TEST QUESTIONS
The double Indemnity Rider requires that the insured dir within ______ days of the accident
90
A 22 year old applicant for life insurance has a limited budget for premiums. Which of the following policies would provide for the highest face value, for the lowest premium amount?
A 30 year torn term B. 20 year term C. annually renewable term D. 10-year term C. Term insurance does not accumulate cash value. The "pure premium" purchase is the highest amount of insurance compared to the other forms of life insurance. The shortest term period Offers the lowest cost per $1000 of coverage at the outset and in the early years.
Which of the following whole life insurance policies has the lowest annual premium payment per $1000 of coverage for 35 year old, all other factors being equal?
A 30-pay ordinary whole life, B. limited pay ordinary whole to age 85 C. ordinary straight whole life, D. 20-pay ordinary whole life C. The longer the premium-paying period, the lower the annual premium. A $100,000 ordinary Straight whole life policy spreads the payments out over a long period of time than a limited premium payment policy.
Consideration Clause
A clause in a Life policy specifying the premium due for the insurance protection and the frequency of payment (also called Mode). The more frequent the Mode of Payment, the higher the cost, since most insurers charge service fees for budget payments. The cheapest Mode is annual.
Misrepresentation
A false state/ contained in the application
If the policyowner specifies a time over which all settlement options, instalments are to be paid, he/she has chosen which settlement option?
A fixed amount B. fixed period C. extended term D. life with period certain B. The keyword is time. Anytime the policy owner specifies payments to be guaranteed for a specific period regardless of who may receive the payments the fixed period settlement option has been chosen.
Nontraditional Whole Life (interest/Market - Sensitive)
A form of whole life. Based on current money market rates, the premiums and interest rates credited can change.
How is variable whole life different from variable universal life?
A it is designed to provide a hedge against inflation B. the policy owner takes on all of the investment risk C. Cash values can be invested in a separate account. D. The policy has a guaranteed minimum face amount. D. Generally, speaking, variable whole life has a guaranteed minimum death benefit provided that all premiums are paid in full and on time as scheduled, whereas a variable universal life policy has no guaranteed death benefit.
Partial Withdrawals or Partial Surrenders
A partial withdrawal of cash value is permitted in a Universal or a Variable Universal Life policy. A partial withdrawal is considered a partial surrender of the policy. A partial surrender is actually paid from the policy value and reduces both the amount of the death benefit or the amount of cash value in the policy. Since this is not considered a loan, annual interest is not charged. Taxable of loan exceed amount of premium.
The ______________ is the time period provided after the premium due date before a policy lapses
A premium mode B. Grace period C. automatic premium loan (APL) D. reinstatement period B.
On a variable universe life policy, what is the difference between the cash value and the cash surrender values
A the amount of any outstanding policy loan B. the surrender charge C. the investment performance D. the interest earned B. The difference between the cash values and the cash surrender values is a surrender charge, which provides an incentive for the policy owner to maintain a policy and allows for the insured to recoup any policy issues costs.
A viatical settlement is a contract between a life insurance policy owner, and a ___________
A viatical settlement broker B. life settlement dealer C. viatical settlement provider D. Life settlement broker C. A viatical settlement is an agreement between a viatical settlement provider and a life insurance policy owner. A viatical settlement broker may be involved in the transaction, but is not a party to the contract.
If jon dies with an outsanding policy loan of $10,000 on his $100k interest-sensitive whole life policy that has a chas value of $15k, what will the beneficiary receive at the time of the claim?
A. $100k B. $115k C. $90k D. $105k C. Cash values are not added onto death benefit, but absorbed by insurer. Outstanding loans are recovered before the death benefit is paid out.
Which of the following term life insurance policies have the lowest 1st year premium, all other factors equal.
A. 1-year B. 15-year C. 5-year D. 10-yr A. In essence one year of coverage is less risky for the insurer than being locked into more uears.
The mortality rate is based on mortality tables which show life expectancy and death rate per ________ people living in the US.
A. 100,000 B. 1,000 C. 100 D. 10,000 B. Mortality tables show death rate per 1,000 similar to how policy premiums are based on a rate per $1,000 of coverage.
All of the following statement regarding sources of underwriting are correct except:
A. A consumer investigative report may include a credit report B. The agent's report is confidential between producer and insurer C. A medical exam may be requested based on the amount of coverage being applied for D. The applicant may be denied coverage based solely in the MIB report D. The applicant may not be denied coverage based solely on the MIB. This report is used as an alert for the insurer to gather additional info and to help detect fraud.
A second to die policy would be besta for which of the following
A. A hubby and wife concerned about paying estate taces after they have died B. Two business partners who are concerned about the future success of the business C. A business owner who wants to make sure his wife has enough money to buy the business D. A corporation concerned the CEO might die A.
An application for insurance is completed and submitted to and insurance company. In order for coverage to be effective immediately, all of the following conditions must be met, except:
A. A medical exam is not required B. The initial premium is submitted with the application C. A conditional receipt is issued D. The policy is issued at a higher risk than the standard risk applied for. D. In order for coverage to be effective immediately, the policy must be issued as applied for, in this case is was applied for "standard" vs higher.
A producer is explaining the concept of limited-pay life insurance to a 40 yr old client. When comparing a straight life policy with a 10-pay life policy, which of the following statements is correct?
A. A policy is fully paid uo in 20 years will endow at the client's age Of 50 B. A 10-pay life policy will have a lower annual premium than a straight life C. A straight life policy has immediate cash value D. The cash value in a straight life policy will accumulate at a slower rate vs cash value of a 10-pay life policy D.
