Life Insurance 101 (Primerica)
Misrepresentation
False statement (a lie)
Buyer's Guide
General information that explains insurance for the consumer to aid their decision-making regarding insurance.
Competent Parties
Have legal capacity to enter into a contract. Parties to a contract must be of legal age, sane, sober of sound mind.
Which of the following is true about an insurance producer license?
The license remains in effect as long as the renewal fee is paid and continuing education requirements are met by the due date.
All of the following are true regarding viatical settlement regulations in Indiana EXCEPT
Viatical contracts allow for a 10-day free-look period.
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?
$200,000
Agreement
(Offer and acceptance) an offer, followed by an acceptance. The application and initial premium, if collected from the proposed insured is the offer, and the insurance company approving the application and issuing a policy is the acceptance.
Legal Contracts
A contract is a legally binding agreement between two or more legally competent parties. To form a valid contract, 4 elements are necessary.
Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be
Adjusted to the insured's age at the time of renewal.
Which of the following would be considered an unfair claims settlement practice?
Advising the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered
Which of the following products provides income for a specified period of years or for life, and protects a person against outliving their money?
An annuity
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
Which of the following terms means a result of calculation based on the average number of months the insured is projected to live due to medical history and mortality factors?
Life expectancy
Which of the following would help prevent a universal life policy from lapsing?
Target premium
What authority is responsible for examining the operations of insurance companies in this state?
The Commissioner
Which of the following would provide an underwriter with information concerning an applicant's health history?
The Medical Information Bureau
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?
The annuitant must be a natural person.
Unilateral Contract
one-sided contract, only one party makes any promises.
Medical Exams and History
An insurer can request an Attending Physician Statement in addition to the medical exam. This concerns the details of the insured's medical history.
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered
An unfair trade practice.
In an annuity, the accumulated money is converted into a stream of income during which time period?
Annuitization period
An insured purchased a life insurance policy on his life naming his wife as primary beneficiary, and his daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
If the primary beneficiary predeceased the insured
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?
Inspection Report
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?
Limited pay whole life
The premium of a survivorship life policy compared with that of a joint life policy would be
Lower
An applicant who receives a preferred risk classification qualifies for
Lower premiums than a person who receives a standard risk.
The steps to issuing a policy are:
Sales presentations, Taking the application, Underwriting the risk, Accepting or declining the risk, Issuing and delivering the policy.
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT
Signed waiver of premium.
If a life insurance policy has an irrevocable beneficiary designation,
The beneficiary can only be changed with written permission of the beneficiary.
A 40-year old man buys a whole life policy and names his wife as his only beneficiary. His wife dies 10 years later. He never remarries and dies at age 61, leaving 2 grown-up children. Assuming he never changed the beneficiary, the policy proceeds will go to
The insured's estate.
An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?
The insurer will pay the full death benefit from the group policy to the beneficiary.
Legal Purpose
The purpose of an insurance contract must be legal.
If NO receipt is used
coverage begins on the date the policy is delivered and the first premium is paid.
The Application
is the basis for acceptance or rejection of the proposed insured. Three parts (General Information, The Medical Information, The Agent's Report~ Some companies require an agent statement to be submitted with the application, which usually includes general information about how long the agent has known the applicant and if the coverage applying for will replace another insurance policy. The agent must sign this section.
Underwriting
is the process of selecting and categorizing risks into similar groups and assigning the appropriate premium amount to each group.
Adverse Selection
is the tendency for those who are more prone to loss to purchase insurance. It is tendency for people in poor health to buy or seek to buy insurance more than other risks (healthy individuals).
Insurable interest
must exist between the individual whose life will be covered on the policy (called the insured) and the applicant, meaning the individual who fills out the application and applies for insurance.
Contract of Adhesion
"Take it or leave it", any "ambiguities in the wording of the contract" will be resolved in favor of the policyowner.
According to the Entire Contract provision, a policy must contain
A copy of the original application for insurance.
