Life Ins Basics Flashcards
The disclosure authorization notice that an insurance producer gives to an applicant must be approved by:
The insurance commissioner (director) must approve the disclosure notice given to insurance applicants. The applicant must sign the notice to show he/she consents for the insurer to receive certain information and to use the information in certain ways.
The correct answer is: the insurance commissioner.
Which of the flowing is true regarding taxes and viatical settlements?
Some or all of the proceeds of a viatical settlement may be taxed under federal income tax and state franchise and income taxes. This must be disclosed to the viator.
The correct answer is: Some or all of the proceeds may be subject to federal income tax.
Which of the following is true regarding a family rider to a life policy when an insured enters into a viatical settlement?
Coverage on the lives of any other joint or additional insured or family riders could be forfeited.
The correct answer is: Family rider coverages may be reduced or canceled.
All of the following are types of risk classifications used to categorize applicants except:
There are four ways in which applicants are classified: (1) Standard Risks: normal risks with standard premium rates, (2) Preferred Risks: insureds with excellent health & usually lower rates, (3) Substandard Risks: those with higher than average risks, and (4) Uninsurable: excessive risks that the company does not want to accept.
The correct answer is: Common Risks
A written disclosure statement must be given to an insurance applicant:
A written disclosure statement must be given to an insurance applicant no later than the time that the application form is signed by the applicant.
The correct answer is: No later than the time that the application form is signed by the applicant.
The responsibilities of an insurance producer who sells a policy that replaces an already existing policy include all of the following EXCEPT:
It is the responsibility of the insurance company, not the producer, to send to each existing insurer a written communication advising of the replacement or proposed replacement.
The correct answer is: Send to each existing insurer a written communication advising of the replacement or proposed replacement.
A MINIMUM of how many life insurance policies would be needed to insure three partners under a Cross-Purchase Buy-Sell agreement?
Each partner would purchase a policy on the life of the other two partners. Three partners x two polices = 6 total policies.
The correct answer is: Six
Which of the following might best be used by a consumer to determine the actual cost of a policy over a specified time period before the insured would cancel the policy and receive the policy’s cash value?
The actual premium does not take cash value accumulation into account, as the insurer may have large administrative costs. The Surrender Cost Index takes premiums, dividends, interest rates and policy costs into consideration while computing the actual cash value at the end of a time period to help determine what money the policy owner would get back - and consequently what the policy’s actual cost is. The correct answer is: Surrender Cost Index
Which of the following is NOT true concerning the Medical Information Bureau?
The MIB gathers information about the physical and health condition of prior applicants to reduce the speed of policy issue and to help identify life insurance fraud. This cooperative organization between life and health insurers is for the benefit of providing information concerning former applicants to insurers and is not affiliated with the government.
The correct answer is: It gathers medical information for statistical analysis.
B, when applying for life insurance, stated that she has never smoked, and that no one in her family has had a heart attack before age 50. These are examples of a _____and a _____.
A warranty is a specific, guaranteed statement made in answer to a specific question, while representations are statements believed to be true by the applicant. When B says she has never smoked, she is stating something she can know and is making a warranty. The statement that no one in her family has had a heart attack before age 50 is a representation, one that B believes to be true, but cannot know for sure. In general, however, all statements made by an applicant on an application are considered to be representations.
The correct answer is: warranty, representation
Which of the following is a characteristic of executive bonus plans?
The executive bonus plan is a tax-deductible way to reward key executives. The plan can be offered to specific employees. The company gives the executive a bonus equal to the cost of the life insurance policy premium. The executive owns the policy and pays the premium. Cash values build on a tax-deferred basis and accumulated cash value is available for retirement. Any death benefit is income tax free.
The correct answer is: Any death benefit is income tax free.
In the case of viatical settlements, creditors . . .
Unlike life insurance death benefits paid to beneficiaries, proceeds of viatical settlements could be subject to the claims of creditors.
The correct answer is: May be able to make claims on the proceeds.
The effective date of a life insurance policy can be no sooner than:
The first premium for a policy must be paid in advance and a mode (frequency and method) of premium payment established prior to a policy going into effect. Premiums can be paid annually, semiannually, quarterly, monthly, or through a Bank Check Plan in which the premium is deducted on a monthly basis from the insured?s bank account. The annual mode is generally the least expensive Annual and Bank Check Plan modes are the most likely to stay in force longest.
The correct answer is: the date the initial premium mode is paid in full.
The Medical information Bureau (MIB) was established to provide which of the following criteria to insurance companies?
The Medical Information Bureau collects data from insurers regarding applicants for insurance. this information is shared with other insurers that might want to check or verify information on an application to assist with gathering accurate information for underwriting purposes.
The correct answer is: Applicants’ medical conditions as reported by other companies
