Life Insurance Basics

Illustrations are often used to help explain complex terms of insurance contracts. Illustrations are subject to all of the following rules EXCEPT:

Illustration must state the insured's marital status and employment status

There are three types of insurers - private, government and self-insurers. Which of the following is a key difference between private and government insurers?

-Contractual rights are the basis for private insurance; statutes/laws are the basis for government insurance. -Private insurance is focused on coverage for private buyers; government insurance strives to provide benefits for all people. -Government insurance provides benefits and coverage for individuals that private insurers cannot cover - usually for financial reasons.

Certain conduct can result in charges being brought against the alleged offender, and can result in fines and jail time. Which of the following could have a consequence of jail time?

-Knowingly making false material statements with the intent to deceive, in connection with reports or documents presented to an insurance regulatory official or agency -Embezzling or misappropriating funds, premiums or credits of any person engaged in the business of insurance -Making threats of force or attempting to influence or impede the proper administration of the law for a proceeding pending before an insurance regulatory agency

Jeremy's agent issued a receipt that provides coverage from the date of the application, even if Jeremy turns out to be uninsurable. This receipt is called -

A binding receipt

A contract of adhesion provides which of the following?

A contract that is clearly in favor of one party

The definition of using the 'needs approach' for financial planning is which of the following?

Calculating the amount of funds necessary to provide for a family based on their immediate need upon the death of the insured

An aleatory contract is a contract that:

Provides a benefit for a fortuitous event in return for a cash payment

When an insured purchases a new life insurance policy (or annuity) to replace an existing policy, it is called a policy replacement. Which of the following is not an important item for the producer to know?

That an existing policy is to be reissued with an increase in cash value

A unilateral contract has all of the following features EXCEPT:

The offeree (the other party to the contract) is required to pay the consideration under penalty of court action.

The agent or producer conducts what is called 'field underwriting' when they are face-to-face with the applicant. The agent is expected to use his/her powers of observation to help determine the level of risk that an applicant poses. One of the most important parts of field underwriting is completing the application. Which of the following is the agent expected to know?

-That the application contains 3 main parts -That he/she should correct any errors/mistakes on the application in the presence of the applicant -That he/she should collect the first premium

All states have rules and regulations that pertain to general practices used by agents/producers when soliciting insurance contracts. The insurance agent that Joseph dealt with for many years retired. A new 'replacement' agent was assigned to service Joseph's account. This new agent recommended that Joseph replace several older policies, with significant cash value, with newer 'improved' policies. The replacement agent provided Joseph with charts and graphs detailing the benefits of the new policies. When his annual statement arrived, Joseph saw that the cash value of the new policies was a great deal less than the old policies. Joseph was a victim of -

-Twisting -A deceptive trade practice -Fraudulent/dishonest conduct

A conditional contract depends on which of the following?

An agreement between two parties that is enforceable by law Correct

A personal contract can be any of the following types of contracts EXCEPT:

An ambiguous contract

All insurance companies employ underwriters whose job is to select, classify and rate risks. The underwriters utilize a variety of resources to aid the evaluation process. All of the following are used for underwriting EXCEPT:

Family origins

A famous Massachusetts case involved a woman that had been convicted of a felony, and did not disclose it on her non-resident application to conduct insurance business. She also failed to disclose the felony conviction when she applied for non-resident licenses in 4 other states, several of which either denied her license application, or revoked any licenses that she had been granted. Which of the following were most likely the repercussions?

Her license(s) were revoked; she was prohibited from conducting insurance business ;she was fined $7,000.

Life insurance has a number of uses. An important factor in determining how much insurance one should carry is called the Needs Approach. This approach primarily focuses on -

How much money the survivor(s) need

Frankie and Julie are looking at life insurance options. Their agent is using the human life value approach. This approach considers all of the following EXCEPT:

Illness and funeral costs

An insurance policy is a legal contract between 2 or more parties. Every contract contains all but which of the following?

Incompetent parties

Many different types of people are involved in the process of selling insurance. Which of the following is not involved in the selling of insurance?

Insurance commissioner

Sometimes the actual effective date of a policy can be confusing. Shelly filled out an application, paid the first premium and handed it to her agent on July 10th. The agent then submitted the application to the insurer on July 12th. The insurer issued the policy on July 15th. Which of the following was the effective date of the policy?

None of the above, Policy must be delivered and first premium must be paid

A producer has certain duties when issuing a life insurance policy. A producer is required to do all of the following EXCEPT:

Obtain a written statement only if a replacement is involved

Harvey has a major medical plan. Harvey requires a liver transplant, but the insurance company refuses to pay the claim. The policy does not specifically exclude this operation, but they don't include it either. What is the court likely to do in this case?

Order the insurance company to pay full benefits due to the ambiguous wording in the policy

Amelia is 55 years old, 5'4" tall and weighs 235 lbs. She has diabetes and high blood pressure, both associated with her weight. How is a life insurance company most likely to rate Amelia's risk?

Substandard

Most states do not allow an individual to obtain a license to sell insurance if they have been convicted of a felony involving dishonesty, breach of trust or insurance crimes. An individual wishing to get a license to transact insurance business may submit an exemption request to -

The state insurance commissioner

Premiums are determined after the underwriters have classified the risk based on a variety of factors. Once the individual has been classified, there are ________ factors used to determine premiums.

Three