NC Life Agent Exam
Bob bought a universal life insurance policy with a $100,000 stipulated amount and chose an Option 2 (increasing) death benefit. At his death ten years later, the policy's cash value had increased to $50,000. What will his beneficiary receive? $200,000 $100,000 $50,000 $150,000
$150,000
Jack's beneficiaries were unable to collect the $250,000 in proceeds under his life insurance policy because of the insurer's insolvency. What amount will his beneficiaries typically be able to collect if the policy is covered by the Life and Health Insurance Guaranty Association? $300,000 $200,000 $250,000 $100,000
$250,000
When does the free-look period for a variable life insurance policy end? 30 days after the policy is delivered 21 days after the policy is delivered 7 days after the policy is delivered 10 days after the policy is delivered, or 45 days after the insurance application is completed, whichever is later
10 days after the policy is delivered, or 45 days after the insurance application is completed, whichever is later
With a traditional whole life insurance policy, policy loans can be as high as: 25 percent of the cash value, less any outstanding debt against the policy 50-75 percent of the cash value, less any outstanding debt against the policy 100 percent of the cash value, less any outstanding debt against the policy 75-90 percent of the cash value, less any outstanding debt against the policy
100 percent of the cash value, less any outstanding debt against the policy
If a group life insurance plan sponsor pays 100 percent of the premiums, what percentage of the group's eligible members must participate in the plan? 50 percent of the group 75 percent of the group 100 percent of the group 25 percent of the group
100 percent of the group
An insurer must notify its current customers of its privacy policies or practices at least once every how often? 6 months 12 months 24 months 18 months
12 months
Anthony becomes an agent for Acme Insurance Company. Acme must file a notice of appointment with the Commissioner within how many days? 15 10 31 30
15
The suicide exclusion provision of a typical life insurance policy excludes coverage if death is the result of suicide within: 6 months following policy issue 1 year following policy issue 3 years following policy issue 2 years following policy issue
2 years following policy issue
A "jumping juvenile" whole life insurance policy typically increases its face amount when the insured reaches: age 16 age 18 age 21 age 26
21
Terry is licensed in North Carolina as a life and health insurance agent. To maintain his license, how many hours of continuing education must he complete every two years? 30 24 12 40
24
How long from when an insurance contract is issued does an insurance company have to void a life insurance policy on the basis of fraud? 12 months 24 months 18 months 6 months
24 months
Under the standard bring-back rule, assets transferred out of a decedent's estate will be valued in the estate if the transfer occurred within how many years before death? 3 years 7 years 5 years 4 years
3 years
The Commissioner may issue a learner's permit authorizing a person to act as an adjuster for up to how many days? 90 45 30 60
90
All the following statements regarding the North Carolina Life and Health Insurance Guaranty Association are correct EXCEPT: The purpose of the Insurance Guaranty Association is to protect policyholders when an insurance company becomes insolvent. Benefits paid to claimants and policyholders are subject to limits. All insurance companies licensed to sell insurance in North Carolina must be members of the North Carolina Life and Health Insurance Guaranty Association. An agent may use the existence of the Guaranty Association to assure a claimant that his policy will be protected even if the insurer becomes insolvent.
An agent may use the existence of the Guaranty Association to assure a claimant that his policy will be protected even if the insurer becomes insolvent.
Which one of the following statements about term life insurance is most correct? Term life insurance is an inexpensive way to provide permanent lifetime coverage. Term life insurance builds a cash value. At any given age when issued, a level term policy will be less expensive than a permanent policy of the same face amount. Term life insurance cannot be converted to permanent coverage.
At any given age when issued, a level term policy will be less expensive than a permanent policy of the same face amount.
Bill recently purchased an indeterminate premium whole life insurance policy. Which one of the following statements about his policy is correct? Bill will pay a low initial fixed premium for several years, at which point there will be a one-time increase in the premium that is guaranteed to remain level thereafter. Bill's policy was issued with a premium that will be level for most of the policy period but may be reduced under certain conditions. Bill's policy was issued with a low introductory premium that may periodically increase over time, but which will never be higher than a guaranteed maximum rate. Bill's policy was issued with a high introductory premium that will be reduced as the insurer's actual experience is known.
Bill's policy was issued with a low introductory premium that may periodically increase over time, but which will never be higher than a guaranteed maximum rate.
All of the following statements about binding receipts are correct EXCEPT: If underwriters determine the applicant is uninsurable, then a binding receipt terminates coverage when that determination is made. Binding receipts are the most common type of premium receipt used with life insurance sales. A binding receipt guarantees coverage from the time the applicant completes the application through the underwriting process, even if the applicant is found to be uninsurable. An alternative to a binding receipt is the temporary insurance agreement.
Binding receipts are the most common type of premium receipt used with life insurance sales.
Bob bought a $100,000 ten-year level term insurance policy on March 1, 2012. What will happen if he dies on April 1, 2022? The beneficiary of Bob's policy will be permitted to pay a one-month premium to extend the policy coverage to April 1, 2022, in which case he or she would be entitled to the $100,000 death benefit. Bob's beneficiary will not get any benefits. The beneficiary of Bob's policy will get $100,000. The beneficiary of Bob's policy will be entitled to the policy's cash value but not the death benefit.
Bob's beneficiary will not get any benefits.
Which statement is correct with respect to the contract charges and fees charged by variable life and traditional whole life policies? Both charge investment advisory fees. Both base the premium on a mortality charge that reflects the insured's risk of death. Both charge account transfer fees. Both charge a fee for expenses incurred by the separate investment accounts.
Both base the premium on a mortality charge that reflects the insured's risk of death.
Variable life and variable universal life insurance are similar in all of the following ways EXCEPT: Both let the policyowner put funds in investment subaccounts. Both require fixed, set premiums. Both are considered securities. Both offer a death benefit that varies based on the performance of the subaccount investments. Variable life insurance policies have a fixed, set premium payable for the life of the policy.
Both require fixed, set premiums.
Which of the following statements about utmost good faith in insurance contracts is correct? Only the insurer must act in utmost good faith. Both the insured and insurer must act in utmost good faith. Only the insured and the beneficiary must act in utmost good faith. Only the insured must act in utmost good faith.
Both the insured and insurer must act in utmost good faith.
All of the following statements comparing whole life insurance and term life insurance are correct EXCEPT: Term life insurance is designed for temporary needs while whole life insurance is designed to cover the insured's entire life. Both whole life insurance and term life insurance build a cash value. Both whole life and term life insurance have level premiums, but only whole life guarantees a level premium for as long as the insured lives. Only term life insurance has a renewal provision.
