insurance quizz questions
an insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance does this describe?
Aleatory
which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company
aleatory
what is the least expensive first-year premium
annually renewable term
what is INCORRECT regarding a $100,000 20-year level term policy
at the end of 20 years, the policy's cash value will equal $100,000
when must insurable interest exist in a life insurance policy
at the time of application
which of the following is true regarding suitability requirements for variable insurance products
both insurance and securities laws apply
what is true of a buy-sell agreement
buy-sell agreements are normally funded with a life insurance policy
what does "liquidity" refer ti in a life insurance policy
cash values can be borrowed at any time
A state-issued document empowering an insurance company to become an admitted insurer is called what?
certificate of authority
a producer who fails to separate premium monies from his own personal funds is guilty of
commingling
when an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following
consideration
A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called
cost of living rider
what happens when a policy is surrendered for its cash value
coverage ends and the policy cannot be reinstated
an insurance company sells an insurance policy over the phone in response to a TV ad. which of the following best describes this act?
direct response marketing
when the insured selects the extended term nonforfeiture option, the cash value will be used to purchase term insurance with what face amount?
equal to the original policy for as long as the cash values will purchase
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
executive bonus
In the Executive Bonus plan, who is the owner of the policy, and who pays the premium
executive is the owner and the executive pays the premium
The authority granted to an agent through the agent's contract is referred to as
express authority
Which nonforfeiture option has the highest amount of insurance protection?
extended term
what does "level" refer to in level term insurance
face amount
this is NOT a dividend option
fixed-period installments
under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid
for 20 years or until death, whichever occurs first
which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?
fraternal benefit society
what is not a business use of life insurance
funding against company's general financial loss
what is true about the cash surrender nonforfeiture option
funds exceeding the premium paid are taxable as ordinary income
what term best describes the coverage provided by term policies as compared to any other form of protection?
greatest
at the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. this rider is called
guaranteed insurability
an individual is purchasing a permanent life insurance policy with a face amount of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy?
guaranteed insurability option
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a
guaranteed insurability rider
what method of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation
human life value approach
annually renewable term policies provide a level death benefit for a premium that
increases annually
What type of insurance would be used for a Return of Premium rider?
increasing term
the Medical Information Bureau (MIB) was created to protect
insurance companies from adverse selection by high risk persons
what is the benefit of choosing extended term as a nonforfeiture option
it has the highest amount of insurance protection
which of the following best describes annually renewable term insurance
it is level term insurance
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?
it is reduced to the amount of what the cash value would buy as a single premium
when a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy
it is reduced to the amount of what the cash value would buy as a single premium
which of the following is usually true of participating life insurance policy?
it pays dividends to policyowners
which of the following statements best describes the effect the Accelerated Benefit provision would have on the benefits paid to the beneficiary
it will decrease the benefits paid to the beneficiary
which statement is NOT true regarding a Straight life policy?
it's premium steadily decreases over time, in response to its growing cash value
variable whole life insurance is based on what type of premium?
level fixed
a policy will pay the death benefit if the insured dies during the 20-year premium paying period and nothing if the death occurs after the 20-year period. what type of policy is this?
level term
what is an example of a limited-pay life policy
life paid-up at age 65
the premium of a survivorship life policy compared with that of a joint life policy would be
lower
what type of whole life insurance policy has premiums that are adjusted so that during the first years of the policy, the premiums are lower than those of a straight whole life policy, and in subsequent years the premiums are higher than those of a straight whole life policy
modified life
which of the following best describes gross annual premium
net premium plus expenses
the dividend option in which the policy owner uses dividends to purchase a term policy for one year is referred to as the
one-year term option
a rider attached to a lifetime insurance policy that provides coverage on the insured's family members is called the
other-insured rider
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called
paid-up additions
an insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. what dividend option could she use
paid-up option
which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early?
