Life insurance quiz questions
If an insured changes his payment plan from monthly to annually, what happens to the total premium? A) stays the same B) doubles C) increases D) decreases
Decreases
Which authority is not stated in an agent's contract but is required for the agent to conduct business? A) implied B) apparent C) assumed D) Express
Implied
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? A) term Insurance only B) permanent Insurance only C) universal Life Insurance only D) any form of life insurance
Any form of life Insurance
An individual's tendency to be dishonest would be indicative of a A) moral hazard B) morale hazard C) pure hazard D) physical hazard
Moral hazard
Insurance policies are not drawn up through negotiations, and an insured has little to say about his provisions. What contract characteristic does this describe? A) conditional B) personal C) adhesion D) unilateral
Adhesion
Which of the following types of agent authority is also called "perceived authority"? A) Express B) implied C) fiduciary D) apparent
Apparent
When and insured makes truthful statements on the application for insurance and pays the required premium, it is known as which of the following? A) consideration B) legal purpose C) contract of adhesion D) acceptance
Consideration
Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as A) aleatory contracts B) binding contracts C) contracts of adhesion D) unilateral contracts
Contracts of adhesion
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as A) survivorship insurance B) juvenile protection provision C) Survivor protection D) Life planning
Survivor protection
A producer agent must do all of the following when delivering a new policy to the insured except A) explain the policy provisions, riders, and exclusions B) collect any premium due C) explain the rating procedures if the policy is rated differently than applied for D) disclose commissions earned from the sale of the policy
Disclose commissions earned from the sale of the policy
When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n) A) aleatory contract B) executive bonus C) key person policy D) fraternal association
Executive bonus
Events in which a person has both the chance of winning or losing are classified as A) retained risk B) speculative risk C) insurable D) Pure risk
Speculative risk
Are insurance company underwriters allowed to discriminate? A) yes, but not unfairly B) no, higher risks pay higher premium C) no, discrimination is an unfair practice D) yes, but only for gender
Yes, but not unfairly
All advertisements are the responsibility of the A) soliciting agent B) advertising agency C) department of insurance D) insurer
insurer
In a life settlement transaction, how many days does the owner have terminate the contract after the date it is executed? A) 10 days B) 15 days C) 21 days D) 30 days
15 days
in insurance, an offer is usually made when A) an applicant submits an application to the insurer B) the insurer approves the application and receives the initial premium C) the agent hands the policy to the policyholder D) an agent explains a policy to a potential applicant
An applicant submits an application to the insurer
Which of the following applicants could the insurer charge a higher rate of premium and not violate regulations regarding unfair discrimination? A) an applicant who is a smoker B) an applicant who was born in another country C) an applicant who is legally blind D) an applicant who has been a victim of domestic abuse
An applicant who is a smoker
If an insurer meets the state's financial requirements and is approved to transact business in that state, it is considered to be A) certified B) qualified C) approved D) authorized
Authorized
The risk management technique that is used to prevent a specific loss by not exposing oneself to that activity is called A) Sharing B) avoidance C) transfer D) reduction
Avoidance
An insurance producer who by contract is bound to write insurance for only one company is classified as a/an A) independent producer B) captive agent C) solicitor D) broker
Captive agent
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is A) conditional B) Aleatory C) personal D) unilateral
Conditional
An Insurance company is domiciled in Montana and transaction Insurance in Wyoming. Which term best describes the insurer's classification in Wyoming? A) Unauthorized B) foreign C) Alien D) domestic
Foreign
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? A) industrial life B) Credit life C) ordinary life D) franchise life
Industrial life
The medical information bureau (MIB) was created to protect A) Insurance departments from lawsuits by policyowners B) Insureds from unreasonable underwriting requirements by the insurance companies C) medical examiners that perform insurance physical examinations D) Insurance companies from adverse selection by high risk persons
Insurance companies from adverse selection by high risk persons
Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives? A) agent's report B) General information C) medical information D) inspection report
Medical information
An insured purchased an insurance policy five years ago. Last year, she received a dividend check from the insurance company that was not taxable. This year, she did not receive a check from the insurer. From what type of insurer did the insured purchase the policy? A) Mutual B) reciprocal C) nonprofit service organization D) stock
Mutual
All of the following are factors that an underwriter could use to select and classify risk except A) occupation B) avocation C) National origin D) morals
National origin
Which of the following best describes gross annual premium? A) Basic insurance rate plus commissions B) expense premium C) net premium plus expenses D) annual loading
