Insurance Flashcards
When a policy pays dividends to its policyholders, it is said to be?
Participating.
Which of these describe a participating insurance policy?
Policyowners are entitled to receive dividends.
What year was the McCarran-Ferguson Act enacted?
1945.
An insurance applicant MUST be informed of an investigation regarding his/her reputation and character according to the?
Fair Credit Reporting Act.
Dividends payable to a policyowner are?
Declared by the insurance company.
Which of the following requires insurers to disclose when an applicant’s consumer or credit history is being investigated?
1970 – Fair Credit Reporting Act.
Who elects the governing body of a mutual insurance company?
Policyholders.
The stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called?
Reserves.
When third-party ownership is involved, applicants who also happen to be the stated primary beneficiary are required to have?
Insurable interest in the proposed insured.
Life and health insurance policies are?
Unilateral contracts.
A policy of adhesion can only be modified by whom?
The insurance company.
At what point does an informal agreement become a binding contract?
When consideration is provided by one of the parties to the contract.
When must insurable interest exist for a life insurance contract to be valid?
Inception of the contract.
Which of the following BEST describes a warranty?
Statement guaranteed to be true.
A policy of adhesion can only be modified by whom?
The insurance company.
A contract where one party either accepts or rejects the terms of a contract written by another party is called a contract of?
Adhesion.
Insurance policies are offered on a “take it or leave it” basis, which make them?
Contracts of Adhesion.
A life insurance policy would be considered a wagering contract WITHOUT?
Insurable interest.
What is the consideration given by an insurer in the Consideration clause of a life policy?
Promise to pay a death benefit to a named beneficiary.
All of the following are considered to be typical characteristics describing the nature of an insurance contract, EXCEPT?
Bilateral.
E and F are business partners. Each takes out a $500,000 life insurance policy on the other, naming himself as primary beneficiary. E and F eventually terminate their business, and four months later E dies. Although E was married with three children at the time of death, the primary beneficiary is still F. However, an insurable interest no longer exists. Where will the proceeds from E’s life insurance policy be directed to?
F.
Which of the following consists of an offer, acceptance, and consideration?
Contract.
Which of these is considered a statement that is assured to be true in every respect?
Warranty.
Who makes the legally enforceable promises in a unilateral insurance policy?
Insurance company.
Q purchases a $500,000 life insurance policy and pays $900 in premiums over the first six months. Q dies suddenly and the beneficiary is paid $500,000. This exchange of unequal values reflects which of the following insurance contract features?
Aleatory.
Which of these in NOT considered to be an element of an insurance contract?
Negotiating.
Stranger Originated Life Insurance (STOLI) has been found to be in violation of which of the following contractual elements?
Legal Purpose (Insurable Interest).
Which of these in NOT a type of agent authority?
Principal.
When must insurable interest be present in order for a life insurance policy to be valid?
When the application is made.
A life insurance policy which ensures that the premium will be paid if the insured becomes disabled has what kind of rider attached?
Waiver of Premium.
M has an insurance policy that also has an outstanding policy loan at the time of M’s death. The insurer will deduct the outstanding loan balance from the?
Policy proceeds.
Which of these life insurance riders allows the applicant to have excess coverage?
Term rider.
K’s whole life insurance policy lapsed two months ago due to nonpayment. She would now like to reinstate the policy. All of these statements are correct about the policy’s reinstatement EXCEPT?
K will forfeit the right to use the automatic loan provision upon reinstatement.
What action will an insurer take if an interest payment on a policy loan is not made on time?
Automatically add the amount of interest due to the loan balance.
A policyowner may generate taxable income from which of the following Dividend Options?
Accumulation at Interest.
All of these Settlement options involve the systematic liquidation of the death proceeds in the event of the insured’s death, EXCEPT?
Interest Only.
A Return of Premium life insurance policy is?
Whole life and increasing term.
Typically a life insurance death benefit is paid by a lump-sum payment. A(n) ______ option is a method of distributing a Life Insurance policy’s death benefit OTHER than by a lump sum payment?
Settlement.
What does the ownership clause in a life insurance policy state?
Who the policyowner is and what rights the policyowner is entitled to.
S buys a $50,000 whole life policy with a $50,000 Accidental Death and Dismemberment rider. S dies 1 year later of natural causes. How much will the insurer pay the beneficiary?
$50,000.
