All of the following are examples of a third-party ownership, EXCEPT: Show A A Third-party ownership exists when the insured and the owner of the policy are different persons. A business owner buys a life policy on his own life. He may be all of the following except _______________. A A The insured may not be the beneficiary of his own policy. The owner and the applicant may also be the insured.
At the time of a life insurance policy delivery, a producer must provide which of the following? A D An illustration or policy summary must be provided prior to or at the time a policy is delivered. If the policy is not the same as that which was illustrated previously, the client must be given a new illustration matching the policy that is issued. In practice, insurance companies include a matching illustration or summary with every policy approved for delivery. Who is required to sign a completed application? A C Only the applicant/insured and the producer's signatures are required in an application for insurance. An applicant for life insurance realizes several days later that she may have answered a question about a health issue incorrectly. She should do which of the following? A B The insurance company is entitled to have the most correct information available before it approves a person for insurance. Incorrect information in the application may only be changed before the policy is issued. Information from a third party collected by the insurance company in the application for insurance and during underwriting of the policy may be subject to the jurisdiction of the: A C The Fair Credit Reporting Act is the only one in the list which may have jurisdiction over information gathered for underwriting purposes. Which of the following is not true about life insurance applications? A B Which of the following is not true about life insurance applications? A Which of the following statements correctly describes the difference between gross premium and net premium? A A Gross premium is the total amount a person pays the insurer for his/her coverage. Net premium, sometimes called the "pure premium," does not include business expenses of the insurer. Which of these modes would result in the insured paying the least annual outlay for life insurance? A B Paying premiums on an annual basis is always the least costly premium mode. Paying premiums monthly is usually the most expensive mode. Although some insurers may offer a discount for automatic monthly bank drafts, not all do, so this is not an acceptable choice. Payroll deduction is not a "mode." A personal use of life insurance does which of the following? A A Life insurance is often described as creating an immediate estate. Annuities are designed to provide protection against living too long. When determining an appropriate amount of life insurance, a producer takes into consideration the existing mortgage and other debt, future education expenses for the client's children and continuing income for his surviving spouse. This approach is known as: A D When a producer takes into account a variety of factors related to lost future income, he/she is using a needs approach. Industrial life insurance is typically sold in face amounts of: A B Industrial Life policies provide benefits of $1,000 or less. Which of the following describes group life insurance? A D Group insurance is underwritten as a single policy that covers many lives. A policy issued to an individual that covers all family members is still an individual policy. A group specifically formed for the purpose of obtaining insurance is not a valid group under state insurance laws. What information must appear on the policy summary provided to a life insurance client? A C The producer's name and address along with the address of the insurance company must appear on the policy summary. Which of the following is a type of rating that does not involve an extra premium being assessed? A C With the lien plan, initially, only the premium would be refunded in case of death. The death benefit increases over time with the full face amount eventually payable. This is generally used with Senior Life Insurance plans to provide minimal benefits without a medical examination. In determining the proper amount of life insurance, the Needs Analysis Approach takes into consideration all of the following factors, except: A A The Needs Analysis Approach factors in paying off all bills, creating a lifetime stream of income for the surviving spouse, creating a college fund for surviving children, and paying off the mortgage. Once totaled, this amount is reduced by financial assets already in place. When producer Pete delivers a policy, he should also do which of the following? A B It is the producer's or agent's responsibility to deliver the policy, verify the insured has remained in good health, and explain the policy to be sure the insured understands the benefits, including endorsements and riders. If a medical exam is required as part of the underwriting process, who normally conducts the exam? A B Physicians, nurses, or paramedics are the ones who conduct medical exams which may include blood tests, urine tests, EKGs, and medical histories among other things. _______________ is the process of selection, classification and rating, and determining if someone is insurable. A A Home office underwriting is the process of selection, classification and rating, and determining if someone is insurable. The insurance company must meet requirements under the _____ when gathering information about an applicant from a third party. A C The insurance company must meet requirements under the FCRA (Fair Credit Reporting Act) when gathering information about an applicant from a third party. Which of the following best describes producer field underwriting? A D Probing beyond the stated questions in the application based upon the applicant's responses is field underwriting. The producer does not engage in any of the other listed activities. The individual who has the ownership rights of a policy is called the: A C Typically, the owner, insured and applicant would be the same person, but not always, as in the case of third-party ownership (e.g. juvenile