Life Insurance

Front 1

An Agent's authority as it is defined in the agent's contract is know as:

Back 1

Express Authority.

Front 2

A marketing a distribution method characterized by agents collecting premiums in customer homes on a regular basis is which of the following?

Back 2

A. Home Service
B. Industrial
C. Debit or MDO (MonthlyDebitOrdinary)
D. Any of the above

Front 3

Insurance Company A is a stock life insurance company, which means:

Back 3

The company has sold shares of stock to investors.

Front 4

For misrepresentation on the part of an applicant to have occurred, generally the applicant must:

Back 4

Have an intent to defraud the insurance company.

Front 5

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?

Back 5

Contract of Adhesion.

Front 6

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.

Back 6

D. the right to a policy loan applies to term and permanent insurance policies.

Front 7

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.

Back 7

Both I & II

Front 8

The applicant's offer to the insurance company is not complete until:

Back 8

the application has been submitted and the initial premium has been paid.

Front 9

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.

Back 9

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.

Front 10

What type of insurance company might typically issue participating life insurance policies?

Back 10

Mutual insurers

Front 11

What policy provision prevents the company from denying coverage after a specified period has passed?

Back 11

Incontestable Clause

Front 12

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?

Back 12

Market Value Adjusted Annuity

Front 13

What is another term used for Market Value Adjusted Annuity?

Back 13

Modified Guaranteed Annuity.

Front 14

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.

Back 14

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.

Front 15

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.

Back 15

B is the correct answer because cash value increases while the pure aspect of the insurance decreases.

Front 16

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?

Back 16

Fraud and False Statements U.S.C.§1033,1034

Front 17

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.

Back 17

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.

Front 18

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.

Back 18

I, II, and III are all correct statements regarding a 401(k).

Front 19

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.

Back 19

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.

Front 20

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.

Back 20

I, II, and III all apply.

Front 21

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.

Back 21

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.

Front 22

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.

Back 22

B is not necessarily true of an annuity in that an annuity can be purchased by one person for someone else.

Front 23

What percentage of eligible employees must participate in a company contributory group plan?

Back 23

75% of eligible participants must choose to participate in order for the insurer to not be subject to adverse selection.

Front 24

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

Back 24

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.

Front 25

Making false, derogatory or maliciously critical statements in any form with the intention to injure any person or company is the definition of what?

Back 25

Defamation

Front 26

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?

Back 26

boycott, coercion, and/or intimidation

Hint 26

3 terms apply to this definition.

Front 27

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?

Back 27

Unfair discrimination

Front 28

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?

Back 28

false advertising

Front 29

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

Back 29

the answer is C.

Front 30

Level Term Insurance provides that premiums and amount of coverage remain the same over the duration of the policy. True or False

Back 30

True

Front 31

Under a decreasing term policy:
I. the face amount decreases annually.
II. the premium payment decreases annually.

Back 31

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.

Front 32

When a straight term policy expires, what advantages to the expiration remain?

Back 32

None. A straight term policy expires automatically if the insured is living when the term period ends.

Front 33

Renewable Term policies require the insured to submit to a health exam before the policy will be renewed. True or False

Back 33

False.

Front 34

Renewable Term Policies are renewable at the option of the insurer and/or the insured?

Back 34

Insured.

Front 35

Renewable term policies are usually renewable to what age?

Back 35

65

Front 36

What happens to the premiums of a renewable term policy upon reentry?

Based on what?

Back 36

The premiums will rise based on the insured attained age.

Front 37

Convertibility allows an insured to convert a term policy to a whole life policy without evidence of insurability. True or False?

Back 37

True

Front 38

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.

Back 38

B.

Front 39

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.

Back 39

A and B are both correct although, most companies base the new policy premium on the attained age.

Front 40

What three characteristics separate whole life insurance from term life insurance?

Back 40

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.

Front 41

At what age does a whole life insurance policy endow?

Back 41

100

Front 42

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

Back 42

A. $325