All of these statements concerning Settlement Options are true, EXCEPT?
Only the beneficiary may select.
D owns a Whole Life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which Nonforfeiture Option will the insurer likely proceed with?
Extended term.
An insurer may normally delay the payment of a cash value loan or surrender value for up to?
6 months.
The Accelerated Death Benefit provision in a life insurance policy is also known as a(n)?
Living Benefit.
What benefit does the Payor clause on a Juvenile Life policy provide?
Premiums are waived if payor becomes disabled.
A Life insurance policyowner would like to take out a policy loan against the cash value in the Whole Life policy. The interest rate applied to this loan may vary over time. This is referred to as a(n)?
Variable.
A Term Life rider offers the insured?
Additional life coverage.
An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?
Full face amount minus any past due premiums.
The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insured’s death is called a(n)?
Insuring agreement.
Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?
Entire Contract Provision.
S would like to use dividends from her life insurance policy to purchase paid-up additions. All of these would be factors that determine how much coverage can be purchased EXCEPT?
Beneficiary’s age.
What provision in a life insurance policy states that the application is considered part of the contract?
Entire Contract provision.
The _______ has the right to change a life insurance policy’s beneficiary?
Policyowner.
L takes out a life insurance policy and dies 10 years later. During the claim process, the insurer discovers that L had understated her age on the application. Under the Misstatement of Age provision, the insurer will?
Adjust the death benefit to a reduced amount.
Which statement is TRUE in regards to a policy loan?
Past-due interest on a policy loan is added to the total debt.
In a life insurance policy, which provision states who may select policy options, designate and name a beneficiary, and be the recipient of any financial benefits from the policy?
Owner’s Rights.
The Automatic Premium Loan provision is designed to?
Avoid a policy lapse.
A(n) _____ rider may be used to include coverage for children under their parents’ life insurance policy?
Term.
The free-look provision begins?
Upon receipt of the policy by the policyowner.
All of the following statements are true regarding a policy’s Grace period, EXCEPT?
Past due premiums are waived.
Which statement regarding the Misstatement of Age provision is considered to be true?
Coverage will be adjusted to reflect the insured’s true age if a misstatement of age is discovered.
Which life insurance rider typically appears on a Juvenile life insurance policy?
Payor benefit rider.
Which of these Nonforfeiture Options continue a build-up of cash value?
Reduced Paid-up.
When does a Guaranteed Insurability Rider allow the insured to buy additional coverage?
At future dates, specified in the contract with no evidence of insurability required.
Which of these statements about a Guaranteed Insurability Option rider is NOT TRUE?
Evidence of insurability is required when the option is exercised.
S buys a $10,000 Whole Life policy in 2003 and pays an annual premium of $100. S dies 5 years later in 2008 and the insurer pays the beneficiary $10,500. What kind of rider did S include on the policy?
Return of premium rider.
N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?
Claim will be denied.
When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)?
Exclusion.
The Consideration clause in a life insurance policy indicates that a policyowner’s consideration consists of a completed application and?
The initial premium.
Which of these is NOT considered to be a right given to a policyowner?
Modify a provision in the insurance contract.
T is given a receipt after completing a life insurance application and paying the initial premium. Under this situation, T’s coverage is?
Conditional, depending on the insurer’s underwriting guidelines.
Which of these is an element of a Single Premium annuity?
Lump-sum payment.
An immediate annuity consists of a?
Single premium.
A retirement plan that sets aside part of the company’s net income for distributions to qualified employees is called a?
Profit-sharing plan.
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
Request of the change will be refused.
A(n) ______ beneficiary may be changed by the policyowner WITHOUT the consent of the beneficiary?
Revocable.
Which of the following is NOT a limited benefit plan?
Life insurance policy.
Which product would best serve a retired individual looking to invest a lump-sum of money through an insurance company?
Annuity.
An employee requested that the balance of her 401(k) account be sent directly to her in one lump sum. Upon receipt of the distribution, she immediately has the funds rolled over into an IRA. What is the tax consequence of the distribution sent to this employee?
Distribution is subject to federal income tax withholding.
What kind of premium does a Whole Life policy have?
Level
P owns a $25,000 Life Policy that pays the face amount to him if he lives to age 70, or to his beneficiary if he dies before age 70. What kind of policy does P own?
Endowment at age 70.
T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?
Ten-Year Endowment.
