Basic Principles Flashcards
1
Q
Admitted Insurer
A
someone who has received a certificate of authority from a state’s department of insurance authorizing them to conduct insurance business in that state
2
Q
Captive Insurer
A
an issuer established and owned by a parent firm for the purpose of insuring the parent firm’s loss exposure.
3
Q
Certificate of Authority
A
a license issued to an insurer by a department of insurance, which authorizes that company to conduct insurance business in that particular state.
4
Q
Industrial Insurer
A
make up a specialized branch of the industry, primarily providing policies with small face amounts with weekly premiums. Other names for industrial insurers include home service or debit insurers.
5
Q
Lloyds of London
A
group of individuals and companies that underwrite unusual insurance.
Help its associates settle claims and disputes, and through its member underwriters, provide coverages that might otherwise be unavailable in certain areas.
6
Q
Multi-line insurer
A
one stop shop insurer
7
Q
Mutual Insurance Company
A
insurance company characterized by having no capital stock, being owned by its policy owners, and usually issue participating insurance.
8
Q
Non particitpating policy
A
do not allow policyowners to participate in dividends or electing the board of directors.
- typically issued by stock companies.
9
Q
Participating plan
A
an insurance policy under which the policy owners share in the company’s earnings through receipt of dividends and also elect the company’s board of directors.
10
Q
Reciprocal Insurer
A
an unincorporated organization in which all members insure one another.
11
Q
Reinsurance
A
Acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contract by another insurer who has contracted for the entire coverage
12
Q
Reinsurer
A
provides financial protection to insurance companies
13
Q
Risk Retention Group
A
mutual insurance company formed to insure people in the same business, occupation, or profession.
Pooling risks
14
Q
Self- Insurer
A
establishes a self funded plan to cover potential losses instead of transferring the risk to an insurance company.
15
Q
Surplus Lines Insurance
A
offer coverage for substandard or unusual risks not available through private or commercial carriers. only available from a surplus lines insurer.
16
Q
How insurance is sold
A
Career Agencies recruit, train, and supervise agents through managers or general agents. They primarily build staff.
Personal Producing General Agencies (PPGA) do not recruit, train, or supervise agents. They primarily sell insurance.
Independent agents (American Agency System) represent any number of insurance companies through contractual agreements.
17
Q
What kind of life insurance policy issued by a mutual insurer provides a return of divisible surplus?
A
Participating life insurance policy.
18
Q
Ken is a producer who has obtained Consumer Information Reports under false pretenses. Under the Fair Credit Reporting Act, what is the maximum penalty that may be imposed on Ken?
A
$5,000 and 1 year imprisonment.
19
Q
Why are dividends from a mutual insurer not subject to taxation?
A
Because dividends are considered to be a return of premium.
20
Q
An insurer’s claim settlement practices are regulated by the
A
State Insurance Departments.
21
Q
Non participating Insurer
A
policy holders do not participate in receiving dividends or electing the board of directors, unless they are
22
Q
Adverse Selection
A
selection against the company. It includes the tendency of people with higher risks to seek or continue insurance to a greater extent than those with little or less risk. Adverse selection also includes the tendency of policyowners to take advantage of favorable options in insurance contracts.
23
Q
Homogeneous Exposure Units
A
Homogeneous exposure units are similar objects of insurance that are exposed to the same group of perils.
24
Q
Indemnity contract
A
Contract of indemnity attempt to return the insured to their original financial position
25
Law of Large Numbers
a fundamental principle of insurance that the larger the number of individual risks
26
Moral Hazard
hazard brought on by the effect of personal reputation, character, associates, personal living habits, financial responsibility, and environment, as distinguished from physical health, upon an individual's general insurability
27
Morale Hazard
hazard arising from indifference to loss because of the existence of insurance. Morale hazards are often associated with having a careless attitude.
28
Reinsurance
acceptance by one or more insurers, called reinsurers, of a portion of the risk underwritten by another insurer who has contracted for the entire coverage.
29
Risk Retention
act of analyzing the loss exposure presented by a risk and determining that the potential loss is acceptable. Risk retention is often associated with self-insurance.
