LIFE INSURANCE Flashcards by Tanner Mosson

A group owned insurance company that is formed to assume and spread the liability risk of its members is known as a?

Risk Retention Group

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Which of the following requires insurers to disclose when an applicant’s consumer or credit history is being investigated?

1970- Fair Credit Reporting Act

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Which of these describing participating insurance policy?

policy owners are entitled to receive dividends

policyholders pay assessments for company losses

start companies allow their policy owners to share in any company earnings

policy owners are entitled to vote for members on board of directors

policy owners are entitled to receive dividends

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At point must Life Insurance applicant be informed of their rights that fall under the fair credit reporting act?

before the appointment is scheduled

upon completion of the application

at the policy’s delivery

when the insurer receives the MIB report

upon completion of the application

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In an insurance contract, the insurer is the only party who makes it legal enforceable promise. What kind of contract is this?

Segregation

unenforceable

adhesion

uni lateral

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Which of these requiring offer acceptance and consideration?

estoppel

warranty

contract

representation

contract

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Life and health insurance policies are?

multilateral contracts

bilateral contracts

unilateral contracts

non lateral contracts

unilateral contracts

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In regard to representations or warranties which of these statements is true?

warranties or statements considered to be true to the best of the applicant’s belief.

is material to the risk, false representations will void a policy

representations are statements guaranteed to be true in every respect.

material to the risk false representations will not void a policy

is material to the risk, false representations will void a policy

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A Life insurance policy will be considered a wagering contract without?

insurable interest

premium payment

agent solicitation

constructive delivery

insurable interest

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What is the consideration given by an insurer in the consideration clause of a life policy?

promise to never cancel coverage

promise to pay a death benefit to a named beneficiary

promise to not raise premiums

promise to accept an insured assignment of beliefs

promise to pay a death benefit to a named beneficiary

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Who makes the legally enforceable promises in a uni lateral insurance policy?

beneficiary

insurance company

insured

applicant

insurance company

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A life insurance arrangement which circumvents insurable interest statutes is called?

a contract of adhesion

Indemnity in the contract

key person insurance

investor originated life insurance

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When must insurable interest exist for a life insurance contract to be valid?

inception of the contract

throughout the entire length of the contract

when the insured dies

during the contestable period

inception of the contract

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The consideration clause of an insurance contract includes?

the buyers guide

a summary of the coverage provided

the named beneficiaries

the schedule and amount of premium payments

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Which of these arrangements allows one to bypass insurable interest laws?

concealment

indemnity contract

contract of adhesion

investor originated life insurance

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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 ?

life paid-up at 70

20-pay life

increasing term to age 65

straight life

20-pay life

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Kate purchased a life insurance policy in 1986 which paid 10% interest in the early years of the policy. 20 years after the purchase, she received notice from the insurer stating that policy will soon terminate unless a much higher premium is paid because of the falling interest rates. This type of policy is known as a ____ policy?

whole

universal

graded

increasing

universal

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A limited pay life policy has ?

grated health benefits

no cash value

premium payments are limited to a specific number of years

premium payments that are paid to age 100

premium payments are limited to a specific number of years

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Life insurance that covers an insured whole life with level premiums paid over a limited time is called

adjustable life

renewable term

limited pay life

joint life

limited pay life

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When a policy owner exchanges a term policy for a whole life policy without providing proof of good health, which of these apply?

extended term option

conversion provision

1035 exchange

incontestable period

conversion provision

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Credit life insurance is typically issued with which of the following types of coverage?

Annual renewable term

decreasing term

individual whole life

group term

decreasing term

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How long does the coverage normally remain on a limited pay life policy?

age 65

age 100

when premium payments stop

age 100

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What kind of insurance policy supplies an income steam over a set period of time that starts when the insured dies?

Family maintenance policy

family income policy

survivor policy

family survivor policy

Family maintenance policy

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K buys a policy where the premium stays fixed for the first five years. The premium then increases in year six and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?

variable life

adjust the life

grated premium whole life

modified whole life

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Which of the following is considered an element of variable life policy? Underlying equity investment little or no risk to insured guaranteed dividends insurer assumes all the risk

Underlying equity investment

Which of the following actions require a policy owner to provide proof of insurability and in an adjustable life policy? increase face amount decrease face amount increase premium paying period Decrease premium payment

increase premium paying period

F is covered by a whole life policy. Which insurance product can cover his children? Assignment provision payor benefit accelerated benefit rider child term rider

child term rider

Term insurance has which of the following characteristics? Expires at the end of the policy period Build cash value has non forfeiture options and hours at the end of the policy period

Expires at the end of the policy period

Which of these statements describe a modified endowment contract? Falls below the minimum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract the 7 pay test is used to determine the minimum death benefit of the policy the 7 pay test is used to determine the maximum death benefit of a policy

exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract

Credit life insurance is? Issued in any amount at the discretion of the applicant issued in the event of loss of income issued in an amount not to exceed the amount of the loan coverage that waives the premium on a loan payment in the event of total disability

issued in an amount not to exceed the amount of the loan

Which provision allows the policy owner to change a term life policy to a permanent one without Providing proof of good health? Modification conversion exchange adjustable

conversion

A father who dies within three years after purchasing a life insurance policy on his infant daughter can have the policy premiums waived under which provision? Payor provision accelerated benefits provision assignment provision waiver of premium provision

