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Life Insurance Exam > Life Insurance Exam > Flashcards

Life Insurance Exam Flashcards

1
Q

What must exist for an individual to purchase life insurance on another individual?

A

Insurable Interest

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2
Q

What is it called when someone owns a life insurance policy on his spouse?

A

Third-party ownership

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3
Q

For how long may an agent be imprisoned for making statements that jeopardize the solvency of one insurer?

A

15 years (per federal regulation 18, USC 1033/1034)

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4
Q

Who are the owners of a stock company ?

A

It’s stockholders

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5
Q

The only type of risk that can be insured

A

Pure

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6
Q

If a person needs to obtain coverage for a substandard or unusual risk, he would use a (blank) broker.

A

Surplus lines

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7
Q

What are the two major approaches used to determine the amount of life insurance needed?

A

Human life law and needs approach

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8
Q
A
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8
Q
A
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9
Q

True or False, the most common method of managing risk is to transfer risk

A

True

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9
Q

Define blackout period

A

The time period from the insureds death until the surviving spouse is permitted to recieve retirement income benefits

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10
Q

Name five methods of risk management

A

Avoidance, retention, sharing reduction, and transfer

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11
Q

An exclusive agency employs (BLANK) agents who agree to market products of (BLANK) insurer.

A

Independent, One.

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12
Q

Identify the two parties in a life insurance contract.

A

The policyowner and insurer

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13
Q

Explain error and omission

A

An unintentional error or honest mistake by a producer

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14
Q

True or False - A foreign insurer is authorized in a state, but it’s principal office is another country.

A

False. A foreign insurer has its principal office in another state.

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15
Q

What general name is used to describe agents, brokers, and consultants?

A

Producer

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16
Q

Name the two types of risk?

A

Pure risk and speculative risk

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17
Q

True or False. Insurable interest must exist at the time of death

A

False: insurable interest must exist at the time of policy issue, not death.

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18
Q

The insurer assumes the risk in an insurance policy since it receives a (BLANK)

A

Premium

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19
Q

What term describes a business that assumes the total risk of potential losses?

A

Self Insured

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20
Q

Insurance policies are contracts of (BLANK)

A

Indemnity

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21
Q

What are the two basic types of reinsurance?

A

Facultative and Automatic

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22
Q

Direct writers employ (BLANK) agents

A

Captive

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23
Q

Describe the needs approach.

A

Determining the amount of Life Insurance a person needs by using her specific financial goals and objectives

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24
Q

Premiums paid for insurance coverage that is not provided are referred to as (BLANK) premiums.

A

Unearned

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25
Q

Identify the two parties in a life insurance contract.

A

The policyowner and insurer

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26
Q

Explain error and ommission

A

An unintentional error or honest mistake by a producer

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27
Q

True or False - A foreign insurer is authorized in a state, but its principal office is in another country.

A

False. A foreign insurer has its principal’s office in another state.

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28
Q

What general name is used to describe agents, brokers, consultants?

A

Producer

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29
Q

Name the two types of risk

A

Pure risk and speculative risk

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30
Q

True or false - Insurable interest must exist at the time of death

A

False. Insurable interest must exist at the time of policy issue, not death.

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31
Q

True or False - Insurance is defined as the transfer of risk from one party to another ?

A

True

32
Q

True or False. Extra changes may apply if the premium is paid on other than an annual basis.

A

True

33
Q

Define the terms peril and hazard

A

Peril is a cause of loss . Hazard is a condition that increases the chance of a loss occurring.

34
Q

When a life insurance death benefit is paid, it creates a (BLANK)

A

Estate

35
Q

An unincorporated organization in which members insure one another is known as a (BLANK)

A

Reciprocal

36
Q

True or False - Physical hazards include faulty wiring and slippery floors.

A

True

37
Q

When an insurer approves coverage for bad risks than good risks, he is exposed to (BLANK) selection.

A

Adverse

38
Q

An alien insurer is authorized in (BLANK) and it’s principal office is (BLANK) this country.

A

Any state, Outside.

39
Q

What two factors make up the net single premium?

A

Mortality and Interest.

40
Q

Who do agents represent?

