Life Insurance Definitions

23. A/An _____ is a form of life insurance which allows changes on the policy face amount, the amount of premium, the length of the premium payment period, or change the policy from a whole life to a term life, then back to a whole life. A. Adjustable life policy B. Adjustable premium policy C. Limited pay policy D. Variable life policy

A. Adjustable Life Policy

26. An insurance company which is authorized to sell insurance in a particular State, is often called a/an A. admitted company. B. non admitted company. C. surplus line company. D. unauthorized company.

A. Admitted Company

37. A producer who represents the insurance company is called a/an A. agent. B. broker C. solicitor D. surplus lines broker

A. Agent

36. What is a hazard? A. An increase in the possibility that a loss might occur. B. The certainty that a loss might occur. C. The circumstance that causes the loss. D. The possibility of a loss.

A. An increase in the possibility that a loss might occur.

40. When the owner of a policy gives the right in the policy to another person or to a company, the owner is using the right of A. Assignment B. Conformity C. Consideration D. Renewability

A. Assignment

14. The person who receives the death benefit of a life insurance policy is called the A. beneficiary. B. named insured. C. owner. D. policyholder.

A. Beneficiary

2. Deliberate failure to reveal material facts that would affect the validity of a policy of insurance is ___. A. Concealment B. Honesty Clause C. Misrepresentation D. Waiver

A. Concealment

21. That part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments is the_________. A. Consideration Clause B. Entire Contract C. Incontestability Clause D. Insuring Clause

A. Consideration Clause

34. Which of the following is NOT a characteristic of a Variable life insurance contract? A. It is considered a lower risk policy since the cash is invested in particular blue chip companies. B. The cash value in a policy can actually decrease. C. The cash value is invested in the stock market. D. The policy is considered high risk to the owner due to the fluctuation of the stock market.

A. It is considered a lower risk policy since the cash is invested in particular blue chip companies.

41. _______ is a form of whole life insurance characterized by premium payments only being made for a set number of years. A. Limited Pay Life B. Term Life C. Universal Life D. Variable Life

A. Limited Pay Life

28. The type of life insurance that is in force for a period of time and is the least expensive form of death benefit protection is called A .term life. B. universal life. C. variable life. D. whole life.

A. term Life

16. This is a form supplied by the insurance company, usually filled in by the producer, which is a formal request for insurance coverage. It must be signed by the insured, owner and producer, and is part of the insurance policy (consideration). A. Acceptance B. Application C. Binder D. Conditional Receipt

B. Application

38. A producer who represents the consumer or insured is called a/an A. agent B. broker C. sales manager D. solicitor

B. Broker

5. A/An ______ receipt is given to an applicant only when a premium is paid at the time of application. Such receipt provides temporary (no guarantee) coverage. A. Binding B. Conditional C. Unconditional D. Warranty

B. Conditional

10. Acceptance by the company of payment of the premium and statements made by the prospective insured in the application and the promise of the insurance company to pay for certain losses are known as _______. A. Assignment B. Consideration C. Insuring Agreement D. Warranty

B. Consideration

20. This is a share in the divisible surplus of a company issuing insurance on the participating plan. A return of unused or overcharged premiums. Not Taxable! A. Cash Value B. Dividend C. Loan Value D. Surrender Value

B. Dividend

32. The profit an insurance company gives back to the policy owner is called a A. Commission B. Dividend C. Miracle D. Rebate

B. Dividend

1. Specified hazards listed in a policy for which benefits will not be paid are known as __________. A. Benefits B. Exclusions C. Insuring Agreements D. Risks

B. Exclusions

24. Which of the following would cause income tax to be paid by an employee under group life insurance (Section 79 of the IRC)? A. If the coverage on dependent children is $2,000 or less. B. If the coverage on the spouse exceeds 50% of the amount of coverage on the employee. C. If the employee pays the full premium. D. If the employer pays 50% of the premiums.

B. If the coverage on the spouse exceeds 50% of the amount of coverage on the employee.

17. A part of this clause is that there is a two year period during which the company may contest a claim on a policy because of a material fact which is misleading, or for incomplete information. This is found in the ___ clause. A. Consideration B. Incontestability C. Insuring Agreement D. Warranty

B. Incontestability

27. The payor waiver benefit is most commonly placed on which policy? A. Investor Owned Life B. Juvenile Life C. Limited Pay Life D. Traditional Whole Life

B. Juvenile Life

33. Which of the following is NOT correct regarding Life Insurance? A. It is a legal contract is between the insurance company and the policy owner. B. Life insurance is a legal contract that promises to pay a specified amount which is taxed as ordinary income. C. Life insurance is a legal contract that promises to pay beneficiary an income tax free benefit. D. Life insurance is a legal contract that promises to pay beneficiary when the insured person dies.