Payor provision

J issued a life insurance policy with a death benefit of $100,000. She pays $600 per year in premium for the first five 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 endowment grated premium life straight life modified premium life

modified premium life

Variable whole life insurance can be described as? both an insurance and securities product an insurance product only a securities product only the insurance company assumes the investment risk

both an insurance and securities product

Which of these statements about guaranteed insurability option writer is not true? Coverage can be added at a specific event such as marriage or having a child evidence of insurability is not required when the option is exercised evidence of insurability is required when the option is exercised coverage can be added at specific ages

evidence of insurability is required when the option is exercised

Which of these types of life insurance allows the policy owner to have level premiums and to also choose from a selection of investment options? Modified whole life variable life universal life adjustable life

variable life

A policy loan is made possible by which of these life insurance features? extended term provision cash value provision owners rights provision consideration clause

cash value provision

What benefit does the payor clause on a juvenile life policy provide? Allows payer to assign ownership in the event payer becomes disabled allows player to increase base amount without providing evidence of insurability premiums are waived if juvenile becomes disabled premiums are waived if payer becomes disabled

premiums are waived if payer becomes disabled

M has the insurance policy that also has an outstanding policy loan at the time of M’s death. The insurer will deduct outstanding loan balance from the cash value estate of the insured policy proceed nonforfeiture value

policy proceed

Which of the following Statements about accumulated interest earned on dividends from an insurance policy is true? Partially taxable tax deductible non taxable text as ordinary income

text as ordinary income

The agreement in a life insurance contract that states a specific sum of money will be paid to a designated person upon an insureds death is called entire contract provision consideration clause insuring agreement assignment agreement

insuring agreement

Which of these actions is taken when a policy owner uses a life insurance policy as collateral for a bank loan? Revokable assignment beneficiary change irrevocable assignment collateral assignment

collateral assignment

Additional coverage can be added to a whole life policy by adding a ? payor rider accelerated benefit rider decreasing term rider automatic premium loan rider

decreasing term rider

An insured’s inability to perform two or more activities of daily living may trigger which type of life policy writer? waiver of premium long term care accelerated death benefit accidental

long term care

The consideration clause in a life insurance contract contains what pertinent information? Summary of benefits offer and acceptance entire contract amount of premium payments and when they are due

amount of premium payments and when they are due

A whole life insurance policy owner does not have the right to? Designate a beneficiary take out a policy loan change the grace period Assign the policy

change the grace period

The advantage of reinstating an original life policy is? The premiums are based on the current age of the insured the premiums are based on a younger age the interest charged on policy loans will be lowered a new incontestable period Will begin

the premiums are based on a younger age

When does a guaranteed insurability rider allow the insured to buy additional coverage? 10 year increments a future date specified in the contract with proof of insurability required a future date specified in the contract with no evidence of insurability required at anytime while the policy is active

a future date specified in the contract with no evidence of insurability required

Which of these are not an example of non forfeiture option? Extended term reduce paid up cash surrender life income

life income

A provision in a life insurance policy that pays the policy owner an amount that does not surpass the guaranteed cash value is called the? policy loan provision automatic premium loan provision accelerated benefits provisioned consideration clause

policy loan provision

Which of these provisions require proof of insurability after a policy is lapsed? Insuring conversion reinstatement consideration

reinstatement

What a misrepresentation on a life insurance policy application is discovered, what action may an insurance company take? Void the policy if found during the contestable. void the policy no matter when it's discovered void the policy at anytime only if it is found to be material void the policy only if it is discovered during the contestable period And proven to be material

void the policy only if it is discovered during the contestable period And proven to be material

K is 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 paid to P’s state proceeds will be divided equally between K and P estate proceeds will be payable to K’s estate if P dies within a specific time the courts will decide who will receive the death benefits

proceeds will be payable to K’s estate if P dies within a specific time

J chooses a monthly premium payment mode on his whole life insurance policy. Which of these statements is correct? The gross premium is higher on a monthly payment mode as compared to being paid annually the gross premium is lower on a monthly payment mode as compared to being paid annually the cash value Turn the light policy paid on a monthly basis builds quicker than one paid an annual basis the face amount of all life policy paid on a monthly basis is higher than one paid on an annual basis

The gross premium is higher on a monthly payment mode as compared to being paid annually

___ Over the personal life insurance premiums is usually deductible for federal income tax purposes 100% 75% 50% 0%

C is trying to determine whether to convert her convertible term life policy to whole life insurance using her original Age or attained age. What factor would affect her decision the most? The cost the nonforfeiture options the contestable period The assignment of ownership