Which of the following is NOT a type of group eligible for group life insurance?
A social group
Representation
A statement believed to be true to the best of one's knowledge.
Warranty
A statement guaranteed to be true (The absolute truth)
Conditional Contract
Certain conditions must be met to pay the claim, if...
Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member?
Family term rider
If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?
Fixed period
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.
When would a misrepresentation on the insurance application be considered fraud?
If it is intentional and material
When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will
Issue the policy anyway and pay the face value to the beneficiary.
Which of the following is TRUE of a qualified plan?
It has a tax benefit for both employer and employee.
Which of the following best describes annually renewable term insurance?
It is level term insurance.
Which of the following is NOT true regarding penalties for violation of the rules and regulations of the Insurance Code?
License may not be revoked
The Medical Information Bureau (MIB)
Non-profit member funded association that collects and tracks underwriting information on applicants for life and health insurance/ Does not have specific medical history and information on all applicants.
All of the following are true regarding insurance policy loans EXCEPT
Policy loans can be made on policies that do not accumulate cash value.
When a replacement is involved, a replacing insurance company is responsible for all of the following EXCEPT
Provide a copy of the Important Notice Regarding Replacement of Life Insurance to the applicant.
The policyowner pays for her life insurance annually. Until 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
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?
The date of medical exam
Consideration
The exchange of something of value for a service, such as the exchange of premiums for insurance coverage.
Investigate Consumer Report
To supplement the information on the application, the underwriter may order an inspection report on the applicant from an independent investigating firm or credit agency, which covers financial and moral information.
An insured has been diagnosed with a life-threatening disease, and is given approximately 6 months to live. The insured is in a hard financial situation which will worsen with the upcoming medical expenses. Which of the following options could the insured utilize right away?
Viatical Settlement
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
With the policy.
Once a complaint has been filed with the Commissioner regarding an unfair claims practice, the Commissioner
Within 10 business days will send a copy of the complaint to the company involved.
Illustrations
a presentation or depiction that includes nonguaranteed elements of a policy of individual or group life insurance over a period of years. A life insurance illustration must distinguish between guaranteed and projected amounts. An agent may only use the illustrations of the insurer that have been approved and may not change them in any way.
Aleatory Contract
an unequal exchange of value.
What is the other term for the cash payment settlement option?
Lump sum
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.
A producer licensed in another state wants to become a nonresident producer in Indiana. The other state gives the same privileges to Indiana producers as it does to its own producers. Indiana, therefore, extends the licensing privileges to the prospective producer of the other state. What is this called?
Reciprocity
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
If an agent fails to obtain an applicant's signature on the application, the agent must
Return the application to the applicant for a signature.
A woman has a life policy in force for $300,000. She is terminally ill. She wants to get an "advance" from her death benefit to help pay her mounting medical bills. She met some people who said they could advance her $100,000 if she would sign ownership over to them. Which of the following is true?
She probably met with a Viatical Settlement Company.
Policy Summary
Specific information on the policy that is being sold to the consumer. It must include information on premiums, dividends, benefits and cash values. It must identify the agent, insurer, the policy and each rider.
Field Underwriting
The agent is the company's front line and is referred to as a field underwriter because the agent is usually the one who has solicited the potential insured. As a field underwriter, the agent has many important responsibilities during the underwriting process and beyond.
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?
The policy will be interpreted as if the insurer waived its right to have an answer on the application.
Under the Replacement Regulation, Rule 16.1, which of the following statements would best describe the producer's duties?
The producer must conduct a reasonable investigation to determine if a replacement will take place.
If a conditional receipt is given
the agent issues the conditional receipt to the applicant on the date the application is taken; the agent must explain that the coverage is only effective if the application is approved exactly as applied for Coverage beings either on the date of the application or on the date of the medical exam, whichever is later If the policy is not issued exactly as it was applied for on the application, the company will return the premium to the applicant.