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42 Cards in this Set

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  • Back
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An Agent's authority as it is defined in the agent's contract is know as:
Express Authority.
A marketing a distribution method characterized by agents collecting premiums in customer homes on a regular basis is which of the following?
A. Home Service
B. Industrial
C. Debit or MDO (MonthlyDebitOrdinary)
D. Any of the above
Insurance Company A is a stock life insurance company, which means:
The company has sold shares of stock to investors.
For misrepresentation on the part of an applicant to have occurred, generally the applicant must:
Have an intent to defraud the insurance company.
Because the terms of an insurance policy are prepared by The insurer and are offered to the prospect on a "take it or leave it" basis, and insurance contract is viewed as what type of contract?
Contract of Adhesion.
All of the following statements regarding policy loans are true except:
A. the policy owner may never borrow more than the policy cash value.
B. the policy cash value serves as collateral for the loan.
C. the interest on a policy loan is usually paid annually.
D. the right to a policy loan applies to term and permanent insurance policies.
D. the right to a policy loan applies to term and permanent insurance policies.
According to the principle of insurable interest:
I. the policy owner must benefit by the insured continuing to live.
II. each person has an unlimited insurable interest in his or her own life.
III. an individual may purchase a policy covering the life of any blood relative.
Both I & II
The applicant's offer to the insurance company is not complete until:
the application has been submitted and the initial premium has been paid.
All of the following statements regarding term insurance are true, except:
A. the policy provides temporary insurance protection.
B. benefits are payable only if death occurs within the stipulated term.
C. term insurance provides pure insurance protection.
D. the term policy builds cash values.
D is the correct answer. A term policy does not build cash value because when the term of the policy ends it expires without value and all protection ends.
What type of insurance company might typically issue participating life insurance policies?
Mutual insurers
What policy provision prevents the company from denying coverage after a specified period has passed?
Incontestable Clause
A certain type of annuity guarantees a fixed rate of return for a specified period of time provided the buyer hold the annuity for the entire period. However, if the owner surrenders or makes a withdrawal from the annuity before the period is completed, a different rate of interest will apply, at the insurer's option. What type of annuity is this?
Market Value Adjusted Annuity
What is another term used for Market Value Adjusted Annuity?
Modified Guaranteed Annuity.
All of the following statement regarding credit life insurance are true, except:
A. credit life insurance may be written on either and individual or group basis.
B. this insurance is often written in connection with automobile loans.
C. group credit life insurance does not build cash values.
D. group credit insurance must have a suicide clause and a misstatement of age clause.
D is the correct answer because a suicide clause is usually inserted into a policy when issued on a mortgage loan and the misstatement of one's age makes no difference because the initial rate is usually based on the indebtedness and not a person's age.
With a straight whole life policy, the amount of pure insurance protection:
A. increases annually in step with the cash value increases.
B. decreases annually while the cash value increases.
C. varies according to the insured's health.
D. remains constant.
B is the correct answer because cash value increases while the pure aspect of the insurance decreases.
What is the federal law that forbids a person from misappropriating money in regard to the business of insurance affecting interstate commerce, and establishes certain penalties that include fines and/or imprisonment?
Fraud and False Statements U.S.C.§1033,1034
With the automatic loan provision:
I. the insurer may use the policy's cash value to pay any past due premium.
II. the policy owner must elect this provision and pay an additional premium charge when the election is made.
III. the policy owner can restore the original policy status by repaying the amount owed.
The correct answer is I & and III because this is considered automatic if this is a feature of the policy and if the policy owner pays the back premium, with interest, he can bring the status of the policy back to it's full status.
Characteristics of 401(k) plans include the following:
I. Contributions are made with before-tax dollars.
II. Sole proprietors and partners may participate.
III. Employers contributions are tax-deductible.
I, II, and III are all correct statements regarding a 401(k).
With a modified whole life insurance policy:
I. the premium is lower than that for a term policy in the first years of the policy.
II. the premium remains at a lower rate for a period usually of three to five years.
III. the premium increases to a rate higher than the rate for straight whole life at the end of the three to five years period.
II & III are the correct answers because whole life is level premium insurance for life with a cash value. This type of modified premium insurance is good for those who expect to be able to afford the increased premium level (the amount over what would have been charged in a non-modified policy)in three to five years but are unable to afford those premiums now nor are they able to afford the the premiums of straight whole life in the un-modified form.
