Insurance Underwriting and Life Policies
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Questions and Answers

Which is the primary source of information used for insurance underwriting?

Application

All advertisements are the responsibility of the?

Insurer

Which of the following will NOT be considered unfair discrimination by insurers?

  • Discriminating in benefits and coverages based on the insured's habits and lifestyle (correct)
  • Discriminating based on gender
  • Discriminating based on race
  • Discriminating based on age

    • What must the insurer do in order to legally acquire information from investigators regarding an applicant for insurance?

    <p>Present the insured with a Disclosure Authorization Notice</p> Signup and view all the answers

    Children's riders attached to whole life policies are usually issued as what type of insurance?

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

    Which policy provision allows an insured to reactivate her lapsed life insurance policy?

    <p>Reinstatement provision</p> Signup and view all the answers

    During an economic downswing, if an insurer's investments only drew 2.5%, what interest rate will the insurer pay to its policyholders if the guaranteed minimum interest is set at 3%?

    <p>3%</p> Signup and view all the answers

    The term 'illustration' in a life insurance policy refers to?

    <p>A presentation of non-guaranteed elements of a policy</p> Signup and view all the answers

    Which of the following insurance principles has the insurer violated if it neglects to pay a legitimate claim covered under the policy?

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

    When M is killed in a car accident, what will the policy beneficiary receive if M's policy has a triple indemnity rider and death being contributed to by the insured is specified?

    <p>$100,000</p> Signup and view all the answers

    A Universal Life Insurance policy is best described as?

    <p>An Annually Renewable Term policy with a cash value account</p> Signup and view all the answers

    Which of the following individuals must be licensed as an insurance agent?

    <p>An employee of an insurer who receives commissions only on a few policies a year</p> Signup and view all the answers

    What type of annuity promises to pay to a beneficiary the difference between the amount paid into the contract and the benefits received before the annuitant's death?

    <p>Cash refund annuity</p> Signup and view all the answers

    Which retirement account allows contributions to continue beyond age 70 1/2?

    <p>Roth IRA</p> Signup and view all the answers

    Which characteristic of an insurance contract describes a situation where an insured pays a $100 premium for coverage that promises $10,000 for a covered loss?

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

    Which of the following is NOT true regarding the annuitant?

    <p>The annuitant cannot be the same person as the annuity owner</p> Signup and view all the answers

    Which of the following statements is true regarding the cash value in a Universal Life policy?

    <p>The insurer credits the cash value with a current interest rate</p> Signup and view all the answers

    To qualify for conversion from a group life policy to an individual policy, how many years must a person have been insured under the group plan?

    <p>5</p> Signup and view all the answers

    What source will an insurer consult for the majority of its underwriting information?

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

    What type of insurance covers the amount due on a loan if the debtor dies before the loan is repaid?

    <p>Credit life</p> Signup and view all the answers

    Which individual would receive the largest monthly check from a single premium straight life immediate annuity?

    <p>A 60-year-old man</p> Signup and view all the answers

    Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

    <p>Premiums are not tax deductible as a business expense</p> Signup and view all the answers

    Which of the following statements is TRUE concerning irrevocable beneficiaries?

    <p>They can only be changed with the written consent of that beneficiary</p> Signup and view all the answers

    What should a policy-owner name her husband as, if she wishes to retain all rights of ownership?

    <p>Revocable beneficiary</p> Signup and view all the answers

    Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?

    <p>Option B</p> Signup and view all the answers

    In what type of insurance is the Waiver of Cost of Insurance rider found?

    <p>Universal Life</p> Signup and view all the answers

    In a survivorship life policy, when does the insurer pay the death benefit?

    <p>Upon the last death</p> Signup and view all the answers

    Which of the following is NOT true regarding policy loans?

    <p>Money borrowed from the cash value is taxable</p> Signup and view all the answers

    Which statement is NOT true regarding a Straight Life policy?

    <p>Its premium steadily decreases over time</p> Signup and view all the answers

    What would the premium be like in a survivorship life policy as compared to a joint life policy?

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

    An insured owns a $50,000 whole life policy. What would be the face amount of a new term policy if he cancels his policy and exercises the extended term option for the policy's cash value, which is currently $20,000?

    <p>$50,000</p> Signup and view all the answers

    All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT?

    <p>At distribution, all amounts received by the employee are tax free</p> Signup and view all the answers

    Under a 20-pay whole life policy, how long must the premiums be paid for the policy to pay the death benefit?

    <p>For 20 years or until death, whichever occurs first</p> Signup and view all the answers

    Under an extended term nonforfeiture option, the policy cash value is converted to what?

    <p>The same face amount as in the whole life policy</p> Signup and view all the answers

    A rider attached to a life insured policy that provides coverage on the insured's family members is called?

    <p>Other-insured rider</p> Signup and view all the answers

    What period of time does the accumulation period of an annuity refer to?

    <p>The period during which the payments into the annuity grow tax deferred</p> Signup and view all the answers

    What happens to an Annually Renewable Term Life policy's premium each renewal?

    <p>Requires a premium increase</p> Signup and view all the answers

    Which of the following statements about group life is correct?

    <p>The cost of coverage is based on the ratio of men and women in the group</p> Signup and view all the answers

    Upon policy delivery, the producer may be required to obtain any of the following EXCEPT?

    <p>Signed waiver of premium</p> Signup and view all the answers

    When does the automatic premium loan provision activate?

    <p>At the end of the grace period</p> Signup and view all the answers

    Which of the following is an example of apparent authority of an agent appointed by an insurer?

    <p>The agent accepts a premium payment after the end of the grace period</p> Signup and view all the answers

    What type of annuity did a couple buy if, after the wife dies, the husband no longer receives annuity payments?