policies, key person policies, etc.) In this case, even though the owner is not the insured, he or she still controls every right that the policy affords. If a home office underwriter obtains MIB codes inconsistent with information provided on the application, what is the underwriter required to do? A B When the home office underwriter receives MIB codes that are inconsistent with information provided on the application, the underwriter is required to conduct a further investigation to obtain more information prior to making an underwriting decision. Underwriting decisions cannot be based solely on MIB codes since there could be a reasonable explanation for the discrepancy. A ____________ account is an amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A B A reserve is an amount representing actual or potential liabilities kept by an insurer to cover debts to policyholders. A reserve is usually treated as a liability. Part 2 of the application consists of all of the following information, except: A A Part 2 of the application contains questions pertaining to medical background, past and present health, any medical visits, hospitalizations, or surgeries in recent years, medical status of immediate family members, and age and causes of their death. Capital liquidation assumes: A B Capital liquidation assumes both principal (capital) and interest are liquidated over the relevant time period to provide the required income for the dependents. This will cause the balance to decrease and benefits are paid. If a client chooses to pay premiums other than annually, what can he or she expect? A C Additional charges are included in modes other than annual to offset the lost interest earnings and the increased administration costs. All of the following are true regarding an Attending Physician's Statement (APS), except: A C An Attending Physician's Statement (APS) is used in cases in which the individual application and/or medical reports reveal conditions for which more information is required. An applicant must sign a written release to enable a release of the APS. The insurer pays for this. In a replacement transaction, all of the following are insurer duties and responsibilities, except: A C The Replacing Insurer's responsibilities include: upon receiving proper notification with the new application, the replacing insurer must notify the existing insurer of the planned replacement, maintain copies of the information regarding replacement for a specified period of time as mandated by the state. Policy __________ are the net premiums paid plus interest earned and reflect potential insurance contract obligations. A C A reserve is maintained by an insurer in order to meet future potential obligations and is also required by State insurance laws. The process of calculating life insurance net premium requires consideration of all of the following, except: A C Net Premium for life insurance takes into account interest and mortality (not morbidity) factors only. The insured's age and gender are considered mortality factors. Which of the following types of life insurance provides the largest portion of all coverage in force? A A Ordinary life insurance represents the largest portion of all life insurance in force in the United States. __________ insurance policies do not pay dividends to policyowners. A C Participating policies pay dividends, a refund of excess premiums. Mutual companies may issue participating policies. Nonparticipating policies issued by Stock companies do not pay dividends to policyholders. What should the producer do, if the insured is in the hospital with a heart condition pending surgery on the day the newly issued policy was to be delivered and initial premium collected? A A Producers must return the policy to the insurer if they know that the insured's health status has materially changed since the time of application. If a client is unsure about whether or not he/she can obtain coverage or how much it would cost, what can the producer suggest to see what the insurer can do without tying up any of the client's funds? A C A trial application is one submitted without a premium. The policy would not take effect until the policy is issued by the insurer, delivered by the agent, and the premium is paid. It is used when insurability and pricing are in doubt. A young couple just starting out on a limited budget, but having a large need for life insurance coverage, most likely would be best suited for ________ life insurance: D Term is for the price conscious. It provides the largest amount of coverage for the lowest premium initially. The person who submits an application for insurance is always referred to as the _______. B The person who submits an application for insurance is always referred to as the applicant. Industrial Life Insurance is also referred to as a: A B Industrial life policies are also known as home service and debit policies where premiums are collected by a Debit Agent. When an insurer accounts for the interest and mortality factors, then adds additional charges to meet all costs of a contract, it derives __________. A A Insurer expenses (loading) are added to the net premium rate to enable an insurer to meet all costs under the contract, such as operating costs, commissions, medical examination costs, etc. Which of the following receipts states that coverage will begin immediately for a specific length of time, regardless of whether the applicant is ultimately approved for coverage by the insurer? A A If premium is paid, coverage will begin immediately for a specific length of time regardless of whether the applicant is ultimately approved by the insurer. This may also be referred to as a temporary insurance agreement or a binding receipt. J took out a life policy when he was 35. It had a conversion feature that he exercised at age 45. Age 45 is referred to as his ____ age. A C Attained age is the insured's age at any point in time, typically used at renewal or conversion. Which of the following is true? A C The applicant, insured, and owner might all be different parties, and any changes to the policy must be approved only by the policyowner. Loading includes all of the following, except: A A The mortality rate is used to determine net premium. Loading are additional charges to net premium to derive gross premium. The MIB is used in the underwriting of all of the following types of insurance, except: A B The MIB's Underwriting Services are used exclusively by MIB-member life and health insurance companies to assess an individual's risk and eligibility during the underwriting of life, health, disability income, critical illness, and long-term care insurance policies. A typical life insurance application contains how many parts? A A A typical life insurance application contains two parts, part 1 is general information and part 2 is medical information. A generic brochure developed by the NAIC to provide consumers with descriptions of basic types of life insurance as well as the comparative costs of each is called the _______. A B It is required that prospective life insurance buyers receive the NAIC Buyer's Guide to assist them in their life insurance purchase decision. Which of the following is included in Part II of a Life Insurance Application? A D Part II of the application contains questions pertaining to medical background, present health, any medical visits in recent years, medical status of family members and causes of death of deceased relatives. Mortality cost ______ interest (investment earnings) = equals the net premium. A B Mortality cost minus interest (investment return) = net premium (pure rate). Which of the following best describes 'Capital Liquidation' in an effort to meet an income objective? A B In a capital liquidation strategy both principal and earnings are paid out over the anticipated time period in order to meet the income objective. Each payment would be the same as any investment earnings shortfall would be offset by principal liquidations. All of the following are characteristics of Term Insurance, except: A A Term Insurance is characterized by a low initial premium outlay when the insured is young and increases as the insured's age advances. The human life value approach in determining the amount of life insurance someone needs takes into consideration all of the following, except: A C The human life value approach takes into consideration the individual's age and gender, the individual's occupation, the individual's annual wage and employment benefits, the individual's planned retirement age, and personal and financial information of family members living at home. If a premium is collected with a life insurance application and coverage begins immediately for a specific length of time regardless of whether the applicant is ultimately approved by the insurer, the receipt given by the agent is called a(n): A B A binding receipt provides coverage for up to 90 days or until a policy is issued or the risk is declined by the insurer. This is also known as a temporary insurance agreement. Which of the following is not a factor in premium determination? A B Premiums are based on expected mortality, interest, and expenses. Upon receipt of all of the necessary information, the home office underwriters can issue the coverage applied for in all of the following ways, except: A A Declined means that the policy would not be issued. The other choices indicate an acceptable risk at different pricing based on insurability. Which of the following best describes a Statement of Good Health? A
B Generally, this is used when the policy was issued with an outstanding premium requirement to assure the issuer that the health status of the insured has not significantly changed since the time of application. Interest earned on premiums paid to an insurer helps to ________ the premiums charged. A A Interest earned on premiums assists in premium rate reduction. Medical exams are requested in all of the following situations, except: A D Medical examinations are usually requested by the insurer after determining if the amount of coverage, age of applicant, or his/her health history warrants the examination. Premium has nothing to do with it. Normally, when the insurer determines that the insured is an acceptable risk, the insurer will send the policy to the ____________. A B Normally, the insurer will mail the issued policy to the producer for delivery so that if any outstanding premium is due, it can be collected, if a statement of good health is required, it can be obtained, and any questions the applicant has about the policy can be answered. Which of the following receipts states that coverage will begin immediately for a specific length of time, regardless of whether the applicant is ultimately approved for coverage by the insurer? A B If premium is paid, coverage will begin immediately for a specific length of time regardless of whether the applicant is ultimately approved by the insurer. This may also be referred to as a temporary insurance agreement or a binding receipt. Which of the following is included in Part 2 of a life insurance application?Part 2 of the application contains questions pertaining to medical background, past and present health, any medical visits, hospitalizations, or surgeries in recent years, medical status of immediate family members, and age and causes of their death.
How many parts are there in an insurance application?There are basically three sections in a typical life insurance application: Part I - General. Part II - Medical. Part III - Agent's Report.
Which of the following is included in Part 1 of a life insurance application?PART I is the front or initial part of the application which contains personal information about both the applicant and the proposed insured - general information such as the type of policy, amount of insurance, name, address, birth date, gender, marital status, smoker or nonsmoker, occupation, and income.
What is contained in Part III of an application for insurance?Part III reports the name, SSN (or TIN for covered individuals other than the employee listed in Part I), and coverage information about each individual (including any full-time employee and non-full-time employee, and any employee's family members) covered under the employer's health plan, if the plan is “self-insured ...
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