Both whole life insurance and term life insurance build a cash value.
Larry, Brian, Susan, and Jennifer just started working for AllPro Insurance Company in North Carolina. Based on their job descriptions below, which of them is NOT acting as a producer? Susan, who collects insurance premiums for AllPro Brian, who is a vice president in AllPro's human resources department and does not receive commissions Larry, who receives insurance applications from the public Jennifer, who solicits insurance policies for AllPro and receives commissions
Brian, who is a vice president in AllPro's human resources department and does not receive commissions
Anne, a life insurance applicant, wants to change an answer that she gave on the application. She should do which of the following? Cross out and initial the incorrect entry, and enter the correct information next to it. Erase the original entry and enter the correct information. Cover up the incorrect entry and write the correct information over it. Attach a note to the application explaining what she intended to answer.
Cross out and initial the incorrect entry, and enter the correct information next to it.
Which one of the following statements most correctly describes how interest-sensitive whole life and current assumption whole life insurance differ? Current assumption whole life's premium can change over time, while the premium for interest-sensitive whole life does not change. Only current assumption policies include an interest crediting feature. Neither current assumption whole life nor interest-sensitive whole life permit changes to the policy's death benefit. Current assumption policies guarantee minimum cash values while interest-sensitive policies do not guarantee a minimum cash value
Current assumption policies guarantee minimum cash values while interest-sensitive policies do not guarantee a minimum cash value.
Karen transfers all rights in her life insurance policy to her brother, David, through an absolute assignment. Who is responsible for paying the policy's premiums from that point forward? The policy is converted to paid-up status and there are no future premiums required. Premiums are split between Karen and David. Karen must continue paying the premiums. David must pay the premiums.
David must pay the premiums.
Emily solicits policies and accepts premiums from the public but is not licensed as an agent. She then turns over the applications and premiums to her husband, who is licensed. Which statement is correct? Emily has committed a felony. Emily is not required to be licensed to solicit policies and accept premiums. Emily has committed a Class 1 misdemeanor. Emily has not committed any type of unlawful act.
Emily has committed a Class 1 misdemeanor.
All of the following are automatically deemed to represent an insurable interest EXCEPT: ABC Corp. (the applicant) and its key executive Frank (the applicant) and his elderly neighbor Karen (the disabled applicant, age 28), and her father who cares for her. Sue (the applicant) and her husband
Frank (the applicant) and his elderly neighbor
Which of the following most accurately describes "insurable interest" in a life insurance policy? Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured. Insurable interest is the relationship between the person paying for the insurance and the designated beneficiary. Insurable interest is the relationship between the person applying for insurance and the insured at the time of the insured's death. Insurable interest is the primary factor in determining how much life insurance the insurer will issue on a person.
Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured.
In life insurance, for how long must insurable interest exist? If no insurable interest exists when a policyowner buys a life insurance policy, the contract may still be enforced. It must continue for the life of the policy. Insurable interest must exist only at the time the applicant enters into a life insurance contract. It must exist when a claim is submitted.
Insurable interest must exist only at the time the applicant enters into a life insurance contract.
All of the following statements regarding the money laundering process and anti-money laundering efforts are correct EXCEPT: Money laundering is the process of integrating illegally obtained money into the legal monetary system in a way that hides its illegal origins. There are three basic levels of the money laundering process: placement, layering, and integration. Permanent life insurance can be used to launder money. Insurance companies are exempt from the need to create and maintain anti-money laundering programs.
Insurance companies are exempt from the need to create and maintain anti-money laundering programs.
What happens to a signed application after the applied-for policy is issued? It is destroyed. It becomes property of the state. It becomes part of the contract between the insurer and the policyowner. It is sent to the MIB for permanent storage.
It becomes part of the contract between the insurer and the policyowner.
Which of the following most accurately describes who can be a life insurance policy beneficiary? The beneficiary must have an insurable interest in the insured. It can be virtually any person or entity the policyowner chooses. The beneficiary can be anyone as long as it is a natural person. The beneficiary must be a blood relative of the insured.
It can be virtually any person or entity the policyowner chooses.
What typically happens to the face amount of an indexed whole life insurance policy over time? It increases every year at the same rate as the national inflation rate. It increases annually to reflect increases in the consumer price index. It increases annually as long as the insured continues to prove insurability. It increases annually based on a fixed rate specified in the policy.
It increases annually to reflect increases in the consumer price index.
Which of the following best describes the premium tax insurance companies must pay when they receive premiums? It is a federal tax that is collected at the state level by all states. It is federal tax paid to the U.S. Treasury. It is a state tax imposed by relatively few states. It is a state tax imposed by all states.
It is a state tax imposed by relatively few states.
When must insurable interest exist for a life insurance policy to be valid? Insurable interest must exist only at the time of the insured's death for a life insurance policy to be valid. Insurable interest is never required for a life insurance policy to be valid. Insurable interest must always exist for a life insurance policy to be valid. It is only necessary for insurable interest to exist at the time the applicant applies for a life insurance contract.
It is only necessary for insurable interest to exist at the time the applicant applies for a life insurance contract.
Zelda, a producer selling health insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the North Carolina Life and Health Insurance Guaranty Association. Which of the following statements is correct regarding this kind of assurance? It is required when selling to Medicare-eligible individuals. It is highly regulated by the Insurance Department. It is recommended when selling health insurance. It is prohibited at all times
It is prohibited at all times.
Ralph, Jerry, and Paula are primary and equal beneficiaries of the $600,000 insurance policy on the life of their mother, Judy. Ralph dies before his mother. He leaves two children, Tim and Hal. Judy's life insurance policy designates the death benefit per capita. How will the insurer distribute the policy benefits? Jerry and Paula will each receive $300,000 Ralph's $200,000 share will pass equally to his two children when Judy dies. Jerry, Paula, Tim, and Hal will divide the benefits equally among them. Tim and Hal will divide the death benefit between them.
Jerry and Paula will each receive $300,000
All of the following statements regarding joint life insurance and survivorship life insurance are correct EXCEPT: Joint life insurance is especially popular in the estate planning market. Joint life insurance lets the surviving insured purchase an individual policy without having to prove insurability upon the first insured's death. Survivorship life insurance pays the death benefit upon the death of the second insured. Both joint life and survivorship life have a lower premium than two comparable individual policies covering the two insureds.
Joint life insurance is especially popular in the estate planning market.