Net premium plus expenses
What is the major difference between a stock company and a mutual company? A) types of whole life policies B) ownership C) amount of death benefit D) Number of producers
Ownership
All of the following are examples of risk retention except A) copayments B) self-insurance C) premiums D) deductibles
Premiums
Installing deadbolt locks on the doors of a home is an example of which method of handling risk? A) avoidance B) transfer C) self-insurance D) reduction
Reduction
Life settlement brokers or providers are required to give the owner a separate disclosures document no later than what date? A) the last day allowed for contract termination B) the date the contract proceeds are paid C) the date the contract is signed D) the date of application
The date of application
Who is the owner and who is the beneficiary on a key person life insurance policy? A) the key employee is the owner and beneficiary B) the key employee is the owner and the employer is the beneficiary C) the employer is the owner and beneficiary D) the employer is the owner and the key employee is the beneficiary
The employer is the owner and beneficiary
Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an Insurance contract? A) concealment B) indemnity C) representation D) warranty
Warranty
Which of the following statements is not true concerning insurable interest as it applies to life insurance? A) a husband or wife has an insurable interest in their spouse B) an individual has an insurable interest in his or her own life C) a debtor has an insurable interest in the life of a lender D) Business partners have an insurable interest in each other
a debtor has an insurable interest in the life of a lender
A tornado that destroys property would be an example of which of the following? A) a loss B) a physical hazard C) a peril D) a pure risk
a peril
Which of the following is the closest term to an authorized insurer? A) certified B) licensed C) legal D) admitted
admitted
What documentation grant express authority to an agent? A) agent's insurance license B) fiduciary contract C) State provisions D) agent's contract with the principal
agent's contract with the principal
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? A) adhesion B) subrogation C) warranty D) aleatory
aleatory
Which of the following statements concerning buy-sell agreements is true? A) premiums paid our deductible as a business expense B) benefits received are considered income taxable C) buy-sell agreements pay in the event of a medical emergency D) buy-sell agreements are normally funded with a life insurance policy
buy-sell agreements are normally funded with a life insurance policy
The requirement that agent's not commingle insurance monies with their own funds is known as A) premium accountability B) Express authority C) accepted accounting principal D) fiduciary responsibility
fiduciary responsibility
In insurance transactions, fiduciary responsibility means A) handling insurer funds in a trust capacity B) maintaining a good credit record C) being liable with respect to payment of claims D) commingling premiums with agent's personal funds
handling insurer funds in a trust capacity
A life insurance policy has a legal purpose if both of which of the following elements exist? A) underwriting and reciprocity B) offer and counteroffer C) policyowners and named beneficiaries D) insurable interest and consent
insurable interest and consent
The insurer may suspect that a moral hazard exists if the policyholder A) always drives over the speed limit B) is not honest about his health on an application for insurance C) is prone to depression D) is indifferent to activities that may be dangerous
is not honest about his health on an application for insurance
A participating insurance policy may do which of the following? A) require 80% participation B) pay dividends to the policy owner C) provide group coverage D) pay dividends to the stockholder
pay dividends to the policy owner
Which of the following best describes the "owner" as it pertains to life settlement contracts? A) A fiduciary for the contract B) the insurance provider C) the policyowner of the life insurance policy D) a financial entity that sponsors the transaction
the policyowner of the life insurance policy
In forming an insurance contract, when does acceptance usually occur? A) when an insurer's underwriter approves coverage B) when an insurer delivers the policy C) when an insurer receives an application D) when an insured submits an application
when an insurer's underwriter approves coverage
Which of the following documents delivered to the policy owner includes information about premium amount, cash values, surrender values and death benefits for specific policy years? A) a notice regarding replacement B) a privacy notice C) a buyer's guide D) a policy summary
A policy summary
Because an agent is using stationary with the logo of an insurance company, applicants for insurance assume that the agent is authorized to transact on behalf of that insurer. What type of agent authority does this describe? A) Express B) implied C) assumed D) apparent
Apparent
The authority granted to an agent through the agent's contract is referred to as A) absolute authority B) Express authority C) apparent authority D) implied authority
Express authority
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation? A) Blackout approach B) lump-sum approach C) Human life value approach (HLVA) D) needs approach
Human life value approach (HLVA)
Which law is the foundation of the statistical prediction of loss upon which rates for insurance are calculated? A) law of large numbers B) law of masses C) law of averages D) law of group evaluation
Law of large numbers
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? A) risk exposure B) morbidity C) Life expectancy D) mortality rate