A

The insurer that sponsors them.

41
Q

What is loss exposure?

A

A hazardous condition brought about by the nature of an insureds activities.

42
Q

What is the price paid per unit of coverage?

A

Rate

43
Q

Name the three types of hazard

A

Physical, Moral, and Morale

44
Q

In order for a risk to be insurable, the chance of loss must be (BLANK), (BLANK), AND (BLANK)

A

Accidental, Measurable, and Definable

45
Q

The insurer seeking reinsurance is the (BLANK) insurer, while the insurer assuming the risk (BLANK).

A

Ceding, Reinsurer.

46
Q

Who do solicitors represent?

A

Agents

47
Q

Who manages a reciprocal?

A

An Attorney

48
Q

Where does a domestic insurer have it’s principal or home office?

A

In the state where it is headquartered

49
Q

Give an example of a moral hazard

A

Filing a false insurance claim

50
Q

Identify the contents of the total premium

A

The earned and the unearned premium

51
Q

Who do brokers represent?

A

Themselves and the policyowner/insured

52
Q

True or False - An individual is not required to be licensed to recieve commissions.

A

False. An individual receiving or sharing commissions must have an insurance license.

53
Q

The insurers return on its investments is used to determine which factor in the gross premium?

A

Interest

54
Q

Who issues participating life insurance policies?

A

Mutual Companies

55
Q

True or False - Insurable interest must exist when a life insurance policy is issued

A

True

56
Q

True or False - Insurance should restore a person to a better financial position than existed prior to the loss

A

False. Insurance should restore a person to the same financial position that existed prior to the loss.

57
Q

True or False - An independent agency may place business with only one insurer

A

False. An independent agency may place business with multiple insurers.

58
Q

The uncertainty or chance of financial loss is known as (BLANK)

A

Risk

59
Q

Define the term reinsurance

A

When an insurer seeks insurance from another insure.

60
Q

Which type of reinsurance does not allow the reinsurer to reject the risk?

A

Treaty or automatic reinsurance

61
Q

List some of the personal uses for life insurance

A

Financial expenses, estate protection, survivor protection, debt payment, education expenses, etc.

62
Q

Apparent authority

A

When the public merely an agent as having a type of authority.

63
Q

True or False - Driving under the influence is an example of a moral hazard.

A

False. DUI is an example of a moral hazard

64
Q

Morality is the (BLANK) of death at a particular age for an individual.

A

Probability

65
Q

What is implied authority?

A

Authority not specifically defined in the contract but considered to be an extension of regular duties

66
Q

True or False - Speculative risk provides the chance for financial gain.

A

True

67
Q

Which valuation approach measures a person’s potential future earnings to determine the amount of life insurance needed?

A

The human life value approach.

68
Q

The greater the number of lives insured the more predictable losses will be, is attributed to what law?

A

The law of large numbers

69
Q

What type of insurer is owned by it’s policy holders?

A

Mutual Company

70
Q

Explain the concept of actual or express authority

A

When an agent’s authority is defined in the agent’s contract.

71
Q

Authorized insurers are known as (BLANK) companies, while unauthorized insurers are known as (BLANK) companies

A

Admitted, Nonadmitted

72
Q

Premiums that an insurer is entitled to are referred to as (BLANK) premiums.

A

Earned

73
Q

Define insurance producer

A

An individual who sells insurance products to the public

74
Q

Which type of reinsurance allows the reinsurer to reject the risk?

A

Facultative Reinsurance

75
Q

Name four independent insurance rating services

A

A.M Best Review, Moody’s investment, Standard and poors, and Weiss Research.

76
Q

True or False - The expense factor in the gross premium is based on what the insurer pays for operating expenses.

A

True

77
Q

True or False - A fraternal association provides insurance only to it’s members.

A

True

78
Q

What three factors are used to determine the gross premium for a life insurance policy?

A

Mortality, Interest, and expenses.

79
Q

Other than human life value and needs approach, what other methods are used to determine the amount of life insurance?

A

Multiple of earnings, interest only, single needs, “seat of the pants” and capital needs.

Life Insurance Exam (2 decks)

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