Donna, age 40, buys a $200,000 straight whole life policy. On the same date, Kara, age 40, buys a $200,000 20-pay life policy. Which of the following statements is correct? The cash value of Kara's policy will build faster than Donna's policy after Kara's policy is paid up. Kara can make further premium payments once her policy is paid up while Donna cannot. Kara's policy will build cash value quicker than Donna's policy while she is paying premiums, but once premiums stop, cash value growth will slow down. Kara's policy will mature (endow) at a younger age than Donna's policy.
Kara's policy will build cash value quicker than Donna's policy while she is paying premiums, but once premiums stop, cash value growth will slow down.
What is the mathematical concept of probability that helps insurers estimate the statistical likelihood of mortality or morbidity losses at any given age? actuarial principle underwriting principle law of probability law of large numbers
Law of large numbers
All the following uses for life insurance in a business represent a valid insurable interest, EXCEPT: Life insurance bought by businesses to cover the lives of their key employees or owners. Life insurance purchased by business partners to provide funds that can be used to buy out the business interest of the one who dies. Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies. Life insurance used to provide funds in the event an insured key employee or partner dies
Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies.
All of the following are elements of an insurable risk EXCEPT: Any losses resulting from the insured peril must be definable as to time, cause, and location. The loss must be measurable. The insured peril must be outside of the insured's control. Losses resulting from the insured peril must be potentially catastrophic.
Losses resulting from the insured peril must be potentially catastrophic.
Mary pays for her life insurance with an annual premium. However, she is thinking of switching to a monthly premium mode. Which of the following best describes the consequence if she changes her mode to a monthly premium? There is no way of determining how much more or less Mary will be paying by increasing the frequency of her premium payments without knowing her age. Mary will end up paying more over time than if she continued paying annual premiums. Mary will end up paying less over time than if she continued paying annual premiums. Mary will end up paying the same amount as if she had continued paying annual premiums.
Mary will end up paying more over time than if she continued paying annual premiums.
Emil, an agent licensed in North Carolina, moves to a new home on April 30. He is required to notify the North Carolina Department of Insurance by what date? October 31 May 10 May 7 May 30
May 10
As a general rule, insurers do not pay death benefits to designated beneficiaries who are minors because: The risk is too great that an adult will take advantage of the minor. Federal law limits the amount of money that may be paid to a minor. Minors are incapable of managing large sums of money. Minors do not have the legal capacity to sign a binding receipt for the funds.
Minors do not have the legal capacity to sign a binding receipt for the funds.
From an insurance perspective, all the following statements regarding risk and loss are correct EXCEPT: Risk is defined as the chance of loss. The state of being subject to a loss is called loss exposure. Only speculative risk is insurable. A loss is defined as an unplanned reduction in economic value.
Only speculative risk is insurable.
Which of the following statements about backdating life insurance applications is correct? Backdating has no impact on the policy's premium, but it does result in the policy being issued with a cash value. The purpose for backdating an application is to qualify for a better underwriting classification. Only the insurance company, not the producer, can authorize the backdating of specific applications. Insurers normally allow an applicant to backdate a policy by up to 2 years.
Only the insurance company, not the producer, can authorize the backdating of specific applications.
All of the following statements regarding the career agency distribution system are correct EXCEPT: The managerial form of career agency system uses company employees as the agency managers. There are two types, the general agency system and the managerial system. It uses agents who primarily if not exclusively represent one insurer. Personal producing general agents (PPGAs) are commonly hired to manage career agencies.
Personal producing general agents (PPGAs) are commonly hired to manage career agencies.
All the following statements regarding withdrawals from a universal life policy are correct EXCEPT: Withdrawals from a UL policy's cash value are called partial surrenders. Universal life insurance policies allow withdrawals from their cash values. Policy loans are not permitted with universal life insurance policies A policyowner can withdraw amounts less than the full cash value.
Policy loans are not permitted with universal life insurance policies
Which one of the following statements best describes if and when a traditional whole life insurance premium may change under the level premium concept? Premiums may vary each time they are due based on the insured's current insurability. Premiums may change if the risk to the insurer increases over time. Premiums are either fixed or flexible at the option of the insurer. Premiums are set and remain fixed over the full term of the premium-paying period.
Premiums are set and remain fixed over the full term of the premium-paying period.
In a current assumption whole life policy, what happens to premium rates if an insurer earns more on its investments than was factored into the premium calculation? Premiums decrease to a new rate supported by the actual investment experience. Premiums return to their original introductory rate. Premiums increase to a new rate supported by the actual investment experience. Premiums stay the same.
Premiums decrease to a new rate supported by the actual investment experience.
Cindy and Rich each bought a $100,000 universal life insurance policy from the same insurer, each with a ten-year back-end surrender charge schedule. In year two, Cindy withdrew $5,000 from her policy. Rich withdrew $5,000 from his policy in year five. Which of the following statements is most correct regarding surrender charges they may face? Neither Cindy nor Rich will pay a surrender charge. Cindy and Rich will pay the same surrender charge. Rich will have a lower surrender charge than Cindy. Cindy will have a lower surrender charge than Rich.
Rich will have a lower surrender charge than Cindy.
Abby lives in Maryland, where she is licensed as an insurance agent. She wants to apply for a nonresident license in North Carolina. Which of the following conditions must she satisfy? She must move to North Carolina. She must show her license to be in good standing in Maryland. She must surrender her Maryland license. She must be sponsored by an agent licensed in North Carolina.
She must show her license to be in good standing in Maryland.
Smith and Thomas are licensed producers. Smith knows that Thomas is embezzling money from clients. However, Smith does not notify the Commissioner in order to protect his friend. What is the result? Smith will not be punished because he does not have a fiduciary duty to report the crime. Smith's license will be suspended for up to two years. Smith's license may be revoked. Smith can be sanctioned but not disciplined.
Smith's license may be revoked.
If an applicant for an insurance policy submits an application without the first premium, which of the following is correct? The applicant has invited the insurer to make an offer. The insurer has made an offer to the applicant. The applicant has made an offer to the insurer. The insurer may not make a counteroffer to the applicant.
The applicant has invited the insurer to make an offer.
Replacement occurs if a life insurance policy is purchased and, in conjunction, any of the following happen EXCEPT: The existing policy is surrendered. The existing policy is amended with a reduction in benefits. The existing policy is converted to reduced paid-up insurance. The existing policy's beneficiary designation is changed.
The existing policy's beneficiary designation is changed.
