quiz questions Flashcards
who elects the governing body of a mutual insurance company
policyholders
when a policy pays dividends to its policy holders, it is said to be
participating
a nonprofit incorporated society that does not have capital stock and operates for the sole benefit of its members is known as
a fraternal benefit society
Which act requires insurers to disclose when an applicants consumer or credit history is being investigated
1970 Fair Credit Reporting Act
a participating insurance policy?
policyowners are entitled to recieve dividends
at what point must a life insurance applicant be informed of their rights that fall under the Fair Credit Reporting Act
upon completion of the application
the stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called
reserves
what year was the McCarran-Ferguson Act enacted
1945
what type of reinsurance contract involves 2 companies automatically sharing their risk exposure
treaty
who elects the governing body of a mutual insurance company
policyholders
the stated amount or percent of liquid assets that an insurer must have on hand that will satisfy future obligations to its policyholders is called
reserves
what type of risk involves the potential for loss and the potential for gain
speculative
an insurer has a contractual agreement which transfers a portion of its risk exposure to another insurer. What type of contractual agreement is this?
reinsurance contract
which of the following can be defined as a cause of loss
peril
what risk is insurable
pure
which term describes the elimination of a hazard
risk avoidance
how can an insurance company minimize exposure to loss
reinsuring risks
the act of insuring a risk against possible loss
risk transfer
according to the law of large numbers, how would losses be affected if the number of similar insured units increase
predictability of losses will be improved
a business becoming incorporated is an example of risk…
transfer
what type of risk involves the potential for loss with no possibility of gain
pure risk
a condition that increases the possibility of financial loss is called a(n)
hazard
a hold-harmless clause is an example of risk
transfer
an insurance risk requires
that the chance of loss be calculable
for insurance purposes similar objects which are exposed to the same group of perils are referred to as
homogeneous exposure units
the law of large numbers enables an insurer to
predict losses
what is the potential for loss defined as
risk
when must insurable interest be present in order for a life insurance policy to be valid?
when the application is made
which of these is not a type of agent authority?
express
principal
implied
apparent
princaple
what type of insurance incorporates flexible premiums and an adjustable death benefit?
universal life
what type of policy has a death benefit that adjusts periodically and is written for a specific period of time?
decreasing term
what insurance products require an agent to have proper FINRA securities registration in order to sell them
universal variable life, variable annuity, and variable life
what life insurance policy combines term with an investment element
universal life
which of these policies may not have the automatic premium loan provision attached to it
modified whole life
20-pay life
endowment
decreasing term
decreasing term
a universal life policy is sometimes referred to as an unbundled life policy because the owner can see the interest earned, cost of insurance and the
expense charge
which of the following is considered an element of a variable life policy
underlying equity investment
guaranteed dividends
insurer assumes all the risk
little or no risk to insured
underlying equity investment
which of the following types of permanent life insurance policies offers the highest initial cash value?
single premium
limited pay
interest-sensitive
straight whole
single premium
all of these are characteristics of an adjustable life policy except…
combination of term and whole life insurance
face amount can be adjusted using dividends
adjustable premiums
adjustable premium payment period
face amount can be adjusted using dividends
what type of policy would offer a 40 year old the quickest accumulation of cash value?
straight whole life
paid up at 65
30-pay life
20-pay life
20 pay life
which of these nonforfeiture options continue a build up of cash value?
cash surrender
extended term
waiver of premium
reduced paid-up
reduced paid-up
a cost of living rider gives the insured
tax incentives
additional death benefits
monthly income
decreasing premiums
additional death benefits
a return of premium life insurance policy is
interest-sensitive
variable life
whole life and increasing term
a nonforfeiture option
whole life and increasing term
M has an insurance policy that also has an outstanding policy loan at the time of M’s death. The insurer will deduct the outstanding loan balance from the
nonforfeiture value
cash value
estate of the insured
policy proceeds
policy proceeds
B recently died and was insured with a life insurance policy for over 5 years. During the claims process, the insurer discovered that B had understated his age by 5 years at the time of his application. in this situation, the insurer will:
pay the full face amount
pay the amount that the premium would have purchased at the correct age
pay the amount of premiums paid plus interest
pay half of the face amount
pay the amount that the premium would have purchased at the correct age
how are surrender charges deducted in a life policy with a rear-end loan provision?
from the death benefit
when the policy is discontinued
from policy’s cash value
when assigned to another policyholder
when the policy is discontinued
D owns a Whole life policy that was purchased 10 years ago. If the premium payments suddenly stop and D takes no additional action, which nonforfeiture option will the insurer likely proceed with?
extended term
loan provision
reduced paid-up
cash surrender
extended term
how do life insurance companies handle cases where the insured commits suicide within the contracts stated contestable period?
claims are denied under the suicide clause of the policy
in a life insurance contract, an insurance companies promise to pay stated benefits is the
consideration clause
insuring clause
owners rights
entire contract
insuring clause
K owns a WL policy. If K wants an increasing DB to protect against inflation, which dividend option should she choose?
reduced premiums
cash option
paid up additional insurance
accumulate with interest
paid up additional insurance
the advantage of reinstating an original life policy is
the interest charged on policy loans will be lower
the premiums are based on a younger age
the premiums are based on the current age of the insured
a new incontestable period will begin
the premiums are based on a younger age
typically a life insurance DB is paid by lump-sum payment. A(n)……… option is a method of distributing a life insurance policy’s DB OTHER than a lump sum payout
aleatory
settlement
conversion
dividend
settlement
which of these life insurance riders allow the applicant to have excess coverage
guarantee insurability rider
automatic premium loan rider
waiver of premium rider
term rider
term rider
what actions will an insurer take if an interest payment on a policy loan is not made on time?
