Life exam quizzes
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 contract does this describe? A) Aleatory B) Good health C) Adhesion D) Conditional
A) Aleatory
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT? A) Conditions B) Consideration C) Legal Purpose D) Offer and acceptance
A) Conditions Conditions are part of the policy structure.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated? A) Consideration B) Good Faith C) Representation D) Adhesion
A) Consideration
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as ? A) Contracts of adhesion B) Unilateral Contracts C) Aleatory contracts D) Binding contracts
A) Contracts of adhesion
What is another name for interest-sensitive whole life insurance? A) Current assumption life B) Variable life C) Term life D) Adjustable life
A) Current assumption life
Stranger-originated life insurance policies are in direct opposition to the principle of? A) Insurable interest B) Law of large numbers C) Good faith D) Indemnity
A) Insurable interest
What do individuals use to transfer their risk of loss to a larger group? A) Insurance B) Insurable interest C) Exposure D) Indemnity
A) Insurance
Which of the following best describes the MIB? A) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance B) It is a government agency that collects medical information on the insured from the insurance companies C) It is a member organization that protects insured against insolvent insurers D) It is a rating organization for health insurance
A) It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that? A) Joint Life Policy B) Survivorship Life Policy C) Second-to-Die D) Family Income Policy
A) Joint Life Policy
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 that a person who receives a standard risk
A) Lower premiums than a person who receives a standard risk.
Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives? A) Medical information B) Inspection Report C) Agent's Report D) General Information
A) Medical Information
Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT? A) Other insurance coverages B) Family health history C) Alcohol and tobacco consumption D) Recent surgeries
A) Other insurance coverages
Under the Fair Credit Reporting Act, if the consumer challenges the accuracy of the information contained in his or her report, the reporting agency must? A) Respond to the consumer's complaint B) Defend the report if the agency feels it is accurate C) Change the report D) Send an actual certified copy of the entire report to the consumer
A) Respond to the consumer's complaint
Which of the following would provide an underwriter with information concerning an applicant's health history? A) The Medical Information Bureau B) A medical examination C) The agent's report D) The inspection report
A) The Medical Information Bureau
Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly? A) The producer B) The beneficiary of the applicant C) The insurance company D) The applicant
A) The producer It is the responsibility of the producer (agent) to make sure an application for insurance is filled out completely and correctly
In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe? A) Unilateral B) Unidirectional C) Aleatory D) Conditional
A) Unilateral
In forming an insurance contract, when does acceptance usually occur? A) When an insurer's underwriter approves coverage B) When an insurer delivers the policy C) When an insurer receives an application D) when an insured submits an application
A) When an insurer's underwriter approves coverage
Which of the following is NOT an essential element of an insurance contract? A) counteroffer B) Consideration C) Agreement D) Legal purpose
A) counteroffer
What is a material misrepresentation? A) Concealment B) A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company C) Any misstatement made by an applicant for insurance D) Any misstatement by the producer
B) A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
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 insurance company? A) Warranty B)Aleatory C) Adhesion D) Subrogation
B) Aleatory
In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT? A) Applicant's present occupation B) Applicant's past income C) Applicant's past medical history D) Applicant's present physical condition
B) Applicant's Past income
Which of the following is the basic source of information used by the company in the risk selection process? A) Consumer report B) Application C) Agent's report D) Warranty
B) Application The application is the basic source of information an insurer uses in the risk selection process
An insurance contract must contain all of the following to be considered legallly binding EXCEPT? A) Competent parties B) Beneficiary's consent C) Offer and acceptance D) Consideration
B) Beneficiary's Consent
Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process? A) Illustrations B) Buyer's Guide C) Insurance Index D) Policy Summary
B) Buyer's Guide
Representations are written or oral statements made by the applicant that are? A) Immaterial to the actual acceptability of the insurance contract. B) Considered true to the best of the applicant's knowledge C) Guaranteed to be true D) Found to be false after further investigation
B) Considered true to the best of the applicant's knowledge
All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT? A) Occupation B) Education C) Age D) Gender
B) Education
An applicant is denied insurance because of information found on a consumer report. Which of the following requires that the insurance company supply the applicant with the name and address of the consumer reporting company? A) Disclosure rule B) Fair Credit Reporting Act C) Consumer Privacy Act D) Conditional receipt
B) Fair Credit Reporting Act
An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? A) Underwriter's Report B) Inspection Report C) Medical Information Bureau's report D) Agent's Report
B) Inspection Report.