With respect to third-party ownership of life insurance in the personal insurance market, all the following statements are true EXCEPT: Third-party ownership is common in estate planning. The insured has the right to name the beneficiary. Third-party ownership is the basis of stranger-oriented life insurance (STOLI). Policy ownership can be transferred to anyone without there having to be an insurable interest between that person and the insured.
The insured has the right to name the beneficiary.
All the following statements regarding stranger-owned life insurance (STOLI) are correct EXCEPT: STOLI and investor-owned life insurance (IOLI) are the same thing. The insured retains the right to designate the policy's beneficiary. STOLI is financed through premium loans during the first several years, until it is transferred from the insured to the investors. STOLI is an arrangement in which investors convince an individual to purchase a life insurance policy on himself which is transferred to the investor in exchange for a sum of money.
The insured retains the right to designate the policy's beneficiary.
Stephanie is a policyowner who pays premiums monthly. How does her insurer cover the cost of sending her more frequent premium notices? The insurer views the lost earnings as a cost of doing business. The insurer charges higher premiums. The insurer charges a one-time lost-earnings fee. The insurer imposes policy loan restrictions.
The insurer charges higher premiums.
Carl is a policyowner who prefers to pay premiums monthly rather than annually. How will Carl's insurance company adjust his premium to accommodate this request? The insurer divides the annual premium by 12 and then adds a modest charge. The insurer divides the annual premium by 12 and then reduces the premium amount to reflect the fact that premiums will be paid throughout the year. The insurer divides the annual premium by 12 and then adds a modest charge in the first policy year after which premiums equal the annual premium divided by 12. The insurer simply divides the annual premium by 12.
The insurer divides the annual premium by 12 and then adds a modest charge.
What does the life insurance company do upon an insured's death if there is a collateral assignment attached to the insured's policy? The collateral assignee and beneficiary split the death benefit equally. The insurer pays the collateral assignee the entire death benefit. The insurer pays the collateral assignee the balance of the loan still owed out of the death benefit, and the rest of the death benefit goes to the beneficiary. The policyowner decides at the time of the assignment how to divide up the death benefit.
The insurer pays the collateral assignee the balance of the loan still owed out of the death benefit, and the rest of the death benefit goes to the beneficiary.
Jerry names a trust as the beneficiary of his life insurance. When Jerry dies, how will this trust work? The trust passes the insurance benefit to Jerry's next of kin. The insurer pays the death benefit to the trustee who manages the assets for the trust's beneficiaries, named by Jerry when the trust was formed. The trustee invests the insurance benefit in securities. A trust cannot be a beneficiary; Jerry must name an individual or business.
The insurer pays the death benefit to the trustee who manages the assets for the trust's beneficiaries, named by Jerry when the trust was formed.
All the following statements about the net premium for a traditional life insurance policy are correct EXCEPT: The net single premium for a traditional life insurance policy is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment. Calculating the net single premium is the first step in calculating the gross premium charged to the policyowner. The net premium is the insurer's estimated cost to provide the policy benefits without accounting for the insurer's expenses.
The net single premium for a traditional life insurance policy is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment.
Which of the following most accurately describes the basic function of a life insurance policy's net premium? The net single premium is the amount required to cover the policy's promised benefits, without accounting for the insurer's policy-related expenses. The net premium is the amount actually charged to the policyowner. The net premium is the amount an individual actually pays to provide all the benefits promised in the policy regardless of premium mode. The net premium represents the insurer's mortality charge.
The net single premium is the amount required to cover the policy's promised benefits, without accounting for the insurer's policy-related expenses.
All the following statements regarding life insurance level premiums are correct EXCEPT: The policyowner pays the same premium amount each time it is due for as long as the policy is in force. The premium amount does not change even though the risk to the insurer increases over time. The owner of a whole life policy may elect to let the insurer raise premiums over time, resulting in a lower initial premium than would be the case with a level premium policy. For most types of permanent life insurance policy, premiums remain level regardless of the mode of premium selected.
The owner of a whole life policy may elect to let the insurer raise premiums over time, resulting in a lower initial premium than would be the case with a level premium policy.
Dan owns a fixed whole life insurance policy. What type of death benefit is Dan guaranteed? The policy guarantees a fixed death benefit amount. The amount depends on the number of premium payments Dan has made. The policy has no guaranteed death benefit. The policy guarantees a death benefit will be paid, but not the amount.
The policy guarantees a fixed death benefit amount.
Which one of the following statements about term life insurance is correct? The policy pays a death benefit only if the insured dies during the term. It is permanent insurance. It is intended to cover the insured to age 120. A cash value accumulates in term life policies.
The policy pays a death benefit only if the insured dies during the term.
Which of the following statements regarding the practice of backdating a life insurance application is correct? The producer has the authority to approve the backdating of policy applications. Most states allow a policy application to be backdated up to 12 months. The policyowner is not required to pay back premiums from the backdated issue date to the present. The policy premium is lower than it would be if the policy was issued with the actual date the application was signed.
The policy premium is lower than it would be if the policy was issued with the actual date the application was signed.
All the following statements about survivorship life insurance policies are correct EXCEPT: They are also known as second-to-die policies. The premiums are about the same as for two comparable single-life policies. The death benefit is paid only at the surviving insured's death. They insure two persons under one policy.
The premiums are about the same as for two comparable single-life policies.
Alice wants to spread her life insurance premiums over the year, rather than pay a single annual premium. She asks her agent what that would mean in terms of the sum of premiums paid. Which of the following is the correct response? The sum of premiums will be higher than if she paid a single annual premium. The sum of premiums may be higher or lower than the single annual premium, depending on whether the annual premium is paid at the start or end of the policy year. Whichever mode of premium she chooses, the sum of premiums over the course of the year is the same. The sum of premiums will be lower than if she paid a single annual premium.
The sum of premiums will be higher than if she paid a single annual premium.
Which of the following statements is correct if a labor union buys a group life insurance policy to insure its members? The union must pay all of the premiums. The plan may be selective in deciding which union members can enroll in the plan. The union owns the policy for the benefit of its members. Coverage may be suspended on any union member that goes on strike.
The union owns the policy for the benefit of its members.
All the following statements about standard policy exclusions are correct EXCEPT: The war exclusion usually excludes paying the death benefit only if the death directly resulted from war. Standard exclusions found in most policies last for the life of the policy, even after the contestability period ends. If a policy excludes a risk from coverage, the insurer will not pay the policy's benefit if death results from that risk. The war and commission of a felony exclusions are required by law.
The war and commission of a felony exclusions are required by law.
