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Questions and Answers
Which of the following is NOT an essential element of an insurance contract? (Select all that apply)
Which of the following is NOT an essential element of an insurance contract? (Select all that apply)
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?
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?
Representations are written or oral statements made by the applicant that are:
Representations are written or oral statements made by the applicant that are:
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?
Which of the following reports will provide the underwriter with the information about an insurance applicant's credit?
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When an insured makes truthful statements on the application and pays the required premium, it is known as which of the following?
When an insured makes truthful statements on the application and pays the required premium, it is known as which of the following?
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Another name for a substandard risk classification is:
Another name for a substandard risk classification is:
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Why should the producer personally deliver the policy when the premium has already been paid?
Why should the producer personally deliver the policy when the premium has already been paid?
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A prospective insured received a conditional receipt but dies before the policy was issued. The insurer will:
A prospective insured received a conditional receipt but dies before the policy was issued. The insurer will:
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Which of the following best describes the aleatory nature of an insurance contract?
Which of the following best describes the aleatory nature of an insurance contract?
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The term illustration in a life insurance policy refers to:
The term illustration in a life insurance policy refers to:
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Upon policy delivery, the producer may be required to obtain any of the following except:
Upon policy delivery, the producer may be required to obtain any of the following except:
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Which of the following is not an example of insurable interest?
Which of the following is not an example of insurable interest?
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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?
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?
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If an insurer issued a policy based on the application that has unanswered questions, which of the following will be true?
If an insurer issued a policy based on the application that has unanswered questions, which of the following will be true?
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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?
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?
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When must insurable interest exist in a life insurance policy?
When must insurable interest exist in a life insurance policy?
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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?
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?
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Who makes up the Medical Information Bureau?
Who makes up the Medical Information Bureau?
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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?
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?
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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?
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?
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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?
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?
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When an insured makes truthful statements on the application and pays the required premium, it is known as which of the following?
When an insured makes truthful statements on the application and pays the required premium, it is known as which of the following?
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In insurance, an offer is usually made when:
In insurance, an offer is usually made when:
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Which of the following determines the cash value of a variable life policy?
Which of the following determines the cash value of a variable life policy?
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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?
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?
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Equity indexed annuities:
Equity indexed annuities:
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A universal life insurance policy is best described as a/an:
A universal life insurance policy is best described as a/an:
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All of the following entities regulate variable life policies except:
All of the following entities regulate variable life policies except:
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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?
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?
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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?
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?
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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?
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?
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Which of the following would help prevent a universal life policy from lapsing?
Which of the following would help prevent a universal life policy from lapsing?
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Fixed annuities provide all of the following except:
Fixed annuities provide all of the following except:
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The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is true?
The annuity owner dies while the annuity is still in the accumulation stage. Which of the following is true?
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The death protection component of Universal Life Insurance is always:
The death protection component of Universal Life Insurance is always:
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Which statement is not true regarding a straight life policy?
Which statement is not true regarding a straight life policy?
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Which of the following is another term for the accumulation period of an annuity?
Which of the following is another term for the accumulation period of an annuity?
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Both Universal Life and Variable Universal Life have a:
Both Universal Life and Variable Universal Life have a:
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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.
Annuity Products
- Immediate annuities provide payouts right after the purchase, while deferred annuities delay payments.
- Equity indexed annuities seek higher returns and are less risky than variable annuities.
Life Insurance Types
- Universal life is characterized as an annually renewable term policy with a cash value account; variable life has premiums that vary.
- Joint Life insurance is suitable for partners planning to build a business, offering affordability and death benefits.
Annuity Values and Regulations
- The cash value of a variable life policy is determined by the performance of the policy's portfolio.
- Fixed annuities do not offer a hedge against inflation; they provide guaranteed interest, future income, and equal payments for life.
Policy Implications
- If an annuity owner dies during the accumulation stage, beneficiaries receive the greater amount of contributions or cash value.
- The death protection component of Universal Life is based on Annually Renewable Term coverage.
Understanding Policy Structures
- Straight Life policies feature the lowest annual premiums among whole life types and develop cash values typically by the third policy year.
- Flexible premiums are a characteristic of both Universal Life and Variable Universal Life policies.
Misconceptions
- Premiums in straight life policies do not decrease over time; they remain consistent while cash value increases.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Test your knowledge on essential concepts of life insurance with these flashcards. Each card presents a question and a definition to help reinforce your understanding of important terms and principles in life insurance. Perfect for exam preparation!
