At what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act? - ANSWER-Upon completion of the
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Who elects the governing body of a mutual insurance company? - ANSWER-policyholders
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the - ANSWER-Fair Credit Reporting Act
What type of reinsurance contract involves two companies automatically sharing their risk exposure? - ANSWER-Treaty
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called - ANSWER-reserves
Which of the following requires insurers to disclose when an applicant's consumer or credit history is being investigated - ANSWER-1970 - Fair Credit Reporting Act
What is the consideration given by an insurer in the Consideration clause of a life policy? - ANSWER-Promise to pay a death benefit
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have - ANSWER-insurable interest in the proposed insured
Statements made on an insurance application that are believed to be true to the best of the applicant's knowledge are called - ANSWER-representations
The part of a life insurance policy guaranteed to be true is called a(n) - ANSWER-warranty
Which of these is NOT a type of agent authority?
Express
Implied
Principal
Apparent - ANSWER-Principal
The Consideration clause of an insurance contract includes - ANSWER-the schedule and amount of premium payments
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E's life insurance policy be directed to? - ANSWER-In this situation, the proceeds from E's life insurance policy will go to F.
Which of the following terms defines the legally enforceable promise in an insurance contract by the insurer? - ANSWER-Unilateral
When must insurable interest exist for a life insurance contract to be valid? - ANSWER-Inception of the contract
Insurance contracts are known as ____ because certain future conditions or acts must occur before any claims can be paid. - ANSWER-conditional
Which of these require an offer, acceptance, and consideration? - ANSWER-Contract
Which of these arrangements allows one to bypass insurable interest laws? - ANSWER-Investor-Originated Life Insurance
Investor-originated life insurance (or IOLI), sometimes called stranger-originated life insurance (or STOLI) is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.
Which of these is NOT considered to be an element of an insurance contract?
the offer
acceptance
negotiating
consideration - ANSWER-negotiating
An agent is an individual that represents whom? - ANSWER-Insurer
Insurable interest must exist at what time? - ANSWER-at the time of application
Which policy requires an agent to register with the National Association of Securities Dealers (NASD) before selling? - ANSWER-Variable Life
Which of the following actions require a policy owner to provide proof of insurability in an Adjustable Life policy? - ANSWER-increase face amount
When a policy owner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply? - ANSWER-Conversion provision
What type of life insurance are credit policies issued as? - ANSWER-Term
How long does the coverage normally remain on a limited-pay life policy? - ANSWER-age 100
All of these statements about Equity Indexed Life Insurance are correct EXCEPT
Cash value has a minimum rate of accumulation
If the gain on the index goes beyond the policy's minimum rate of return, the cash value will mirror that of the index
The premiums can be lowered or raised, based on investment performance
Tied to an equity index such as the S&P 500 - ANSWER-The premiums can be lowered or raised, based on investment performance
Which of these is an element of a Variable Life policy? - ANSWER-A fixed, level premium
What type of life insurance incorporates flexible premiums and an adjustable death benefit? - ANSWER-Universal Life
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase? - ANSWER-Ten-Year Endowment
What type of life policy covers 2 lives and pays the face amount after the first one dies? - ANSWER-Joint Life Policy
Life insurance that covers an insured's whole life with level premiums paid over a limited time is called - ANSWER-Limited-Pay Life
What kind of life insurance product covers children under their parent's policy? - ANSWER-Term rider
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment
Policyowner has no say where the investment will go but can choose the premium mode
The investment vehicle for this type of policy is held in the insurer's general portfolio
The death benefit can vary but the policyowner has no say in the premium amount paid - ANSWER-Policyowner controls where the investment will go and selects the amount of the premium payment
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase? - ANSWER-Family Maintenance policy
Which of the following statements about a Variable Whole Life policy is CORRECT?
It provides a minimum guaranteed Death benefit
It is a combination of a Limited Period Endowment and a Decreasing Term policy
Its premiums and benefits are variable
It has a guaranteed rate of return - ANSWER-It provides a minimum guaranteed Death benefit
Credit Life insurance is - ANSWER-issued in an amount not to exceed the amount of the loan
The amount of coverage on a group credit life policy is limited to - ANSWER-the insured's total loan value
Term insurance has which of the following characteristics? - ANSWER-Expires at the end of the policy period
What does a Face Amount Plus Cash Value Policy supposed to pay at the insured's death? - ANSWER-Face amount plus the policy's cash value
A life policy with a death benefit that can fluctuate according to the performance of its underlying investment portfolio is referred to as - ANSWER-Variable Life
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this? - ANSWER-Modified Whole Life
Which of these life products is NOT considered interest-sensitive? - ANSWER-Modified Whole Life
What type of life policy covers two people and pays upon the death of the last insured? - ANSWER-Survivorship
Which is true concerning a Variable Universal Life policy? - ANSWER-Policyowner controls where the investment will go and selects the amount of the premium payment
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this? - ANSWER-Renewable
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed? - ANSWER-Decreasing term policy
G purchased a Family Income policy at age 40, The policy has a 20-year rider period. If G were to die at age 50, how long would G's family receive an income? - ANSWER-10 years
The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is - ANSWER-the cost
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT - ANSWER-beneficiary's age
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n) - ANSWER-exclusions
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
Requires that a new policy must be applied for if a misstatement of age is found on the current policy
Misstatement of Age provision is valid only during the contestable period
Insurer may void the policy if a misstatement of age is discovered - ANSWER-Coverage will be adjusted to reflect the insured's true age if a misstatement of age is discovered
Which of these is NOT considered to be a right given to a policyowner? - ANSWER-Modify a provision in the insurance contract
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions? - ANSWER-Reinstatement provision
T took out a $50,000 life insurance policy with an Accidental Death and Dismemberment rider. Five years later, T commits suicide. How much will the insurer pay? - ANSWER-50,000
D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive? - ANSWER-The full face amount
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Coverage can be added at specific events such as marriage or having a child
Evidence of insurability is not required when the option is exercised
Evidence of insurability is required when the option is exercised
Coverage can be added at specific ages - ANSWER-Evidence of insurability is required when the option is exercised
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period? - ANSWER-Full face amount minus any past due premiums
Which of these are NOT an example of a Nonforfeiture option?