Which one of the following statements about indexed whole life insurance is correct? Its cash values may decrease as well as increase. It combines whole life insurance and term life insurance. The policyowner may adjust the policy premium up or down. There are two different premium plans available to indexed whole life policyowners, with one plan starting out with a lower premium than the other.
There are two different premium plans available to indexed whole life policyowners, with one plan starting out with a lower premium than the other.
Which of the following statements regarding life insurance policy cost comparison methods is correct? There are two types, the traditional net cost method and the interest-adjusted net cost method, and both types are used equally. There are two types, the traditional net cost method and the interest-adjusted net cost method, and the traditional net cost method is most commonly used today. There are two types, the traditional net cost method and the interest-adjusted net cost method, and most states forbid either type from being used. There are two types, the traditional net cost method and the interest-adjusted net cost method, and the interest-adjusted net cost method is most commonly used today.
There are two types, the traditional net cost method and the interest-adjusted net cost method, and the interest-adjusted net cost method is most commonly used today.
All of the following statements regarding life insurance premium modes are correct EXCEPT: The sum of premiums paid monthly over the course of a year will be greater than the annual premium for that policy. There is no additional cost for paying premiums more frequently than annually. common premium modes include monthly, quarterly, and semi-annually Actuaries base premium calculations on the assumption that the premium will be paid annually, at the start of the policy year.
There is no additional cost for paying premiums more frequently than annually.
How do actuaries compensate for the cost of running the business when determining the gross premium charged to the policyowner? They assume a higher rate of interest than actually expected, which provides a safety margin by increasing the gross premium. They increase the mortality charge, increasing the net premium. They assume there will be fewer deaths than their past mortality experience would predict, which provides a safety margin by increasing the gross premium. They add an expense load, which includes a safety margin factor, to the net premium to produce the gross premium.
They add an expense load, which includes a safety margin factor, to the net premium to produce the gross premium.
All of the following are characteristics of a stock insurance company EXCEPT: They may issue dividends. They are governed by a board of directors. They have minimum financial capital requirements that must be met before they can conduct business. They are owned by policyowners.
They are owned by policyowners.
All of the following are characteristics of a mutual insurance company EXCEPT: They may issue policy dividends. They are governed by a board of directors. They are owned by stockholders. They have minimum financial capital requirements that must be met before they can conduct business.
They are owned by stockholders.
Which statement about multiple employer welfare arrangements (MEWAs) is correct? They are usually created by employers in the same industry. The group must have a minimum of ten employers. They must be fully insured. They must be self-insured.
They are usually created by employers in the same industry.
Endowment contracts are NOT considered life insurance (for tax purposes) because: They do not pay a death benefit if the insured dies before the contract matures. They endow before age 120. They do not build cash values. They never mature.
They endow before age 120.
Which of the following is NOT true about fraternal benefit societies? They exist for profit solely for the benefit of their members. They operate on a lodge system. They have no capital stock. They have a representative form of government
They exist for profit solely for the benefit of their members.
Which statement regarding the licensing of fraternal benefit society agents is TRUE? They are not required to be licensed as agents. They must be licensed as agents but are not required to take the licensing exam. They must be licensed as special agents only. They must comply with the same licensing requirements that apply to resident and nonresident agents.
They must comply with the same licensing requirements that apply to resident and nonresident agents.
In setting premiums for a new policy, when do actuaries assume those premiums will be paid? They will be paid in full at the beginning of the policy year. They will be paid in full at the end of the policy year. They will be paid monthly. They will be paid in full in the middle of the policy year.
They will be paid in full at the beginning of the policy year.
Which of the following best describes a partial surrender of a permanent (non-universal) life insurance policy? A partial surrender is a loan against the policy's cash surrender value. Under a partial surrender, the death benefit is reduced proportionately by the amount of the surrender. A partial surrender is the same as a cash withdrawal under a universal life insurance policy. Under a partial surrender, the death benefit is not affected by the amount of the surrender.
Under a partial surrender, the death benefit is reduced proportionately by the amount of the surrender.
All of the following statements about key person life insurance are correct, EXCEPT: Upon the insured employee's death, the employee's surviving family receives the policy's death benefit. Key person, or key employee, life insurance is an example of third-party ownership. Life insurance used as key person life is normally owned by the business rather than the insured. The business applies for, owns, and is the beneficiary of the policy covering the life of a key employee.
Upon the insured employee's death, the employee's surviving family receives the policy's death benefit.
Which one of the following statements about variable life insurance is correct? With variable life insurance, it is the insurance company that assumes most of the investment risk. Variable life insurance policyowners can transfer funds between investment subaccounts and the insurer's general account. Variable life insurance policies do not guarantee a minimum death benefit. The death benefit under a variable life insurance policy will never be more than the stated minimum.
Variable life insurance policyowners can transfer funds between investment subaccounts and the insurer's general account.
