Life insurance
Which of the following types of agent authority is also called "perceived authority"
Apparent
Which piece of legislation requires that any commercial e-mail must contain an opt-out mechanism?
CAN-SPAM
What does "level" refer to in level term insurance?
Face amount
Risk
Risk is the uncertainty or chance of a loss occurring. The two types of risks are pure and speculative only one of which is insurable
For variable products, underlying assets must be kept in
Separate account
Which of the following is an example of liquidity in a life insurance contract?
The cash value available to the policy owner
An insured purchased a variable life insurance policy with a face amount of $50,000. Over the life of the policy, stock performance declined and the cash value fell to $10,000. If the insured dies, how much will be paid out?
$50,000
CAN-SPAM legislation requires that any commercial email must contain an opt out mechanism, how many days does a company have to cease their distribution?
10 Business days
A consumer receives spam emails from an insurance company. He requests to be removed from the company's list. Within that period of time must the insurer comply with the request?
10 days.
According to CAN-SPAM, once a person requests to be excluded from a commercial e-mail list, this request must be honored within
10 days.
any licensed person whose activities affect interstate commerce and who knowingly makes false material statements related to the business of insurance may be imprisoned for up to
10 years.
the validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years
2 years
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?
5 days
Whole life insurance policies mature when the insured reaches the age of 100. If the owner of a whole life policy dies at age 80, and there are no outstanding loans on the policy, __ portion of the death benefit will be paid to the beneficiary
A full death benefit
homogeneous
A large number of units having the same or similar exposure to loss is known as homogeneous. The basis of insurance is sharing risk among the members of a largely homogeneous group with similar exposure to loss.
Agent/ Producer
A legal representative of an insurance company; The classification of producer usually includes agents and brokers; agents are the agents of the insurer.
Sharing
A method of dealing with risk for a group of individual persons or businesses with the same or similar exposure to loss who share the losses that occur within that group. A reciprocal insurance exchange is a formal risk-sharing arrangement.
Know this!
A risk is a chance that a loss will occur; a hazard increases the probability of loss; a peril is the cause of loss.
What is a material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company.
What documentation grants express authority to an agent?
Agent's contract with the principal
Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
Any form of life insurance.
Which of the following types of agent authority is also called "perceived authority"?
Apparent
When must insurable interest exist in a life insurance policy?
At the time of application
The risk management technique is used to prevent a specific loss by not exposing oneself to the activity is called
Avoidance
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?
Common disaster clause
Hazards
Conditions or situations that increase the probability of an insured loss occurring. Classified as physical hazards, moral hazards, or moral hazards. Conditions such as lifestyle and existing health, or activities such as scuba diving, are hazards and may increase the chance of a loss occurring.
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?
Consideration
Which of the following includes information regarding a person's credit, character, reputation, and habits?
Consumer report
Which of the following reports will provide the underwriter with the information about an insurance applicants credit?
Consumer report
if a change needs to be made to the application for insurance, the agents may do all of the following except
Erase the incorrect answer & record the correct answer.
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 agents contract is referred to as
Express authority
Which of the following regulatory authorities participated in creating the National Do Not Call Registry
FTC The Federal Trade Commission (FTC)
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.
Fair credit Reporting Act
When an employee terminated coverage under a group insurance policy, coverage continues in force.
For 31 days
an insurance company assures its new policyholders that their premium costs will not increase for a period of at least five years. However, due to increasing financial strain, they plan to raise premium costs for all insureds by 10% over the next two years. What terms best describe this act?
Fraud
all of the following are business uses of life insurance except
Funding against the company's general financial loss
which is true about the cash surrender nonforfeiture option?
Funds exceeding the premium paid are taxable as ordinary income.
The Automatic Premium Loan provision automatically becomes effective at the end of the
Grace period
An individual is purchasing a permanent life insurance policy with a face value 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
In which of the following cases will the insured be able to receive the full face amount from a whole-life policy?
If the insured lives to the age of 100
Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
Indemnity
An insured has a life insurance policy with a face amount of $500. He pays a premium each week to the agent who sold him the policy. What kind of policy does the insured have?
Industrial life
Which of the following statements regarding HIV testing for life insurance purposes is NOT true?
Insurers are barred from requesting HIV testing.
An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?
It will increase because the insured will be 5 years older than when the policy was originally issued.
Concerning Juvenile Life insurance, which of the following statements is INCORRECT?
Juvenile life is classified as any life insurance purchased by a minor
Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated
Law of large numbers
What are the licensing requirements for someone who sells variable universal life insurance
Life insurance and securities
Which of the following would be the best option that would help that surviving spouse of the insured to put her child through daycare after the insureds death
Life insurance proceeds
Which of the following premium modes would result in the highest annual cost for an insurance policy?
Monthly
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report
Must be informed of the source of the report
Using a class designation for beneficiaries means
Naming beneficiaries as a group
An insured purchased an insurance policy with a face amount of $15,000. He pays a premium each month. What type of policy is that?
Ordinary life
The causes of loss insured against in an insurance policy are known as
Perils
Peril
Perils are the causes of loss insured against an insurance policy *Life insurance insures against the financial loss caused by the premature death of the insured; *Heath insurance insures against the medical expenses and/or loss of income caused by the insured's sickness or accidental injuries; *Property insurance insures against the loss of physical property or the loss of its income-producing abilities; *Casualty insurance insures against the loss and/or damage of property and resulting liabilities.
