Ch 2: Life Insurance Basics Quiz

Question 1

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?

1. As of the policy date
2. As of the policy delivery date
3. As of the first of the month after the policy issue
4. As of the application date

Answer 1

As of the application date

Question 2

Which of the following would provide an underwriter with information concerning an applicant’s health history?

1. The agent’s report
2. A medical examination
3. The inspection report
4. The Medical Information Bureau

Answer 2

The Medical Information Bureau

Question 3

What is the purpose of a conditional receipt?

1. It is intended to provide coverage on a date prior to the policy issue.
2. It serves as proof that the applicant has been determined insurable
3. It is given only to applicants who fully prepay the premium
4. It guarantees that a policy will be issued in the amount applied for

Answer 3

It is intended to provide overage on a date prior to the policy issue

Question 4

Which of the following statements is correct about a standard risk classification in the same age group an with similar lifestyles?

1. Standard risk is also known as high exposure risk
2. Standard risk is representative of the majority of people
3. Standard risk pays a higher premium than a substandard risk
4. Standard risk requires extra rating

Answer 4

Standard risk is representative of the majority of people

Question 5

Which of the following statements concerning buy-sell agreements is true?

1. Buy-sell agreements are normally funded with a life insurance policy
2. Benefits received are considered income taxable
3. Buy-sell agreements pay in the event of a medical emergency
4. Premiums paid are deductible as a business expense

Answer 5

Buy-sell agreements are normally funded with a life insurance policy

Question 6

Which of the following is the basic source of information used by the company in the risk selection process?

1. Application
2. Consumer report
3. Warranty
4. Agent’s report

Answer 6

Application

Question 7

All of the following are business uses of life insurance EXCEPT

1. Compensating executives
2. Funding against company’s general financial loss
3. Funding against financial loss caused by the death of a key employee
4. Funding business continuation agreements

Answer 7

Funding against company’s general financial loss

Question 8

An applicant signs an application for $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which of the following is true?

1. The premium would be returned to the insured’s estate because the policy was not issued.
2. The application will be voided
3. The death claim will be rejected
4. The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy.

Answer 8

The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy.

Question 9

Who makes up the Medical Information Bureau?

1. Physicians and paramedics
2. Former Insured
3. Insurers
4. Hospitals

Answer 9

Insurers

Question 10

When must insurable interest exist in a life insurance policy?

1. At the time of application
2. Where there is a change of the beneficiary
3. At the time of loss
4. At the time of policy delivery

Answer 10

At the time of application

Question 11

Which of the following individuals must have insurable interest in the insured?

1. Beneficiary
2. Policyowner
3. Producer
4. Underwriter

Answer 11

Policyowner

Question 12

All of the following information about the applicant is identified in the General Information section of a life insurance application EXCEPT

1. Age
2. Gender
3. Education
4. Occupation

Answer 12

Education

Question 13

Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?

1. An individual has an insurable interest in their own life
2. A married person has an insurable interest in their spouse
3. Business partners have an insurable interest in each other
4. A debtor has an insurable interest in the life of a lender

Answer 13

A debtor has an insurable interest in the life of a lender

Question 14

Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds?

1. Vacation travel expenses
2. Debt consolidation
3. Day care
4. Travel expenses for family to come to the funeral

Answer 14

Vacation travel expenses