Annuity Products Quiz & Flashcards for Lottery Winners

Questions and Answers

Which of the following is NOT an essential element of an insurance contract? (Select all that apply)

Legal Purpose

Counteroffer (correct)

Agreement

Consideration

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?

Subrogation

Warranty

Aleatory (correct)

Adhesion

Representations are written or oral statements made by the applicant that are:

Found to be false after further investigation

Considered true to the best of the applicant's knowledge (correct)

Immaterial to the actual acceptability of the insurance contract

Guaranteed to be true

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?

Consumer report Signup and view all the answers

When an insured makes truthful statements on the application and pays the required premium, it is known as which of the following?

Consideration Signup and view all the answers

Another name for a substandard risk classification is:

Rated Signup and view all the answers

Why should the producer personally deliver the policy when the premium has already been paid?

To help the insured understand all aspects of the contract Signup and view all the answers

A prospective insured received a conditional receipt but dies before the policy was issued. The insurer will:

Pay the policy proceeds only if it would have issued the policy Signup and view all the answers

Which of the following best describes the aleatory nature of an insurance contract?

Exchange of unequal values Signup and view all the answers

The term illustration in a life insurance policy refers to:

A presentation of nonguaranteed elements of a policy Signup and view all the answers

Upon policy delivery, the producer may be required to obtain any of the following except:

Signed waiver of premium Signup and view all the answers

Which of the following is not an example of insurable interest?

Debtor in creditor Signup and view all the answers

In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?

Unilateral Signup and view all the answers

If an insurer issued a policy based on the application that has unanswered questions, which of the following will be true?

The policy will be interpreted as if the insurer waived its right to have an answer on the application Signup and view all the answers

An insured stated on her application for life insurance that she had never had a heart attack when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit is denied?

Material Misrepresentation Signup and view all the answers

When must insurable interest exist in a life insurance policy?

At the time of application Signup and view all the answers

In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. Which of the following is true concerning the policy premium?

It will likely be higher because the applicant is a substandard risk Signup and view all the answers

Who makes up the Medical Information Bureau?

Insurers Signup and view all the answers

An insurer has made all of the decisions regarding the provisions included in the insured's policy. The insured finds an objectionable provision and wants to negotiate it with the insurer but is not allowed to do so. Her only options are to reject the policy or accept it as is. Which contract feature does this describe?

Adhesion Signup and view all the answers

The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?

As of the application date Signup and view all the answers

An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?

Consideration Signup and view all the answers

When an insured makes truthful statements on the application and pays the required premium, it is known as which of the following?

Consideration Signup and view all the answers

In insurance, an offer is usually made when:

The completed application is submitted Signup and view all the answers

Which of the following determines the cash value of a variable life policy?

The performance of the policy portfolio Signup and view all the answers

A lucky individual won the state lottery, so the state will be sending him a check each month for the next 25 years. What type of annuity products are they likely to use to provide these benefits?

Immediate annuity Signup and view all the answers

Equity indexed annuities:

Seek higher returns Signup and view all the answers

A universal life insurance policy is best described as a/an:

Annually renewable term policy with a cash value account Signup and view all the answers

All of the following entities regulate variable life policies except:

The guaranty association Signup and view all the answers

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

Decreasing term Signup and view all the answers

Which of the following is NOT one of the three basic types of coverage that are available, based on how the face amounts change during the policy term?

Renewable Signup and view all the answers

Twin brothers are starting a new business. They know it will take several years to build the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

Joint Life Signup and view all the answers

Which of the following would help prevent a universal life policy from lapsing?

Target premium Signup and view all the answers

Fixed annuities provide all of the following except:

Hedge against inflation Signup and view all the answers

The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is true?

The beneficiary will receive the greater of the money paid into the annuity or cash value Signup and view all the answers

The death protection component of Universal Life Insurance is always:

Annually Renewable Term Signup and view all the answers

Which statement is not true regarding a straight life policy?

Its premium steadily decreases over time, in response to its growing cash value Signup and view all the answers

Which of the following is another term for the accumulation period of an annuity?

Pay-in period Signup and view all the answers

Both Universal Life and Variable Universal Life have a:

Flexible premium Signup and view all the answers

Study Notes

Insurance Contracts

Essential elements of an insurance contract include Agreement, Legal Purpose, and Consideration; Counteroffer is not essential.
Representations by applicants are considered true to the best of their knowledge, but may be found false upon further investigation.

Premium Concepts

Aleatory contracts involve the exchange of unequal values, where a small premium covers a large risk for the insurer.
Consideration occurs when the insured makes truthful statements and pays the required premium.

Underwriting and Risk Classification

A Consumer report provides credit information essential for underwriting.
Substandard risk classifications are also referred to as Rated.

Delivery and Policy Understanding

Producers should personally deliver insurance policies to help insured individuals understand contract details.
If a prospective insured dies after receiving a conditional receipt, policy proceeds are only paid if the insurer would have issued the policy.

Contract Features in Insurance

The Unilateral contract feature means only the insurer is legally bound to pay losses covered by the policy.
Contracts of Adhesion cannot be negotiated by the insured; acceptance or rejection is the only option.

Insurable Interest

Insurable interest must exist at the time of application, not at the time of loss or policy delivery.
Examples of insurable interests include an employer in an employee and business partners in each other; a debtor in a creditor is not an example.

Policy Provisions and Gambling

If a policy is issued despite unanswered application questions, it may be considered as if the insurer waived the need for answers.
Material misrepresentation occurs when an applicant provides false information, impacting eligibility for a death benefit.