Life expectancy
An applicant wants to buy a policy that has a cash value element. Which type should she buy? A) investment B) term C) permanent D) stock
Permanent
Which of the following will be included in a policy summary? A) copies of illustrations and application B) comparisons with similar policies C) primary and secondary beneficiary designations D) premium amounts and surrender values
Premium amounts and surrender values
The risk of loss may be classified as A) high risk and low risk B) pure risk and speculative risk C) certain risk and uncertain risk D) named risk and un-named risk
Pure risk and speculative risk
Hazard is best defined as A) neglect to communicate on material fact B) a deliberate attempt to deceive C) something that increases the risk of loss D) the uncertainty of loss
Something that increases the risk of loss
Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles? A) Standard risk is also known as high exposure risk B) Standard risk is representative of the majority of people C) Standard risk he's a higher premium than a substandard risk D) Standard risk requires extra rating
Standard risk is representative of the majority of people
Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called A) suitability B) client protection C) approval D) underwriting
Suitability
All of the following statements concerning the use of life insurance as an executive bonus are correct except A) the policy is owned by the company B) any type of insurance policy may be used C) the employer pays a bonus to selected employee to fund the policy D) it is considered a non-qualified employee benefit
The policy is owned by the company
Which is generally true regarding insureds who have been classified as preferred risks? A) they can borrow higher amounts off of their policies B) they can decide when to pay their monthly premiums C) they keep a higher percentage of any interest earned on their policies D) their premiums are lower
Their premiums are lower
When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by A) a home office underwriter B) a paramedic or examining physician at the insurer's expense C) the agent D) a physician of the applicants choice and at his expense
a paramedic or examining physician at the insurer's expense
An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? A) aleatory B) good health C) adhesion D) conditional
aleatory
To legally transact insurance in this state, an insurer must obtain which of the following? A) business entity license B) certificate of insurance C) certificate of authority D) power of attorney
certificate of authority
When applying for an individual life insurance policy, an applicant states that he went to the doctor for nausea, but fails to mention that he was also having severe chest pains. This is an example of A) misrepresentation B) fraud C) warranty D) concealment
concealment
If a change needs to be made to the application for insurance, the agent may do all of the following except A) draw a line through the first answer, Record the correct answer, and have the applicant initial the change B) note on the application the reason for the change C) destroy the application and complete a new one D) erase the incorrect answer and record the correct answer
erase the incorrect answer and record the correct answer
Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization? A) stock company B) reciprocal association C) fraternal benefit society D) mutual company
fraternal benefit society
The mode of premium payment A) does not affect the amount of premium paid B) is defined as the frequency and the amount of the premium payment C) is the factor that determines the amount of dividends in a policy D) is the method used to compute the cash surrender value of the policy
is defined as the frequency and the amount of the premium payment
Which of the following is true regarding a risk retention group? A) it is a liability insurance company owned by its members B) it provides support for underwriters and is not an insurance company C) it is a benefit society formed to provide insurance for members of an affiliated lodge D) it is a company owned by the stockholders that provides nonparticipating policies
it is a liability insurance company owned by its members
Which of the following is not true regarding a certificate of authority? A) it is issued to group insurance participants B) it may be necessary for transacting business in a specific state C) it is equivalent to an insurance license D) it is issued by the state department of insurance
it is issued to group insurance participants
A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? A) moral B) legal C) physical D) morale
morale
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? A) Insured's annual expenses B) effect of inflation on income over time C) predicted needs of the family after the insured's death D) Insured's current and future income
predicted needs of the family after the insured's death
All of the following are characteristics of group Life insurance except A) certificate holders may convert coverage to an individual policy without evidence of insurability B) premiums are determined by the age, sex and occupation of each individual certificate holder C) Group life insurance is written as a master policy D) individuals covered under the policy receive a certificate of insurance
premiums are determined by the age, sex and occupation of each individual certificate holder
What is the purpose of the insurance guarantee association? A) to prevent unfair trade practices B) to protect policyowners against insurer insolvency C) to protect insurance companies against insurance fraud D) to provide double indemnity for the insured's loss