Which of the following is considered an element of a Variable Life Policy?
Underlying equity investment.
All of these are characteristics of an Adjustable Life policy, EXCEPT?
Face amount can be adjusted using policy dividends.
When a life insurance policy exceeds certain IRS table values, the result would create which of the following?
Modified Endowment Contract (MEC).
Y purchased $100,000 worth of permanent protection on himself and $50,000 worth of 10-year Term coverage for his wife on the same policy. Which of these policies did Y purchase?
Whole Life policy with an Other insured Rider.
What kind of life insurance policy pays a specified monthly income to a beneficiary for 30 years and then pays a lump sum benefit at the end of that 30 years?
Family Maintenance Policy.
A company that owns a life insurance policy on one of its key employees may do all of the following EXCEPT?
Change the policy’s interest rate.
When a policyowner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?
Conversion provision.
J is 35 years old and looking to purchase a whole life insurance policy. Which of the following types of policies will provide the most rapid growth of cash value?
20 pay Life.
A Limited Pay Life policy has?
Premium payments limited to a specified number of years.
What does a Face Amount Plus Cash Value Policy pay upon the insured’s death?
Face amount plus the policy’s cash value.
Life insurance that covers an insured’s whole life with level premiums paid over a limited time is called?
Limited Pay Life.
What kind of insurance policy supplies an income stream over a set of period of time that starts when the insured dies?
Family Maintenance Policy.
N is a 40 year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid up at retirement. Which of these should N purchase?
30 Pay Life.
Under a Renewable Term policy?
The renewal premium is calculated on the basis of the insured’s attained age.
K is looking to purchase Renewable Term insurance. Which of these types of Term insurance may be renewable?
Level.
Which type of policy is considered to be overfunded, as stated by IRS guidelines?
Modified Endowment Contract.
Which of these statements describe a Modified Endowment Contract (MEC)?
Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract.
The advantage of reinstating an original life policy is?
The premiums are based on a younger age.
P died five years after purchasing a life policy. While investigating the claim, the insurer discovered material misrepresentations made by P during the application process. Which of these actions will the insurer take?
Beneficiary will be paid the Death Benefit.
Variable Whole Life insurance can be described as?
Both an insurance and securities product.
K owns a Whole Life policy. If K wants an increasing Death Benefit to protect against inflation, which Dividend Option should she chose?
Paid-Up Additional Insurance.
How are surrender charges deducted in a life policy with a rear-end loaded provision?
Deducted when the policy is discontinued.
Which type of life policy contains a monthly mortality charge as well as self-directed investment choices?
Variable Universal Life.
J let her life insurance policy lapse 8 months ago due to nonpayment. She can reestablish coverage under which of the following provisions?
Reinstatement provision.
B owns a Whole Life policy with a guaranteed insurability option that allows him to purchase, without evidence of insurability, stated amounts of?
Additional Whole Life coverage at specified times.
Which of the following statements is CORRECT about accelerated death benefits?
Must have a terminal illness to qualify.
What action can a policyowner take if an application for a bank loan requires collateral?
Assign policy ownership to the bank.
Which of these actions is taken when a policyowner uses a Life Insurance policy as collateral for a bank loan?
Collateral assignment.
How are policyowner dividends treated in regards to income tax?
Interest on accumulations is taxed.
The provision that can be used to put an insurance policy back in force after it has lapsed due to nonpayment is called?
Reinstatement.
B recently dies and as insured with a life insurance policy for over five years. During the claims process, the insurer discovered that B has understated his age by 5 years at the time of application. In this situation, the insurer will?
Pay the amount that the premium would have purchased at the correct age.
B receives yearly dividends and interest from a participating life insurance policy. Which of these should B include as gross income for federal income tax purposes?
Interest only.
Dividends paid from a life insurance policy are?
Issued by the insurer.
A provision in a life insurance policy that pays the policyowner an amount that does not surpass the guaranteed cash value is called the?
Policy Loan Provision.
A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?
20-Pay Life accumulates cash value faster than Straight Life.
Which of these are NOT an example of a Nonforfeiture option?
Life Income.
The incontestable clause allows an insurer to?
Contest a claim during the Contestable period.
What is the Suicide provision designed to do?
Safeguard the insurer from an applicant who is contemplating suicide.
Periodic health claim payments MUST be made at least?
Monthly.