Which is a way to provide additional life insurance protection for a temporary period of time without having to acquire an additional Life insurance?
A. Add a term rider to a new or existing policy B. Choose desth benefit on a UL C. Buy joint life policy A.
This rider allows for the insured to obtain additional insurance in between the specified ages including marriage, birth or adoption of a child when the need for insurance coverage may increase without having to prove insurability. It is called the ________ rider:
A. Additional insurance protection B. Family C. Guaranteed Insurability D. Waiver of insurability C.
How long would a policy owner have tomoay premiums on a term life policy to age 65 that was taken out at the age of 35?
A. Age 65 B. Whenever the insured dies C. To the earlier of the insured's death or to age 65 D. 30 years. C.
_____________ is/are not considered material to the policy issuance.
A. Age and/or gender B. hazardous occupations and/or hobbies C. recent major inpatient hospital surgeries D. 12 driving under the influence tickets within six months prior to the application A. Age and/or gender are not considered material to the policy.
An applicant claims they have no hazardous hobbies but the agent sees a plaque proclaiming the applicant as president of a local skydiving club. The agent would need to include this info on the:
A. Agent's report B. APS report C. MIB report D. Inspection Report A. The agent's report is the vehicle ti report information obtained thru personal observation which may be material to the underwriting process.
Which term to a contract in which only one party is legally bound to constructual obligations after the premium is paid?
A. Aleatory contract B. Contract of adhesion C. Conditional contract D. Unilateral contract Unilateral is a one-sided contract.
HIPAA's Privacy Rules are implemented to:
A. Allow insurer to obtain investigative, medical, and financial reports to complete the underwriting process B. Protect the applicant evidence of insurability finding data collected on the initial sales appt C. Protect the privacy of all individually identifiable health information D. Require all insurers to perform testing for HIV C. HIPAA's prov rules require insurers to preserve and protect patient confidentiality when obtaining individually identifiable health information.
Which of the following best describes the return of premium rider!
A. An increasing term benefit that matches the cumulative premiums paid B. A benefit similar to waiver of premium but is free of charge C. An i creasing term benefit that matches the cash value D. A level term rider int he amount of 20 annual premiums. A.
Insurance contracts are aleatory contracts. What does aleatory refer to?
A. An unequal exchange of value B. Duties and conduct expected of the parties C. Ambiguity in policy D. A contract written by one party A.
A producer mist include their bame and address on which of the following?
A. Any policy amendment or rider B. And insurance policy's cover page C. A policy summary D. A buyers guide C.
All of the flowing become part is d the entire contract EXCEPT
A. Any riders B. Copy of the check C. Copy of the application D. The policy itself B.
Which of the following manufactures and sells insurance coverage in the form of insurance policies or contracts of insurance?
A. Applicants/insureds B. Insurance companies C. Insurance agents D. Insurance agencies
A "level term" policy means that the ________remains the same throughout the entire policy period.
A. Beneficiary B. Loan value C. Face amount D. Cash value C. The "death benefit" or fave amount of insurance remains level throughout the term of the policy. Term policies do not have cash values or loan value
Applicants must consent to be tested and be informed that testing for ___________ may determine insurability.
A. Blood alcohol B. Illegal drugs C. Nicotine D. HIV D. Applicant must consent to be tested for HIV and be informed for HIV may determine unsurability
By what means does the client acknowledge that an insurer may use services and info provided by third partied to gather information during the underwriting process?
A. By signing the check given to the producer for the modal premium B. By verbally acknowledging that the producer informed him:/her about the FFRA C. By signing the application D. By accepting a coo of the FCRA brochure from the producer C. The insurance company must meet requirements under the FCRA when gathering info from a third party. The signature on the application acknowledges that the applicant has been given required notice of information practices. The applicant has the right to request a copy of any prepared report from a reporting agency. Any inaccurate or incomplete info found in any report may be challenged by the applicant.
If after policy has been issues and delivered, the insurer discovers unanswered questions on the application, what can the insurer legally do at the this point?
A. Cancel the policy B. Nothing , the insurer has waived its rights to that information. C. Require the applicant/insured to answer the questions and re-underwrite the policy D. Increase the policy's premium B. If a policy is issued with an unanswered question, the contract will be interpreted as if the question had not been asked and therefore waived by the insurer.
If a medical exam is required as part of the underwriting process, who normally conducts the exam?
A. Chiropractor B. Producer's manager in the agency office C. A physician or nurse D. The producer C. Or even paramedics are the ones who cinduct medical exams.
On the day a newly issued policy was to be delivered and the initial premium collected, the producer discovers that the insured is in hospital w a heart condition pe ding surgery. What should the producer do?
A. Collect additional premium at time of delivery to reflect higher risk now facing B. Hold on To policy until insured is discharged and them deliver the policy C. Return the policy to insurer with a letter of explanation D. Deliver the policy to an immediate family member and collect the outstanding premium. C.
In a replacement sale all of the following are producer responsibilities EXCEPT
A. Complete a notice regarding replacement with the applicant and producer signatures. B. Reimburse the applicant for any surrender charges that may be insurer as a result of the transaction C. Obtain info regarding the in force policies including name and policy numbers D. Provide copies of the notice regarding replacemtn and sny sales proposals to the apllicant wnd replacing insurer
Each of the following is an element of a legal contract, except: "I"
A. Consideration B. Indemnify C. Legal Purpose D. Agreement B. The fourth element of a legal contract is a COMPETENT PARTY or someone that has the legal capacity to enter into a legal contract.