30
Principle of Indemnity
Their purpose is to make the insured “whole” again financially; Accident, health, property, and casualty insurance contracts are all contracts of indemnity. Their purpose is to make the insured “whole” again financially; to reimburse the loss while not making the insured better off than they were prior to the loss.
31
LAW OF LARGE NUMBERS (SPREAD OF RISK)
The law of large numbers states that larger groups provide an increased degree of accuracy in loss predictions, based on past experience. The higher the exposure, the more likely the event can be predicted.
32
Adverse Selection
tendency for higher-than-average risks to seek out insurance
33
indirect loss / consequential loss
If John were to die of a heart attack while receiving treatment for the broken leg, his accidental death policy will probably NOT pay the policy’s death claim as the death was a direct result of a heart attack. The fact that the heart attack may have been a consequence of the accident is irrelevant if the policy only covers direct loss from an accident.
34
Morale hazard
is created based as a result of the personal or subjective thought process of the insured. It can arise from a state of mind related to the indifference of an insured to whatever loss may occur. The insured unintentionally creates a loss situation on an unconscious level. They just do not care about loss prevention since the property is insured.
35
Special or Open Peril
insurance policies do not name the perils they cover but instead begin by saying they cover all direct causes of loss.
For example, comprehensive medical insurance and standard life insurance usually will cover medical bills and pay death claims related to perils other than those expressly excluded. Examples of perils commonly excluded in life and health contracts include suicide, acts of war, and injury or death sustained while committing an illegal act.
36
Homogeneous exposure units
similar objects of insurance that are exposed to the same group of perils. The larger the number of homogeneous units (similar risks), the easier it becomes to predict loss.
37
speculative risk
not insurable
risk that presents the chance for both loss and gain.
Investing in the stock market and gambling are a speculative risk
38
Pure risk
presents a potential for loss only with no possibility of g
39
Elements of insurable risk
- Loss must be due to chance (accident)/ outside of control
- Loss must be definite and measurable - can document time, place, amount, and when payable for example.
- Loss must be predictable - can estimate the average frequency and severity
- loss cannot be catastrophic - must be reasonable, a one trillion dollar life insurance policy is not reasonable
- Loss exposure to be insured must be substantial - law of number to help insurance companies predict loss
- loss must be randomly selected - avoid adverse selection.
40
Standard risk
average potential for loss. Standard risks are typically insured with a predetermined standard premium.
41
Substandard risks
considered to be a poor risk for the insurance company and have a higher potential for loss. Substandard risks may be insured with an increased premium, a lower benefit, or could be declined altogether.
42
Preferred risks
lower potential for loss. Preferred risks may be offered a lower premium for the transfer of their risk.
43
Law of large numbers
help insurance companies predict the increase of indvidual risks
44
Adhesion
Take it or leave it
A contract of adhesion describes a contract that has been prepared by one party (insurance) with no negotiation between the applicant and insurer.
45
Agent
represents themselves and the insurer at the time of application.
46
Aleatory
presents the potential for an unequal exchange of value or consideration between both parties.
Aleatory contract are conditioned upon the occurrence of an event.
47
Apparent Authority
appearance of the insurer providing the agent authority to perform unspecified tasks based on the agent insurer relationship.
48
Broker
broker represents themselves and the insured at the time of application.
49
Competent Party
capable of understanding the contract being agreed to.
All parties must be of leal competence,
- Must be of legal age
- mentally capable of understanding the terms and not influenced by drugs or alchohol.
50
Concealment
Failure of the applicant to disclose a known material fact when applying for insurance.
51
Consideration
part of an insurance contract setting forth the amount of initial and renewal premiums and frequency of future payments
52
estoppel
legal impediment to one party denying the consequences of its own actions or deeds of such actions or deeds result in another party acting in a specific manner or if certain conclusions are drawn.
53
Express Authority
explicit authority granted to the agent by the insurer, as written in the agency contract.
54
Fiduciary
position of trust with regards to the funds of their clients and the insurer.