The first portion of a covered Major Medical insurance expense that the insured is required to pay is called the?
Initial deductible.
Which of the following is TRUE about a qualified retirement that is “top heavy”?
More than 60% of plan assests are in key employee accounts.
Which of these statements accurately describes the Waiver of Premium provision in an Accident and Health policy?
Premiums are waived after the insured has been totally disabled for a specified time period.
S owns a life insurance policy with cash values that fluctuate according to the underlying investment performance of common stocks. Which of these policies does S own?
Variable Whole Life.
Additional coverage can be added to a Whole Life policy by adding a(n)?
Decreasing term rider.
An employer that offers a qualified retirement plan to its employees is eligible to?
Make tax-deductible contributions to the plan.
An individual who purchases a Life annuity is given protection against?
The risk of living longer than expected.
P has recently signed an application for insurance. The insurer MUST advise her in writing that an investigative consumer report may be conducted according to the?
Fair Credit Reporting Act.
The Accidental Death and Dismemberment (AD&D) provision in a life insurance policy would pay additional benefits if the insured?
Is blinded in an accident.
Generally, how long is a benefit period for a Major Medical Expense Plan?
One year.
A whole life insurance policyowner does not wish to continue making premium payments. Which of the following enables the policyowner to sell the policy for more than its cash value?
Life settlement contract.
The policy provision that entitles the insurer to establish conditions the insured must meet a claim is pending is?
Time Limit on Certain Defenses.
All of these statements about Equity Indexed Life Insurance are correct, EXCEPT?
The premiums can be lowered or raised, based on investment performance.
Long Term Care policies will usually pay for eligible benefits using which of the following methods?
Expense incurred.
How does group insurance differ from individual insurance?
Premiums are lower.
Which of the following does Social Security NOT provide benefits for?
Dismemberment.
To be eligible for Social Security disability benefits, an employee must be unable to perform?
Any occupation.
An employee with $25,000 group term life coverage was recently fired. This employee’s group coverage may be converted to a?
$25,000 individual whole life policy.
If its employees share in the cost of insurance, what type of group life insurance plan would a corporation have?
Contributory.
A nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as?
A fraternal benefit society.
A noncontributory group term life plan is characterized by?
The entire cost of the plan is paid for by the employer.
Which requirement must be met for an association to be eligible for a group life plan?
Group was formed for a purpose other than acquiring insurance.
What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability?
Conversion.
Nursing home benefits must be provided for at least 12 consecutive months in which of the following types of policies?
Long-Term Care.
Which of the following types of care is typically not covered in a Long-Term Care policy?
Acupuncture.
P is self-employed and owns an Individual Disability Income policy. He becomes totally disabled on June 1 and receive $2,000 a month for the next 10 months. How much of this income is subject to federal income tax?
$0.
All individuals covered under a group contract will receive a(n)?
Certificate.
Why must an insurance applicant answer all questions on the application?
Statements and representations on the application are part of the consideration for issuing a policy.
A statement made by an insured in an insurance application that must be true to the best of one’s knowledge and which becomes a part of the contract is known as?
A representation.
Which of these is NOT an element of Life insurance premiums?
Morbidity rate.
Group/voluntary long-term care premiums are typically deducted from the employee’s income and,?
Are less costly as compared to individual long term care coverage.
A foreign insurance company conducting insurance business in Texas?
Was formed under the laws of another state.
Which of the following statements about accumulated interest earned on dividends from an insurance policy is TRUE?
Taxed as ordinary income.
Taking receipt of premiums and holding them for the insurance company is an example of?
Fiduciary responsibility.
Traditional individual retirement annuity (IRA) distribution must start by?
April 1st of the year following the year the participant attains age 70 ½.
M has a Major Medical insurance policy with a $200 flat deductible and an 80% Coinsurance clause. If M incurs a $2,200 claim for an eligible medical expense, how much will M receive in payment for this claim?
$1,600.
A(n) _________ contained in a life insurance policy states that the policy will NOT cover certain risks?
Exclusion.
All of these statements about the Waiver of Premium provision are correct, EXCEPT?
Insured must be eligible for Social Security disability for claim to be accepted.
A(n) _______ Life policy offers the owner investment in products such as money-market funds, long-term bonds and equities?
Variable.
If a 10-Year Term Life policy contains a Renewability provision, the policy will renew?
Without evidence of insurability.