Which of these statements describes a life insurance contract deemed by the IRS to be designed primarily as a tax-favored investment rather than as a death protection?
I. It is termed a modified endowment contract.
II. It generally fails to meet the IRS-defined seven-pay test.
III. It is subject to different tax treatments than a conventionally life insurance contract.
I, II, and III all apply.
Which statement is correct about a family policy of life insurance?
I. The entire family is insured under a single contract.
II. The policy premium is based on the average age of the parents.
III. The term insurance covering the children is convertible to permanent insurance without evidence of insurability.
I. and III. are the accepted answers. II is not correct because the policy premium is based on the age of the primary earner of the household and the spouse and children have term insurance.
All of the following are true of annuities except:
A. an annuity typically contains a beneficiary designation.
B. the annuity owner is always the annuitant.
C. an annuity typically provides a death benefit.
D. the annuity payout is determined by the settlement option chosen.
B is not necessarily true of an annuity in that an annuity can be purchased by one person for someone else.
What percentage of eligible employees must participate in a company contributory group plan?
75% of eligible participants must choose to participate in order for the insurer to not be subject to adverse selection.
The feature in many term insurance policies that allows an insured to renew at a more favorable rate than just the attained age rate by demonstrating insurability is known as which of the following?
A. The renewability option
B. The conversion feature
C. The mortality factor
D. The re-entry feature
D is the correct answer which allows an insured to renew a term policy based not only on attained age, but on insurability factors as well. A health exam may be required.
Making false, derogatory or maliciously critical statements in any form with the intention to injure any person or company is the definition of what?
Defamation
Committing any of these three acts intentionally with the purpose of or resulting in unreasonable restraint of or monopoly in the insurance business is the definition of what?
boycott, coercion, and/or intimidation
3 terms apply to this definition.
Making any unfair distinction between individuals of the same class and risk solely on the basis of sex, race, color, creed, national origin, disability (and any other factors specified in the insurance code) in determining premium rates or in providing any benefits or dividends payable under the policy is the definition of what?
Unfair discrimination
Making any false, deceptive or misleading statement or omitting any material facts from any type of advertisement for insurance (including newspapers, magazines or any other publication such as posters, pamphlets, letters, circulars, notices, billboards), or over any radio or television outlet, or any other means is the definition of what?
false advertising
Which of the following is/are true regarding the level premium concept?
A. The level premium charged is more than required to meet death claims in the early years.
B. The level premium charged is less than required in the later years to meet death claims.
C. Both A and B
D. Neither A nor B
the answer is C.
Level Term Insurance provides that premiums and amount of coverage remain the same over the duration of the policy. True or False
True
Under a decreasing term policy:
I. the face amount decreases annually.
II. the premium payment decreases annually.
Only I is correct in this instance. Typically, the premium would remain level even though the amount of coverage is reduced over a period of time.
When a straight term policy expires, what advantages to the expiration remain?
None. A straight term policy expires automatically if the insured is living when the term period ends.
Renewable Term policies require the insured to submit to a health exam before the policy will be renewed. True or False
False.
Renewable Term Policies are renewable at the option of the insurer and/or the insured?
Insured.
Renewable term policies are usually renewable to what age?
65
What happens to the premiums of a renewable term policy upon reentry?

Based on what?
The premiums will rise based on the insured attained age.
Convertibility allows an insured to convert a term policy to a whole life policy without evidence of insurability. True or False?
True
A convertible term policy permits an insured to convert the term policy into a permanent policy:
A. upon showing appropriate evidence of insurability.
B. without regard to insurability.
B.
If a term policy is converted into a whole life policy, the premium may be adjusted based on the insured's:
A. attained age.
B. original age.
A and B are both correct although, most companies base the new policy premium on the attained age.
What three characteristics separate whole life insurance from term life insurance?
1. Whole life insurance provides permanent death protection.
2. Premiums are generally payable for as long as the insured remains alive.
3. A whole life policy accumulates a cash value.
At what age does a whole life insurance policy endow?
100
Assume that Mindy purchases a whole life policy at age 35 for an annual premium of $325. At age 65, the cost of providing the pure insurance protection for an equivalent face amount is $620. Mindy's premium for the whole life policy at age 65 will be:
A. $325 B. $620
A. $325