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)? A) Attending Physician Statement B) Inspection report C) Medical Information Bureau report D) Medical examination
B) Inspection report
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 prof that the applicant has been determined insurable
B) It is intended to provide coverage on a date prior to the policy issue
Insurance is a contract by which one seeks to protect another from? A) Hazards B) Loss C) Exposure D) Uncertainty
B) Loss Insurance will protect a person, business or entity from loss
Another name for a substandard risk classification is? A) Elevated B) Rated C) Controlled D) Declined
B) Rated Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium
The Federal Fair Credit Reporting Act ? A) Prevents money laundering B) Regulates consumer reports C) Protects customer privacy D) Regulates telemarketing
B) Regulates consumer reports
Which is generally true regarding insureds who have been classified as preferred risk? 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
All of the following are requirements for life insurance illustrations EXCEPT: A) They must differentiate between guaranteed and projected amounts B) They must be part of the contract C) They may only be used as approved D) They must identify nonguaranteed values
B) They must be part of the contract An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.
If only on party to an insurance contract has made a legally enforceable promise, what kind of contract is it? A) A legal ( but unethical) contract B) Unilateral C) Adhesion D) Conditional
B) Unilateral In a unilateral contract, only one of the parties to the contract is legally bound to do anything
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? A) Which individual will pay the premium B) Whether an insurable interest exists between the individuals C) The gender of the applicant D) The type of policy requested
B) Whether an insurable interest exists between the individuals
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 delvier
C) At the time of application
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract? A) Personal B) Unilateral C) Conditional D) Adhesion
C) Conditional
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is? A) Personal B) Unilateral C) Conditional D) Aleatory
C) Conditional
Which of the following includes information regarding a person's credit, character, reputation, and habits? A) Insurability report B) Agent's report C) Consumer report D) Consumer history
C) Consumer report Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources.
A producer must do all of the following when delivering a new policy to the insured EXCEPT? A) Collect any premium due B) Explain the rating procedures if the policy is rated differently than applied for C) Disclose commissions earned from the sale of the policy D) Explain the policy provisions, riders, and exclusions.
C) Disclose commissions earned from the sale of the policy..
If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT? A) Note on the application the reason for the change B) Destroy the application and complete a new one C) Erase the incorrect answer and record the correct answer D) Draw a line through the first answer, record the correct answer, and have the applicant initial the change.
C) Erase the incorrect answer and record the correct answer
Which of the following best describes the aleatory nature of an insurance contract? A) Ambiguities are interpreted in favor of the insured B) Policies are submitted to the insurer on a take-it-or-leave-it basis C) Exchange of unequal values D) Only one of the parties being legally bound by the contract
C) Exchange of unequal values
Who makes up the Medical Information Bureau? A) Former insured B) Physicians and paramedics C) Insurers D) Hospitals
C) Insurers The Medical Information Bureau is made up of insurers so the companies can compare the information they have collected on a potential insured with information other insurers may have discovered.
In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium? A) The applicant's habits and health do not affect the premiums B) It will likely be lower because the applicant is a preferred risk C) It will likely be higher because the applicant is a substandard risk D) It will likely be the average premium issued to standard risks
C) It will likely be higher because the applicant is a substandard risk
Which of the following information about the applicant is NOT included in the General Information section of the application for insurance? A) occupation B) Marital status C) Medical background D) Gender
C) Medical background
What is a definition of a unilateral contract? A) One author: the company wrote the contract; the insured must accept it as written B) If one party makes a condition, the other party can counteroffer C) One-sided: only one party makes an enforceable promise D) Two or more parties go into a contract understanding there may be an unequal exchange of value
C) One-sided: only one party makes an enforceable promise
Which of the following individuals must have insurable interest in the insured? A) Underwriter B) Producer C) Policyowner D) Beneficiary
C) Policyowner
Which of the following will be included in a policy summary? A) Comparisons with similar policies B) Primary and secondary beneficiary designations C) Premium amounts and surrender values D) Copies of illustrations and application
C) Premium amounts and surrender values
A domestic insurer issuing variable contracts must establish one or more? A) Annuity accounts B) General accounts C) Separate accounts D) Liability accounts
C) Separate accounts
Which of the following is a risk classification used by underwriters for life insurance? A) Normal B) Excellent C) Standard D) Poor
C) Standard
Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles? A) Standard risk requires extra rating B) Standard risk is also known as high exposure risk C) Standard risk is representative of the majority of people D) Standard risk pays a higher premium than a substandard risk
C) Standard risk is representative of the majority of people Standard risks are representative of the majority of people in their age and with similar lifestyles. They are the average risk.
