Insurance IIAP Mock Exam
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What is the typical grace period provision in a life insurance policy?

  • Establish a policy loan to cover any premium which the policyowner fails to pay by due date
  • Keep the policy in force for the duration of any major disability suffered by the policyowner
  • None of the above (correct)
  • Allow the policy owner a three-month extension beyond the due date to make the late premium payment without penalty (correct)

    • In most life insurance applications, the largest amount of information requested is data which relates to:

  • Relates to the insurability of the applicant (correct)
  • Describes the type of insurance applied for
  • Describes the desired benefits and mode of payment
  • Identifies the applicant

    • The conservation of a life insurance policy is NOT dependent on:

  • The level of first year commission
  • Agent’s service oriented attitude
  • Pressure selling (correct)
  • The use of effective needs selling

    • What is the term for a policy where part of the premium paid by a policyholder is invested by the insurance company?

    <p>investment</p> Signup and view all the answers

    Life insurance contributes directly to the welfare and progress of the country by encouraging provisions for the future.

    <p>True (A)</p> Signup and view all the answers

    Rebating is:

    <p>Premium discrimination against policyholders (A)</p> Signup and view all the answers

    One example covered under ethical practices and procedures is:

    <p>Keep all policyholder information confidential (A)</p> Signup and view all the answers

    Which of the following are unethical practices in the solicitation and procurement of insurance?

    <p>Obtaining a license by fraud or misrepresentation (D)</p> Signup and view all the answers

    The misstatement of facts by either party of insurance is:

    <p>Misrepresentation (A)</p> Signup and view all the answers

    An agent is prohibited from doing all of the following except:

    <p>Make complete comparisons of policies he sells and those offered by competitors (B)</p> Signup and view all the answers

    Inducing an insured to lapse or forfeit his insurance is:

    <p>An offense in the great majority of cases (A)</p> Signup and view all the answers

    The suicide clause is in effect for:

    <p>The first 2 years (D)</p> Signup and view all the answers

    Benefits payable under health insurance policies cover:

    <p>All of the above (D)</p> Signup and view all the answers

    In case of misstatement of age:

    <p>The amount of insurance is adjusted to the premium paid at the correct age (A)</p> Signup and view all the answers

    Name the provision in a permanent life insurance policy under which, if the premiums are discontinued, full insurance coverage will be maintained for a specified period:

    <p>Paid up insurance (B)</p> Signup and view all the answers

    Which of the following is not derived from the non-forfeiture values?

    <p>Dividends (D)</p> Signup and view all the answers

    In the event that the policyowner elects the paid-up insurance option:

    <p>Insurance continues at a reduced amount and with reduced premium (C)</p> Signup and view all the answers

    Which of the non-forfeiture options gives the largest amount of protection?

    <p>Fully paid insurance (A)</p> Signup and view all the answers

    Any policy which has lapsed can be reinstated subject to normal conditions of proof of insurability within:

    <p>Three years (C)</p> Signup and view all the answers

    A single premium policy means a policy...

    <p>Under which only one premium payment is required (D)</p> Signup and view all the answers

    A fixed amount added to the premium of a given policy regardless of policy size is known as...

    <p>Policy fee (D)</p> Signup and view all the answers

    To be able to calculate the required premiums for a given policy, the agent must know the applicant’s...

    <p>All of the above (D)</p> Signup and view all the answers

    To calculate premiums for the other modes of premium payment, the annual premium is...

    <p>Divided by a conversion factor for the mode of payment desired (B)</p> Signup and view all the answers

    The convertible feature of a term insurance policy provides that the policy may be...

    <p>Changed to a permanent insurance policy without evidence of insurability (B)</p> Signup and view all the answers

    Within two years of buying a life insurance policy, if you are accidentally killed, the insurance company will...

    <p>Pay the face amount (B)</p> Signup and view all the answers

    When explaining dividends, the following information must be supplied...

    <p>That they are not guaranteed (C)</p> Signup and view all the answers

    The fundamental advantage of the use of insurance as a means of meeting economic losses is that through insurance these losses are...

    <p>Spread over a large number of people (C)</p> Signup and view all the answers

    An individual, at age 35, purchases a policy under which he will receive the face amount of the policy if he is still alive at a specified future date. This policy is a...

