limited payment increasing term decreasing term

decreasing term

If the Alpha-Omega Corporation wants to provide cost-effective life insurance for all its full-time employees, it will most likely buy which of the following? business life insurance individual term life insurance whole life insurance group term life insurance

group term life insurance

Which one of the following best describes a policy that has a relatively low face amount and has premiums that are paid to an insurance agent who generally calls on the policyowner at home to collect them? group life insurance industrial life insurance ordinary whole life insurance ordinary term insurance

industrial life insurance

Which one of the following statements about term life insurance is most correct? Term life insurance is an inexpensive way to provide permanent lifetime coverage. Term life insurance cannot be converted to permanent coverage. At any given age when issued, a level term policy will be less expensive than a permanent policy of the same face amount. Term life insurance builds a cash value

At any given age when issued, a level term policy will be less expensive than a permanent policy of the same face amount.

Which statement is correct with respect to the contract charges and fees charged by variable life and traditional whole life policies? Both charge account transfer fees. Both charge investment advisory fees. Both charge a fee for expenses incurred by the separate investment accounts. Both base the premium on a mortality charge that reflects the insured's risk of death.

Both base the premium on a mortality charge that reflects the insured's risk of death.

All of the following statements regarding life insurance premium modes are correct EXCEPT: Actuaries base premium calculations on the assumption that the premium will be paid annually, at the start of the policy year. There is no additional cost for paying premiums more frequently than annually. The sum of premiums paid monthly over the course of a year will be greater than the annual premium for that policy. common premium modes include monthly, quarterly, and semi-annually

There is no additional cost for paying premiums more frequently than annually.

Which of the following most correctly describes the difference between decreasing term insurance and level term insurance? Decreasing term life insurance can be converted to a permanent policy while level term cannot. The insured can renew decreasing term life insurance but not level term. Under decreasing term insurance, the death benefit decreases over the policy period while a level term policy maintains a level death benefit over the policy period. Premiums decrease over the life of a decreasing term policy but stay the same for level term policies.

Under decreasing term insurance, the death benefit decreases over the policy period while a level term policy maintains a level death benefit over the policy period.

When underwriting a group life insurance policy, which of the following does the underwriter look at? the health status of the group's youngest members only the health status of the group's older members only the group as a whole the health status of specific members

the group as a whole

Under group insurance coverage, one policy covers a number of people. Who owns these group polices? the insureds the insurance company who issues the policy representatives of the sponsoring companies the organization that represents the group and which sponsors the coverage

the organization that represents the group and which sponsors the coverage

A whole life insurance policy matures, or endows, when: the premiums the owner has paid equal the policy's face amount the premiums the owner has paid equal the policy's cash value the policy's cash value equals its face amount the policy's cash value equals its loan value.

the policy's cash value equals its face amount

All the following reasons that a business might buy life insurance represent a valid insurable interest, EXCEPT: to insure partners' lives to provide funds to buy out a deceased partner's interest to insure the lives of key employees or owners to insure liquidity in case one of the owners or key employees dies to provide insurance coverage for large-volume customers

to provide insurance coverage for large-volume customers

Which of the following best describes insurable interest? It refers to the role life insurance can play in protecting policyowners from investment fraud. It refers to the financial relationship between the policyowner and the insured person or property. It describes the basic relationship between the insurance company and the policyowner. It refers to the maximum amount of insurance that may be purchased on the insured person or property.

It refers to the financial relationship between the policyowner and the insured person or property.

Which of the following best describes how the insured's money is handled in a variable life insurance policy? Premiums are placed in the insurance company's general account. Premiums are invested in certificates of deposit issued by the insurance company. Premiums are placed in investment subaccounts selected by the insurance company. Premiums are placed in investment subaccounts selected by the policyowner.

Premiums are placed in investment subaccounts selected by the policyowner.

When may an insurer cancel either whole life or term life insurance? The insurer may cancel both types of policies if the policyowner does not pay the premiums. The insurer may not cancel either type of life insurance policy under any circumstances. The insurer may cancel either type of policy only if the insured becomes uninsurable. The insurer may cancel either type of policy without reason at any time.

The insurer may cancel both types of policies if the policyowner does not pay the premiums.