disallow any further loans
automatically add the amount of interest due to the loan balance
cancel the policy if not paid within the grace period
subtract from any dividends owed
automatically add the amount of interest due to the loan balance
which of the following is an example of a nonforfeiture option?
reduced paid up option
conversion option
inflation option
guaranteed insurability option
reduced paid up option
which of these types of life insurance allows the policyowner to have level premiums and to also choose from a selection of investment options?
variable life
adjustable life
modified whole life
universal life
variable life
which of these types of policies may not have the automatic premium loan provision attached to it?
ednowment
modified whole life
20 pay life
decreasing term
decreasing term
which provision prevents an insurer from changing the terms of the contract with the policyowner by reffering to documents not found within the policy itself?
entire contract provision
an insured is past due on his life insurance premium, but is still within the grace period. what will the beneficiary recieve if the insured dies during this grace period?
full face amount minus any past due premiums
B owns a WL policy with a guarunteed insurability option that allows him to purchase without any evidence of insurability, stated amounts of
additional WL coverage at specified times
D was actively serving in the marines when he was killed in an accident while on leave. His $100k WL policy contains a war exclusion clause. How much will his beneficiary recieve?
the full face amount
B recieves yearly dividends and interest from a participating life insurance policy. What should B include as gross income for federal tax purposes?
interest only
T took out a $50,000 life insurance policy with an accidental death and simemberment rider. 5 years later T commits suicide. What will the insurer pay?
$50,000
do you have to have a terminal illness to qualify for accelerated death benefits?
yes
S has a WL policy with a premium payment due soon. what provision would keep the policy in force if S does not makethe required payment and the policy has adequate cash value from which the premium payment can be made?
automatic policy loan
the free look provision begins…
upon reciept of the policy by the policy owner
which of these is not an example of a nonforfeiture option?
life income
reduced paid up
extended term
cash surrender
life income
when does a guaranteed insurability rider allow the insured to buy additional coverage?
at future dates specified in the contract with no evidence of insurability required
additional coverage can be added to a WL policy by adding a(n)
decreasing term rider
k is the insured and p is the sole benficiary on a life insurance policy. Both are involved in a fatal accident where k dies before p. under the common disastor provision, where will the policy funds go?
proceeds will be payable to k’s estate if p dies within a specified time
T is the policyowner for a life insurance policy with an irrevocable beneficiary. if T wants to change the beneficiary, they need consent from
the beneficiary
a level premium indicates
the premium is fixed for the entire duration of the contract
J chooses a monthly premium payment mode on his WL policy. the gross payment is higher or lower on monthly compared to annually?
higher
what is true about blue cross blue shield organizations?
they are nonprofit organizations
what best describes how pre-admission certification is used?
used to prevent nonessential medical costs
which of the following best describes a preffered provider organization (PPO)
discounted fees for the patient
the premiums for continued health insurance coverage under COBRA are paid for by the
employee
pre hospitilization authorization is considered an example of
managed care
someone quits their job and wants to convert their health coverage to an individual policy during the COBRA period
they dont need to provide evidence of insurability
the provision in a group health policy that allows the insurer to postpone coverage for a covered illness 30 days after the policy’s effective date is referred to as the:
Waiting period
Preferred Provider Organizations (PPOs)
reduce benefits and increase costs when service is obtained outside the PPO
MEWA (multiple Employer Welfare Arrangments) permits?
small non affiliated employers to insure their members
in a 501(c)(9) Trust, the trust must be controlled by
independent trustee, its member, and a fiduciary
a PPO
offers medical insurance by sponsering a network of health care providers
what service is not included under hospitalization expenses coverage
surgical fees
what type of policy would only provide coverage for specific types of illnesses
dread disease insurance
not true about major medical benefits
benefits have no maximum limits
the individual most likely to buy a medicare supplement policy would be an
68 yr old male covered by medicare
the guarantee of insurability option provides a long-term care policyowner the ability to
buy additional coverage at a later date
what is the minimum number of activities of daily living an insured must be unable to perform to qualify for long term care benefits
2
what type of care is not covered in a long term care policy
acupuncture
a reimbursement policy pays what amount of covered long term care expenses
actual covered expenses up to the daily maximum
medicare b does not cover
inpatient hospital services
long term care policies will usually pay for elidgible benefits using which of the following methods
expense incurred
what policy provision prevents an insurance company from incorporating external documents into an insurance policy
entire contract
the sections of an insurance contract which limit coverage are called
exclusions
a ……. company is one that is domiciled in another state and has not recieved a license to do business in AL
foreign nonadmitted
AL’s head of the department of insurance does not have the power to
promulgate insurance laws
an insurance producer who offers a potential cient something of value as an incentive to purchase insurance is engaging in
rebating
how is the AL life and disability insurance guaranty association able to pay claims for insolvent insurers
assessments against other admitted insurers in AL
a disability policy in AL that is paid monthly has a grace period of
10 days
in AL an insurer who violates state laws for the payment of insurance commissions may be fined up to
3x commissions paid
in AL, all health maintenance organizations must
have a complaint system to resolve written complaints from enrollees
in AL, when are newborns covered under a health policy
the moment of birth
replacement regulation in AL does not apply to
credit life insurance
the commisioner of insurance may not…
change insurance laws
minimum age requirement for a minor to purchase a life insurance policy
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