On a life insurance policy, who is qualified to change the beneficiary designation?
Policyowner.
Which of the following policies is characterized by a flexible premium and death benefit and allows the policyowner of the investment aspect of the plan?
Variable universal life.
Which of the following is considered to be the time period after a Health Policy is issued, during which no benefits are provided for illness?
Probationary Period.
An insurance agent has a fiduciary responsibility to all of the following EXCEPT?
Other agents.
Which of these is NOT considered to be a cost connected with an individual’s death?
Business expenses.
P is an employee who quits her job and wants to convert her group health coverage to an individual policy. After the expiration of COBRA benefits, which of the following statements is TRUE?
She DOES need to provide evidence of insurability.
K is an annuitant currently receiving payments. If she were to die before receiving payments equal to correct value, a beneficiary will continue receiving payments until an amount equal to the contract value has been paid. This is called a(n)?
Installment Refund annuity.
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met.
What type of insurance offers permanent life coverage with premiums that are payable for life?
Whole Life.
A Whole Life insurance policyowner does NOT have the right to?
Change the grace period.
Life insurance companies are required to establish and maintain an anti-money laundering compliance program according to which federal regulation?
USA Patriot Act.
Which of these factors does NOT influence an applicant’s need for life insurance?
Self-maintenance expenses.
_____ of personal life insurance premiums is usually deductible for federal income tax purposes?
0%.
A prospective insured completes and signs an application for health insurance but intentionally conceals information about a pre-existing heart condition. The company issues the policy. Two months later, the insured suffers a heart attack and submits a claim. While processing the claim, the company discovers the pre-existing condition. In this situation, the company will?
Continue coverage but exclude the heart condition.
All are true statements regarding the underwriting process, EXCEPT?
AIDS and HIV virus exams can be conducted in a discriminatory fashion.
S has a Whole Life policy with a premium payment due soon. Which provision would keep the policy in force if S does not make the required payment and the policy has adequate cash value from which the premium payment can be made?
Automatic Policy Loan.
Q applied for life insurance and submitted the initial premium on January 1. The policy was issued February 1, but it was not delivered by the agent until February 7. Q is dissatisfied and returns the policy February 13. How will the insurer handle this situation?
Policy was returned within the free-look period, premium will be fully refunded.
A policy loan is made possible by which of these life insurance policy features?
Cash value provision.
The Coordination of Benefits provision?
Prevents an insured covered by two health plans from making a profit on a covered loss.
Which of the following phrases refers to the fees charged by a healthcare professional?
Usual, customary, and reasonable expenses.
What is the elimination period of an individual disability policy?
Time period a disabled person must wait before benefits are paid.
M purchased an Accidental Death and Dismemberment (AD&D) policy and named his son as beneficiary. M has the right to change the beneficiary designation at anytime. What type of beneficiary is his son?
Revocable.
Which of the following statements about Health Reimbursement Arrangements (HRA) is CORRECT?
If the employee paid for qualified medical expenses, the reimbursement may be tax-free.
K is the insured and P is the sole beneficiary on a life insurance policy. Both are involved in a fatal accident where K dies before P. Under the Common Disaster provision, which of these statements is true?
Proceeds will be payable to K’s estate if P dies within a specified time.
The reason for backdating a policy is?
To obtain a premium rate based on an earlier age.
Who is NOT required to sign a life insurance application?
Beneficiary.
What is being delivered during a policy delivery?
Insurance contract to the proposed insured.
Which type of plan allows an employer to give money to an employee for buying a life insurance policy and also permits the employee to select the beneficiary?
Split-dollar plan.
C is a key employee at ABC incorporated. If a Key Employee life policy is purchased on her life, which of these statements would be true?
ABC is the policyowner, C is the insured, and ABC is the beneficiary.
Company Z has a Cross Purchase Buy-Sell Agreement in place among its three founding partners. If the agreement is funded with individual life insurance, what would it require?
Each partner must own a policy on the other partners.
Two partners own equal shares in a business worth a total of $1,000,000. If they both commit to the purchase of a life insurance policy that will fund a Buy-Sell Agreement, which of the following is TRUE?
Each partner owns a $500,000 policy on their partner’s life.
If a corporation pays the premium on a group life policy for its employees, the corporation is required to report how much additional taxable income for each employee?
Nothing.
Which of these is NOT a reason for purchasing life insurance on the life of a minor?