Responsibility an insurance producer has to account for all premiums collected and provide sound financial advice to clients.
55
Indemnity contract
contract of indemnity attempt to return the insured to their original financial position.
56
insurable interest
financial, economic, and emotional impact associated with a person experiencing a specified loss. A person has a insurable interest in a loss if they have more to gain by not suffering the loss.
57
Parol Evidence Rule
involved parties put their agreement in writing, all previous verbal statements come together in that writing, and a written contract cannot be changed or modified by parol (oral) evidence.
58
Policy rider or endorsement
an amendment added to an insurance contract that overrides terms in the original policy, endorsements may add or remove coverages, change deductibles, or revise any other policy feature.
59
Unilateral
only one party, the insurer, makes any kind of enforceable promise.
60
Utmost Good Faith
Involves the belief that both the policyowner and the insurer must know all material facts and relevant information
61
valued contract
life insurance contracts are valued contracts.
Valued contract pays a stated sum regardless of the actual loss incurred.
62
Consideration clause
policyowner's consideration consists of completing the application and paying the initial premium.
63
Aleatory Contract
an insurance contract is an aleatory contract since one party may recover more in value than he or she has parted with based upon a possible future event.
64
Insurable Interest
only required at the time of the application. Insurable interest does not have to continue throughout the duration of the policy, nor does it have to exist at the time of claim.
65
Stranger Originated Life Insurance
life insurance arrangements where investors persuade individuals typically seniors to take out new life insurance, naming the investors as beneficiaries.
66
Tort law
full compensation for proved harm.
67
Insurance carrier
responsible for assembling the policy forms for the insured person
68
What makes an insurance policy a unilateral contract?
Only the insurer is legally bound. Insurance contracts are unilateral, meaning that only the insurer makes legally enforceable promises in the contract.
69
A professional Liability for which producers can be sued for mistakes of putting a policy into effect is called
Errors and Omissions
70
Which contract element is insurable interest a component of
Legal purpose
71
A paid premium
example of the insured's consideration
72
industrial life insurance
issues very small face amounts, such as $1,000 or $2,000.
73
Convertible term
a provision that allows policy owners to convert their term insurance into permanent policies without showing proof of insurability.
74
Renewable term
term insurance that guarantees the insured the right to continue term coverage after expiration of the initial policy period without having to prove insurability.
75
Term Rider
type of life insurance product which covers children under their parent's policy.
A term rider is always level term.
76
Whole life insurance
provides death benefits for the entire life of the insured. It also provides living benefits in the form of cash values. It matures at age 100 and Normally has a level premium. All whole life has the same type of benefits.
77
Whole Life - Straight Life Insurance
premiums are payable throughout the insured's lifetime, and coverage continues until the insured's death.
78
Whole life - Limited Pay
coverage remains on a limited - pay life policy until age 100 or death.
if you were to purchase a 20-pay policy, premiums would need to be paid for 20 consecutive years. After that, you would not be required to make any additional premium payments, and your coverage would be guaranteed until death or age 100.
79
Whole Life - Modified
Modified whole life has all of the same features of ay other whole life except the premium for the first few years will be cheaper.
80
Whole life - Modified Endowment Contract (MEC)
best described as a policy that exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract.
81
Joint Life policy
covers the lives of 2 individuals and save on premium cost by averaging the ages of the two insureds.
82
Joint Survivor or Last Survivor Life Policies
cover the lives of two individuals and saves on premium costs by averaging the ages of the two insured. For example, say B and M purchase a joint life survivor policy. If B were to die first and then M died 10 years later, no benefits would be paid out from the policy until M died.
83
Family Maintenance policy
monthly income from the date of death of the insured to the end of the preselected period.
84
Family income policy
pay an income beginning at the insured's death and continues for a period specified from the date of policy issue.
For example, G purchased a Family Income policy at age 40, with a 20-year rider period. If G were to die at age 50, G's family would receive an income for 10 years.
85
Adjustable Life Policy
owner is usually looking for a policy offering flexible premiums.
86
Universal Life insurance policy
flexible premiums and an adjustable death benefit.