A term life insurance policy in which the protection and premium amounts stay the same during the term period is known as: a level term policy a renewable decreasing term policy a decreasing term policy an increasing term policy
a level term policy
All the following types of insurance involve a personal contract EXCEPT: a disability income insurance policy a life insurance policy an automobile policy a medical expense insurance policy
a life insurance policy
Tax law considers any limited payment life insurance policy that is paid-up in seven years or less to be which of the following? an endowment policy a modified premium whole life policy an insured security a modified endowment contract
a modified endowment contract
Term life insurance is well suited for all the following needs EXCEPT: mortgage protection protection while the family children are living at home or attending college inexpensive protection until the policyowner can afford permanent life insurance a source of emergency cash for any financial need
a source of emergency cash for any financial need
To reinstate a lapsed life insurance policy under the typical reinstatement provision, the policyowner must provide all of the following, EXCEPT: proof of insurability a written request or application for reinstatement payment of all back premiums, plus interest a valid reason for the unpaid premiums
a valid reason for the unpaid premiums
Insurers will decline applicants with very high substandard risk ratings. What percentage of applicants do insurers reject? about 5 percent Practically speaking, no applicants are rejected as uninsurable. about 10 percent about 2 percent
about 2 percent
Which insurance company function calculates company mortality and morbidity rates as well as the dividends on participating life insurance policies? underwriting division actuarial division claims division sales division
actuarial division
Best Insurance Company is incorporated in Canada and just applied for a license to transact insurance in North Carolina. Which type of insurer is Best Insurance Company considered in North Carolina? alien domestic foreign limited
alien
The Royale Insurance Company, domiciled in Toronto, Canada, transacts business legally in New York. In New York, Royale is classified as a(n): alien insurance company foreign insurance company unauthorized insurance company domestic insurance company
alien insurance company
The entire contract provision states that changes can be made to policy provisions by: the policyowner only the policyowner, an insurance company executive, or the producer the producer only an executive officer of the company only
an executive officer of the company only
Which insurance sales distribution arrangements is NOT affiliated with just a single insurance company but instead represents multiple companies? a sales agency that is managed by a general agent who is under contract with an insurance company to employ sales agents to represent that company a sales arrangement in which sales are made directly to consumers through mass media channels without the use of producers a sales office that is managed by a general manager who is an insurance company employee an independent sales office that is managed by a Personal Producing General Agent (PPGA)
an independent sales office that is managed by a Personal Producing General Agent (PPGA)
For a life insurance contract to be enforceable, which of the following parties must be legally competent? applicant insurer applicant and insurer applicant, insurer, and beneficiary
applicant and insurer
During the application process, ABC Insurers receives personal and confidential information about Tom, who is applying for a life insurance policy. In which of the following circumstances must ABC Insurers obtain Tom's written authorization before disclosing this information? before disclosing information to law enforcement agencies who are investigating insurance fraud before disclosing information to third parties for telemarketing and sales purposes before disclosing information to a consumer reporting agency before disclosing information in response to an administrative order
before disclosing information to third parties for telemarketing and sales purposes
The policy value that builds within a whole life insurance policy and is accessible by the policyowner while the insured is alive is called the: cash value face amount policy reserve death benefit
cash value
Which remedy does the Commissioner have if a person has violated the Insurance Information and Privacy Protection Act? fine of up to $20,000 criminal sanctions cease and desist order license termination
cease and desist order
To qualify for an insurance agent's license, a person must have all of the following EXCEPT: licensing fee 18 years of age good reputation and character college degree
college degree
Beatrice is a member of the Supreme Lodge fraternal benefit society. What must Beatrice do before she can sell insurance on its behalf? obtain a surplus lines license become a licensed agent with a specialty in fraternal lines insurance comply with the same general licensing requirements that apply to resident agents obtain a restricted agent's license
comply with the same general licensing requirements that apply to resident agents
Deliberately withholding material facts when applying for insurance is called: concealment waiver collusion twisting
concealment
Steven is filling out an application for life insurance. The application asked whether he had ever had heart problems. Steven intentionally skips this question even though he had heart surgery three years ago because he is afraid his application will be denied. What is the term for Steven's failure to give his entire medical history? waiver breach of contract concealment estoppel
concealment
Ambiguities in an insurance contract are most often interpreted in favor of the policyowner because insurance contracts are: aleatory conditional unilateral contracts of adhesion
contracts of adhesion
Which one of the following would a state NOT permit as a life insurance policy exclusion? death directly resulting from war death resulting from a plane crash in which the insured was a fare-paying passenger death resulting from suicide in the first couple policy years death resulting from the insured's hobby
death resulting from a plane crash in which the insured was a fare-paying passenger
When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed? coercion rebating unfair discrimination defamation
defamation
When underwriting group life insurance, the underwriter can offset the risk of loss posed by the group by doing all of the following, EXCEPT: requiring a minimum group size making sure that all applications are complete and accurate making sure the required percentage of group members has enrolled for insurance denying insurance coverage to any person with a pre-existing condition
denying insurance coverage to any person with a pre-existing condition
Robert is purchasing a life insurance policy in which he is the insured. If he wants to keep the policy proceeds out of his estate for tax purposes, all of the following arrangements would help him meet that goal EXCEPT: designate an irrevocable life insurance trust to be the owner and beneficiary of the policy designate an irrevocable life insurance trust to be the owner and Robert's estate to be the policy beneficiary designate an adult son to be the owner and allow him to designate a beneficiary other than Robert's estate purchase the policy as the owner, but then transfer policy ownership to a third party at least three years before his death
designate an irrevocable life insurance trust to be the owner and Robert's estate to be the policy beneficiary
An insurance company is developing a new product. Which of the following is the actuaries' most important responsibility? determining the actual premium to be charged to an applicant for the new product assuring that the new product will appeal to average consumers designing the product's features and benefits determining the basic premium rates for the new product
determining the basic premium rates for the new product
Which of the following does NOT provide independent ratings of insurance companies' financial strength and claims-paying abilities? Moody's Standard & Poor's each state's Department of Insurance A.M. Best
each state's Department of Insurance
Jerry owns a life insurance policy with premiums payable directly to the insurer's home office. However, for the past five years Jerry has sent his payments to his agent, who then forwards them to the insurer. The insurer had accepted this arrangement but then tries to cancel Jerry's policy when it learns he had died while the premium was being forwarded by the agent. The insurer will probably not be able to cancel the policy in this case because of which of the following legal principles?
estoppel
Most states permit insurers to include a provision in their life insurance policies that does which of the following? allows the insurer to cancel the policy if the total amount owed on a policy loan is less than the cash value of the policy makes the value of the policy at policy maturity anything less than the face amount plus dividend additions minus any outstanding loan amount limits the period for filing a lawsuit against the insurer to less than one year after a contested claim excludes coverage of death that occurs while the insured is operating an aircraft
excludes coverage of death that occurs while the insured is operating an aircraft
The purpose for the Buyer's Guide, which must be given to every insurance prospect in the first meeting with a producer, is to: provide buyers with details of the insurance policy they are considering for purchase explain the general features, benefits, and conditions of the type of insurance being considered explain the step-by-step process involved in purchasing the recommended product advise the buyer to consider an alternative to the insurance product being considered
explain the general features, benefits, and conditions of the type of insurance being considered
The Commissioner of Insurance cannot suspend or revoke an agent's license for which of the following reasons? accepting insurance from an unlicensed individual forging an individual's name on an insurance application failing to meet projected sales goals having an agent's license denied or suspended in another state
failing to meet projected sales goals
Which of the following is NOT an unfair claims settlement practice if committed by an insurance company in North Carolina? failing to promptly acknowledge communications about claims offering to settle claims for less than due to encourage litigation raising policy defenses to reduce a claim failing to promptly settle a claim for which liability is uncertain
failing to promptly settle a claim for which liability is uncertain
Variable life insurance policies offer all of the following EXCEPT: a guaranteed death benefit a variety of investment subaccount choices flexible premium payments a cash value
flexible premium payments
The Excalibur Insurance Company, domiciled in Iowa, transacts business legally in Nebraska. In Nebraska, Excalibur is a(n): foreign insurance company non-admitted insurance company alien insurance company domestic insurance company
foreign insurance company
In a front-end loaded universal life contract, when does the insurer deduct a charge to cover the costs of administering the policy? once, when the first premium is paid from the cash value after the premium has been deposited to it from the premium payment before it is credited to the policy's cash value at the start of each policy year
from the premium payment before it is credited to the policy's cash value
An insurance company that primarily sells life insurance policies designed for burial and last expense purposes, and whose agents typically collect premiums in person, is known as a: risk retention group reinsurance company fraternal insurance company home service insurance company
home service insurance company
Medical expense insurance policies are what type of contract? indemnity contract bilateral contract commutative contract valued contract
indemnity contract
From a regulatory perspective, all variable life insurance policies are considered: modified endowment contracts government-secured investments risk-free investments that are as safe as ordinary life insurance investment securities
investment securities
By submitting an application for life insurance without the first premium, Larry is doing which of the following? negotiating for lower premiums inviting the insurer to make an offer suggesting that the insurer should not issue the policy for some reason making the policy's effective date earlier than it would be if the initial premium was paid with the application.
