Life 5 Flashcards
To legally transact insurance in this state, an insurer must obtain which of the following? a) Certificate of Authority b) Power of Attorney c) Business entity license D) Certificate of Insurance
A Certificate of Authority is required in order to transact
insurance.
Which of the following is a generic consumer
publication that explains life insurance in general terms
in order to assist the applicant in the decision-making
process?
a) Insurance Index
b) Policy Summary
C)
Illustrations
d) Buyer’s Guide
The Buyer’s Guide is a consumer publication that
explains life insurance in general terms in order to assist
the applicant in the decision-making process. It is a
generic guide that does not address the specific policy
of the insurer, instead explaining life insurance in a way
that the average consumer can understand
An insurer neglects to pay a legitimate claim that is
covered under the terms of the policy. Which of the
following insurance principles has the insurer violated?
a) Representation
b) Adhesion
c) Consideration
d) Good faith
The binding force in any contract is consideration.
Consideration on the part of the insured is the payment
of premiums and the health representations made in
the application. Consideration on the part of the insurer
is the promise to pay in the event of loss.
When a reduced-paid up nonforfeiture option is chosen,
what happens to the face amount of the policy?
A) It is reduced to the amount of what the cash value
would buy as a single premium.
b) It is increased when extra premiums are paid.
c) It decreases over the term of the policy.
d) It remains the same as the original policy, regardless of
any differences in value.
A) It is reduced to the amount of what the cash value
would buy as a single premium.
In a reduced paid-up policy, the original policy’s cash
value is used as single premium to pay for a permanent
policy with a reduced face amount from the original,
hence the name. The new policy accumulates in cash
value until its maturity or the insured’s death.
An employee is insured under her employer’s group life
plan. If she terminates her group coverage, which of the
following statements is INCORRECT?
a)
The premium for individual coverage will be
based upon the insured’s attained age.
b) The insured may choose to convert to term or
permanent individual coverage.
C)
The insured would not need to prove insurability for a
conversion policy.
d) The insured may convert coverage to an individual
policy within 31 days.
When group coverage is converted to an individual
policy, the insurer will determine the type of coverage,
usually permanent insurance.
Which option is being utilized when the insurer
accumulates dividends at interest and then uses the
accumulated dividends, plus interest, and the policy
cash value to pay the policy up early?
a) Accumulation at Interest
b) Paid-up additions
c) Dividend Accumulation option
d) Paid-up option
Paid up option
With the paid-up option, the insurer can accumulate
dividends at interest and then use them, in addition to
interest and the policy’s cash value, to pay the policy
earlier than planned.
The policyowner wants to make sure that upon his
death, the life policy will pay a portion of the proceeds
annually to his spouse, but that the principal will be paid
to their children when they reach a certain age. Which
settlement option should the policyowner choose?
a) Joint and survivor
b) Fixed amount option
c) Interest only option
d) Life income with period certain
Interest only option
With the interest-only option, the insurance company
retains the policy proceeds and pays interest on the
proceeds to the recipient (beneficiary) at regular
intervals.
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called a) Waiver of cost of insurance. b) Payor benefit. c) Waiver of premium. D) Guaranteed insurability.
Waiver of premium rider waives the premium if the
insured owner has been totally disabled for a
predetermined period. The payor benefit provides for
an owner other than the insured and the waiver of cost
of insurance is found in Universal Life.
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled? a) Waiver of Premium b) Payor Benefit c) Jumping Juvenile d) Juvenile Premium Provision
If the payor (usually a parent or guardian) becomes
disabled for at least 6 months or dies, the insurer will
waive the premiums until the minor reaches a certain
age, such as 21.
All of the following entities regulate variable life policies EXCEPT a) The Guaranty Association. b) Federal government. c) The SEC. d) The Insurance Department.
Variable life insurance is regulated by both the state and
federal government, as well
as the Insurance
Department, and the SEC.
Equity indexed annuities a) Seek higher returns. b) Are more risky than variable annuities. C) Are security instruments. d) Invest conservatively.
Seek higher returns
Equity Indexed Annuities are not securities, but they
invest on a relatively aggressive basis to aim for higher
returns. Like a fixed annuity the Equity Indexed Annuity
has a guaranteed minimum interest rate. The current
interest rate that is actually credited is often tied to a
familiar index like the Standard and Poor’s 500
Which statement is NOT true regarding a Straight Life
policy?
a)
The face value of the policy is paid to the
insured at age 100.
b) It usually develops cash value by the end of the third
policy year.
c) It has the lowest annual premium of the three types of
Whole Life policies
d)
Its premium steadily decreases over time, in response
to its growing cash value.
Straight Life policies charge a level annual premium
throughout the insured’s lifetime and provide a level,
guaranteed death benefit.
Which of the following riders would NOT cause the Death Benefit to increase? a) Cost of Living Rider b) Accidental Death Rider c) Payor Benefit Rider d) Guaranteed Insurability Rider
Payor Benefit Rider does not increase the Death
Benefit; it only pays the premium if the payor is disabled
or dies. With Guaranteed Insurability Rider, the
policyowner can increase B at specified ages or
events, i.e. marriage or birth of a child; Cost of Living
Rider increases DB to keep pace with inflation; in
Accidental Death Rider, if the insured dies from an
accident, DB is a multiple of the Face Amount.
What kind of policy allows withdrawals or partial surrenders? a) 20-pay life b) Term policy c) Variable whole life d) Universal life
Universal Life products allow the partial withdrawal, or
surrender, of the policy cash value.
In insurance, an offer is usually made when
a) The agent hands the policy to the policyholder.
b) Anagent explains a policy to a potential applicant.
c) An applicant submits an application to the insurer.
d) The insurer approves the application and
receives the initial premium.
d) The insurer approves the application and
receives the initial premium.
In insurance, the offer is usually made by the applicant
in the form of the application. Acceptance takes place
when an insurer’s underwriter approves the application
and issues a policy.