Dan owns a fixed whole life insurance policy. What type of death benefit is Dan guaranteed? The policy has no guaranteed death benefit. The policy guarantees a death benefit will be paid, but not the amount. The amount depends on the number of premium payments Dan has made. The policy guarantees a fixed death benefit amount.

The policy guarantees a fixed death benefit amount.

All of the following statements about participating policies are correct EXCEPT: They may also be called par policies. Though not required to do so, insurers may guarantee their participating policy dividends. Participating life policies pay the policyowner a policy dividend out of its divisible surplus. They are generally issued only by mutual insurance companies.

Though not required to do so, insurers may guarantee their participating policy dividends.

Which one of the following statements about variable life insurance is correct? The death benefit under a variable life insurance policy will never be more than the stated minimum. Variable life insurance policyowners can transfer funds between investment subaccounts and the insurer's general account. Variable life insurance policies do not guarantee a minimum death benefit. With variable life insurance, it is the insurance company that assumes most of the investment risk.

Variable life insurance policyowners can transfer funds between investment subaccounts and the insurer's general account.

Variable life insurance policies offer all of the following EXCEPT: a variety of investment subaccount choices a cash value a guaranteed death benefit flexible premium payments

a guaranteed death benefit

Insurers will decline applicants with very high substandard risk ratings. What percentage of applicants do insurers reject? about 10 percent Practically speaking, no applicants are rejected as uninsurable. about 2 percent about 5 percent

about 2 percent

What do covered employees receive to show they have coverage under a group life insurance policy? certificate of insurance certificate of enrollment individual insurance contract copy of the master plan

certificate of insurance

Permanent life insurance can also provide funds, through its cash value, that may be used during the insured's lifetime. What is that feature called? living benefits capital accumulation the money feature permanent values

living benefits

What do actuaries use to predict the likelihood of an individual dying at any certain age in the premium rate-making process? company experience mortality industry-wide rating history morbidity

morbidity

Which of these personal relationships does NOT automatically constitute insurable interest? children in their parents or grandparents neighbors in each other people in themselves spouses in each other

neighbors in each other

Harry and Connie each want to buy life insurance that will provide a guaranteed death benefit whenever they die, will generate a guaranteed cash value they can access while living, and even return excess premiums to them. Which of the following would best fit this couple's needs? term life insurance variable life insurance group life insurance participating whole life insurance

participating whole life insurance

In which of the following areas may a life insurance underwriter discriminate in determining policy eligibility and coverage limits? physical defects race sexual orientation personal health history

personal health history

The requirement that an insurable interest must exist when life insurance is purchased is intended to prevent people from doing which of the following? overusing life insurance designating an ineligible person as the policy beneficiary using life insurance to fund future cash needs using life insurance as a speculative investment on another person's life

using life insurance as a speculative investment on another person's life

The Fair Credit Reporting Act (FCRA) generally requires insurers that seek a credit report to notify the applicant of the request within: seven days of requesting the report one day of requesting the report 15 days of requesting the report three days of requesting the report

three days of requesting the report

Which of the following statements regarding the practice of backdating a life insurance application is correct? The policyowner is not required to pay back premiums from the backdated issue date to the present. The producer has the authority to approve the backdating of policy applications. The policy premium is lower than it would be if the policy was issued with the actual date the application was signed. Most states allow a policy application to be backdated up to 12 months.

The policy premium is lower than it would be if the policy was issued with the actual date the application was signed.

In life insurance, for how long must insurable interest exist? Insurable interest must exist only at the time the applicant enters into a life insurance contract. If no insurable interest exists when a policyowner buys a life insurance policy, the contract may still be enforced. It must exist when a claim is submitted. It must continue for the life of the policy.

Insurable interest must exist only at the time the applicant enters into a life insurance contract.

Which one of the following statements about variable life insurance is correct? The cash value is not guaranteed with variable life. Variable life policyowners cannot choose how their contract premiums are invested. There is no guaranteed death benefit with variable life. Variable life's premiums are only invested in safe, conservative investments.

The cash value is not guaranteed with variable life.

From a regulatory perspective, all variable life insurance policies are considered: investment securities risk-free investments that are as safe as ordinary life insurance government-secured investments modified endowment contracts

investment securities

All of the following statements about binding receipts are correct EXCEPT: An alternative to a binding receipt is the temporary insurance agreement. Binding receipts are the most common type of premium receipt used with life insurance sales. If underwriters determine the applicant is uninsurable, then a binding receipt terminates coverage when that determination is made. A binding receipt guarantees coverage from the time the applicant completes the application through the underwriting process, even if the applicant is found to be uninsurable.