All of the following are essential elements of a legal contact, EXCEPT: "R"
A. Consideration B. Representation C. Competent Parties D. Legal Purpose
A federal regulation called the __________ protects the consumer privacy.
A. Consolidated Omnibus Budget Reconciliation Act B. Fraudulent insurance act C. Fair Credit Reporting Act D. Privacy Protection Act C. The FCRA protects consumer privacy by ensuring the data collected by companies on a person is confidential, accurate, relevant, and used for a proper purpose.
A client wants to Make sure they can have permanent life insurance policy several years from now when they can afford it without having to prove insurability. What feature should they have on their new term life insurance policy?
A. Convertibility B. Renewability C. Adjustability D. Flexibility A.
Upon receipt of all the necessary info, the home writing office underwriters can issue the coverage applied for in all of the following ways, EXCEPT:
A. Declined B. Substandard C. Preferred D. Standard A. Declined means the policy would not be issued.
Mutual insurance companies are owned by:
A. Directors B. Policy owners/policyholders C. Stockholders D. Beneficiary
Interest only, life income w period certain, lump sum, and life income only are Forms of which of these life insurance policy options:
A. Dividend Option B. Beneficiary options C. Settlement Options D. Nonforfeiture options C. How the beneficiary will receive the death benefits
In a policy summary all of the following must be shown as being guaranteed, EXCEPT
A. Dividends B. Premiums C. Cash values D. Interest rates A. Dividends are never guaranteed
Which of the following is an insurance company that is organized under the laws of a different state within the United States
A. Domestic B. Authorized C. Alien D. Foreign A foreign insurer is not organized under the laws of the state in which it is writing the insurance, whereas domestic insurer is organized under the laws of the state in which it is writing insurance.
________ are primarily social organizations that engage i. Charitable and benevolent activities consisting of members of a given faith, lodge, or order, and are usually organized as non-profits
A. Domestic Ins. Comp B. Mutual Ins comp C. Stock Ins comp D. Fraternal Benefits Societies D.
An Insurer which is formed under the laws of another country is a(n):
A. Domestic insurer B. Alien insurer C. Unauthorized insurer D. Foreign insurer B.
The MiB medical insurance bureau is formed by:
A. Employers B. The government C. Medical professionals D. Insurance companies D. The MIB is a member-owned corp that operates on a non-for-profit basis u. The US & Canada. The MiB underwriting services are used exclusively by MIB-member life and health ins comp to assess an individual's risk and eligibility during the underwriting of life, health, disability income, critical illness and long-term care ins policies
When the life insurance policy's cash value equals the face amount of the policy and the proceeds are paid to the policy owner, this is known as the policy's ___________.
A. Endowment B. Renewal C. Reinstatement D. Conversion A.
The difference betweeb Estate Creation and Estate Conservation is that
A. Estate creation results from the accumulation of cash value and estate conservation uses the dace amount B. Estate creations occurs when policy proceeds are paid to survivors. Estate conservation occurs when those proceed are used to pay estate taxes B. An estate is created every time a policy is bought, because the purchaser creates a pool of money that will be paid at death. Estate conservation assumes wealth has already been created during one's life and needs to be protected from tax and loans due to death of the insured.
What is the correct insurance term for a statement that is guaranteed to be true?
A. Fact B. Warranty C. Utmost good faith D. Representation B. Warranties are guaranteed to be true and Representations are statements made to the best of one's knowledge.
Information from a third party collected by the insurance company in the application for insurance and during underwriting of the policy may be subject to the jurisdiction of which of the following:
A. Fair Credit Reporting Act B. Unfair Claims Practice Act C. USA PATRIOT ACT D. HIPAA
Which principle states that an insured may be reimbursed up to the amount of the actual loss?
A. Fair claims settlement B. Insurable risk C. Indemnity D. Adhesion C. The Principle of Indemnity states the the insured should not profit from an insurance transaction, but should be restored in whole o in part to their prior condition
An insurer NOT authorized to do business within this state is considered what type of insurer?
A. Foreign B. Non-admitted C. Domestic D. Alien An insurer NOT authorized to do business is referred to non-admitted. Foreign, Domestic, Alien refer to where an insurer is domiciled. DOMICILE IS NOT THE SAME AS ADMITTANCE
A producer should do all of the following when meeting e the client after the policy has been issued, EXCEPT:
A. Go over the benefits and exclusions B. Disclose the smount of commission paid and earned on the sale C. Review any endorsements and riders D. Explain the policy to the applicant C. The producer should explain the policy to be sure the client understands the benefits, including any ratings, endorsements and *riders (*add-on coverage that ur policy doesn't cover)
Timothy is the insured/owner of a UL and is concerned that in the event of disability, the policy might lapse. Which rider would keep the policy from lapsing if he became disabled?
A. Guaranteed Insurability rider B. Return of premium rider C. Waiver of Cost of Insurance D. Waiver of premium rider C. Tim has a Ul which needs to have enough cash value in it in order to pay the monthly cost of Insurance. If he disabled the Waiver of Cost of Insurance will keep the policy in force.
If a client chooses to pay premiums other than annually, what can ye expect
A. Higher surrender charges on some policies B. Lower overall total premium costs C. Additional charges to offset the interest, earnings and increased administrative costs D. Better client service C.
Under the FCRA (Fair Credit Reporting Act) which of the statements are true?