    <p>20 Year Endowment (A)</p> Signup and view all the answers

    In a 20 Pay Life policy...

    <p>Protection is for 20 years, payment of premium is for 20 years (C)</p> Signup and view all the answers

    A term insurance which allows policyowners to convert it to a permanent insurance without evidence of insurability contains the feature of...

    <p>Convertibility (A)</p> Signup and view all the answers

    The main difference between a term plan and a permanent plan is...

    <p>Permanent plans provide both protection and savings while term plans offer protection only (A)</p> Signup and view all the answers

    If an insured is disabled and his life insurance policy is being continued through waiver of premium, the dividends of the policy would...

    <p>Continue but they would be applied toward the premium being waived (D)</p> Signup and view all the answers

    Since the purchase of life insurance is a voluntary choice, the individual must meet...

    <p>Certain standards of health and occupation (B)</p> Signup and view all the answers

    Which of the following factors would have the least effect on the premium charged for life insurance?

    <p>Income (C)</p> Signup and view all the answers

    Anti-selection occurs when...

    <p>Persons in poor health wish to buy insurance (D)</p> Signup and view all the answers

    In an application, the information that must be disclosed includes...

    <p>Every fact in his knowledge that is material to the insurance (B)</p> Signup and view all the answers

    Why is it important that the application is the basis of the policy?

    <p>Because the completed application is the basis of the policy contract and the company may accept or reject an application based on the information given in the application (A)</p> Signup and view all the answers

    The term loading means...

    <p>The difference between the gross and net premiums for the purpose of paying the insurance overhead expenses including commissions and taxes (A)</p> Signup and view all the answers

    The three elements that make up a life insurance premium are...

    <p>Mortality experience, investment earnings and operating expenses (B)</p> Signup and view all the answers

    If the insured dies during the grace period of an unpaid life insurance policy, the amount payable to the beneficiary is usually the...

    <p>Face amount of the policy minus the unpaid premium (C)</p> Signup and view all the answers

    Which of the following statements is correct?

    <p>An insurance agent’s license will be renewed when the Commissioner is satisfied that the information in the application is accurate and all requirements are met (A)</p> Signup and view all the answers

    Which of the following statements is correct?

    <p>An agent is allowed to share commissions with another licensed agent or agents but with no one else (C)</p> Signup and view all the answers

    Persuading a policyowner to surrender or lapse a policy in one company and replacing it with a policy from another company is...

    <p>Twisting (A)</p> Signup and view all the answers

    Interest is charged on policy loans...

    <p>If the loan is outstanding for more than a year. A loan repaid within a year is interest-free (B)</p> Signup and view all the answers

    An insurance agent’s license can be revoked for...

    <p>Any or all of the above (D)</p> Signup and view all the answers

    The three non-forfeiture values in a permanent policy are...

    <p>Cash surrender values, loan value, assignment (D)</p> Signup and view all the answers

    Study Notes

    Life Insurance Concepts

    • A single premium policy requires only one premium payment.
    • A policy fee is a fixed amount added to the premium of a policy, regardless of policy size.

    Calculating Premiums

    • To calculate premiums, an agent must know the applicant's age, choice of plan, and face amount desired.
    • The annual premium is divided by a conversion factor for the mode of payment desired.

    Policy Features

    • The convertible feature of a term insurance policy allows the policy to be changed to a permanent insurance policy without evidence of insurability.
    • A term insurance policy can be converted to a permanent insurance policy within a specified period without evidence of insurability.

    Dividends

    • When explaining dividends, it must be disclosed that they are not guaranteed.
    • Dividends are a return of excess premium paid by the policyowner.

    Insurance Principles

    • The fundamental advantage of insurance is that losses are spread over a large number of people.
    • Insurance allows for the transfer of risk from an individual to a group.

    Policy Types

    • A 20-Year Endowment policy provides a face amount to the policyowner if they are still alive at the end of the 20-year term.
    • A 20-Pay Life policy provides protection until age 100, with premium payments for 20 years.
    • Term insurance provides protection for a specified period, while permanent insurance provides both protection and savings.