A binding receipt guarantees coverage from the time the applicant completes the application through the underwriting process, even if the applicant is found to be uninsurable.

Which statement best describes the restrictions an insurer must operate under when using information from the MIB? Insurers may rate or decline a life insurance applicant based solely on MIB information, as long as they do so consistently for all applications. Insurers cannot rate, but can decline, a life insurance applicant based solely on MIB information. Insurers cannot rate or decline a life insurance applicant based solely on MIB information. Insurers must rate or decline a life insurance applicant based solely on MIB information.

Insurers cannot rate or decline a life insurance applicant based solely on MIB information.

Donna, age 40, buys a $200,000 straight whole life policy. On the same date, Kara, age 40, buys a $200,000 20-pay life policy. Which of the following statements is correct? Kara's policy will build cash value quicker than Donna's policy while she is paying premiums, but once premiums stop, cash value growth will slow down. The cash value of Kara's policy will build faster than Donna's policy after Kara's policy is paid up. Kara can make further premium payments once her policy is paid up while Donna cannot. Kara's policy will mature (endow) at a younger age than Donna's policy.

Kara's policy will build cash value quicker than Donna's policy while she is paying premiums, but once premiums stop, cash value growth will slow down.

Life insurance has been purchased by ABC Company on the lives of two partners, Hugh and Danny, and three key employees Eileen, Vern, and June. Which of the following would apply if Hugh and June were to leave the business? The company would have to drop its coverage for both Hugh and June within 30 days of their departures. The company can only retain its coverage on June because she is not a principal of the company. The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not. The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.

The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.

Which one of the following statements about term life insurance is correct? It is intended to cover the insured to age 120. The policy pays a death benefit only if the insured dies during the term. A cash value accumulates in term life policies. It is permanent insurance.

The policy pays a death benefit only if the insured dies during the term.

The convertibility provision of a term life policy lets the owner convert the term coverage into what type of policy? a permanent life insurance policy a paid-up whole life insurance policy a renewable term policy a convertible term policy

a permanent life insurance policy

How is increasing term life insurance normally sold? as a stand-alone term life insurance policy as a permanent insurance policy as a rider attached to a permanent life insurance policy as an endorsement

as a rider attached to a permanent life insurance policy

Which of the following play a role in the regulation of variable insurance product sales? state insurance departments only the Securities Exchange Commission (SEC) only both FINRA and state insurance departments Financial Industry Regulatory Authority (FINRA) only

both FINRA and state insurance departments

Which of the following is the actuary's first step in determining the premium charged for a policy? calculate the expected profit calculate the annual policy dividend calculate the gross premium calculate the net premium

calculate the net premium

The policy value that builds within a whole life insurance policy and is accessible by the policyowner while the insured is alive is called the: face amount cash value policy reserve death benefit

cash value

Premium rates will vary unpredictably depending on the insurer's actual experience in which one of the following types of whole life insurance? straight whole life limited pay whole life current assumption whole life graded premium whole life

current assumption whole life

When underwriting group life insurance, the underwriter can offset the risk of loss posed by the group by doing all of the following, EXCEPT: making sure the required percentage of group members has enrolled for insurance denying insurance coverage to any person with a pre-existing condition requiring a minimum group size making sure that all applications are complete and accurate

denying insurance coverage to any person with a pre-existing condition

Frank, an applicant for life insurance who is a substandard risk, can expect to pay a premium that is best described as which of the following? generally the same as for standard risks for the duration of the policy generally higher than for a standard risk generally lower than for standard risks generally the same as for standard risks, but over a shorter period of time

generally higher than for a standard risk

To renew a term life insurance policy at a lower re-entry rate than the guaranteed rate, what must the insured prove? he or she is under age 60 his or her insurability his or her attained age an insurable interest exists

his or her insurability

In what form does the MIB present its information to insurers? a posting on the MIB website describing the applicant's medical history a telephone call from a MIB analyst discussing the MIB's findings on the applicant numeric codes, indicating risks identified in previous applications, that are communicated electronically a written report, which includes an underwriting recommendation, detailing the MIB's findings on the applicant

numeric codes, indicating risks identified in previous applications, that are communicated electronically