Which of the following protects consumers agianst the circulation of inaccurage or obsolete personal or financial information? A) The Guaranty Association B) Consumer Privacy Act C) The Fair Credit Reporting Act D) Unfair Trade Practices Law
C) The Fair Credit Reporting Act
In comparison to consumer reports, which of the following describes a unique characteristic of investigative consumer reports? A) They provide information about a customer's character and reputation B) The customer has no knowledge of this action C) The customer's associates, friends, and neighbors provide the report's data D) They provide additional information from an outside source about a particular risk
C) The customer's associates, friends, and neighbors provide the report's data
If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination? A) The examiner B) The applicant C) The insurer D) The cost of the examination will be waived
C) The insurer
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? A) The policy will be void B) The insurer may deny coverage later, because of the information missing on the application C) The policy will be interpreted as if the insurer waived its right to have an answer on the application D) The policy will be interpreted as if the insured did not have an answer to the question
C) The policy will be interpreted as if the insurer waived its right to have an answer on the application
What is the purpose of the buyer's guide? A) To list all policy riders B) To provide information about the issued policy C) To allow the consumer to compare the costs of different policies D) To provide the name and address of the agent/producer issuing the policy
C) To allow the consumer to compare the costs of different policies
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? A) On the designated effective date B) When the agent submits the application to the company and the company issues a conditional receipt C) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Heal
C) When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable statement of good health If the initial premium is not paid with the application, the agent will be required to collect the premium at the time of policy delivery.
In insurance, an offer is usually made when? A) The insurer approves the application and receives the initial premium B) The agent hands the policy to the policyholder C) An agent explains a policy to a potential applicant D) An applicant submits an application to the insurer
D) An applicant submits an application to the insurer In insurance , the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy
If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to? A) Require a yearly medical examination B) Lower its insurability standards C) Refuse to issue the policy D) Charge a higher premium
D) Charge a higher premium The premium rate will be adjusted to reflect the insurer's increased risk
An insurance contract requires that both the insured and the insurer meet certain conditions in order for the contract to be enforceable. What contract characteristic does this describe? A) Contingent B) Aleatory C) Unilateral D) Conditional
D) Conditional
When an insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A) legal purpose B) Contract of adhesion C) Acceptance D) Consideration
D) Consideration
Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? A) Annuitization period B) Pay-out period C) Liquidation period D) Depreciation period
D) Depreciation period
According to the Fair Credit Reporiting Act, all of the following would be considered negative information about a consumer EXCEPT? A) Tax delinquencies B) Late payments C) Failure to pay off a loan D) Disputes regarding consumer report information
D) Disputes regarding consumer report information
When would a misrepresentation on the insurance application be considered fraud? A) Never: statements by the applicant are only representations B) When the application is incomplete C) Any misrepresentation is considered fraud D) if it is intentional and material
D) If it is intentional and material A misrepresentation would be considered fraud if it is intentional and material. Fraud would be grounds for voiding the contract.
A life insurance policy has a legal purpose if both of which of the following elements exist? A) Underwriting and reciprocity B) Offer and counteroffer C) Policyowners and named beneficiaries D) Insurable Interest and consent
D) Insurable interest and consent To ensure legal purpose of a life insurance policy, it must have both insurable interest and consent
The Medical Information Bureau (MIB) was created to protect? A) Insurance departments from lawsuits by policyowners B) Insureds from unreasonable underwriting requirements by the insurance companies C) Medical examiners that perform insurance physical examinations D) Insurance companies from adverse selection by high risk persons
D) Insurance companies from adverse selection by high risk persons
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report? A) Are entitled to obtain a copy of the report from the party who ordered it B) Must be advised that a copy of the report is available to anyone who requests it C) May sue the reporting agency in order to get inaccurate data corrected D) Must be informed of the source of the report
D) Must be informed of the source of the report
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will ? A) Pay the policy proceeds up to an established limit B) Not pay the policy proceeds under any circumstances C) Automatically pay the policy proceeds D) Pay the policy proceeds only if it would have issued the policy
D) Pay the policy proceeds only if it would have issued the policy
If an agent fails to obtain an applicant's signature on the application, the agent must: A) sign the application for the applicant B) Sign the application, stating it was by the agent C) Send the application to the insurer with a note explaining the absence of signature D) Return the application to the applicant for a signature
D) Return the application to the applicant for a signature All applications must have the appropriate authorized signatures.
