MD EXAM-LIFE

WE PASS IT NOWW

What does risk refer to in insurance terminology?

Risk refers to the uncertainty of financial loss.

What is the reduction or decrease of value of a person or property insured in a policy called?

It is called Loss.

Who owns mutual insurance companies?

Mutual companies are owned by the policyowners.

What type of risk allows for both gains and losses?

Speculative risk allows for both gains and losses.

What method of handling risk does purchasing a life insurance policy represent?

Purchasing a life insurance policy is considered the method of risk Transfer.

What type of insurance does a fraternal benefit society usually provide?

Life or health insurance to its members.

If a company is incorporated in Georgia but operates in Connecticut, what type of insurer is it?

It is a Foreign insurer.

What authority do an agent's actions reflect?

An agent's actions show Apparent authority.

What is the tendency for less favorable risks to seek insurance called?

It is called Adverse Selection.

What is it called when an insurance company transfers its loss exposure to another insurer?

It is known as Reinsurance.

What is the company transferring a portion of risk to another insurer called?

The company is called the Ceding Company.

What is the primary reason for relying on the Law of Large Numbers?

A large number of similar risks is needed to accurately predict losses.

What type of company provides dividends to policyholders each year?

A mutual insurance company.

What term describes producers that sell insurance products from multiple companies?

Independent producers.

What is the main purpose of the guaranty association?

To protect policyowners against the insolvency of insurers.

What element must a contract have to prevent exploitation of minors or the insane?

Competent Parties.

What term describes ambiguous areas in an insurance contract?

They are decided in favor of the insured because it is a Contract of Adhesion.

What do you call true statements in an insurance application?

Representations.

What establishes that each party in an insurance contract gives something of value?

It is known as Consideration.

What is a legal contract where only one party makes a legally enforceable promise?

It is called a Unilateral contract.

What is the intent to misrepresent or conceal a material fact in an insurance application called?

It is called Fraud.

What term is used to describe restoring an insured to their financial position after a loss?

It is known as Indemnity.

What term refers to unequal values between two parties in a contract?

It is called Aleatory.

What is the characteristic requirement of all insurance contracts regarding compliance?

It is known as Conditional.

What is an insurable interest?

It must exist at the time of application.

How long must a worker have quarters of coverage to be fully insured by Social Security?

A worker must have 40 quarters of coverage.

When a business owns and is the beneficiary of a life insurance policy, what type of insurance is this?

This is called Key Person insurance.

What document highlights critical elements of an insurance policy?

It is called the Policy Summary.

What method for paying premiums considers the time value of money?

It is known as the Interest-Adjusted Net Cost Method.

What statement about viatical settlements is not true?

Viatical settlements are usually allowed in the first 5 years after policy issue.

What is the primary purpose of an individual life insurance policy?

To create an immediate estate.

Which document is the main source of information used by underwriters?

The Application.

Which factors are NOT considered by an underwriter for premium rates?

IQ.

A statement of good health is required when?

At the time of Policy Delivery.

Investigative consumer reports may include all EXCEPT what area?

Cosmetic surgery.

What is the Medical Information Bureau (MIB)?

It is a source of medical information to alert insurers about adverse medical history.

What happens if a proposed insured dies before a policy is issued while having a conditional receipt?

The company pays the policy proceeds only if it would have issued the policy.

Who needs to give written consent for medical information about an applicant to be requested?

The Applicant.

What is the least expensive method of paying life insurance premiums?

Annual payment.

Which factors could NOT affect an insured's premium?

Insurance Company Expenses.

What type of risk pays a higher premium compared to a standard risk?

A substandard risk.

As a field underwriter, which responsibility does NOT belong to the producer?

Obtaining the MIB report.

What are statements on an application for life insurance considered?

Representations.

When must a Buyers Guide be provided?

Prior to accepting the applicant's initial premium payment.

Under which circumstance can a medical test for HIV antibodies be performed on an applicant?