B. Life insurance is a legal contract that promises to pay a specified amount which is taxed as ordinary income.

12. A ____ is information about the insured that if known would change the underwriting basis of the insurance, and would cause the insurer to refuse the application. A. Concealment B. Material Misrepresentation C. Misrepresentation D. Warranty

B. Material Misrepresentation

22. A ____ is information about the insured that if known would change the underwriting basis of the insurance, and that would cause the insurer to refuse the application or issue the policy on substantially different terms. A. Concealment B. Material Fact C. Misrepresentation D. Warranty

B. Material fact

35. The type of insurance company in which the policyholder is considered an owner, with voting rights and a right to company profits, is a/an A. Lloyds of London Company. B. Mutual Company. C. Non Admitted Company D. Stock Company.

B. Mutual Company

8. A person who is a substandard risk will usually pay a higher premium than that charged for a standard or preferred risk. For example, charging a younger person the premiums of an older aged individual is known as __. A. Morbidity Charge B. Rate-Up C. Reinsurance D. Surcharge

B. Rate-Up

29. Mrs. K missed her premium payment on the first of the month. Two weeks after the premium was due she dies. Which of the following is correct? A. She is covered because of the conditional receipt. B. She is covered because she died during the grace period. C. She is not covered until two weeks of premium is paid by the beneficiary. D. She is not covered.

B. She is covered because she died during the grace period.

19. This is a provision added to a policy to either broaden or restrict coverage, and it may also be in the form of a rider. It is not valid unless signed by an executive officer of the company and attached to and made part of the policy. A. Assignment B. Endorsement C. Exclusion D. Waiver

B. endorsement

6. A privilege granted in an insurance policy to convert to a different plan of insurance without providing evidence of insurability (non-medical) is known as _____. A. Adhesion B. Assignment C. Conversion D. Renewability

C. Conversion

15. An insurance contract that the insured has the right to continue in force by payment of premiums, and which the insurance company cannot cancel or nonrenew coverage is called a _____ contract. A. Guaranteed Cancelable B. Guaranteed Insurable C. Guaranteed Renewable D. Nonforfeiture

C. Guaranteed Renewable

13. The Return of Premium POLICY returns premiums A. if the beneficiary dies. B. if the insured becomes disabled. C. if the insured lives to a certain time period. D. if the producer dies.

C. If the insured lives to a certain period of time

31. An Assignment is the signed legal transfer of interest, rights or benefits of a policy from a policy owner to another party. A living benefit right of the policy owner which includes all of the following EXCEPT A. Absolute Assignment (used when a policy is gifted). B. Collateral Assignment (used to guarantee a loan). C. Loan Provision. D. Sell the policy to another party for a fee, such as a STOLI, stranger owned life insurance.

C. Loan Provision

9. A statement made by an applicant on the application which is believed to be true is known as a _________. A. Concealment B. Misrepresentation C. Representation D. Warranty

C. Representation

25. A flexible premium life policy means that A. the beneficiary may change the premium amount. B. the insurance company may increase the premiums. C. the owner can increase or decrease the amount of his premiums. D. the premiums may NOT be changed.

C. the owner can increase or decrease the amount of his premiums.

39. What is paid to the beneficiary when the insured dies? A. Death Benefit B. Death Proceeds C. Face Amount of the policy D. It can be called any of these three.

D. It can be called any one of these

7. On the part of an insurance company or producer, falsely representing the terms or benefits of a policy, or on the part of an applicant, falsely representing the health condition of the proposed insured. A. Concealment B. Defamation C. Estoppel D. Misrepresentation

D. Misrepresentation

3. The possibility (or uncertainty) of a loss is known as ______. A. Hazard B. Insured C. Moral Hazard D. Risk

D. Risk

11. All of the following statements regarding life insurance are correct, EXCEPT: A. Cancellation for non-payment of premium is allowed only with a minimum 10-day written notice. B. Cancellation means termination of coverage in advance of the policy renewal date. C. Nonrenewal means that the insured will not be offered a chance to renew the policy by the insurer. D. Termination of coverage on the policy renewal date(anniversary date) is known as cancellation.

D. Termination of coverage on the policy renewal date(anniversary date) is known as cancellation.

4. Risk is the probability (chance) of loss for an insured or prospect. Types of life insurance risks include all of the following, EXCEPT: A. Impaired or Substandard risk B. Preferred risk C. Standard risk D. Ultra Preferred Risk

D. Ultra Preferred Risk

18. A person who is considered an under-average or impaired risk because of physical condition, occupation, or dangerous habits is known as a ______ and will likely pay a higher premium A. preferred risk B. standard rate insured C. standard risk D. sub-standard risk

D. sub-standard risk

30. _____ is a legal contract, governed principally be state law, that promises to pay a specified amount of money to a beneficiary when the insured person dies. A. An Annuity B. Health insurance C. Life insurance D. Property and Casualty insurance

Life Insurance