paid-up option
a prospective insured receives a conditional receipt but dies before the policy is issued. the insurer will
pay the policy proceeds only if it would have issued the policy
which of the following allows the insurer to relieve a minor insured from premium payments if the minors parents have died or become diabled
payor benefit
what rider would "not" cause the "death benefit" to increase ?
payor benefit rider
what would NOT cause the death benefit to increase
payor benefit rider
which of the following will be included in a policy summary
premium amounts and surrender values
which of the following is correct concerning the taxation of premiums in a key-person life insurance policy
premiums are not tax deductible as a business expense
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
purchase a single premium policy for a reduced face amount
Which nonforfeiture option provides coverage for the longest period of time?
reduced paid-up
the policyowner pays for her life insurance annually. util now, she has collected a nontaxable dividend check each year. she has decided that she would rather use the dividends to help pay for her next premium. what option would allow her to do this
reduction of premium
what method do insurers use to protect themselves against catastrophic losses?
reinsurance
what is NOT one of the three basic types of coverage that are available based on how the face amount changes during the policy term
renewable
A man decided to purchase a $100,000 annually renewable term life policy to provide additional protection until his children finished college. he discovered that his policy
required a premium increase each renewal
which settlement option provides a single beneficiary with income for the rest of his/her life?
single life
what is correct about a standard risk classification in the same age group and with similar lifestyles?
standard risk is representative of the majority of people
what policy would be classified as a traditional level premium contract?
straight life
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. this is a personal use of life insurance known as
survivor protection
the interest earned on policy dividends is
taxable
what type of insurance policies would provide the greatest amount of protection for a temporary period during which an insured will have limited financial resources
term
nonforfeiture values guarantee which of the following for the policy owner
that the cash value will not be lost
A cooperation is the owner and beneficiary of the key person life policy. if the corporation collects the policy benefit, then
the benefit is received tax free
a corporation is the owner and beneficiary of the key person life policy. if the corporation collects the policy benefit, then
the benefit is received tax free
what is an example of liquidity in a life insurance contract
the cash value available to the policy owner
who is the owner and who is the beneficiary on a Key Person Life insurance policy
the employer is the owner and beneficiary
who is the owner and who is the beneficiary on a Key Person life insurance policy
the employer is the owner and beneficiary
A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums?
the insured's premiums will be waived until she is 21
This is NOT a true statement regarding the accumulation at interest option
the interest is not taxable since it remains inside the insurance policy
what is NOT a true statement regarding the accumulation at interest option
the interest is not taxable since it remains inside the insurance policy
what is not true of key person insurance
the plan is funded by permanent insurance only
Under an extended term nonforfeiture option, the policy cash value is converted to
the same face amount as in the whole life policy
for the purpose of insurance, risk is defined as
the uncertainty or chance of loss
which is generally true regarding insureds who have been classified as preferred risks
their premiums are lower
what is true of nonforfeiture values
they are required by state law to be included in the policy
what is NOT true regarding the guaranteed insurability rider
this rider is available to all insureds with no additional premium
what is the purpose of key person insurance?
to lessen the risk of financial loss because of the death of a key employee
which of the following is NOT a goal of risk retention
to minimize the insured's level of liability in the event of loss
when an individual purchases insurance, what risk management technique is he or she practicing?
transfer
which of the following Life Insurance policies would be considered interest-sensitive?
universal life
which of the following is a key distinction between variable whole life and variable universal life products?
variable whole life has a guaranteed death benefit
in forming an insurance contract, when does acceptance usually occur?
when an insurer's underwriter approves coverage
when would a 20-pay whole life policy endow?
when the insured reaches age 100
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 not an example of a business use of life insurance
workers compensation
Which authority is NOT stated in an agents contract but is required for the agent to conduct business?
Implied
adverse selection is the concept best described as
Risks with higher probability of loss seeking insurance more often than other risks.
upon policy delivery, the producer may NOT be required to obtain
Signed waiver of premium
The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
$100,000
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?
$50,000
what is the minimum age, at which a person can purchase insurance on him or herself in this state?
15 years old