An insurer wants to obtain information from investigators regarding an applicant for insurance. What must the insurer do in order to legally acquire this information?
Present the insured with a disclosure authorization notice
The Gramm-Leach-Bliley Act was passed to
Protect private customer information filed with a financial institution.
a situation in which a person can only lose or have no change represents
Pure risk
Pure risk
Refers to situations that can only result in a loss or no change. There is no opportunity for financial gain. pure risk is the only type of risk that insurance companies are willing to accept.
If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may
Require evidence of insurability
In case of a loss, the indemnity provision in insurance policies
Resorts an insured person to the same financial state as before the loss
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.
Respond to the consumer's complaint.
Reduction
Since we usually cannot avoid risk entirely, we often attempt to lessen the possibility or severity of a loss. The reduction would include actions such as installing smoke detectors in our homes, having an annual physical to detect health problems early, or perhaps making a change in our lifestyles
Moral hazards
Tendencies towards increased risk. Moral hazards involve evaluating the character and reputation of the proposed insured. Moral hazards refer to those applicants who may lie on an application for insurance, or in the past, have submitted fraudulent claims against an insurer.
A person requests that an insurance company quit sending him e-mail solicitations. According to the law, the company has 10 days to stop e-mailing the complainant. However, the company sends him four more emails after that time limit has expired. Which of the following is true?
The company will be fined at least $250 for each e-mail.
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
The policy owner of an adjustable life policy wants to increase the death benefit. which of the following statements is correct regarding this change?
The death benefit can be increased by providing evidence of insurability.
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy
The employer is the owner and beneficiary.
Which of the following is not a characteristic of an insurable risk?
The loss must be catastrophic
In terms of parties to a contract, Which of the following does NOT describe a competent party
The person must have at least completed secondary education.
all of the following are true of key person insurance except
The plan is funded by permanent insurance only.
All of the following are true about variable products EXCEPT
The premiums are invested in the insurer's general account.
A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why
The purpose of the group was to purchase life insurance.
Why should the producer personally deliver the policy when the first premium has already been paid?
To help the insured understand all aspects of the contract.
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?
When the agents deliver the policy, collect the initial premium, and the applicant completes an acceptable Statement of Good health
Insurance policy
a contract between a policy owner (and/or insured) and an insurance company that agrees to pay the insured or the beneficiary for loss caused by specific events
According to the Entire Contract provision, a policy must contain
a copy of the original application for insurance
Reciprocity/Reciprocal
a mutual interchange of rights and privileges
Applicant or proposed insured
a person applying for insurance
insured
a person covered by the insurance policy; may or may not be the policy owner.
beneficiary
a person who receives the benefits of an insurance policy
broker
an insurance producer not appointed by an insurer and is deemed to represent the client.
Physical hazards
are individual characteristics that increase the chances of the cause of loss. physical hazards exist because of a physical condition, past medical history, or a condition at birth, such as blindness.
A state-issued document empowering an insurance company to become an admitted insurer is called
certificate of authority
Loss
defined as the reduction, decrease, or disappearance of value of the person or property insured in a policy, caused by a named peril. Insurance provides a means to a transfer's loss.
Concept
insurance is a contract in which one party (the insurance company) agrees to indemnify (make whole) the insured party against loss, damage, or liability arising from an unknown event. In life insurance, the policy protects survivors from losses suffered after an insured's death.
Concept
insurance is a transfer of risk of loss from an individual or a business entity to an insurance company, which, in turn, spreads the costs of unexpected losses to many individuals. if there were no insurance mechanism, the cost of a loss would have to be borne solely by the individual who suffered the loss.
What provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
insuring clause
Speculative risk
involves the opportunity for either loss or gain. An example of speculative risk is gambling. These types of risks are not insurable.
Exposure
is a unit of measure used to determine rates charged for insurance coverage. In life insurance, all of the following factors are considered in determining rates: *The age of the insured; *Medical history; *Occupation; and *Sex
Avoidance
one of the methods of dealing with risk is avoidance, which means eliminating exposure to a loss. For example, if a person wanted to avoid the risk of being killed in an airplane crash, they might choose never to fly in an airplane. Risk avoidance is effective but seldom practical.
Retention
retention is the planned assumption of risk by an insured through the use of deductibles, co-payments, or self-insurance. It is also known as self-insurance when the insured accepts the responsibility for the loss before the insurance company pays. The purpose of retention is 1. To reduce expenses and improve cash flow 2. To increase control of claim reserving and claims settlements; and 3. To fund for losses that cannot be insured.
Morale hazards
similar to moral hazards, except that they arise from a state of mind that causes indifference to lose, such as carelessness. Actions taken without forethought may cause physical injuries.
children's riders attached to whole life policies are usually issued as what type of insurance
term
Insurer (principal)
the company who issues an insurance policy
premium
the money paid to the insurance company for the insurance policy
policyowner
the person entitled to exercise the rights and privileges in the policy
an absolute assignment is a
transfer of all ownership rights in a policy
