Other Life Topics

Question 1

an amount to be paid for an insurance policy.

Answer 1

Premium

Question 2

insurance paid to named beneficiaries when the insured person dies

Answer 2

life insurance

Question 3

What are the three types of agent authority?

Answer 3

Express, implied and apparent

Question 4

An insurance policy paid a nontaxable dividend to the insured one year, and nothing the next. From what type of insurer did the insured purchase the policy?

Answer 4

Mutual

Question 5

What type of life insurance offers an applicant a cash value element?

Answer 5

Permanent insurance (usually, whole life)

Question 6

In forming an insurance contract, when does an acceptance usually occur?

Answer 6

When the insurer approves a prepaid application

Question 7

What is the term that describes the frequency and the amount of the premium payment?

Answer 7

Premium mode

Question 8

A business is the owner and beneficiary of a key-person life policy. When the business collects the policy benefit, how is it taxed?

Answer 8

The benefit is received tax free.

Question 9

What document is required for an insurance company to transact insurance?

Answer 9

Certificate of Authority

Question 10

What is the best way to handle incomplete insurance applications?

Answer 10

Return the application to applicant for completion

Question 11

Upon surrender of a life insurance policy, what portion of the cash value will be taxed?

Answer 11

Only the portion in excess of the premium paid

Question 12

A person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard?

Answer 12

Morale

Question 13

What do individuals use to transfer their risk of loss to a larger group?

Answer 13

Insurance

Question 14

What are the three types of hazards?

Answer 14

Physical, Moral, Morale

Question 15

What are the strategies used by underwriters to prevent adverse selection?

Answer 15

Restriction of coverage, refusal to accept a risk, and accepting a risk at a higher rate

Question 16

What document describes the specific information about a policy

Answer 16

Policy summary

Question 17

All others factors being equal, which premium payment mode will require an overall higher premium: monthly or annual?

Answer 17

Monthly

Question 18

Who owns stock companies?

Answer 18

Stockholders

Question 19

What is included in Part 2 of a life insurance application?

Answer 19

Medical information about the prospective insured

Question 20

What are the three main instances when insurable interest exists in life insurance?

Answer 20

Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policy-owner

Question 21

Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policy-owner

Answer 21

The existence of insurable interest between the applicant and the insured

Question 22

In calculating the amount of life insurance needed, what is the needs approach based on?

Answer 22

The predicted needs of a family after the premature death of the insured

Question 23

In insurance, when is the other usually made on a contact?

Answer 23

When the insurance application is submitted

Question 24

What term describes the fee a person pays an insurance company to receive coverage?

Answer 24

Premium

Question 25

According to the taxation rules of life insurance policies, how are cash value increases taxed?

Answer 25

Cash value growth is tax deferred

Question 26

The reduction, decreased, or disappearance of value of the person or property insured in a policy is known for what?

Answer 26

Loss

Question 27

Insurance is a contract that protects the insured from what?

Answer 27

Loss

Question 28

In the agent/insurer relationship, who is considered the principal?

Answer 28

Insurer

Question 29

Mortality tables are used by insurance companies to predict what?

Answer 29

Life expectancy and the death-rates for specific groups of individuals

Question 30

What entities make up the Medical Information Bureau?

Answer 30

Insurers

Question 31

What are the three factors that determine the premium for a particular life insurance policy?

Answer 31

Mortality, interest and expense

Question 32

What is the name for an overfunded life insurance policy?

Answer 32

A Modified Endowment Contract (MEC)

Question 33

What is the purpose of the agent's report during the application process?

Answer 33

The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process.

Question 34

What is a warranty in an insurance contract?

Answer 34

An absolutely true statement upon which the validity of the policy depends

Question 35

An applicant conceals relevant health information on the application. The applicant presents what type of hazard?

Answer 35

Moral

Question 36

If an applicant does not receive his or her insurance policy, who would be held responsible?

Answer 36

The agent

Question 37

Conditions that increase the chance of a loss are known as what?

Answer 37

Hazards

Question 38

Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?

Answer 38

Estate conservation

Question 39

What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy?

Answer 39

Death benefits are generally not subject to income taxes

Question 40

For the purpose of insurance, what is risk?

Answer 40

Uncertainty of loss

Question 41

The requirement that agents must account for and promptly remit all insurance funds collected is knowns as what type of agent responsibility?

Answer 41

Fiduciary

Question 42

What is the main purpose of the 7-pay test?

Answer 42

To determine if a life insurance policy is a Modified Endowment Contract

Question 43

What portion of a non-qualified annuity payment would be taxed?

Answer 43

Interest earned on principal

Question 44

According to the Law of Agency, a principal is represented by whom?

Answer 44

Agent or producer

Question 45

Who is the beneficiary on a key-person life insurance policy?

Answer 45

The employer

Question 46

Wagering on a sporting event is known as what type of risk?

Answer 46

Speculative

Question 47

an insurer meets the state's financial requirements and is approved to transact business in the state, it is considered what type of insurer?

Answer 47

Authorized or admitted

Question 48

When must insurable interest exist in a life insurance policy?

Answer 48

At the time of application

Question 49

When planning for survivor protection in life insurance, what needs to be considered?