inviting the insurer to make an offer
What is the main appeal of joint life insurance? higher death benefit lower cost than two separate policies underwriting is performed only on the older of the two applicants ability to cover an entire family
lower cost than two separate policies
An applicant for a $500,000 whole life insurance policy pays the initial premium along with his application. In this case, what has the applicant done? accepted a counteroffer from the insurer accepted an offer from the insurer made a counteroffer to the insurer made an offer to the insurer
made an offer to the insurer
Which of the following do variable life insurance premiums generally include to cover the cost of managing the investment element of the contract? compensation fee maintenance fee premium surcharge quarterly administrative fee
maintenance fee
Actuaries calculate net life insurance premiums based on which of the following? morbidity and interest assumptions interest and expense assumptions mortality and interest assumptions mortality and expense assumptions
mortality and interest assumptions
Loading reflects the costs that the insurance company can expect to pay for its operations. These costs include all of the following, EXCEPT: mortality costs employee benefits the insurance company's employee salaries commissions paid to the insurer's agents
mortality costs
Which of these personal relationships does NOT automatically constitute insurable interest? spouses in each other children in their parents or grandparents neighbors in each other people in themselves
neighbors in each other
Statewide Insurers wants to obtain an investigative consumer report about an applicant because of questions it has regarding the individual's credit history. What must Statewide do before it can obtain a report? notify the applicant that he has the right to prepare his own report obtain the applicant's signed consent before obtaining the report notify the applicant that he has the right to be interviewed in connection with the report require the applicant to sign an affidavit attesting to the truth of the statements in the report
notify the applicant that he has the right to be interviewed in connection with the report
In what form does the MIB present its information to insurers? a written report, which includes an underwriting recommendation, detailing the MIB's findings on the applicant a telephone call from a MIB analyst discussing the MIB's findings on the applicant a posting on the MIB website describing the applicant's medical history numeric codes, indicating risks identified in previous applications, that are communicated electronically
numeric codes, indicating risks identified in previous applications, that are communicated electronically
Which of the following parties makes an enforceable promise in an insurance contract? only the insurance company only the policyowner both the insurance company and the policyowner only the beneficiary
only the insurance company
Harry and Connie each want to buy life insurance that will provide a guaranteed death benefit whenever they die, will generate a guaranteed cash value they can access while living, and even return excess premiums to them. Which of the following would best fit this couple's needs? group life insurance variable life insurance term life insurance participating whole life insurance
participating whole life insurance
The fact that ownership of a health insurance contract cannot be transferred to another party makes it what type of contract? personal unilateral conditional aleatory
personal
If the parties disagree over the terms of an insurance contract, courts will typically interpret anything unclear in the contract in favor of which party? insurance company policyowner agent beneficiary
policyowner
Amanda, age 45, bought a $50,000 ten-year renewable and convertible term life policy. Regarding this, all the following statements are correct EXCEPT premiums for this policy will be more than for a $50,000 ten-year renewable but non-convertible term life policy. premiums for this policy will be more than for a $50,000 permanent life insurance policy. premiums for this policy will be more than for a $50,000 ten-year nonrenewable but convertible term life policy. premiums for this policy will be more than for a $50,000 ten-year nonrenewable and nonconvertible term life policy.
premiums for this policy will be more than for a $50,000 permanent life insurance policy.
The automatic premium loan (APL) provision does which of the following? provides liquidity if the insured wants to increase a policy's face amount improves the policyowner's credit rating prevents a life insurance policy from lapsing if the policyowner fails to pay a premium provides cash for emergencies and opportunities
prevents a life insurance policy from lapsing if the policyowner fails to pay a premium
The purpose for the Policy Summary, which must be given to every insurance applicant before an application is signed, is to: explain the step-by-step process involved in purchasing the recommended product disclose all the hidden costs associated with the policy being applied for provide buyers with details of the specific insurance contract they are considering for purchase explain the general features, benefits, and conditions of the type of insurance being considered
provide buyers with details of the specific insurance contract they are considering for purchase
When collecting personal financial or health information, an insurance company is required to do all of the following EXCEPT provide methods for individuals to prevent disclosure of the information. provide individuals with copies of documents disclosed to other parties. notify individuals about the company's privacy practices. describe conditions under which the company may disclose the information to other parties.
provide individuals with copies of documents disclosed to other parties.
