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 application 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 [Show More]
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