Answer 49

The insured's current assets, liability and survivor's needs

Question 50

When would a misrepresentation on an insurance application be considered fraud?

Answer 50

When it is intentional and material

Question 51

What are the three types of authority?

Answer 51

express, implied, apparent

Question 52

When a charge needs to be made on the application for insurance, which is the best method for correcting the information?

Answer 52

Complete a new application or ask the applicant to initial the correction on the original application

Question 53

What is the purpose of key person insurance?

Answer 53

To minimize the risk of financial loss caused by the death of a key employee

Question 54

What is insurance underwriting?

Answer 54

The process of risk selection and classification

Question 55

What are the personal uses of life insurance?

Answer 55

Survivor protection, estate creation and conservation, cash accumulation and liquidity

Question 56

Whose responsibility is it determine that all the questions on an insurance application are answered?

Answer 56

The agent's

Question 57

What type of risk is insurable?

Answer 57

Pure

Question 58

Can insurers advertise the existence of the guaranty association during solicitation and sale of insurance policies?

Answer 58

No, advertising of the existence of the guaranty association for the purposes of solicitation and sale of insurance policies by insurers is an illegal business practice.

Question 59

Is the death benefit of a life insurance policy taxed to the beneficiary if it's received as a lump sum?

Answer 59

No, lump-sum benefits are received tax free.

Question 60

When would life insurance policy proceeds be included in the insured's taxable estate?

Answer 60

When there is an incident of ownership at the time of death

Question 61

At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy?

Answer 61

Either on the date of the application or the date of the medical exam (whichever occurs first)

Question 62

What two elements are necessary for a life insurance contract to have a legal purpose?

Answer 62

Insurable interest and consent

Question 63

What type of insurer is formed under the laws of another country?

Answer 63

Alien

Question 64

What are the four elements of an insurance contract?

Answer 64

Agreement (offer and acceptance), consideration, competent parties, and legal purpose

Question 65

What is the term that describes the angle between the relative wind and the chord line of an airfoil?

Answer 65

Premium mode

Question 66

If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed?

Answer 66

Interest only

Question 67

What is the term for the causes of loss insured against in an insurance policy?

Answer 67

Peril

Question 68

What are illustrations in a life insurance policy?

Answer 68

Presentations of non-guaranteed elements of the policy

Question 69

What type of report provides information about the applicant's hobbies, habits and financial status?

Answer 69

Investigative consumer report

Question 70

What are the five characteristics of an ideally insurable risk

Answer 70

Loss must be 1) due to chance, 2) definite and measurable, 3) statistically predictable, 4) non catastrophic, and 5) coverage cannot be mandatory.

Question 71

Insurers are classified according to their domicile. What are the three types of insurers?

Answer 71

Domestic, foreign, and alien

Question 72

The type of insurance company organized to return any surplus money to its policyholders is known as what?

Answer 72

Mutual company

Question 73

Who must be a member of insurance guaranty associations?

Answer 73

All insurers authorized to write insurance within state

Question 74

If an insured changes his payment plan from monthly to annually, what happens to the total premium?

Answer 74

It will decrease.

Question 75

How does the premium mode affect the total premium paid for insurance for the year?

Answer 75

Higher frequency of premium payments will result in higher overall premium

Question 76

When does an insurance policy go into effect?

Answer 76

When the policy is delivered and the premium is paid

Question 77

When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?

Answer 77

Adverse selection

Question 78

The insurer organized to return a profit to the stockholders is what type of insurer?

Answer 78

Stock Company

Question 79

An insurance company is domiciled in California and transacts insurance in Nevada . What is this insurer's classification in Nevada?

Answer 79

Foreign

Question 80

What type of insurance creates an immediate estate?

Answer 80

Life insurance

Question 81

What is the main responsibility of a comapany's underwriting unity?

Answer 81

Risk selection

Question 82

Who is responsible for the contents of insurance advertisements?

Answer 82

The insurance company

Question 83

When agents act within the scope of their contract, their actions will be assumed to be the acts of whom?

Answer 83

Insurer

Question 84

If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do?

Answer 84

Send the application back to the applicant for signature

Question 85

What is the purpose of insurance guaranty association?

Answer 85

To protect policy-owners, insureds and beneficiaries from financial losses caused by insolvent insurers

Question 86

Who must have insurable interest in the insured?

Answer 86

Policyowner

Question 87

In a direct rollover, how is the money transferred from one retirement plan to a new one?

Answer 87

From trustee to trustee

Question 88

What does liquidity mean in life insurance policy?

Answer 88

Availability of cash value

Question 89

A situation in which a person can only experience a loss and no gain presents what type of risk?

Answer 89

Pure Risk

Question 90

Whom does an insurance agent represent?

Answer 90

insurance company

Question 91

Why are dividends in life insurance policies not taxable?

Answer 91

Dividends are not considered income for tax purposes; they are a return of unused premium.

Question 92

An insurance company that is formed under the laws of another state is known as what type of insurer?

Answer 92

Foreign

Question 93

When must the policy summary for a life insurance policy be delivered to the policy owner?

Answer 93

At the time of policy delivery