Insurance Producers

Question 1

Principal

Answer 1

party on whose behalf the agents acts (Insurer)

Question 2

Agent

Answer 2

party who acts for another, that “other” being the principal. Legally, the term agent refers to the relationship any person has with a principal.

Question 3

Express Authority

Answer 3

The contract between the producer and insurer sets forth certain acts and duties the producer is specifically authorized to perform.

Question 4

Implied Authority

Answer 4

intended to be given by the insurer;
usually relates to the general customs of the business; and
is not contractually provided or specifically explained.

Question 5

Apparent Authority

Answer 5

the contract does not provide;
the insurer does not intend; yet
reasonably appears to the customer to be granted to the agent based on the agent’s statements and the actions (or inactions) of the insurer.

Question 6

Buyer’s Guide

Answer 6

It explains the general features, benefits, and conditions of the type of insurance being considered. Most states require that the guide be provided to a prospective buyer when he or she is first solicited.

Question 7

Agent’s fiduciary responsibility to insured

Answer 7

not engage in any form of rebating (i.e., refunding or offering to refund a portion of the premium or anything of value, in return for the applicant’s purchase of a policy);

• make sure all product recommendations are suitable for the customer;
• avoid replacing any policy unless the replacement will clearly improve the customer’s situation;
• disclose all pertinent information concerning a proposed policy; and
• avoid misrepresenting the terms or conditions of a proposed policy.

Question 8

Life insurance surrender cost index

Answer 8

compares costs at a future date when the policy might be

surrendered for cash value

Question 9

life insurance net payment cost index

Answer 9

compares costs at a future date if premiums are continually paid and no cash value is withdrawn.