    Policy Provisions

    • A grace period is a specified period during which the policy remains in force even if a premium is not paid.
    • If the insured dies during the grace period, the beneficiary will receive the face amount of the policy minus the unpaid premium.

    Agent Licensing

    • An insurance agent's license can be revoked for fraudulent practices, violation of the Insurance Code, or misrepresentation in the application for a license.

    Policy Values

    • A policy's cash surrender value, paid-up value, and extended term insurance are non-forfeiture values.
    • An automatic premium loan is a loan against the policy that is automatically granted without separate action from the policyowner.

    Settlement Options

    • Common settlement options include fixed amount, fixed period, interest, and life income options.
    • Endowment life insurance and term life insurance are similar in that both plans provide life insurance protection for a specified period.

    Insurability

    • Insurable interest must exist at the inception of the policy and at the time of loss.
    • To be insurable, an applicant must meet certain standards of health and occupation.

    Policy Conservation

    • The conservation of a life insurance policy is dependent on the agent's service-oriented attitude and effective needs selling.

    Information Sources

    • An insurance company uses information from the applicant's personal appearance, medical examination report, agent's inspection report, and government tax records to determine insurability.

    Contract Parties

    • The parties involved in a life insurance contract are the insurance company, the insured, and the beneficiary.

    Social Benefits

    • Life insurance contributes directly to the welfare and progress of the country by accumulating capital for investment, partially relieving the community of the care of dependents, and encouraging provisions for the future.

    Life Expectancy

    • Life expectancy is the number of years that persons at a given age will live on the average, as shown by the mortality table.

    Plan Types

    • A participating plan offers both protection and savings, while a non-participating plan only offers protection.
    • A convertible term policy can be converted to a permanent insurance policy without evidence of insurability.

    Disability Benefits

    • Waiver of premium is an optional rider that stops further premium payment in the event of disability.
    • Disability benefits are not paid if the disability results from self-inflicted injuries or is not total and permanent.

    Riders

    • A term rider is a term insurance added to a permanent plan.
    • A payor's benefit rider provides for the return of premiums to an adult payor in the event that a minor insured dies.

    Policy Classification

    • Insurance companies classify risks as standard, substandard, or declined based on the applicant's health, occupation, and moral character.

    Risk Classification

    • A risk is considered substandard if it does not meet the company's standard underwriting requirements.
    • A risk is declined if it does not meet the company's minimum underwriting requirements.### Hazardous Occupations
    • A hazardous occupation is defined as an occupation that exposes the insured to a degree of danger of sustaining injury, unhealthy working conditions, or social hazards.

    Insurance Applications

    • Statements in application forms are representations.
    • An agent's confidential report must include all information material to the application for insurance.

    Insurance Companies

    • Insurance companies owned by policyholders are mutual companies.
    • Stock companies are owned by stockholders.
    • Insurance companies have a source of confidential medical information on applicants through the Medical Impairment Bureau.

    Confidentiality

    • All information about a client or prospective client must be treated as confidential.
    • Advertising by life insurance agents is not prohibited, but agents must maintain confidentiality.

    Life Insurance

    • Life insurance is a cooperative risk-sharing plan.
    • Life insurance companies earn income from two main sources: premium income and investment income.
    • The official who makes the necessary assumptions and calculations to arrive at premium rates is the Actuary.
    • Life insurance can provide money when income stops due to disability, death, or retirement.

    Industry Regulations

    • The insurance industry is under government regulations because it affects public interest.
    • Rebating of premiums by an insurance agent is prohibited.
    • Rebating is a form of premium discrimination against policyholders.

    Ethical Practices

    • One example of unethical practices is misleading estimates of dividends or shares of surplus to be received.
    • Misrepresentation of facts by either party in the insurance contract is unethical.
    • Inducing a policyholder to lapse, forfeit, or surrender a policy is unethical.

    Policy Provisions

    • The suicide clause is in effect for the first 2 years.
    • Benefits payable under health insurance policies cover accidental death and dismemberment benefits, expense reimbursement benefits, and disability income benefits.
    • In case of misstatement of age, the amount of insurance is adjusted to the amount which the premium paid at the correct age would have purchased.
    • The extended term insurance provision in a permanent life insurance policy allows for full insurance coverage to be maintained for a specified period if premiums are discontinued.

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