87
Variable life insurance policies
require a producer to have proper FINRA and National Association of Securities Dealers (NASD) securities registration prior to selling any variable policy contract
If a policy owner or applicant was looking for a policy to offset inflation, they would
88
Credit Policies
typically purchase using a decreasing term life insurance policy
89
Variable Universal Whole Life, (VUL)
policyowner controls the investment of cash values and selects the timing and amount of premium payments.
90
Equity Index Universal Life Insurance
Equity Index Universal Life Insurance or Equity Indexed Life combines most of the features, benefits and security of traditional life insurance with the potential of earned interest based on the upward movement of an equity index.
91
Universal Life Death Benefit Options
Option A: policyowner may designate a specified amount of insurance. Death benefit equals the cash value plus the remaining pure insurance.
Option B: death benefit equals the face amount plus the cash values. To comply with the Tax Code's definition of life insurance, the cash values cannot be dispoportionately larger than the term insurance portion.
92
Limited payment whole life policy provides
Lifetime protection
93
The type of policy which pays on the death of the last person is called
survivorship life
94
Julie has a $100,000 30 year mortgage on her new home. What type of life insurance could she purchase that is designed to pay off the loan balance if she dies within the 30 year period
Decreasing term insurance.
95
Variable universal life insurance
Policyholder has the right to select the investment which will provide the greatest return
96
When a decreasing term policy is purchased, it contains a decreasing death benefit and
decreasing premiums.
97
Adjustable Life
allows the policyowner to change two policy features, premium and face amount.
98
Reggie purchased a life insurance policy with a face amount of $500,000. After 15 years, the cash value has accumulated to $100,000 and the policy's face amount has become $600,000. What type of life insurance
Universal Life.
99
level premium permanent insurance accumulates a reserve that will eventually
become larger than the face amount.
100
when a decreasing term policy is purchased, it contains a decreasing death benefit and
level premium.
101
Family term insurance
death benefit it the spouse of the insured dies.
102
Which of the following is not part of an insurance contract?
- Policy
- Application
- riders
- Certificate of Authority
Certificate of Authority
allows an insurer to conduct business in a state. It is not part of an insurance contract.
103
Accelerated Death Benefit Option
benefit can be offered as a rider at a specific cost or may be at no cost.
Accelerated Death Benefit options are offered with no increase in premium.
104
Reinstatement Clause
provide evidence of insurability, pay past due premiums.
105
Policyowner dividends normally accumulate
With interest.
106
Disability income rider
rider which pays a life insurance policyowner a monthly amount in the event of total and permanent disability.
107
A provision that allows a policyowner to withdraw a policy's cash value interest free
partial surrender
108
Waiver of premium rider
allows an insured to waive premium payments in the insured is completely and permanently disabled.
109
In an insured dies during he grace period with no premiums paid
the policy would be payable, minus he premium amount.
110
Accelerated Death Benefit
accelerated Death Benefit options are offered with no increae in premium
111
In an insured dies during the grace period with no premiums paid
The policy would be payable minus the premium amount.
112
enitre contract policy
states that a copy of the application must be attached to the policy when issued
113
Results Clause
insurer is excused from paying the amount only if the death is a result of war.
114
incontestable clause
clause that protects a policyowner from a misrepresentation caused by his or her own innocent mistake is an incontestable clause.
115
entire contract
- entire contract includes the actual policy and the application
- it states that nothing outside of the contract (the contract includes the signed application and any attached policy riders) can be considered part of the contract.
- it also assures the policyowner that no changes will be made to the contract or waive any of the provisions after it has been issued.
- any change to a policy must be made with the approval of an executive officer of the insurance company whose approval must be endorsed on the policy or attached in a rider
- This mandatory health policy provision states that the policy, including endorsements and attached papers, constitutes the entire insurance contract between the parties
- we can't send you additional paperwork later.
- The entire policy and application is sent to you nd that makes your entire contract.
116
Grace period
period of time policyowners are allowed to pay an overdue premium when the policy remains in force, usually 30 days.
