Insurance IIAP Mock Exam

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.

Test your knowledge on insurance policies and concepts with this IIAP mock exam. Answer key included. Questions cover single premium policies, policy fees, and more.