If both parents were to die, it would provide death benefits to the child.
Three law partners form a Cross-Purchase Buy and Sell agreement. This agreement is funded with individual life insurance. How many total life policies are needed for this agreement?
6.
How long is the typical free look period for Long Term Care insurance policies?
30 days.
Which statement regarding third-party ownership of a life insurance policy is true?
It is used extensively in estate-planning as well as business circumstances.
The guarantee of insurability option provides a long-term policyowner the ability to?
Buy additional coverage at a later date.
Which Long Term Care insurance statement is true?
Pre-existing conditions must be covered after the coverage has been in force for six months.
A life insurance arrangement which circumvents insurable interest statutes is called?
Investor-Originated Life Insurance.
Insurance policies are considered aleatory contracts because?
Performance is conditioned upon a future occurrence.
Which health policy clause specifies the amount of benefits to be paid?
Insuring.
When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the?
Entire contract provision.
M’s insurance company denied a reinstatement application for her lapsed health insurance policy. The company did not notify M of this denial. How many days from the reinstatement application date does the insurance company have to notify M of the denial before the policy will be automatically placed back in force?
45 days.
If an individual is covered under an Accidental Death Policy and dies, an autopsy can be performed in all these situations, EXCEPT?
When the state prohibits this by law.
What should an insured to if the insurer does not send claims forms within the time period set forth in a health policy’s Claims Forms provision?
Submit the claim in any form.
An insurance company normally has 2 years to contest information provided on an accident and health application. This 2 year period begins on the date that the?
Insurer dates the policy.
The Consideration clause of an insurance contract includes?
The schedule and amount of premium payments.
The Legal Actions provision of an insurance contract is designed to do all of the following, EXCEPT?
Protect the producer.
Which of the following will a Long Term Care plan typically provide benefits for?
Home health care.
T applied for a Disability Income policy and has a history of back injuries. The insurer issued the policy with a statement that excluded coverage for back injuries. This statement is called a(n)?
Impairment rider.
What is considered to be a characteristic of a Conditionally Renewable Health Insurance policy?
Premiums may increase at time of renewal.
“A producer does not have the authority to change a policy or waive any of its provisions”. The health provision that best describes this statement is called the?
Entire Contract.
Under an individual Health Insurance policy, the Time Limit of Certain Defenses provision states that nonfraudulent misstatements first become incontestable two years?
From the date that the policy was issued.
Health Insurance benefits NOT covered due to an act of war are?
Excluded by the insurer in the contract provisions.
An insurer must provide an insured with claim forms within _____ days after receiving notice of a loss?
15 days.
According to the Time Payment of Claims provision, the insurer must pay Disability Income benefits no less frequently than which of the following options?
Monthly.
After an insured gives notice of loss, what must he/she do if the insurer does not furnish forms?
File written proof of loss.
T owns an Accident & Health policy and notifies her insurance company that she has chosen a less hazardous occupation. Under the Change of Occupation provision, which of the following actions may her insurance company take?
Increase her policy’s coverage amount.
A(n) _______ of benefits of a Health Policy transfers payments to someone other than the policyowner?
Assignment.
The ______ clause identifies which losses resulting from an accident or sickness are insured by the policy?
Insuring.
P received Disability income benefits for 3 months then returns to work. She is able to work one month before her condition returns, leaving her disabled once again. What would the insurance company most likely regard this second period of disability as?
A recurrent disability.
How long does the coverage normally remain on a limited-pay life policy?
Age 100.
The investment gains from a Universal Life Policy usually go toward?
The cash value.
P is looking to purchase a life insurance policy that will pay a stated monthly income to his beneficiaries for 20 years after he dies and a lump sum of $20,000 at the end of that 20 year period. What type of policy should P purchase?
Family Maintenance policy.
A 15-year mortgage is best protected by what kind of life policy?
15-year decreasing term.
Which statement is TRUE regarding a Variable Whole Life policy?
A minimum guaranteed Death benefit is provided.
Which of the following actions is NOT possible with a Universal Life policy?
Premiums may be applied as a credit against income tax.
K is shopping for a permanent life insurance policy that will offer her the MOST protection per dollar of annual premium. Which of these policies best fits her needs?
Straight life.
What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?
Convertible Term.
At what point does a Whole Life Insurance policy endow?
When the cash value equals the death benefit.