The cost

Which premium schedule result in the lowest cost to the policy owner? semi annual monthly quarterly annual

annual

Quarterly premium payments increase the annual cost of insurance because insure risk exposure is greater interest to the insurer is increased while administrative costs are decreased mortality costs are greater interest to the insurer is decreased while the administrative cost is increased

interest to the insurer is decreased while the administrative cost is increased

K has a life insurance policy where her husband is the beneficiary in her daughter is the Can't change beneficiary. Under the common disaster clause, if K and her husband are both killed in an automobile accident, where would the death proceeds be directed? Daughter husband's estate k’s estate trust fund

Daughter

What is the initial source of underwriting for an insurance policy? Application containing statements from the insured MIB report credit report medical exam

Application containing statements from the insured

Upon policy delivery, a signed good health statement is requested from the applicant. Why would this be necessary? The applicant chose an annual premium mode the applicant is suspended of making material misrepresentation the initial premium was submitted within an application the initial premium was not submitted with the application

the initial premium was not submitted with the application

Which of these factors do not play a role in the underwriting of a life insurance policy? Avocations credit status marital status occupation

marital status

An applicant's medical information received from the medical information Bureau may be furnished to the agent applicants spouse NAIC applicant's physician

applicant's physician

M completes an application for life insurance but does not pay the initial premium. All these actions must occur before his policy goes into effect except policy is delivered free look period has expired insurance company issues policy initial premium is collected

free look period has expired

What action should a producer take if the initial premium is not submitted with the application? Keep the application until the premium is paid forward the application to the insurer after giving the applicant a binding receipt forward the application to the insurer without the initial premium for the application to the insurer after giving the applicant at conditional receipt

forward the application to the insurer without the initial premium

What is being delivered during a policy delivery? A binding receipt to the proposed insured an insurance contract to the proposed insured application in initial premium to the insured policy summary Sheet and disclosure material to the proposed insured

an insurance contract to the proposed insured

An employee with $25,000 group term life coverage was recently fired. This employees group coverage may be converted to a $215,000 individual whole life policy $25,000 modified whole life policy $25,000 individual term life policy $25,000 individual whole life policy

$25,000 individual whole life policy

What group term life feature permits an individual to depart from the group and continue to be covered without providing evidence of insurability? Entire contract owners right non forfeiture options conversion

conversion

Under a trustee group life policy, who would be eligible for the certificate of coverage? Corporation employee employer labor union

employee

Which of the following is an important underwriting principle of group life insurance? Physical examinations are required everyone must be covered in the group employer must pay for the initial premium the group must be formed for the purpose of getting affordable insurance

everyone must be covered in the group

Which provision is not a requirement in a group life policy? Conversion Grace period Incontestable period Accidental

Accidental

Which of the following statements about non contributory employee group life insurance is false? A minimum number of employees is required to participate all eligible employees must be covered no evidence of insurability required must have conversion rights

A minimum number of employees is required to participate

The amount of monthly disability benefits payable under Social Security is affected by which of the following factors? Insureds tax bracket amount of benefits available from other sources nature of disability insured education level

amount of benefits available from other sources

What determines the full amount of Social Security retirement benefits a qualified individual is entitled to receive? Primary insurance amount total taxes paid to the FICA number of dependents state of residence

Primary insurance amount

One becomes eligible for Social Security disability benefits after having been disabled for 3 months 5 months 6 months 12 months

5 months

Which of these is not a source of funding for Social Security benefits? Self employed individuals employees federal government employers

federal government

What is the excise tax rate the IRS imposes on individuals age 70 and 1/2 or older who do not take the requirement minimum distributions from their qualified retirement plan? 30% 40% 50% 60%

50%

In an individual retirement account I RA, rollover contributions are subject to capital gains tax subject to ordinary income tax partially limited by dollar amount not limited by dollar amount

not limited by dollar amount

What is the maximum number of employees earning at least $5000 that an employer can have in order to start a SIMPLE retirement plan 25 50 100 250

100

All of the following statements about traditional individual retirement accounts are false accept ? 10% penalty is applied to withdrawals after the age of 59 and a half withdrawals are normally tax free to the recipient 10% penalties applied to withdrawals before age 59 and a half contributions are not tax deductible

10% penalties applied to withdrawals before age 59 and a half

Who is normally considered to be the owner of a 403B tax sheltered annuity? the 403 B custodian the financial institution the employer the employee

the employee

a sole proprietor May use the plan Only if the employees of this business are included in what SEP plan Keogh pension plan individual retirement account SIMPLE plan

Keogh pension plan

How are Roth IR A distributions normally taxed ? 10% penalty tax is applied taxed as ordinary income capital gains tax is applied distributions are received tax free

distributions are received tax free

Company Z has a cross purchase buy sell agreement in place among its three founding partners. If the agreement is funded with an individual life insurance, what would require? One policy is owned and paid for by the company each partner must own a policy on the other's partners one policy is owned by the company and premiums are split equally among the partners each partner owns their own individual policy

each partner must own a policy on the other's partners

When an individual is planning to protect his family with life insurance, one method of doing so is called needs analysis. What exactly does needs analysis involve? Establishes the needs of the individual and his dependence takes into account the present value of future income earned by the breadwinner Place is a dollar value on the life of the individual establishes the investment risk level acceptable to the individual

establishes the investment risk level acceptable to the individual