All of the following are duties and responsibilities of producers at the time of application EXCEPT
A - Change any incorrect statement on the
... [Show More] application by personally initialing next to the corrected statement.
B - Explain the nature and type of any receipt the producer is giving to the applicant.
C - Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information.
D - Check to make sure that there are no unanswered questions on the application.
A - Change any incorrect statement on the application by personally initialing next to the corrected statement.
Any changes to information on an application must be initialed by the applicant.
Which of the following is NOT among the accounts that the Life and Disability Insurance Guaranty Fund maintains?
A - Annuity account
B - Group insurance account
C - Disability insurance account
D - Life insurance account
B - Group insurance account
The Fund maintains the following 3 accounts: the disability insurance account, the life insurance account, and the annuity account.
The Medical Information Bureau (MIB) was created to protect
A - Insureds from unreasonable underwriting requirements by the insurance companies.
B - Medical examiners that perform insurance physical examinations.
C - Insurance companies from adverse selection by high risk persons.
D - Insurance departments from lawsuits by policyowners.
C - Insurance companies from adverse selection by high risk persons.
The MIB makes information available to underwriters to assist them in the underwriting process. It is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals.
Which of the following premium modes would result in the highest annual cost for an insurance policy?
A - Monthly
B - Quarterly
C - Semi-annual
D - Annual
A - Monthly
If the policyowner chooses to pay the premium more frequently than annually, there will be an additional charge (loading) because the company will not have the premium to invest for a full year, and the company will have additional expenses in billing the premium.
Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?
A - Effect of inflation on income over time.
B - Predicted needs of the family after the insured's death.
C - Insured's current and future income.
D - Insured's annual expenses.
B - Predicted needs of the family after the insured's death.
The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach.
Which is generally true regarding insureds who have been classified as preferred risks?
A - They can decide when to pay their monthly premiums.
B - They keep a higher percentage of any interest earned on their policies.
C - Their premiums are lower.
D - They can borrow higher amounts off of their policies.
C - Their premiums are lower.
The preferred risk classification indicates that an insured is in excellent physical condition and employs healthy lifestyles and habits. These individuals qualify for lower premiums than those in the other categories.
Who makes up the Medical Information Bureau?
A - Former insured
B - Physicians and paramedics
C - Insurers
D - Hospitals
C - Insurers
The Medical Information Bureau is made up of insurers so the companies can compare the information they have collected on a potential insured with information other insurers may have discovered.
An insured receives a monthly summary for his life insurance policy. He notices that the cash value of the policy is significantly lower this month than it was last month. What type of policy does the insured have?
A - Term
B - Securities
C - Stock
D - Variable
D - Variable
Variable life policies vary in value, as the name suggests, because the value is based on the stocks that support the policy. If a policyholder wants a more stable, reliable value, he/she should invest in a fixed policy.
An insurer neglected to provide a buyer's guide to a customer at the time of application. Which of the following will happen as a result?
A - The applicant's first premium will be waived.
B - A free-look period of 15 days will be granted.
C - The policy will be terminated.
D - The insurer will be granted 30 additional days to provide these documents.
B - A free-look period of 15 days will be granted.
If the buyer's guide and disclosure document are not provided at the time of application, a free-look period of at least 15 days applies.
At times, it is possible for a life insurance agent to affect a savings of premium rates by backdating an application for life insurance. What is the maximum amount of time that an application may be backdated?
A - One year
B - It is not allowed.
C - It varies from insurer to insurer.
D - 6 months
D - 6 months
No policy in this state can take effect more than 6 months prior to the original application date, therefore allowing an agent to backdate a policy applicant's age if his/her birthday was less than 6 months ago.
An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)
A - Attending Physician Statement.
B - Inspection report.
C - Medical Information Bureau report.
D - Medical examination.
B - Inspection report.
An inspection report may be ordered about an applicant from an independent investigating firm or credit agency. It is a general report of the applicant's finances, character, work, hobbies, and habits.
Who is the owner and who is the beneficiary on a Key Person Life Insurance policy?
A - The employer is the owner and the key employee is the beneficiary.
B - The key employee is the owner and beneficiary.
C - The key employee is the owner and the employer is the beneficiary.
D - The employer is the owner and beneficiary.
D - The employer is the owner and beneficiary.
With the key-person coverage, the business (the employer) is the applicant, owner, premium payer, and beneficiary.
What is the purpose of key person insurance?
A - To maintain an account that insures the owner of a company remains solvent
B - To lessen the risk of financial loss because of the death of a key employee
C - To provide health insurance to the families of key employees
D - To insure retirement benefits are available to all key employees
B - To lessen the risk of financial loss because of the death of a key employee
A business can suffer a financial loss because of the premature death of a key employee that has specialized knowledge, skills or business contacts. A business can lessen the risk of such loss by the use of key person insurance.
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?
A - As of the policy delivery date
B - As of the first of the month after the policy issue
C - As of the policy issue date
D - As of the application date
D - As of the application date
If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application.
What does "liquidity" refer to in a life insurance policy?
A - The policyowner receives dividend checks each year.
B - The insured is receiving payments each month in retirement.
C - Cash values can be borrowed at any time.
D - The death benefit replaces the assets that would have accumulated if the insured had not died.
C - Cash values can be borrowed at any time.
Liquidity in life insurance refers to availability of cash to the insured through cash values.
An insurer has placed a notice on its advertising stating that its policies are protected by the Life and Disability Insurance Guaranty Fund. This practice is
A - Optional: each insurer makes its own decision about this.
B - Illegal: insurers cannot advertise protection by the Fund.
C - Legal: applicants have the right to know about policy guarantees.
D - Required by the Life and Disability Insurance Guaranty Fund.
B - Illegal: insurers cannot advertise protection by the Fund.
Stating that an insurer's policies are guaranteed by the existence of the Life and Disability Guaranty Fund is an unfair trade practice. [Show Less]