Harry and Connie each want to buy life insurance that will provide a guaranteed death benefit whenever they die, will generate a guaranteed cash value they can access while living, and even return excess premiums to them. Which of the following would best fit this couple's needs? group life insurance term life insurance participating whole life insurance variable life insurance

participating whole life insurance

Sylvia's insurer guarantees a fixed death benefit for the policy she owns. Based on this, which one of the following benefits is also most likely guaranteed with this policy? her ability to borrow an interest-free loan from the cash value policy dividends payment of premiums on Sylvia's behalf in the event of emergencies the policy's cash value

the policy's cash value

Who completes an attending physician's statement (APS)? the proposed insured's doctor, who is familiar with how the medical condition is being treated a local doctor, other than applicant's, who is familiar with how the medical condition is being treated a member of the MIB a doctor assigned by the insurer in the state where the insurance is being written

the proposed insured's doctor, who is familiar with how the medical condition is being treated

Alex owns a "home service" life insurance policy, which means he most likely pays his premiums in which of the following ways? annually by personal check with a single premium payment quarterly by checking account debit weekly or monthly, often personally to the agent who comes to Alex's home

weekly or monthly, often personally to the agent who comes to Alex's home

Life and health insurance can be classified as participating or nonparticipating. This classification determines which of the following? whether or not the policy accumulates a cash value whether or not the insurance company contributes premium payments, if needed whether or not the policy distributes policy dividends to its owner whether or not the insurer is a member of the Life Insurance Council of America

whether or not the policy distributes policy dividends to its owner

Tiger Motors Company has 25 employees and would like to start a group life insurance plan. However, one of its employees has had two heart attacks during the past five years and his health is questionable. What will happen in this case? Tiger Motors can ask the employee to voluntarily withdraw from the plan to make premiums lower. Tiger Motors can exclude the employee from coverage. Tiger Motors cannot exclude the employee from the plan based on his risk potential. Tiger Motors can charge the employee a higher premium than the other employees.

Tiger Motors cannot exclude the employee from the plan based on his risk potential.

Amanda, age 45, bought a $50,000 ten-year renewable and convertible term life policy. Regarding this, all the following statements are correct EXCEPT premiums for this policy will be more than for a $50,000 ten-year nonrenewable but convertible term life policy. premiums for this policy will be more than for a $50,000 ten-year nonrenewable and nonconvertible term life policy. premiums for this policy will be more than for a $50,000 permanent life insurance policy. premiums for this policy will be more than for a $50,000 ten-year renewable but non-convertible term life policy.

premiums for this policy will be more than for a $50,000 permanent life insurance policy.

Kevin tells his insurance agent that he wants a life insurance policy that will last for his entire lifetime as long as he pays the premiums, will maintain a level premium, and will generate a cash value. This may describe any of the following types of policy, EXCEPT: industrial whole life insurance ordinary whole life insurance term life insurance variable life insurance

term life insurance

What typically happens to the face amount of an indexed whole life insurance policy over time? It increases every year at the same rate as the national inflation rate. It increases annually as long as the insured continues to prove insurability. It increases annually to reflect increases in the consumer price index. It increases annually based on a fixed rate specified in the policy.

It increases annually to reflect increases in the consumer price index.

All of the following statements about fixed whole life insurance cash values are correct EXCEPT: Cash values grow over the life of the policy and are calculated to equal the policy's face amount at the insured's age 120 (age 95 in the case of universal life insurance). As long as premiums are paid, the insurance stays in force, the cash values grow, and the policy is guaranteed to pay its specified death benefit. The policyowner owns the cash value in the policy and can access it. Withdrawing or borrowing from the cash value will have no impact of the policy's death benefit.

Withdrawing or borrowing from the cash value will have no impact of the policy's death benefit.

Which of the following employees of ABC Computers could NOT convert their group life coverage to an individual policy? Sue, who voluntarily terminated employment this month to work for a competitor Bill, who is on long-term disability this month Paul, who retired this month Emily, who was laid off from her job this month

Bill, who is on long-term disability this month

For any given amount of coverage, how does the cost of group life insurance generally compare to the cost of individual life insurance? Group life is more expensive. Group life is about the same cost. Group life is less expensive. Group life is more expensive for smaller companies only.

