Life Insurance
An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable?
$3,000
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?
$50,000
in order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?
5 years
When an annuity is written, whose life expectancy is taken into account?
Annuitant
When must insurable interest exist in a life insurance policy?
At the time of application
When must the policy summary for a life insurance policy be delivered to the policy owner?
At the time of policy delivery
what is true about a class designation?
Beneficiaries are not identified by name
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 Consideration is something of value that each party gives to the other. The consideration on the part of the insured is the payment of premium and the representations made in the application.
A rider that may be attached to a life insurance policy that will adjust the face amount based upon a specific index, such as the Consumer Price Index, is called
Cost of Living Rider
what is another name for interest sensitive whole life insurance?
Current assumption life
To become a Texas insurance agent, an individual must
Have passed a licensing exam within the 12 months before applying.
What two elements are necessary for a life insurance contract to have a legal purpose?
Insurable interest and consent
What entities make up the Medical Information Bureau?
Insurers
what are the 3 main instances when insurable interest exists in life insurance?
Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policyowner
During partial withdrawal from a universal life policy, which portion will be taxed?
Interest. During the withdrawal, the interest earned on the withdrawn cash value may be subject to taxation.
What report is used to assess risk associated with a health insurance applicant's lifestyle and character?
Investigative consumer report
What type of report provides information about the applicant's hobbies, habits and financial status?
Investigative consumer report
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
Option B Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value. but
A participating insurance policy may do which of the following?
Pay dividends to the policyowner
What document describes the specific information about a policy?
Policy summary
Who might receive dividends from a mutual insurer?
Policyholders
If an insurer needs to obtain information about the applicant from investigators, what is the insurer required to do?
Provide the applicant a Disclosure Authorization Notice
the ownership provision entitles the policyowner to do all of the following except?
Set premium rates
what determines the length of time that benefits will be received under the fixed amount settlement option?
Size of each installment
what are the three types of risk rating classifications in life insurance?
Standard, substandard, and preferred
what information will be stated in the consideration clause of a life insurance policy?
The amount of premium payment
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
What is insurance underwriting?
The process of risk selection and classification
what is NOT true of life settlements?
The seller must be terminally ill
An agent explains the details of a life insurance policy to a client. The agent does not realize, however, that the state has recently rewritten two of the provisions. As a result, the agent inadvertently misrepresents the policy, making it more attractive than it really is. What best describes this situation?
There is no misconduct
what is the purpose of settlement options?
They determine how death proceeds will be paid
which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?
Those who have been insured under the plan for at least 5 years
how is the information obtained for an investigative consumer report?
Through interviews with the applicant's associates, friends and neighbors
during which stage in the insurance process do insurers evaluate information that identifies adverse selection risks ?
Underwriting
what is the name of the process that insurance companies use to determine whether or not an applicant is insurable?
Underwriting
what benefit is not available under Social Security?
Welfare Benefits
When would a misrepresentation be considered material?
When it may alter the underwriting decision
Health contracts are prepared by insurers and must be accepted by the insured on an 'as is' basis. This describes what aspect of a health insurance contract?
contract of adhesion
who would be the beneficiary in credit life insurance?
creditor
children's riders attached to whole life policies are usually issued as what type of insurance?
term
what is the purpose of the agent's report during the application process?
the agents report discusses the agents personal observations about the proposed insured that may help in the underwriting process.
the policyowner of an adjustable life policy wants to increase the death benefit. what is correct regarding this change ?
the death benefit can be increased by providing evidence of insurability
what is incorrect concerning the use of life insurance as an executive bonus
the policy is owned by the company
spouse term rider
the rider is usually level term insurance
an insurance agent wants for a client to replace her current annuities plan with another one. he presents the new one in an incomplete and dishonest way, which makes the new contract seem far more appealing than the original one. the policyowner ends up surrendering her original contract and replacing it with the new one. which term best describes what the agent did?
twisting. Twisting is an illegal act, in which an agent misrepresents the terms of an insurance or annuities contract or draws incomplete comparisons, in a way that would compel the insured to surrender the contract for the new one.
in health insurance contracts, the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. what contract element does this describe?
unilateral
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
What is the waiting period on a Waiver of Premium rider in life insurance policies?
6 months
An agent's license will terminate within how many days from the due date of obligatory fees and continuing education requirements?
90
An insured in a group policy has misstated his age on the insurance application. As a result, the insurer will most likely
Adjust the premium
What are the four elements of an insurance contract?
Agreement (offer and acceptance), consideration, competent parties, and legal purpose
At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?
Either on the date of application of the date of the medical exam (whichever occurs last)
the provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the
Entire Contract
What law protects consumers from the circulation of inaccurate or obsolete information?
Fair Credit Reporting Act
When possible, what should insurers strive to eliminate from illustrations?
Footnotes and caveats
what best describes annually renewable term insurance?
It is level term insurance
A couple receives a set amount of income from their annuity. When the wife dies, the husband no longer receives annuity payments. What type of annuity did the couple buy?
Joint Life
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
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?
The insured may choose to convert to term or permanent individual coverage.
the term "illustration" in a life insurance policy refers to
a presentation of nonguaranteed elements of a policy
When transacting business in this state an insurer formed under the laws of another country is known as a/an
alien insurer
what is NOT an example of a valid insurable interest?
debtor in the life of the creditor
what provision in a life or health insurance policy extends coverage beyond the premium due date?
grace period
the premium of a survivorship life policy compared with that of a joint life policy would be
lower
what is NOT considered a misrepresentation as it pertains to unfair trade practices?
making comparisons between different policies
health insurance contracts are unilateral. what does that mean ?
only one party makes a legally enforceable promise
Adverse Selection
people who are more likely to submit insurance claims are seeking insurance more often than preferred risks
What risk classification would typically qualify for lower premiums?
preferred risk
what is the main responsibility of a company's underwriting unit?
risk selection