What advantage does the renewability feature give to term policy?
The insured may extend the coverage period.
Which of the following types of policies pays a benefit if the insured goes blind?
AD&D.
Which of the following types of Term Life policies most likely contains a Renewability feature?
10 Year Convertible Term.
Under an interest Sensitive Whole Life policy?
Cash values are determined by interest rates.
All of these insurance products require an agent to have proper FINRA securities registration in order to sell them, EXCEPT for?
Modified Whole Life.
When a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take?
Void the policy only if it is discovered during the Contestable period and proven to be material.
K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?
Modified Whole Life.
Which of the following provisions guarantees that premiums will be waived if a Juvenile Life policyowner becomes disabled?
Payor clause.
P purchases a $50,000 whole life insurance policy in 2005. One of the questions on the application asks if P engages in scuba diving, to which P answers “No”. The policy is then issued with no scuba exclusions. In 2010, P takes up scuba diving and dies in a scuba-related accident in 2011. What will the insurer pay to P’s beneficiary?
$50,000 minus any outstanding policy loans.
P is blinded in an industrial accident. Which provision of his life insurance policy will pay a stated benefit amount?
Accidental Death and Dismemberment clause.
Whose life is covered on a life insurance policy that contains a payor benefit clause?
Child.
What kind of life policy either pays the face value upon the death of the insured or when the insured reaches age 100?
Whole Life.
A life insurance policy that provides a policyowner with cash value along with a level face amount is called?
Whole life.
A life policy with a death benefit and cash value that can fluctuate according to the performance of its underlying investment portfolio is referred to as?
Variable Life.
What kind of insurance policy supplies an income stream over a set period of time that starts when the insured dies?
Family Maintenance Policy.
S, age 40, is looking to buy a Life Insurance policy that will allow for increases or decreases in coverage as his needs change. The policy best suited for S would be?
Universal Life.
Which is true concerning a Variable Universal Life policy?
Policyowner controls where the investment will go and selects the amount of the premium payment.
F needs life insurance that provides coverage for only a limited amount of time with a death benefit that changes regularly according to a schedule. What kind of policy is needed?
Decreasing term policy.
K purchased a Life insurance policy in 1986 which paid 10% interest in the early years of the policy. Twenty years after the purchase, she received a notice from the insurer stating that the policy will soon terminate unless a much-higher premium is paid because of falling interest rates. This type of policy is known as a(n) _________ life policy?
Universal.
Which of these is an element of a Variable Life policy?
A fixed, level premium.
The Consideration clause in a life insurance contract contains what pertinent information?
Amount of premium payments and when they are due.
Who has the option to renew a Renewable Term policy?
Insured.
Credit Life insurance is?
Issued in an amount not to exceed the amount of the loan.
Which of the following types of permanent life insurance policies offers the highest initial cash value?
Single premium.
A father who dies within 3 years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision?
Payor provision.
J is issued a Life Insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first 5 years. The premium then increases to $900 per year in the sixth year and remains level thereafter. The policy’s death benefit also remains at $100,000. Which type of life insurance policy is this?
Modified Premium Life.
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, cost of insurance, and the?
Expense charges.
Life insurance immediately creates an estate upon the death of an insured. Which of the following policies is characterized by a guaranteed minimum death benefit?
Variable life.
What type of life policy covers two lives and pays the face amount after the first one dies?
Joint Life Policy.
Which statement is correct regarding the premium payment schedule for whole life policies?
Premiums are payable throughout the insured’s lifetime/coverage lasts until death of the insured.
Under a Graded Premium Whole Life policy?
The premium increases each year during the early years of the contract and remains the same after that time.
Which of these characteristics is consistent with a Straight Life policy?
Premiums are payable for as long as there is insurance coverage in force.
A(n) _______ ____________ life policy combines investment choices with a form of Term coverage?
Variable Universal.
Stranger-Owned Life Insurance (STOLI) is when a person purchases life insurance only to sell to a(n)?
Third-party with no insurable interest.
What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?
Decreasing term.
Which of the following actions require a policyowner to provide proof of insurability in an Adjustable Life policy?
Increase face amount.
How does a typical Variable Life Policy investment account grow?
Through mutual funds, stocks, bonds.
Term Life Policies that have the ability to be converted to permanent coverage may do so during a specific time period. This conversion period?
Varies according to the contract.
T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?