A. If an individual is denied coverage, they can request a copy of the report B. The Act is designed to protect reporting agencies from the public C. The reporting company can provide confidential information to anyone requesting it D. The reporting agency has no responsibility to investigate inaccurate information. A. The FcRa is designed to protect the public and requires the reporting agency to investigate disputed information. The applicant has the right to request a copy of the report from the reporting agency. This act protects confidential information.
Interedt earned on oremiums paid to an insurer helps to ____________ the oremiums charged
A. Increase B. Standardize C. Stabilize D. Lower D. Interest earned on premiums assists in premium rate reduction
Which of the following products requires a producer to obtain a securities registration in addition to an insurance license to solicit?
A. Indexed Life B. Universal C. Current Assumption Whole Life D. Variable universal D. All variable products are subject to SEC regulation (securities & exchange commissions) and can only be sold by producers w a life ins license and a FINRA (securities) registration.
Which of the following provisions commence at the time of the delivery of the policy to the insured?
A. Insirinf clause B. mistakement of age or gender C. free look period D. suicide clause. C. The insured/owner has the rights to examine the policy for 10 days. This may vary by state after a receipt of delivery. If returned within that period, a full refund of premium is granted. It is the insurer's responsibility to prove date a receipt.
What is required to add a non-family member to a life insurance policy under a term rider?
A. Insurable interest B. The non-family commitment to pay the premium for the rider C. Permission of the producer D. The insured must be under the age of 40. A.
Viatical Settelment is an agreement between a thrid party and a(n)___________
A. Insurance agent representing the family of a terminally ill insured B. Terminally ill insured's spouse/children who do not want to wait until the insured dies C. Lender who owns the mortgage of terminally ill insured's home or business. D. Policyowner insuring the life of a terminally ill insured with 2 years or less of life. D.
Which of the following is NOT required to sign a completed application?
A. Insured/guardian B. Applicant C. Producer D. Beneficiary D.
Expense loading ____________ from company to company
A. Is higher B. Is lower C. Varies D. Is the same C. Expense loading is a cost area that can vary based on its operations and efficiency.
If a home office underwriter obtains MIB codes inconsistent with info provided on application, what is the underwriter required to do?
A. Issue the policy at a higher premium die to undisclosed higher risk B. Condict further investigation to obtain more info prior to making decision B. The underwriter is required to conduct further investigation. Underwriting decisions cannot be solely made based on MIB codes since there could an explantation
The State's ________branch enforces the existing statutes that have been put in place.
A. Judicial B. Legislative C. Electoral D. Executive
The ________ branch writes and passes state insurance laws, or statutes, to protect the insuring public.
A. Judicial B. Executive C. Electoral D. Legislative
Of the following, ehich best describes a Straight Whole Life Policy
A. Leveled guaranteed premium and face value (death benefit) for the life of the insured. B. Increasing premium and level death C. Decreasing face amount and level premiums D. Increasing cash value and decreasing premium. A.
Dividend options do not include which of the following:
A. Lifetime Income B. Reduce premiums due C. Paid-up additional insirance D. Reduce premiums due
M. Purchased a traditional permanent life insurance many years ago. What happens when he turns 100?
A. M received nothing B. M gets a refund of all premiums paid C. M gets a check for the face amount of the policy D. M gets a dividend check from the insurer. C. At this age the policy is said to endow/mature
Which of the following is most likely likely to oay the highest premium for a disability income policy, all othe factors being equal?
A. Male age 40 firefighter B. Female age 40 firefighter C. Male age 40 banker C. Female age 40 banker A. All things being equal, males have a higher mortality risk. The male with the higher risk occupation will Lost likely pay the highest premium.
A producer provided a conditional receipt to an applicant on May 5 at the time of application based on a standard risk. The insurer required a medical exam which was complete May 15. The policy was issued based on a substandard risk on May 20 and the producer delivered the policy on May 22. The effective date of coverage is:
A. May 22 B. May 5 C. May 20 D. May 15 A. Since the policy was not issued as applied for, coverage is not effective until the producer delivers the policy on May 23 and explains the changes in coverage or increased premium due to a substandard risk. The applicant must accept the counteroffer.
If X has life ins that is no longer wanted and wants to sell it how much will he recv if the premiums are $10k, cash value $200k and the face amount is $1m
A. More than $200k but less than $1m B. Less than $200k C. $200k D. Nothing cuz its illegal A. It's only illegal in some states and not in FL
When a producer received an application for life ins that is completed and signed, but without premium payment, when does coverage start?
A. On the date the medical exam us complete B. On the date the application received C. On the date the policy is delivered and premium is collected D. On the date the insurer mails the policy to the producer C. Coverage is not effective until both parties have provided the required consideration. Policy must be paid and premium collected. .
An insurable interest must exist between the _________ and the __________ at the time if application for life to be valid.
A. Owner/beneficiary B. Applicant /insured C. Insured/beneficiary D. Applicant/owner B. Applicant is same as owner
Part 2 of the application consists of all of the following information except for:
A. Past & present health B. Surgeries C. Date of birth, gender D. Hospitalizations C. Part 2 contains questions to medical background, past and present health, any medical visits, hospitalizations or surgeries in recent years, medical status or immediate family members, and age and cause of their death.
Medical exams are requested in all the following situations, except:
A. Past health history B. Low amount of premium C. High amounts of coverage D. Insured's advanced age B. Medical exams are usually requested by then insurer after determining of the amount of coverage ,age if applicant or their health history warrants the examination. Premium has nothing to do with it.