117
Reinstatement
Permits the policyowner to reinstate a policy that has lapsed - as long as the policyowner can provide proof of insurability pays all back premiums, outstanding loans, and interest. Most states allow
reinstatement up to 3 years after a policy has lapsed.
118
Collateral Assignment
under absolute assignment, the transfer is complete and irrevocable, and the assignee received full control over the policy and full rights to its benefits.
119
Free Look
The policy owner is permitted a certain number of days (usually 10 days)
once the policy is delivered to look over the policy and return it for a refund of all premiums paid.
120
Excess interest provision
if a beneficiary decides to leave life insurance proceeds with an insurer following the death of the insured, the insurance company must pay interest in the proceeds. The interest credited to or paid to the beneficiary is taxable ordinary income.
121
Payment of claims
- the payment of claims provision in an insurance contract specifies how and to whom claim payments are to be made.
-
122
Unpaid premiums
If there is an unpaid premium at the time a claim becomes payable, the amount of the premium to be deducted from the sum payable to the insured or beneficiary.
123
Intoxicants and Narcotics
insurer is not liable for any loss attributed to the insured while intoxicated or under the influence of narcotics.
124
Payor Provision (rider)
provides waiver of premiums of the adult premium payor should die, or with some policies, become totally disabled.
125
accidental death benefit rider (double indemnity)
provides an additional amount of insurance usually equal to the face amount of the base policy if the cause of death was an accident.
126
Nonforfeiture Options
Cash Surrender: allows the policy owner to receive the policy's cash value. Policyowner no longer has coverage at this point. Normally, the maximum length of time a life insurance company may legally defer paying the cash value of a surrendered policy is 6 months.
Extended Term Option: permits the policy owner to use the policy's cash value to buy level, extended term insurance for a specified period. No premium payments are made. The coverage provided with the extended term nonforfeiture option is qual to the net death benefit of the lapsed policy.
127
Dividend options
pay dividends to policyowners if the company's operations result in a divisible surplus. Dividends are a return of overcharged premiums and are therefore not taxable.
Cash Option: Take the cash - it's your money
Reduced Premiums Option: Reduces premium payments
Accumulate interest Option: Allows dividends to accumulate interest
Paid-Up Additions Option: Purchase single payment whole life coverage
One-Year Term Option: Purchase one-year term protection
128
Exchange privilege rider
permits a policyowner to exchange a life insurance policy for another in the future if desired.
129
guaranteed issue insurance policy has no
medical underwriting
130
Reduced Paid-up nonforfeiture option
Policy has a decreased face amount
131
Graded Premium
a premium funding option characterized by a lower premium in the early years of the contract.
132
Gross (Annual) premium
An insurer's gross premium is the net premium for insurance, plus commissions, operating and miscellaneous expenses, and dividends.
133
Irrevocable beneficiary
a beneficiary which may not be changed by the policyowner without the written consent of the beneficiary.
134
Lump Sum Option
A death settlement option where the death benefit is paid in a single payment, minus any outstanding policy loan balances and overdue premiums.
135
Premium Mode
frequency in which a policyowner elects to pay premiums.
136
Uniform Simultaneous Death Act
The uniform simultaneous death act states that if the insured and the primary beneficiary die at approximately the same time, in a common accident, with no clear evidence as to who died first, the law will assume that the primary died first. Therefore, the death benefit proceeds are paid to the contingent beneficiaries.
137
Net single Premium
Mortality Cost - Interest
138
Gross Premium
Net Premium + insurer expenses.
139
Testamentary Trusts
Created at the insured's death according to a will
140
Intervivos trusts
living trusts are created during the life of the insured.
141
Viatical Settlement Contract
a policy owner can receive an immediate payment before the insured dies
142
No federal income tax is owned on life insurance proceeds
true
143
What happens to the total amount of premium paid for an insurance policy when the payment frequency increases?
Increases
As the premium payment frequency increases, the total amount of premium paid for an insurance policy increases.
144
Interest only: settlement option
allows proceeds to remain with the insurer and earnings to be paid to the beneficiary on a monthly basis is called interest only.