to protect policyowners against insurer insolvency
If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about A) the gender of the applicant B) the type of policy requested C) which individual will pay the premium D) wether an insurable interest exists between the individuals
wether an insurable interest exists between the individuals
In a life settlement contract, whom does the life settlement broker represent? A) the beneficiary B) the life settlement intermediary C) the owner D) the insurer
The owner
All of the following are marketing arrangements used by insurers except A) direct response marketing system B) independent agency system C) reinsurance system D) general agency system
reinsurance system
A situation in which a person can only lose or have no change represents A) pure risk B) speculative risk C) adverse selection D) hazard
pure risk
Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance? A) medical history B) sex C) race D) age
race
Which statement regarding insurable risks is not correct? A) the insurable risk needs to be statistically predictable B) an insurable risk must involve a loss that is definite as to cause, Time, place and amount C) Insureds cannot be randomly selected D) Insurance cannot be mandatory
Insureds cannot be randomly selected
Which of the following statements is an accurate comparison between private and government insurers? A) private insurers provide insurance in areas where the government will not B) private insurers may be authorized to transact insurance by state insurance departments C) Insurance provided by the government is called federal insurance D) private insurers offer fewer lines of insurance then government insurers
private insurers may be authorized to transact insurance by state insurance departments
What is the purpose of key person insurance? A) to maintain an account that insures the owner of a company remains solvent B) to lesson the risk of financial loss because of the death of a key employee C) to provide health insurance to the families of key employees D) to insure retirement benefits are available to all key employees
to lesson the risk of financial loss because of the death of a key employee
A producer who fails to separate premium monies from his own personal funds is guilty of A) commingling B) larceny C) embezzlement D) theft
Commingling
Which of the following insurers are owned by stockholders? A) reciprocal B) fraternal C) stock D) Mutual
Stock
Which of the following would qualify as a competent party in an Insurance contract? A) the applicant is intoxicated at the time of application B) the applicant it a 12-year-old student C) the applicant is under the influence of a mind-impairing medication at the time of application D) the applicant has a prior felony conviction
The applicant has a prior felony conviction
An insurance company sells an insurance policy over the phone in response to a TV ad. Which of the following best describes this act? A) insurance telemarketing B) direct response marketing C) independent agency marketing D) illegal
direct response marketing
Which services are associated with Standard & Poor's and AM Best? A) storing medical information collected by insurance companies B) rating the financial strength of insurance companies C) investigating violations of the fair credit reporting act D) providing employment histories for investigative consumer reports
rating the financial strength of insurance companies
In case of a loss, the indemnity provision in insurance policies A) pays the insured as much as 95% of the loss B) restores an insured person to the same financial state as before the loss C) allows the insured to collect 20% more than the actual loss D) pays the insured a percentage of the loss above and beyond the loss
restores an insured person to the same financial state as before the loss
Which of the following is NOT the consideration in a policy? A) the premium amount paid at the time of application B) the promise to pay covered losses C) the application given to a prospective insured D) something of value exchanged between parties
the application given to a prospective insured
In terms of parties to a contract, which of the following does NOT describe a competent party? A) the person must not be under the influence of drugs or alcohol B) the person must be of legal age C) the person must be mentally competent to understand the contract D) the person must have at least completed secondary education
the person must have at least completed secondary education
What must happen when an individual policy or annuity has been personally delivered to the policyowner? A) the producer must go over the policy with the policyowner B) a notary public must witness the exchange C) the policyowner must sign a delivery receipt D) the policyowner must pay the annual premium in full
the policyowner must sign a delivery receipt
Which of the following is an example of a producer's fiduciary duty? A) a duty to base all transactions upon the principle of Utmost Good Faith B) the obligation to tell the truth to the best of one's knowledge C) the trust that a client places in the producer in regard to handling premiums D) and obligation to state every known fact about the policy the producer is selling
the trust that a client places in the producer in regard to handling premiums
For the purpose of insurance, risk is defined as A) an event that increases the amount of loss B) the uncertainty or chance of loss C) the certainty of loss D) the cause of loss
the uncertainty or chance of loss
Which of the following is the best reason to purchase life insurance rather than annuities? A) to liquidate a sum of money over a lifetime B) to create an estate C) to liquidate a sum of money over a period of years D) to create regular income payments
to create an estate