The grace period in a life insurance is typically 31 days and provides for the:
A. Payment of the premium to be received after its due date without a penalty or lapse in coverage B. policyowner to reinstate the policy before it lapses C. Payment of premium to be received after its due date D. Insurance company to delay payment. A.
In the even a parent becomes disabled or dies while paying premiums in a life insurance for a minor child, which provision would allow the policy to continue in force until the child reached a predetermined age?
A. Payor Benefit (Waver of Payor Premium) B. Return of Premium C. Cost of Premium Rider D. Minor child rider A. These cover children till the age of 21-25.
Term Life is primarily a _____________ form of life insurance protection.
A. Permanent B. Renewable C. Convertible D. Temporary D. Not all term insurance is renewable and/or convertible
The MIB obtains its information from which of the following?
A. Physicians B. Hospitals C. Insurers D. Producer's agencies C. The primary purpose of the MIB is to collect adverse medical information about an applicant's health that is known to insurers to which the applicant has previously applied for.
For life and health insurance, INSURABLE INTEREST must exist at the time of:
A. Policy Delivery B. Application and loss C. Application D. Loss C. Insurable interest in a life and health insurance contract must exist at time of APPLICATION
Dividends issued by Stock insurers are paid to:
A. Policy holders B. Directors C. Members D. Stockholders Stock insurers issue taxable corporate dividends to stockholders but not policyholders. Mutual insurers may issue dividends to policyholders.
If the insured becomes totally disabled, the company waives premiums for the duration of the disability if a ___________ is in force.
A. Premium payor benefit B. Waiver of premium rider C. Disability rider D. Paid up provision B.
Which of the following statements is true about Annual Renewable
A. Premiums are variable B. Premiums initially start out higher than comparable permanent cov and decrease as the insured's age increases C. The premium increases over time as the insureds age increases. D. Premiums are level over time C.
Which of the following is not true about Life Insurance applications?
A. Primary source of underwriting B. May contain all the necessary information to determine insurability C. Confidential info between agent and insurer D. Contains two parts: general information and Health History C. A copy pf the application will be included as part of the policy and is therefore not confidential
A(n) ______ is the person or entity that is covered by an insurance policy.
A. Producer B. Owner C. Insured D. Agency The insured is the person whose life is being used for insurability purposes for a life and/or health insurance policy
Dividends issued by mutual insurance companies:
A. Represent a share of company profits for stockholders C. Are considered guaranteed member benefits D. Are taxable to policyholders Since the policy holders also own the company, any policy dividends are being paid back to those who paid them in the first place; therefore, they are non-taxable refunds rather than taxable income.
The National Association of Insurance Commissioner (NAIC):
A. Requires each legislature to accept recommendations B. Has no legal authority over insurance regulation C. Enacts legislation and policy D. Requires only 30 Commissioners to be members at any time The NAIC does not have legal authority but promotes uniformity in the interpretation of insurance legislation and regulation
A policyowner who wishes to maintain all rights in the policy should designate a(n):
A. Revocable beneficiary B. Irrevocable beneficiary C. Primary beneficiary D. Contingent beneficiary A.
Individual Term policies are generally stand-alone policies l, but may be written woth other types of policies as a(n):
A. Rider B. Endorsement C. Dividend D. Bonus A. Through a rider, a term coverage may be added to a permanent policy. Generally term rider cannot be added to a term policy but some companies allow it to be added as a child rider, spouse rider or other insured rider.
In a UL, the min separation between the cash value and the desth benefit is called:
A. Risk corridor B. The cash value C. The MEC limit D. The earned interest A.
A personalized computer generated illustrations detailing premiums, cash values, interest rates and surrender values is called____
A. Sales literature B. A hypothetical C. An advertisement D. A policy summary D.
It is the __________ who issues a Certificate of Authority enabling an insurer to conduct insurance business within a particular state.
A. Secretary of State B. State legislature C. State Insurance Commissioner or Director D. State senate C. In order for an insurer to operate as an admitted or authorized insurer, the insurer must hold a Certificate of Authority issued by the state Insurance Commissioner, Superintendent or Director
Which of these modes (payment) would result in the insured paying the least annual outlay for life insurance?
A. Semi-annual payroll deduction B. Quarterly C. Annual D. Monthly automatic bank draft B. Paying premiums on an annual basis is always the least costly premium mode. Paying premiums monthly is usually the most expensive mode. Although some insurers may offer a discount for automatic monthly bank drafts, not all do, this not an acceptable choice. Note: payroll deduction is not a mode.
In a viatical settelment, the life insurance policyowner is referred to as the______
A. Settlor B. Viator C. Beneficiary D. Buyer B.
Which of the following is NOT a common rating classification?
A. Standard B. Substandard C. Preferred D. Subrated D. There are only three which are a, b, and c
A warranty is defined as which of the following?
A. Statement in the application that is guaranteed to be true B. A false statement in the application C. A substantially true statement D. Intentional misrepresentation A. A warranty is statement guaranteed true in all respects and if later discovered false, the contract may be voided
If it is known or should be known by the agent that an existing policy is going to be forfeited, lapsed, surrendered or terminated in favor of a new policy, the agent must submit a:
A. Statement release B. Notice if Conservation C. Notice Regarding Replacement D. Cancellation of Service C.
A ____________ insurance company is owned by its policyholders.
A. Stock B. Mutual C. Fraternal Benefits Society D. Reciprocal B. Its members, also called policyholders, own a mutual insurance company
Stock Insurance Companies are owned by:
A. Stockholders B. Members C. Policyholders D. Directors A.
A ____________ settlement is when a terminally ill insured sells his life insurance policy to a third party other than an insurance company for an amount less than the policy's death benefit, but greater its cash value.