Group life is less expensive.

Alpha Industries has a noncontributory group life insurance plan. What happens if Alex joins the company on March 1? He cannot participate in the plan. He can join the plan as long as he contributes his share of the premium. He must be enrolled in the plan (after a waiting period, if applicable). He may be allowed to participate but only at the employer's discretion.

He must be enrolled in the plan (after a waiting period, if applicable).

Which of the following most accurately describes "insurable interest" in a life insurance policy? Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured. Insurable interest is the primary factor in determining how much life insurance the insurer will issue on a person. Insurable interest is the relationship between the person paying for the insurance and the designated beneficiary. Insurable interest is the relationship between the person applying for insurance and the insured at the time of the insured's death.

Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured.

Which statement about the conversion provision in group life insurance policies is correct? It allows terminating plan participants to convert their coverage to another group policy at the same benefit level without the need to provide evidence of insurability. It allows terminating plan participants to convert their coverage to an individual policy of the same face amount if they furnish evidence of insurability or to a policy with a lesser face amount without having to prove insurability. It allows terminating plan participants to convert their coverage to an individual policy of the same face amount without the need to provide evidence of insurability. It allows terminating plan participants to convert their coverage to an individual policy of the same face amount if they furnish evidence of insurability.

It allows terminating plan participants to convert their coverage to an individual policy of the same face amount without the need to provide evidence of insurability.

What happens to a signed application after the applied-for policy is issued? It becomes part of the contract between the insurer and the policyowner. It becomes property of the state. It is sent to the MIB for permanent storage. It is destroyed.

It becomes part of the contract between the insurer and the policyowner.

Jake and seven of his friends are self-employed in different fields. They want to form a group so that they can buy group life insurance. Which of the following most accurately describes their best option? Jake and his friends would be eligible to purchase a group life policy if they find at least two more people to join their group. Jake and his friends should consider buying individual life policies, as they are not eligible for group insurance. Jake and his friends could form a multiple employer welfare arrangement to get group life coverage. Jake and his friends could form an association group to get group life coverage.

Jake and his friends should consider buying individual life policies, as they are not eligible for group insurance.

All the following uses for life insurance in a business represent a valid insurable interest, EXCEPT: Life insurance bought by businesses to cover the lives of their key employees or owners. Life insurance purchased by business partners to provide funds that can be used to buy out the business interest of the one who dies. Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies. Life insurance used to provide funds in the event an insured key employee or partner dies.

Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies.

Carl is a policyowner who prefers to pay premiums monthly rather than annually. How will Carl's insurance company adjust his premium to accommodate this request? The insurer divides the annual premium by 12 and then adds a modest charge. The insurer simply divides the annual premium by 12. The insurer divides the annual premium by 12 and then reduces the premium amount to reflect the fact that premiums will be paid throughout the year. The insurer divides the annual premium by 12 and then adds a modest charge in the first policy year after which premiums equal the annual premium divided by 12.

The insurer divides the annual premium by 12 and then adds a modest charge.

Which one of the following statements about variable life insurance is correct? With a variable life insurance policy, the policyowner assumes most of the investment risk. Variable life policyowners can invest all of their premiums in the insurer's general account. Subaccounts are managed within the insurer's general account. Variable life policyowners can choose flexible premium payment schedules.

With a variable life insurance policy, the policyowner assumes most of the investment risk.

Life insurance underwriters are most likely to request a consumer (inspection) report on which of the following? applicants whom the agent does not know well applicants who are seeking very high amounts of life insurance business life insurance applicants who have already been issued high amounts of life insurance all applicants

applicants who are seeking very high amounts of life insurance

With interest-sensitive whole life insurance policies, insurers may change premium rates after reviewing their investment experience in a process called: renewal underwriting redetermination indexing reconfiguration

redetermination

The basic purpose for the re-entry option with a renewable term life insurance policy is to let the policyowner: reinstate the policy after it has lapsed for nonpayment of premiums without having to provide evidence of insurability convert the term policy to a permanent life insurance policy renew the policy at lower current rates rather than guaranteed renewal rates renew the policy with a higher face amount without having to provide evidence of insurability

renew the policy at lower current rates rather than guaranteed renewal rates