Extended Term
Reduced Paid-up
Cash Surrender
Life Income - ANSWER-life income
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the - ANSWER-Policy Loan provision
The Consideration clause in a life insurance contract contains what pertinent information? - ANSWER-Amount of premium payments and when they are due
What does the insuring agreement in a Life insurance contract establish? - ANSWER-An insurer's basic promise
A young, married teacher has two children and owns a Whole Life policy. If the teacher wants an increasing Death Benefit to protect against inflation, the teacher should select which of the following Dividend Options? - ANSWER-Paid-Up Additional Insurance
Which of the following statements is CORRECT about accumulated interest earned on dividends from an insurance policy? - ANSWER-It is taxed as ordinary income
When can a policyowner change a revocable beneficiary? - ANSWER-anytime
K has a life insurance policy where her husband is beneficiary and her daughter is contingent beneficiary. Under the Common Disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed? - ANSWER-daughter
M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son? - ANSWER-revocable
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true? - ANSWER-Proceeds will be paid to P's estate
Which statement regarding the Change of Beneficiary provision is true? - ANSWER-The policyowner can change the beneficiary
A policyowner's rights are limited under which beneficiary designation? - ANSWER-Irrevocable
What is the underlying concept regarding level premiums? - ANSWER-The early years are charged more than what is needed
A level premium indicates - ANSWER-the premium is fixed for the entire duration of the contract
On a life insurance policy, who is qualified to change the beneficiary designation? - ANSWER-Policyowner
J chooses a monthly premium payment mode on his Whole Life insurance policy. Which of these statements is correct?
The gross premium is higher on a monthly payment mode as compared to being paid annually
The gross premium is lower on a monthly payment mode as compared to being paid annually
The cash value from a life policy paid on a monthly basis builds quicker than one paid on an annual basis
The face amount of a life policy paid on a monthly basis is higher than one paid on an annual basis - ANSWER-The gross premium is higher on a monthly payment mode as compared to being paid annually
An incomplete life insurance application submitted to an insurer will result in which of these actions? - ANSWER-Application will be returned to the writing agent
At what time must a policyowner have insurable interest on the insured in order for the life policy to be valid? - ANSWER-At the time of application
Any changes made on an insurance application requires the initials of whom? - ANSWER-Applicant
An underwriter determines that an applicant's risk should be recategorized due to a health issue. This policy may be issued with a(n) - ANSWER-exclusion for the medical condition
In order for coverage on a non-medical insurance application to take effect the same day, the producer must collect a signed application and - ANSWER-the initial premium
Why is an applicant's signature required on a life insurance application? - ANSWER-To attest that the statements on the application are accurate to the best of the applicant's knowledge
Which of these factors do NOT play a role in the underwriting of a life insurance policy?
Avocations
Credit status
Marital status
Occupation - ANSWER-marital status
Before a life insurance policy is issued, which of these components of the contract is required? - ANSWER-Applicant's signature on application
An insurance company may NOT reject a prospective insured's life application on the basis of which of the following factors?
Height
Weight
Gender
Medical history - ANSWER-gender
P completes an application for a $10,000 life policy, but does not give the producer the initial premium. P's coverage becomes effective when - ANSWER-P receives the policy and pays the premium
What type of group plan involves employees sharing the cost? - ANSWER-contributory plan
A noncontributory group term life plan is characterized by - ANSWER-the entire cost of the plan is paid for by the employer
Under a trustee group life policy, who would be eligible for a certificate of coverage? - ANSWER-Employee
Which provision is NOT a requirement in a group life policy? - ANSWER-Accidental
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have? - ANSWER-Contributory
W is a 39-year old female who just purchased an annuity to provide income for life starting at age 60. All of these would be acceptable annuity choices EXCEPT a(n)
Flexible Premium Deferred annuity
Variable annuity
Immediate annuity
Straight Life annuity - ANSWER-Immediate annuity
T has an annuity that guarantees an income payment for the rest of his life. The contract also guarantees that if T dies before receiving payments for 20 years, the remaining payments will be paid to his son for the balance of the 20 years. What type of annuity is this? - ANSWER-Life Annuity with Period Certain
Which of these is an element of a Single Premium annuity? - ANSWER-Lump-sum payment [Show Less]