A. Stranger originated B. Viatical C. Investor originated D. Senior B.
If a client is insure about whether ir not he can obtain coverage or how much it would cost, what can the producer suggest to see what the insurer can do without tying up any of the client's funds?
A. Submit a term life application B Issue a binding receipt C. Submit a whole life application D. Submit a trial application D. One submitted without a premium.
J is named in a policy as the individual who is entitled to receive the policy proceed upon the death of T. Which of the following statements best applies to this scenario:
A. T is the insured in the policy and J is the named beneficiary B. J is named as the owner of T's policy C. J is insured and beneficiary of the policy D. T is the owner and beneficiary of the policy A.
In a legal sense, premium functions as the insured's __________
A. Tender B. Fee C. Credit D. Consideration D. The premium paid by the insured represents their consideration—a required element of a legal contract.
For the most part, the highest authorityfor insirance regulation is;
A. The NAIC B. the individual states C. The Interdtate commerce commission (ICC) D. The Federal Trade Commission (FTC) B. States have the authority to regulate insurance without interference from federal regulation.
When an applicant completes the insurance application in its entirety and provides the producer w a premium check, what in effect has taken place
A. The applicant is accepting the producer's offer of coversge B. The applicant is making an offer to the insurer. B. When an application accompanies the initial premium, the applicant is making an offer to insurer. Before the acceptance can take place, an offer must first be made. The insurer accepts the offer when the policy is issued.
Which of the following statements about policy roles is TRUE?
A. The applicant, insured, and policyowner must approve any changed to a policy in writing B. The insured and the policyowner are usually the same but not necessarily C. The insured and policyowner are always the same D. Any changes to a policy must be approved by both the insured and policyowner in writing B. The applicant, insured, and owner might all be different parties. Policy changes are only required to be approved by the policyowner.
Tom submitted an application and a premium check. Six days later the insurer issues the policy as applied for and mails it overnight Tom's producer. Tom picks up at producers next day. When did Toms? coverage begin
A. The day the insurer mailed the policy B. The day tom submitted the application C. The day tom picked up the policy at producer office D. The day the insurer issued the policy B. Since issued as applied fir, the effective coverage date is the date of application
What is the net amount at risk in a whole life insurance policy?
A. The face amount minus any dividends paid B. the face amount plus the cash values C. the face amount of the policy D. The face amount less the cash values D. the net amount at risk to the insurer is the difference between the face amount and the cash values.
What is the net amount at risj in a Whole Life?
A. The face amount of the policy B. The face amount plus cash value C. The face less the cash value D. The face minus any dividends C. The net amount at risk to the insurer is the diff between face and the cash values
All of of the following are true of a substandard risk, EXCEPT:
A. The insured may be rated as older than their actual age B. The premium would be discounted C. The coverage could be reduced for a period of time D. The insured may have a flat additional premium added to their base premium. B. Individuals whose risk factors don not measure up to underwriting standards are usually issued rated policies.
A consumer ainvestigative areport in not complete by:
A. The insurer B. A third party provide C. A producer D. A company that regularly conducts inspection reports. C.
The HIV Consent form soecifies which type of individuals may receive___________.
A. The name of the medical lab used and lab work B. The amount snd type of policy applied for C. The rest results D. The underwriters decision
What is the primary advantage to the policy owner in the reinstatement of a life insurance policy?
A. The policyowner continues to enjoy the benefits that were provided in the original policy, including the original premium B. The insured is not required to prove insurability in under age of 40 C. The policy loans that were outstanding at the time of lapse are forgiven D. The insurance company cannot start a new period of contestability.
Which of the following statements is true?
A. To sell equity indexed insirance a producer only needs a securities license B. The insured/owner bears all risks regarding cash surrender value C. The interest credited to the policy is based off of the performance of a stock market index lome S&P500 D. The policyowner can decide which separate acct to invest the policy's cash value into. C.
A __________________ policy has a death benefit that will increase or decrease overtime based on the performance of the separate account, provides a guaranteed min death benefit, offers a choice of subaccounts in which cash value may be collected and has a fixed premium.
A. Universal Life B. Variable Life C. Variable Universal Life D. Indexed Life B. Only variable has all these characteristics. Variable Ul does not hve a guaranteed death benefit. Neither Indexed nor UL permits allocation of cash value in a separate account.
Policy loan provision include all of the following except:
A. Unpaid interest is added to the value of the loan B. Interest is charged annually C. The death benefit of a policy is automatically reduced when a loan is requested D. Outstanding loans will he deducted from the face amount at time of claim. C. Policy loans do not automatically reduce the death benefit. If an outstanding loan exists at the time of death, the amount of the loan will then reduce the benefit paid to the beneficiary.
Which of the following pays a current interest rate and also guarantees a min interest rate that will be credited to the cash values of the life insurance policy?
A. Variable Whole Life B. Universal Life C. Ordinary Whole Life D. Variable Universal Life B. Universal has a current interest rate which is generally higher than the guaranteed min interest rate. It depends on the interest rates that insurer can earn on the assets in its general account.
In a viatical settlement transaction, the policyowner is referred to as:
A. Viatee B. Provider C. Third party D. Viator D.
Which rider waives the cost of insurance and expenses if an insured becomes disabled?
A. Waiver of Monthly Deduction B. Accelerated Death Benefits B. The Waiver of Monthly Deduction will waive the cost of insurance and expenses if the insured becomes disabled. The payor benefit rider will waive the premiums if the owner of the policy (not the insured) becomes disabled; a return of premium rider will pay a refund of premiums and the accelerated death benefit rider will provide benefits if the insured is terminally ill.
