Unit 4

Question 0

An insurance salesperson who offers $100 gourmet dinner in exchange for the purchase of a life insurance policy would be considered to have violated ethical sales practices by:

(A) twisting
(B) replacement
(C) churning
(D) rebating

Answer 0

(D) rebating

Question 1

In what phase of the selling process are serious problems of misrepresentation likely to occur?

(A) Approach
(B) Presentation of recommendations
(C) Fact finding and needs analysis
(D) Policy delivery and ongoing service

Answer 1

(B) Presentation of recommendations

Question 2

Which of the following phrases should agents avoid using when explaining policies to prospective applicants or clients?

(A) Cash value
(B) Vanishing premium
(C) Flexible premium
(D) Death benefit

Answer 2

(B) Vanishing premium

Question 3

All of the following are involved in a product presentation EXCEPT:

(A) pressure
(B) education
(C) discussion
(D) disclosure

Answer 3

(A) pressure

Question 4

Which of the following is NOT part of the home office underwriting process?

(A) Credit report
(B) Medical Information Bureau report
(C) Applicant’s analysis report
(D) Inspection report

Answer 4

(C) Applicant’s analysis report

Question 5

The basis for many state statutes regulating insurance advertising is the NAIC’s:

(A) McCarran-Ferguson Act
(B) Fair Credit Reporting Act
(C) Ethics in Advertising Act
(D) Unfair Trade Practices Act

Answer 5

(D) Unfair Trade Practices Act

Question 6

Ethics is best described as:

(A) laws and statutes enacted by duly elected representatives
(B) religious rituals and ceremonies
(C) instructions on how to interact with fellow members of a group or community
(D) a society’s laws and regulations

Answer 6

(C) instructions on how to interact with fellow members of a group or community

Question 7

Which of the following is the goal of a sales presentation?

(A) To educate the client so the client can make her own decisions about what’s right for her
(B) To sell the client as many products as possible
(C) To convince the client that the producer’s recommendations are best
(D) To explain the rules and regulations governing particular insurance products

Answer 7

(A) To educate the client so the client can make her own decisions about what’s right for her

Question 8

Which of the following is NOT part of a sales presentation?

(A) Review and re-establish the client-producer relationship
(B) Introduce the recommended policy
(C) Review the product application
(D) Review the client’s needs and priorities

Answer 8

(C) Review the product application

Question 9

Which of the following should a producer NOT do during a presentation?

(A) Explain and educate
(B) Sell a policy
(C) Motivate the client
(D) Openly discuss a policy’s limitations

Answer 9

(B) Sell a policy

Question 10

All of the following are reasons why it is seldom in the best interest of a policyholder to replace a life insurance policy with a new one EXCEPT:

(A) most of the first-year premium is swallowed up in commission
(B) replacement policies are never in the best interest of the policyowner
(C) the premium is higher because the insured is older
(D) waiting periods begin anew

Answer 10

(B) replacement policies are never in the best interest of the policyowner

Question 11

Diverting insurance funds for personal use is an example of:

(A) replacement
(B) rebating
(C) misuse of premiums
(D) misrepresentation

Answer 11

(C) misuse of premiums

Question 12

Selling variable universal life insurance policies as mutual funds is an example of a prohibited practice called:

(A) twisting
(B) defamation
(C) disclosure
(D) rebating

Answer 12

(B) defamation

Question 13

When values of an insurance policy are used to purchase another policy with the same insurer for the sole purpose of earning additional premiums or commissions, this practice is called:

(A) replacement
(B) misalliance
(C) rebating
(D) churning

Answer 13

(D) churning

Question 14

Which of the following is an objective of the NAIC?

(A) To promote federal legislation of the insurance industry
(B) To encourage uniformity in state insurance laws and regulations
(C) To develop continuing education courses for insurance producers
(D) To develop model insurance policies for adoption by insurers

Answer 14

(B) To encourage uniformity in state insurance laws and regulations

Question 15

Which of the following is NOT a provision of NAIC’s Life Insurance Illustrations Model Regulation?

(A) Each policy illustration must be accompanied by a written explanation or policy summary
(B) Each policy illustration should use the words vanish and vanishing premium sparingly
(C) Each policy illustration must show that cash values and coverage vary depending on changes in an insurer’s costs and dividends
(D) Each policy illustration must be complete

Answer 15

(B) Each policy illustration should use the words vanish and vanishing premium sparingly

Question 16

Which of the following is NOT part of a product presentation?

(A) Explaining policies
(B) Asking for referrals
(C) Motivating the client
(D) Discussing a policy’s limitations

Answer 16

(B) Asking for referrals

Question 17

The use of preprinted material in a sales presentation is recommended for which of the following reasons?

(A) The agent doesn’t have to know exactly how a product works
(B) It saves a lot of time and explanations
(C) Such material generally has been reviewed for compliance
(D) The agent can give it to the client instead of answering the client’s questions

Answer 17

(C) Such material generally has been reviewed for compliance

Question 18

The purpose behind full disclosure requirements is to:

(A) make sure a client is told everything there is to know about a product
(B) help a client make an informed decision
(C) make sure agents comply with the letter of the law
(D) help a client distinguish one insurer’s product from a similar offering from another insurer

Answer 18

(B) help a client make an informed decision

Question 19

Jim gives Bill a couple of tickets to a baseball game to thank him for purchasing a policy. This is an example of:

(A) rebating
(B) twisting
(C) replacement
(D) churning

Answer 19

(A) rebating

Question 20

Which of the following is an example of churning?

(A) Illegally inducing a person to drop existing insurance to purchase similar coverage with another agent or company
(B) Rephrasing a policy provision in such a way that it says just the opposite of the original
(C) Replacing a policy for another with the same insurer with the intent of earning additional premiums or commissions
(D) Representing an insurance policy as a retirement plan

Answer 20

(C) Replacing a policy for another with the same insurer with the intent of earning additional premiums or commissions

Question 21

Melanie is a newly licensed producer. A customer calls and asks for some product recommendations, but Melanie thinks that she is not yet qualified to help the customer. Therefore, Melanie has an ethical responsibility to:

(A) answer the customer’s questions on the basis of her current knowledge and then send a letter confirming their conversation
(B) assure the customer that because she is licensed, there is a presumption that the advice Melanie gives is reliable
(C) refuse to speak to the customer
(D) seek help from a more experienced colleague or other professional before responding to the customer’s questions

Answer 21

(D) seek help from a more experienced colleague or other professional before responding to the customer’s questions

Question 22

Solicitation of insurance includes:

(A) inviting prospective purchasers to enter a contract for an insurance product
(B) making general or specific recommendations concerning insurance products
(C) comparing insurance products,advising on insurance matters, or interpreting policies or coverages
(D) all of the above

Answer 22

(D) all of the above