145
Spendthrift Trust Clause
Proceeds from a life insurance policy are protected from the beneficiary's creditors
146
Viatical Settlement
Reduced Death Benefit prepayment
147
Policy Summary
A document that specifies the critical segments of an insured's life insurance policy
148
What would happen if a life insurance applicant is given a conditional receipt from an insurance agent and then dies the next day?
claim will be paid if application is approved.
149
Investigative consumer report
Report that contains information on a consumer's character, general reputation, personal characteristics, or mode of living, and is obtained through personal interviews with neighbors, friends, or associates of the consumer
150
fixed immediate annuity. His payment amount will be dependent upon principal, interest, and _____
income period.
151
Which of these will have the highest monthly payout upon annuitization?
Straight Life
152
Temporary annuity certain
the company guarantees that payments will be made for a specified number of years.
153
Refund annuity
What kind of annuity will return to a beneficiary the difference between the annuity value and the income payments already made
154
Flexible premium deferred annuities
require premium payments that very from year to year
155
Life Insurance Buyers Guide includes:
- Compare life insurance policy requirements
- decide how much life insurance to buy
- compare life insurance policy rates.
156
Group Life insurance policies must include a provision entitling policyholders to a grace period of
31 days
157
Primary purpose of replacement regulation is to
protect policyowners from misrepresentations and loss of benefits.
158
No existing producer's license will be revokes until
The producer has been afforded a right to a hearing on the charges
159
A life insurance agent is required to give a disclosure notice about information practices to an applicant or proposed insured
Prior to or at the time of signing the application
160
Which of the following acts by an insurer, if committed without just cause and performed with such frequency as to indicate standard operating procedures, constitutes an Unfair Claims Settlement Practice?
Failing to adopt and implement reasonable standard for the prompt and investigations of claims.
161
Insurance producers must complete ______ hours of continuing education biannually
24
162
A life insurance policy becomes incontestable after it has been in force for
2 years
163
The free look period provided in a life insurance policy is usually
60 days.
164
Primary Purpose of replacement regulation is to
protect policyowners from misrepresentations and loss of benefits
165
If an insurer terminates a producer's appointment, it must notify the Commissioner within how many days of the termination?
30
166
Violations of US Code Title 18 section 1033, may result in
Suspension of Producer's License.
Violations of US Code Title 18 section 1033 ma result in a fine of up to $50,000 per violation and / or incarceration up to a maximum of 15 years.
167
A temporary license is valid for a maximum of _______ days.
180 days
168
Lapsed individual life insurance may be reinstated at any time within
3 years
169
What is an example of replacement
Canceling a while life policy to purchase a term policy.
170
What provision states that the policy and the application shall constitute the entire contract between the parties?
Entire contract
171
A policy illustration given at time of sale does not typically include the:
A. cash value of the policy
B. Names of the beneficiary
C. effective interest rate for policy loans
D. 10th and 20th year cost surrender value
B. names of the beneficiary
172
A life insurance policy becomes incontestable after it has been in force for
2 years
173
Before the Commissioner will issue a license, a person must be at least
18 years old.
174
The commissioner is required to examine admitted insurers at least every
5 years.
175
Human Life Value Approach
Predicts an individual's future earning potential and determines how much of that amount would be devoted to dependents.
176
Rebating
any inducement offered to the insured in the sale of insurance products that is not specified in the policy is called rebating.
177
Under federal law, an individual convicted of a felony involving dishonesty may engage in the business of insurance only after
Receiving written consent from the state insurance regulatory agency.
178
reduced paid-up nonforfeiture option,
the policy will have a decreased face amount
179
What type of beneficiary should be named if the insured wants to give explicit directions on how the policy proceeds should be paid?
Individual
180
In an insurance contract, the applicant's consideration is the
statements made in the application and the premium.
181
The commissioner of insurance serves a term of ________ years
4
182
The least expensive option to pay off a 30 year mortgage balance would be
decreasing term life
183
What is considered the purpose of the Guaranty Association?
protect insured from insolvent insurers
184
Which type of life insurance policy pays the face amount at the end of the specified period if the insured is still alive?