A life insirance premium is paid each month. The insurer then substracts a mortality and expense charge from the policy's cash value. This best describes which if the following death benefits
A. Whole life B. Adjustable whole life C. Variable whole life D. Universal life D. All premiums paid to a UL are placed in the policy's cash value account. The mortality charge (cost of protection) and the expenses are then deducted from the cash value acct.
Which of the following best describes a conditional contract
A. Written by only one party B. The exchange of values may be unequal C. Only one party is legally bound to contractual obligations D. Both parties must perform specified duties in order for the contract to be enforced.
A life in policy is being applied for on Z's life. In order for the contract to be valide, all of the following have an insurable interest and could be the owner of the policy, except:
A. Z B. Z's neighbor C. Z's business partner D. Z's spouse B. Insurable interest is defined as having a relationship which would result in financial or economic loss if the insured dies. A neighbor is not an example of a party that meets this definition.
How would a term policy normally be used to pay off a mortgage upon death?
A. by using the policy's cash values B. using the death proceeds after the insured has died C. by using the policy as a collateral for a policy loan D. Thru a viatical or Life settlement B. Term can be used as a mortgage insurance, which typically provides a decreasing term benefit.
With a variable life policy, which of the following is guaranteed
A. cash value B. investment returns C. death benefit D. dividends C. In a variable life policy, a death benefit is guaranteed. As long as all premiums are paid on time there is both a guaranteed minimum death benefit and a higher stated face amount. The face amount and cash value are not guaranteed, and could be higher or lower than expected.
Which of the following statements regarding life insurance policy exclusions is true?
A. hazardous occupations are usually covered at a reduced benefit. If death is the result of an insurance occupation B. the status clause states that coverage is provided to individuals with military status. C. generally, aviation is excluded, except for fair paying passengers on a commercial flight D. the war clause states coverage is provided if death is the results of war. C.
The face amount of an ordinary, whole life policy ______________ over the life of the
A. increases B. remains the same C. Decreases D. varies B. The face amount is the same as the death benefit and is the amount payable to the beneficiary upon the insured's death. Over the life of the policy remains level.
Which of the following is false about the automatic, premium loan provision (APL)?
A. it is designed to prevent unintentional policy lapse B. For it to be included in the policy, there's an additional premium charge C. It is only available on Cash value policies D. the APL is treated like any other policy loan B. The automatic premium loan provision automatically becomes effective at the end of the grace period to prevent the policy from lapsing. There is no charge for having this provision and a cash value policy.
Albert owns a life insurance policy, insiring his son David. He wants a settlement option thought, if David were to die, would provide guaranteed payments to Albert and his wife, until both of them die. Alberts producer should recommend.
A. life income period certain B. life income joint & survivor C. fixed amount D. joint life B. Life income joint and survivor would provide Albert and his wife guaranteed payments until both of them are deceased.
The face amount of insurance is also referred to as the:
A. limit of liability B. Cash surrender value C. Cash value D. Maximum loan value
The cash received by the policy owner when he she terminated a policy is known as what?
A. paid-up insurance value, B. cash surrender value C. accrued premium value D. loan value B. The cash surrender value is a nonforfeiture option that allows the owner to withdraw the cash value upon the surrender of the policy.
K needs funds and needs to maintain a life insurance she has at the same time. Which of the following should K do with her traditional whole life policy?
A. take out a policy loan B. Elect the interest only settlement option C. make a cash surrender D. elect reduced paid-up insurance A. A policy loan may be made from a cash value policy once there is sufficient cash value to borrow against. In most policies, cash value must be made available to borrow against after three years.
Alice is the insured, Bill is a primary beneficiary, and Clare is a contingent beneficiary. Bill dies, then Alice dies, so who receives the policy proceeds.
A. the treasury of the state, where Alice lives B. Claire C. Alice's estate D. Bill B. Since Claire outlived bill and Alice, then Clare is next in line to receive the policy proceeds
B's policy had a $1000 annual income. He has not paid it for two years and wants to put the policy back in force. The insure charges 10% interest on overdue premiums. What does B have to pay in order to reinstate their policy
A. two years of premiums plus interest due on overdue premium amounts B. two years of premiums C. one months, premium plus a reinstatement fee specified in the policy D. 2 years of premiums, a reinstatement fee and interest A. In order to reinstate the policy, the insured must provide evidence of insurability, and the owner must pay back all premiums from the date of lapse plus interest. This means B needs to pay two years of unpaid premiums plus the interest charge for overdue premiums. There's no additional reinstatement fee needed
Agreement (Offer and Acceptance)
An offer is made when the applicant submits an application for insurance with initial premium to the insurer. The offer is accepted after it has been approved by the insurer A legal contract requires an agreement, which includes the offer by insured:applicant and acceptance by insurer
Aleatory Contract
Based on the uncertainty of a loss, there will likely be an unequal exchange of consideration by either party
Conditional Contract
Both parties must perform certain duties and follow rules of conduct to make the contract enforceable.
The net amount at risk in an Ordinary Whole Life insurance policy _____________ over the life of the policy
Decreases
Consideration Clause
Exchange of value. The part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments. This make the contract binding. The insurer's exchange is the promise to indemnify in the event of a loss.
A cliente wants coverage for himself. Spuse and children all under one policy at an affordable price. Whoch of the following?