Renewable.
A(n) ______ term life policy is normally used when covering an insured’s mortgage balance?
Decreasing.
G purchased a Family Income policy at age 40. The policy has a 20-year rider period. If G were to die at age 50, how long would G’s family receive an income?
10 years.
A policy that becomes a Modified Endowment Contract (MEC)?
Will lose many of its tax advantages.
What type of life insurance incorporates flexible premiums and an adjustable death benefit?
Universal Life.
A Cost of Living rider gives the insured?
Additional death benefits.
Which of these would be considered a Limited-Pay Life policy?
Life Paid-Up at Age 70.
The option that provides an additional death benefit for a limited amount of time at the lowest possible cost is called a(n)?
Accidental Death and Dismemberment rider (AD&D).
The purpose of the ______ Period clause is to avoid an unintentional lapse of a life insurance policy?
Grace.
Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?
Conversion privilege.
What type of policy would offer a 40-year old the quickest accumulation of cash value?
20-pay life.
A Universal Life policy is sometimes referred to as an unbundled Life Policy because the owner can see the interest earned, expense charges, and the?
Cost of insurance.
What type of life insurance gives the greatest amount of coverage for a limited period of time?
Term life.
What type of life policy covers two people and pays upon the death of the last insured?
Survivorship.
When is the face amount paid under a Joint Life and Survivor policy?
Upon death of the last insured.
What type of life insurance are credit policies issued as?
Term.
Term insurance has which of the following characteristics?
Expires at the end of the policy period.
Which of the following is NOT included in a life insurance illustration?
Company’s mortality table.
During a sales presentation for a participating life insurance policy, an agent MUST?
Make a prospect understand that dividends are NOT guaranteed.
In life insurance, the needs approach is used mostly to establish?
How much life insurance a client should apply for.
In a Life insurance contract, an insurance company’s promise to pay stated benefits is called the?
Insuring clause.
The provision in a health insurance policy that suspends premiums being paid to the insurer while the insured is disabled is called the?
Waiver of Premium.
In Texas, which of these statements regarding the Suicide clause is TRUE?
An insurer may not use suicide as a defense against payment after the second year.
Which of these types of coverage is best described as a short term medical policy?
Interim coverage.
B is a teacher who was injured in a car accident and cannot work. She is now receiving monthly benefits as a result of this accident. Which type of policy does B have?
Disability Income.
What is required for an agent whose license has been revoked?
Wait at least five years before applying for a new license.
Medicare Part C is?
Available to those who are enrolled in Medicare Part A and Part B.
The insured and insurance company will share the cost of covered losses under which health policy feature?
Payment of Claims Provision.
Which of these life products is NOT considered interest-sensitive?
Modified Whole Life.
A Business Overhead Expense policy would cover which of the following if a business owner becomes disabled?
Utilities and office rent.
The Notice of Claims provision requires a policyowner to?
Notify an insurer of a claim within a specified time.
Which type of policy would pay an employee’s salary if the employer was injured in a bicycle accident and out of work for six weeks?
Business Overhead Expense.
Who has the right to change a revocable beneficiary?
Policyowner.
The underwriting process involves all of these, EXCEPT for?
Policy loan.
What type of reinsurance contract involves two companies automatically sharing their risk exposure?
Treaty.
What is the name of the law that requires insurers to disclose information gathering practices and where the information was obtained?
Fair Credit Reporting Act.
Which of these statements concerning an individual Straight Life annuity is accurate?
Payments are made to an annuitant for life.
Which of these types of policies may NOT have the Automatic Premium Loan provision attached to it?
Decreasing Term.
An immediate annuity consists of a?
Single premium.
Which of the following is NOT included in the policy face?
Exclusions.
A primary beneficiary has died before the insured in a life insurance policy. A contingent beneficiary is also named in the policy. Which of the following will occur when the insured dies?
Proceeds will go to the contingent beneficiary.
The amount of monthly disability benefits payable under Social Security is affected by which of the following factors?
Amount of the benefits available from other sources.
K pays on a $20,000 20-year endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?
$20,000 death benefit.
What is Medicare?
A hospital and medical expense insurance program.
As a condition for a loan, a bank requires the borrower to purchase credit insurance from a specific company. What is the bank guilty of?
Coercion.
The ________ is authorized to assign a Life Insurance policy as collateral for a loan?
Policyowner.