Endowment policy
185
inducement
no insurer, producer, broker, solicitor, or person, in connection with an insurance transaction shall offer or promise to buy, sell, give, or allow the prospective insured employment, stock or special favors.
186
A field underwriter's main task is
to approve or decline an applicant
187
A life insurance policy loan shall bear interest at a specified rate, not in excess of
8%
188
Viatical settlement
Reduced death benefit prepayment
189
An immediate annuity has been purchased with a single premium. When does the annuitant typically begin receiving benefit payments?
1 month
190
Endowment Policy
life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death.
191
Endowment Policy
life insurance contract designed to pay a lump sum after a specific term (on its 'maturity') or on death.
192
The Washington Life and Health ____ Association is used to rehabilitate insolvent insurers.
Washington Life and Health Guaranty Association
193
Which of the following annuity payout options makes no additional payments regardless of when the annuitant dies?
life only
194
All of the following riders can increase the death benefit amount except:
- Waiver of Premium
- Guaranteed Insurability - Accidental Death Rider
- Cost of Living
Waiver of Premium
195
Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran Ferguson Act, what is the minimum penalty for this?
$10,000
196
A provision that allows a policyowner to withdraw a policy's cash value interest free is a
partial surrender.
197
A life insurance policy that is subject to a contract interest rate is referred to as
Universal Life
198
Upon policy delivery, which of the following must a producer have an applicant sign if no initial premium was collected with the life insurance application
a good health statement.
199
Replacing an existing life insurance policy with a new one may result in
surrender charge
200
Karen is a producer who has obtained personal information about a client without having a legitimate reason to do so. Under the McCarran-Ferguson Act, what is the minimum penalty for this?
$10,000 or up to one year in jail is the penalty for any
201
Tm's individual life insurance policy has just recently lapsed. His policy may be instated at any time within
3 years
202
If the annuitant dies before the annuity start date.
the premiums paid plus interest earned will be given to the benficiary.
203
Simon has purchased a fixed income annuity. His payment amount will be dpendent upon principle, interest, and the contract's
income period.
204
A policyowner can receive a percentage payment of the death benefits prior to death by using what kind of contract?
Viatical settlement agreement.
205
When the principal gives the agent authority in writing, it's referred to as
Apparent authority.
206
All of the following riders can increase the death benefit amount except
Waiver of Premium.
207
Which of these procedures have the right to perform where it is not forbidden by law
Autopsy.
208
An endorsement found in an insurance plan which modifies the provisions of the policy is called a
rider.
209
Peter has a policy where 80% to 90% of the premium is invested in traditional fixed income securities and the remainder of the premium is invested in contracts tied to a stipulated stock index. What kind of policy is this?
Equity indexed life.
210
Which of these factors would an insurer consider when determining whether to accept a group life plan?
Average age.
211
What would limit a company's liability to provide insurance coverage?
Exclusion
212
What is not considered to be a common life insurance nonforfeiture option?
Life income annuity.
213
Under a contract of adhesion
The terms must be accepted or rejected in full.
214
What would be an expense factor in an insurance program
Mortality costs.
215
All of these are considered sources of information that can assist an underwriter in determining whether or not to accept a risk except
National association of Insruance underwriter.
216
Donald is the primary insured of a life insurance policy and adds a children's term rider. What is the advantage of adding this rider?
Can be converted to permanent coverage without evidence of insurability
217
A non-contributory health insurance plan helps the insurer avoid
adverse selection.
Because all eligible employees are usually covered
218
What does a life insurance policy guarantee to the stated beneficiary upon the death of the insured?
Specified amount of money.
219
What is the name of the provision which states that a copy of the application must be attached to the policy when issued?
Entire Contract
220
Which of the following is require for an insurer to conduct business in this state?
Certificate of Authority
221
What would happen if a life insurance applicant is given a conditional receipt from an insurance agent and then dies the next day?
claim will be paid if application is approved.