What is the purpose of a disclosure statements in life insurance policies? A) To obtain important underwriting information from the applicant B) To help consumers compare policy prices C) To protect agents and insurers against lawsuits D) To explain features and benefits of a proposed policy to the consumer
D) To explain features and benefits of a proposed policy to the consumer
When is the earliest a policy may go into effect? A) When the first premium is paid and the policy has been delivered B) When the insurer approves the application C) After the underwriter reviews the policy D) When the application is signed and a check is given to the agent
D) When the application is signed and a check is given to the agent
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than A) Upon issuance of the policy B) Within 30 days after the first premium payment was collected C) Prior to filling out an application for insurance D) With the policy
D) With the policy
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply? A) 10 days B) 3 days C) 5 days D) 7 days
C) 5 days
Which of the following statements is NOT true concerning insurable interest as it applies to life insurance? A) A married person has an insurable interest in their spouse B) An individual has an insurable interest in their own liffe C) A debtor has an insurable interest in the life of a lender D) Business partners have an insurable interest in each other
C) A debtor has an insurable interest in the life of a lender
The term "illustration" in a life insurance policy refers to ? A) Pictures accompanying a policy B) Charts and graphs C) A presentation of nonguaranteed elements of a policy D) A depiction of policy benefits and guarantees
C) A presentation of nonguaranteed elements of a policy
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's ? A) Habits B) Prior insurance C) Ancestry D) Credit history
C) Ancestry
Which is the primary source of infromation used for insurance underwriting? A) Medical records B) Private Investigations C) Application D) Applicant interviews
C) Application
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? A) As of the first of the month after the policy issue B) As of the policy issue date C) As of the application date D) As of the policy delivery date
C) As of the application date
What describes the specific information about a policy? A) Illustrations B) Buyer's Guide C) Producer's report D) Policy Summary
D) Policy Summary
Within how many days of requesting an invetigative consumer reprot must an insurer notify the consumer in writing that the report will be obtained? A) 3 days B) 5 days C) 10 days D) 14 days
A) 3 days
Insurance is the transfer of ? A) Peril B) Risk C) Loss D) Hazard
B) Risk
All of the following are duties and responsibilities of producers at the time of application EXCEPT? A) Change any incorrect statement on the application by personally initialing next to the corrected statement B) Explain the nature and type of any receipt the producer is giving to the applicant C) Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information D) Check to make sure that there are no unanswered questions on the application
A) Change any incorrect statement on the application by personally initialing next to the corrected statement Any changes to information on an application must be initialed by the applicant.
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? A) Revocation of license B) $2,500 C) $1,000 D) $100 per violation
B) $2,500
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) Third-party ownership B) A STOLI policy C) A prearranged funeral plan D) A viatical settlement
B) A STOLI policy.
Under the Fair Credit Reporting Act, if a consumer challenges the accuracy of the information contained in a consumer or investigative report, the reporting agency must? A) Send an actual certified copy of the entire report to the consumer B) Respond to the consumer's complaint C) Defend the report if the agency feels it is accurate D) Change the report
B) Respond to the consumer's complaint
Which of the following best details the underwriting process for life insurance? A) Reporting and rejection of risks B) Selection, classification, and rating of risks C) Solicitation, negotiation and sale of policies D) Issuance of policies
B) Selection, classification, and rating of risks
Which of the following would qualify as a competent party in an insurance contract? A) The applicant is under the influence of a mind-impairing medication at the time of application B) The applicant has a prior felony conviction C) The applicant is intoxicated at the time of application D) The applicant is a 12-year-old student
B) The applicant has a prior felony conviction
Which of the following is NOT the consideration in a policy? A) the promise to pay covered losses B) The application given to a prospective insured C) Something of value exchanged between parties D) The premium amount paid at the time of application
B) The application given to a prospective insured
In terms of parties to a contract, which of the following does NOT describe a competent party? A) The person must be mentally competent to understand the contract B) The person must have at least completed secondary education C)The person must not be under the influence of drugs or alcohol D) The person must be of legal age
B) The person must have at least completed secondary education
An agent selling variable annuities must be registered with? A) The Guaranty Association B) SEC C) FINRA D) Department of Insurance
C) FINRA
What is the timeframe for filing relevant Suspicious Activity Reports? A) Within 90 days of initial discovery B) Within 90 days of suspicious transaction C) Within 30 days of initial discovery D) within 30 days of suspicious transaction
C) Within 30 days of initial discovery
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe? A) Unilateral B) Conditional C) Personal D) Adhesion
D) Adhesion
The LEAST expensive first-year premium is found in which of the following policies? A) Increasing Term B) Decreasing Term C) Level Term D) Annually Renewable Term
D) Annually Renewable Term
When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information? A) Interviews B) State records C) Medical records D) Application
D) Application
Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application? A) Issue a policy anyway since the application has been submitted B) Ask the producer who solicited the policy to complete and resign the application C) Fill in the blanks to the best of the insurer's knowledge D) Return the application to the applicant for completion
D) Return the application to the applicant for completion Any unanswered questions need to be answered before the policy is issued. If the insurer receives incomplete applications, they need to be returned to the applicants for completion
The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What must the insurer do with the application? A) Answer the missed questions for the applicant B) Acknowledge the missed questions with a signature and continue the policy issue process C) Proceed with issuing a policy D) Return to the applicant for completion
D) Return to the applicant for completion
An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which of the following is TRUE? A) The premium would be returned to the insured's estate because the policy was not issued B) The death claim will be rejected C) The application will be voided D) The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy
D) The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy
An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date? A) The date of policy delivery B) The date of issue C) The date of application D) The date of medical exam
D) The date of medical exam