    <p>Joint life</p> Signup and view all the answers

    What is it called when an employer contributes to a qualified retirement plan only when a profit is realized?

    <p>Profit sharing plan</p> Signup and view all the answers

    How do annually renewable term policies provide coverage for a premium?

    <p>Increases annually</p> Signup and view all the answers

    Under a 20-pay whole life policy, when must premiums be paid for the death benefit to be applicable?

    <p>For 20 years or until death, whichever occurs first</p> Signup and view all the answers

    In a survivorship life policy, when does the insurer payout the death benefit?

    <p>Upon the last death</p> Signup and view all the answers

    Which of the following is NOT true regarding policy loans?

    <p>Money borrowed from the cash value is taxable</p> Signup and view all the answers

    Which statement is NOT true regarding Straight Life policies?

    <p>Their premium increases over time</p> Signup and view all the answers

    What happens to the premium in a survivorship life policy compared to a joint life policy?

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

    If an insured wants to cancel a $50,000 whole life policy to exercise the cash value for a new term policy, what would the face amount of the new policy be?

    <p>$50,000</p> Signup and view all the answers

    All the following are TRUE of federal tax advantages of a qualified plan EXCEPT?

    <p>All amounts received by the employee are tax free</p> Signup and view all the answers

    Under a 20-pay whole life policy, how long must the premiums be paid to ensure the policy will pay the death benefit?

    <p>For 20 years or until death, whichever occurs first</p> Signup and view all the answers

    What is the automatic option if a whole life policy is surrendered for its nonforfeiture value?

    <p>Extended term</p> Signup and view all the answers

    Which of the following is NOT a type of hazard?

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

    Which of the following is NOT a component of an insurance policy premium?

    <p>Number of beneficiaries</p> Signup and view all the answers

    All of the following are general requirements of a qualified plan EXCEPT?

    <p>The plan must be temporary</p> Signup and view all the answers

    Study Notes

    Insurance Underwriting and Applications

    • The primary source of information for insurance underwriting is the application submitted by the insured.
    • Insurers are responsible for all advertisements related to their policies.

    Unfair Discrimination and Insurance Practices

    • Discrimination based on an insured's habits and lifestyle is not considered unfair discrimination by insurers.
    • Insurers must provide a Disclosure Authorization Notice when seeking information from investigators about insurance applicants.

    Life Insurance Policies and Riders

    • Children's riders attached to whole life policies are typically issued as term insurance.
    • The reinstatement provision allows an insured to reactivate a lapsed life insurance policy with proof of insurability.
    • Triple indemnity riders specify that death must not result from actions that are the insured's fault.
    • Universal Life Insurance can be seen as an Annually Renewable Term policy coupled with a cash value account.

    Annuities and Premium Payments

    • Fixed annuity premiums are forwarded to the general account of the insurance company, and they guarantee a minimum interest rate.
    • In an economic downturn, the guaranteed interest rate of 3% will still be paid to policyholders, despite lower actual returns.
    • A cash refund annuity compensates beneficiaries with the difference between premiums paid and benefits received before the annuitant's death.

    Taxation and Retirement Accounts

    • Roth IRA contributions can continue beyond age 70½, unlike traditional retirement accounts.
    • Premiums for key-person life insurance are not tax-deductible as a business expense.

    Beneficiaries and Policy Ownership

    • Irrevocable beneficiaries can only be changed with their written consent.
    • A policy-owner can name a husband as a revocable beneficiary, retaining full rights to the policy.
    • Universal life insurance Option B allows beneficiaries to collect the death benefit and cash value.

    Insurance Contracts and Regulations

    • Contracts in insurance are conditional; both parties must meet certain requirements for enforceability.
    • An agent's express authority is granted through their contract with the principal.
    • Apparent authority may lead an agent to accept premium payments even after the grace period has ended.

    Life Insurance Settlements and Conversions

    • Upon converting from a group life policy to an individual policy, a person must have been insured for at least 5 years.
    • When an insured terminates group membership, they can convert to whole life insurance without needing proof of insurability.

    Risk Classifications and Types of Insurance

    • Substandard risk classification is also termed as rated risk.
    • Speculative risks are events where there is a chance of both winning or losing.
    • Credit life insurance provides coverage to pay off a loan if the insured passes away before repayment.

    Insurance Features and Benefits

    • Survivorship life policies pay benefits upon the death of the last insured.
    • Annually renewable term policies provide a level death benefit, but premiums increase annually.
    • The Waiver of Cost of Insurance rider is specific to Universal Life policies.

    Tax Advantages and Group Insurance

    • Qualified plans offer tax benefits for both the employer and employee.
    • Group life insurance costs are determined by the demographic makeup of the group.

    Annuities and Life Insurance Comparisons

    • Annuities and life insurance share similarities; both utilize mortality tables in their calculations.
    • The increasing term insurance sees an increase in the death benefit over time.

    Ethical Standards and Insurance Provisions

    • A high standard of ethics is demonstrated by putting client interests above personal gain.
    • Nonforfeiture options, such as reduced paid-up insurance, provide longer coverage durations.

    General Knowledge on Insurance Policies

    • Contracts of adhesion are unilateral, prepared by one party with "take it or leave it" terms.
    • Straight life and 20-pay whole life policies differ primarily in their premium payment duration.

    Final Insights

    • Key-person insurance proceeds are not taxable to the business upon the insured's death.
    • The auto premium loan provision activates after the grace period ends, allowing insurers to cover overdue premiums automatically.

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    Description

    Test your knowledge on insurance underwriting, unfair discrimination practices, and life insurance policy features. This quiz covers essential aspects, such as application importance, riders, and reinstatement provisions. Perfect for students and professionals in the insurance field!

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