222
A nonparticipating company is sometimes called a(n)
stock insurer
223
When a decreasing term policy is purchased, it contains a decreasing death benefit and
level premiums
224
A life Insurance policy become incontestable after it has been in force for
2 years
225
An insurer must send a notice of appointment for a producer within 15 days from the date of an executed agency contract or after submitting the first application to the insurer
15
226
A securities license is required for a life insurance producer to sell
modified universal life
227
Under a non qualified annuity, interest is taxed after the
exclusion ratio is calculated.
228
How often must the Commissioner examine each domestic insurance company
5 years
229
A life insurance company has transferred some of its risk to another insurer.
reinsurer.
230
Pat is insured with a life insurance policy and Karen is his primary beneficiary. They are both involved in an automobile accidents where Pat dies instantly and Karen dies 5 days later. Which policy provision will protect the rights of the contingent beneficiary to receive the policy benefits?
Common disaster clause
231
Which of these is NOT a characteristic of the Accelerated Death Benefit option?
the benefit can be offered as a rider at a specific extra cost or may be at no cost
232
Which of the following protects a policyowner from a misrepresentation caused by an innocent mistake?
incontestable clause.
233
Which policy feature makes a universal life policy different from a whole life policy?
a flexible premium schedule.
234
What is a corridor in relation to a universal Life insurance policy?
The corridor is the gap between a universal life policy's total death benefit and the policy's cash value.
235
The promise of a discount in premium as an inducement to purchase insurance is known as
rebating.
236
Ownersh of a life insurance policy may be demporarily transferred with an
Collateral assignment
237
Ownersh of a life insurance policy may be demporarily transferred with an
Collateral assignment
238
All of the following are considered to be nonforfeiture options available to a policyowner EXCEPT
- Extended Term Insurance
- Cash Surrender
- Reduction of Premium
- Reduced Paid-Up Insurance
Reduction of Premium
239
How are annuities given favorable tax treatment
Gains are taxes at distribution
240
Insurance premium is determined by each of the following factors except:
- Mortality
- Interest
- Expenses
- Liquidity
Liquidity
241
Underwriters can acquire information from all of the following sources except
- Medical Information Bureau
- Consumer reports
- Attending physician's statements
- genetic testing
genetic testing
242
Upon policy delivery, which of the following must a producer have an applicant sign if not initial premium was collected with the life insurance application?
A good health statement
243
The coverage, conditions, and limitations in the master policy of a group contract can be found in which document?
Certificate of Coverage and benefits.
244
A life policy loan in Washington cannot charge a fixed rate of interest higher than
8%
245
What is created after policy proceeds are obtained in a lumpsum and then immediately invested?
Estate
246
If an insured dies during the grace period with no premiums paid
the policy would be payable, minus the premium amount.
247
Which of these riders will pay a death benefit if the insured's spouse dies?
Family term insurance rider
248
According to life insurance contract law, insurable interest exists
at the time of application
249
All of the following are examples of pure risk except
- losing money at a casino
- injured while playing football
- falling at a casino and breaking a hip
- jewelry stolen during a home robbery
Losing money at a casino.
250
A temporary license is valid for a maximum of
180 days
251
The term which describes the fact that both parties of a contract may not receive the same value is referred to as
aleatory
252
Which of these would limit a company's liability to provide insurance coverage?
Exclusion
253
Ownership of a life insurance policy may be temporarilty transferred with a
Collateral assignment
254
Life Only
Annuity payout options that makes no additional payments regardless of when the annuitant dies.
255
What would be an expense factor in an insurance program?
Mortality Costs
256
a renewable term policy can be renewed
at a redetermined date or age, regardless of the insured's health
257
Simon has purchased a fixed immediate annuity. His payment amount will be dependent upon proncipal, interest, and the contract's
income period.
258
Disclosure regualtion
requires delivery of a buyer's guide and a disclosure document to applicants.
259
An insurer must send a notice of appointment for a producer within 15 days from the date of an executed agency contract or after submitting the first application to the insurer
15
260
Endowment policy
Life insurance policy that pays the face amount ay the end of the specified period if the insured is still alive.
