2 Exam Cards

Question 1

What are the three main instances insurable interest exists in life insurance?

Answer 1

Insuring:

1. Your own life
2. family member’s life
3. Business Parter’s or someone who has a financial obligation to the policy owner

Question 2

Life Insurance may be used to pay state inheritance taxes and federal estate taxes to eliminate the need to sell assets from the estate. What is this called?

Answer 2

Estate Conservation

Question 3

What type of life insurance offers an applicant a cash value element?

Answer 3

Permanent insurance (usually, whole life)

Question 4

How does the premium mode affect the total premium paid for insurance for the year?

Answer 4

Higher frequency of premium payments will result in a higher overall premium (more premium by month>year)

Question 5

What three factors determine the premium for a particular life insurance policy?

Answer 5

Mortality
Interest
Expense

Question 6

All other factors beings equal, which premium payment mode will require an overall higher premium? Monthly or Annual

Answer 6

Monthly

Question 7

What is insurance underwriting

Answer 7

the process of risk selection and classification.

Question 8

What term describes the fee a person pays an insurance company to receive coverage

Answer 8

Premium

Question 9

Who is responsible for the contents of the insurance advertisements

Answer 9

Insurance Company

Question 10

At what point does coverage begin when an agent issues a conditional receipt for an life insurance policy?

Answer 10

Date of application or
Date of Medical Exam
(whichever occurs last)

Question 11

What does liquidity mean in a life insurance policy?

Answer 11

availability of cash value

Question 12

In calculating the amount of life insurance needed, what is the Needs Approach based on? (Definition not examples)

Answer 12

The predicted needs of a family after the premature death of the insured.

(considering debt, income, Social Security blackout, expenses)

Question 13

List Examples of the Needs Approach

Answer 13

family needs (considering debt, income, Social Security blackout, expenses)

Question 14

A business is the owner, beneficiary (and applicant/premium payer) of a key-person life policy. When the business collects the policy benefit, how is it taxed?

Answer 14

The benefit is received tax-free.

Question 15

Who is the beneficiary on a key-person life insurance policy?

Answer 15

The employer

Question 16

When planning for survivor protection in life insurance, what needs to be considered?

Answer 16

1. Insured current assets

2. Liabilities and Survivor’s needs

Question 17

What is included in Part 2 of a life insurance application?

Answer 17

Medical Information about the prospective insured

Medical background, medical visits in recent years, causes of death in deceased relatives, etc

Question 18

What is included in Part 1 of a life insurance application

Answer 18

General Information (age, birthdate, occupation, gender, address, etc)

Question 19

What is the main responsibility of a company’s underwriting unit?

Answer 19

Risk selection
(Standard, substandard, Preferred)

Question 20

What is the purpose of the agent’s report during the application process?

Answer 20

to discuss the agent’s personal observation about the proposed insured that may help in the underwriting process.

Question 21

What are illustrations in a life insurance policy

Answer 21

The presentations of non guaranteed elements of the policy

Question 22

What document describes the specific information about a policy

Answer 22

Policy Summary

Question 23

Can insurance companies advertise the existence of the guaranty association during solicitation and sale of insurance policies?

Answer 23

No. Advertising of the existence of the guaranty association for the purposes of solicitation and sale insurance policies by insurance companies is an illegal business practice.

Question 24

What is the purpose of key person insurance

Answer 24

to minimize the risk of financial loss caused by the death of a key employee

Question 25

When must the policy summary for an insurance policy be delivered to the policy owner?

Answer 25

At the time of policy delivery (They get information on what they are going to be paying for)

Question 26

Who must be a member of insurance guaranty associations

Answer 26

All insurance companies authorized to write insurance within a state.

Question 27

What term describes the frequency and the amount of premium payment

Answer 27

Premium mode or Premium Payment Mode

mode=frequency policy owner pays

Question 28

What types of insurance creates an immediate estate

Answer 28

Life Insurance

Question 29

What are the personal uses of life insurance:

Answer 29

1. Survivor Protection
2. Estate Creation (immidiate estate) and Estate Conservation
3. Cash accumulation and liquidity

Question 30

Who must have insurable interest in the insured?

Answer 30

The policy owner

Question 31

Mortality tables are used by insurance companies to predict what?

Answer 31

Life expectancy and the death rates for specific groups of individuals

Question 32

When must insurable interest exist in a life insurance policy?

Answer 32

At the time of application

Question 33

If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter’s main concern?

Answer 33

existence of insurable interest between the applicant and the insured

Question 34

What is the purpose of insurance guaranty associations?

Answer 34

To protect policy owners, the insured, and beneficiaries from financial losses caused by insolvent insurance companies