Family rider Not family maintenance, not family income. Only plain family rider.
How many essential elements for a legal contract to be enforceable?
Four type of ESSENTIAL ELEMENTS for a legal contract to be enforceable: 1. Competent Parties 2. Legal Purpose 3. agreement (offer and acceptance) 4. Consideration
Binding Receipt
Given by a company upon an applicant's first premium payment. The policy, if approved, becomes effective from the date of the receipt. Usually not allowable in connection to the sale of Life Insurance
Conditional Receipt
Given to the policy owners when they pay a premium at time of application. The receipt provides that coverage will become effective as of either the date of application or date of completion of any required exam, whichever is later. Ex. A producer provided a conditional receipt to an applicant on May 5th at the time of an application. The insurer required a medical exam and was completed May 15th. The policy was issued on standard risk on Mon 20th and the producer hand-delivered Mon may 22. The effective date in this case is May 15th.
A STOLI/IOLI transaction is best defined as which:
Inducing insureds who do not need and cannot afford life insurance to buy a policy and sell it for cash. Legal in Florida
The incontestability clause states that after 2 years the:
Insurer will not refuse to pay a death claim based on misinformation in the original application for insurance.
The difference between a misrepresentation and material misrepresentation is:
Material representation are issue that affect a policu issuance
Warranties
Material state/ in the application or stipulations in the policy that are guaranteed true in all aspects
Members of the _____________ include state and territorial insurance commissioners or regulators
National Association of Insurance Commissioners (NAIC)
Contract of Adhesion
One party, the insurer, prepares the contract and it is not negotiable
Unilateral Contract
Only one party, the insurer, is legally bound to the contractual obligations
What should a porducer do if the policy applide for is issued at a higher rate than expected?
Personally deliver the policy, explain the rating, reinforce the value of the policy and collect the additional premium.
Policy Loan Rate Provisions
Policy loans with fixed rates can have a maximum fixed interest rate of 8% or less as stated in the policy. For policy loans with an adjustable (variable) interest rate, the maximum rate is based upon Moody's corporate bond yield average and is stated in the policy. The policy loan amount cannot exceed the available cash surrender value.
A long-term care rider:
Provides up to 100% of the policy benefits if the insured qualifies for long-term care benefits as defined in the rider, such as the inability to perform 2 out of 6 activities of daily living. Any payout is an acceleration of the life insurance death benefit, meaning it will reduce the ultimate death benefit payable to the beneficiary. The amount of protection is determined at the time of policy purchase. Long-term care benefits are paid income tax free after the insured meets the qualifying requirements. B. Pays 25% of the death benefit as monthly income for an insured who cannot perform all 6 activities of daily living C. Provides an amount equal to the death benefit plus any cash value to a terminally ill insured expected to die within the next 6 months A.
If after meeting with a client, a producer returns to agency office and notices unanswered questions, what us the best course?
Return the application back to applicant for completion prior to submission Any unanswered questions need to be answered before policy is issued.
In a STOLI/IOLI what are the insureds basically doing?
Selling their mortality for up-front cash
Representations
Statements on the application that are substantially true, or believed to be true, to the best of the applicant's knowledge at the time of application
Legal purpose is a term used in contract law meaning
There must be legal reasons for entering a contract. Since an insurable interest must exist between applicant and insured, a contract must be issued in good faith that the owner is not looking to gain from a loss (arson or murder)
Insurable Interest
The relationship that must exist at the time of application in which a potential for financial hardship exists in the event of a loss
Class or Classification (Beneficiary Designation)
This designation is used in instances where each beneficiary is not directly identified by name. The wording of the class designation must be specific and carefully worded to remove any doubt of the owner's/insured's intentions. For example, "any children of this marriage", or "the insured's spouse" may be classified as beneficiaries. This could cause complications if the insured has step children or has been married more than once.
Individual/Named (Beneficiary Designation)
This designation is very specific. An individual is specified by name as the beneficiary, such as Mary Doe (wife) or John Doe (husband). This prevents probate proceedings.
competent parties (contract)
Those entering into the contract must be of legal age and must be mentally competent
Difference between life and viatical settlements
Viatical Settements allow the policy owner to sell their policy for cash if you are diagnosed w a terminal illness (2 year life expectancy) Life is sold by healthy seniors over age of 75.
An applicant completes the application and submits it to the insurer along with a premium check. When is the applicant's offer considered accepted?
When the insurer issues a policy
Life Settlement
a financial transaction by which a policyholder who no longer needs or wants to keep a life insurance policy sells the policy to a third party for more than its cash value
Minors (Beneficiary Designation)
if minors are named as beneficiaries, but no trust has been established, the funds are placed in a settlement option with the insurer acting as trustee - the guardian or legally responsible adult may receive payments for the benefit of the child, until the child receives the lump sum at the age of majority
Trial Application
is one submitted without a premium. The policy would not take effect until the policy is issued by the insurer, delivered by the agent and the premium is paid
Irrevocable Beneficiary
one that cannot be changed without the beneficiary's consent
Corridor of Insurance
protection to keep the policy from endowing due to cash value increasing at a faster rate (due to increasing market interest rates)
Revocable Beneficiary
the policyowner reserves the right to change the beneficiary designation without the beneficiary's consent
Viatical Settlement
the sale of a life insurance policy by a terminally ill insured to another party, typically to investors or investor groups, who hope to profit by the insured's early death
Surrenders
when a policy owner surrenders a policy for cash value, some of the cash value received may be taxable as income if the cash surrender value exceeds the amount of the premiums paid for the policy.