Under the re-entry method, an insured can renew a level term life insurance policy at the end of the specified term at a lower rate than the guaranteed rate by doing which of the following? agreeing to convert to a permanent life insurance policy paying a premium surcharge proving that he or she is under age 50 proving insurability
proving insurability
Agent Johns started offering potential clients courtside tickets to a professional basketball game in exchange for purchasing a life insurance policy. Which ethical sales practice has Agent Johns violated? rebating controlled business churning replacement
rebating
If a whole life insurance policy lapses due to non-payment of the premium, which of the following is NOT an option that is available to the policyowner? receive the policy's cash value in a lump sum payment use the cash value to purchase a paid-up whole life insurance policy receive a full refund of premiums paid for the policy use the cash value to purchase a term life insurance policy
receive a full refund of premiums paid for the policy
The primary reason for using third-party ownership in personal life insurance for estate planning purposes is to: remove the life insurance proceeds from the insured's estate and thus reduce the value of the taxable estate convert the life insurance proceeds from an estate taxable asset to an income taxable asset reduce the tax rate used in calculating the estate tax transfer the estate tax liability from the owner to the beneficiary
remove the life insurance proceeds from the insured's estate and thus reduce the value of the taxable estate
The basic purpose for the re-entry option with a renewable term life insurance policy is to let the policyowner: renew the policy at lower current rates rather than guaranteed renewal rates convert the term policy to a permanent life insurance policy reinstate the policy after it has lapsed for nonpayment of premiums without having to provide evidence of insurability renew the policy with a higher face amount without having to provide evidence of insurability
renew the policy at lower current rates rather than guaranteed renewal rates
Which of the following statements regarding the replacement of a life insurance policy is correct? the new policy may be cancellable by the insurer replacement can be achieved without requiring the applicant to prove insurability once again replacing a policy will require the insured to go through a new contestability period replacing a policy usually results in a lower premium
replacing a policy will require the insured to go through a new contestability period
Statements made on a life insurance application are considered: conditional promises warranties unconditional promises representations
representations
In-person delivery of a whole life insurance policy gives the producer the opportunity to do all of the following, EXCEPT: get any required delivery forms, discuss any exclusions, and explain any substandard ratings review coverage to determine if the policyowner wants to increase the policy's face amount explain that the free-look period begins at that moment, giving the policyowner ten days (in most states) to return the policy for a full premium refund explain policy benefits, terms, and riders
review coverage to determine if the policyowner wants to increase the policy's face amount
The federal Risk Retention Act of 1986 contains guidelines for which of the following entities? risk retention groups Fraternal insurance companies surplus lines insurance companies reinsurance companies
risk retention groups
Actuaries base traditional life insurance premiums on all of the following factors, EXCEPT: mortality sales projections interest rates expenses
sales projections
In addition to the fiduciary responsibility they have with all customer premiums and assets, producers are expected to do all the following EXCEPT: avoid all forms of rebating make sure all product recommendations are suitable for the customer seek opportunities to replace existing policies with newer products disclose all pertinent information concerning a proposed policy
seek opportunities to replace existing policies with newer products
In cases where an existing life insurance policy is going to be replaced by new life insurance policy, the producer must do all the following EXCEPT: give the applicant a "Notice to Applicants Regarding Replacement of Life Insurance" sign a form assuming full responsibility for any consequences that may result from the replacement list all existing life insurance policies that will be replaced give the applicant a policy comparison statement signed by the producer
sign a form assuming full responsibility for any consequences that may result from the replacement
In its fiduciary responsibility to its principal, a producer is required to do all the following EXCEPT: solicit business that is certain to be profitable to the insurer carry out authorized activities with reasonable care fully disclose to the insurer all pertinent information that affects the placement of an insurance policy fully account for premiums and submit them to the insurer on a timely basis
solicit business that is certain to be profitable to the insurer
A life insurance application's main purpose is to provide underwriters with information regarding: the applicant's personal risk data and health the reason for the requested coverage the type of policy being applied for the applicant's wealth
the applicant's personal risk data and health
All of the following must sign life insurance applications, EXCEPT: the insured (if not the applicant) the agent the beneficiary the applicant
the beneficiary
Who normally owns life insurance that is used to meet business insurance needs? the employees the insured the business jointly with the insured the business
the business
In order to be grounds for the insurer to void a contract, an applicant's statements on an insurance application must involve: excessive details a broken warranty the deliberate withholding of material facts an incorrect statement
the deliberate withholding of material facts
In an insurance transaction, what does the applicant give as consideration? the promise to be a responsible policyowner the promise to follow the terms of the insurance contract the initial premium the promise to pay premiums during the entire policy period
the initial premium
Under group insurance coverage, one policy covers a number of people. Who owns these group polices? representatives of the sponsoring companies the organization that represents the group and which sponsors the coverage the insureds the insurance company who issues the policy
the organization that represents the group and which sponsors the coverage
In a third-party life insurance contract, the parties to the contract are the: the owner, the insured, and the beneficiary the owner, the insured, and the insurance company the insurance company, the owner, and the beneficiary the insured, the beneficiary, and the insurance company
the owner, the insured, and the insurance company
Which of the following is an insurable risk? the possibility of becoming disabled and unable to earn an income the possibility of losing money gambling in Las Vegas the possibility of losing money in stock investments the possibility of one's home value decreasing due to a drop in market prices
the possibility of becoming disabled and unable to earn an income
In the purchase of a life insurance contract, the applicant's consideration consists of: the signed application and the first premium the signed application only the first premium only the signed application and the Agent's Report
the signed application and the first premium
All the following reasons that a business might buy life insurance represent a valid insurable interest, EXCEPT: to insure liquidity in case one of the owners or key employees dies to provide insurance coverage for large-volume customers to insure partners' lives to provide funds to buy out a deceased partner's interest to insure the lives of key employees or owners
to provide insurance coverage for large-volume customers
Why would a large manufacturer choose to self-insure rather than buy an insurance policy from an insurance company? so they can pick and choose which losses they cover to shelter company cash from federal taxation to save insurance premiums by paying relatively minor losses out of company funds to avoid having to comply with state insurance laws dealing with employee benefits
to save insurance premiums by paying relatively minor losses out of company funds
When comparing her insurance company's policies to those of Zenith Insurance, Melanie makes a misleading statement to convince an insurance prospect to terminate a policy with Zenith and buy one from Melanie's company. What activity has Melanie engaged in? twisting unfair discrimination defamation rebating
twisting
The insurance company function responsible for evaluating the insurable risks and assigning appropriate premium rates, is the: underwriting division claims division actuarial division sales division
underwriting division
Acme Insurance and Apogee Insurance agree to offer different premium rates for persons of equal risk within a particular class. They also agree to limit benefits paid to insureds within this class if the insureds live in certain counties of North Carolina. What are Acme and Apogee engaging in? acceptable marketing and underwriting practices unfair and prohibited business practices false advertising insurance fraud
unfair and prohibited business practices
Which of the following contract characteristics is unique to insurance contracts but NOT all contracts? legal purpose competent parties consideration unilateral
unilateral
The requirement that an insurable interest must exist when life insurance is purchased is intended to prevent people from doing which of the following? designating an ineligible person as the policy beneficiary overusing life insurance using life insurance to fund future cash needs using life insurance as a speculative investment on another person's life
using life insurance as a speculative investment on another person's life
All the following are standard types of term life insurance EXCEPT: annually renewable term variable term insurance level term insurance increasing term insurance
variable term insurance
What is the term for voluntarily giving up a known right? voidable conditional estoppel waiver
waiver
Statements that are guaranteed to be true, such as an insurer's promise in the policy, are called: warranties representations petitions declarations
warranties