Only when the individual has given written consent.

What document contains the producer’s personal observations concerning the proposed insured?

The Agent’s Report.

Which statement about term life insurance is incorrect?

Term insurance is one of the most expensive forms of protection.

What is decreasing term insurance most often used for?

Credit or Mortgage Insurance.

When does cash value usually start accruing in whole life policies?

Cash value usually starts accruing after 3 Years.

On a limited-pay whole life policy, how long does coverage continue?

Until death or age 100.

What is an indexed whole life policy's interest rate linked to?

It is linked to an equity index such as the Standard and Poor’s 500.

What happens under an annual renewable term policy?

It renews each year with an increased premium.

What two types of insurance does universal life combine?

Annual Renewable Term and a Cash Account.

Which statement about whole life insurance is incorrect?

The policy’s cash value decreases each year the policy is in force.

If a single premium is paid on a whole life policy, when will cash value be available?

Be available immediately.

What happens to premiums at renewal of a term policy?

They are based on attained age.

When are benefits paid from a joint life policy?

When the first insured dies.

Compared to straight life insurance, what is true about survivorship life?

Typically has lower premiums.

When Bob changes his adjustable life policy to increase the death benefit, what must he do?

He must provide evidence of insurability.

What is true regarding a universal life policy?

The premiums can be decreased by the insured.

What occurs when the cash value equals the face amount of a whole life policy?

The policy endows.

What characterizes group life policies?

A master policy is issued to the sponsor.

Which life insurance policy allows partial surrenders?

Universal Life.

When converting a group life policy to an individual policy, what statement is NOT true?

The individual policy will always be the same type of insurance as the group policy.

What increases in an increasing term policy?

Death Benefit.

Which policy type requires a FINRA issued license?

Variable Life.

What is NOT true of a variable life insurance policy?

It can be converted from term to whole life.

With a graded premium whole life policy, how do premium payments increase?

For a specified period and then become level.

Which statement is true about a Convertible Term policy?

An insured doesn't have to provide evidence of insurability when converting.

Which provision of a life insurance policy states the application is part of the contract?

The Entire Contract clause.

What allows reactivation of a lapsed insurance policy?

Under the Reinstatement provision.

What prevents the denial of payment for a death claim after a specified time?

The Incontestable clause.

What happens if an insured understates their age on the application?

The insurer will pay a reduced death benefit.

What term refers to the transfer of ownership rights from one individual to another?

Assignment.

What does the mandatory 10-day free look in a life insurance policy commence?

It commences when the policy is delivered.

If a policy is lapsed, how long is the grace period typically?

31 Days.

What rights does the owner of a life insurance policy have?

Designate or change a beneficiary.

When does a contingent beneficiary receive the death benefit?

If the primary beneficiary dies at the same time as the insured.

What is the outcome if the insured and the beneficiary die in a common disaster?

The Insured’s estate receives the death benefit.

Which item is NOT typically an exclusion in life policies?

Death due to plane crash for a fare-paying passenger.

What does nonforfeiture in life insurance often associate with?

Cash Values.

What occurs when a policyowner surrenders a whole life policy for reduced paid-up insurance?

The cash value continues to increase.

What specifies how proceeds are paid to a beneficiary?

It is known as Settlement Options.

With dividends accumulation, what happens to premium amount with dividends applied?

The premiums will then be reduced.

What is NOT a nonforfeiture option?

One-Year Term.

What option provides a fixed amount of benefits until exhausted?

Fixed Amount.

Which statement about policy dividends is true?

They are not guaranteed.

What happens if a policyowner borrows from the cash value without repayment?

The death benefit will be reduced by the loan amount plus interest.

What nonforfeiture option maintains the same coverage amount as original policy?

Reduced Paid-Up Insurance.

What option leads to benefits during insanity resulting from accident?

Paid-Up Additions.

What is the purpose of the waiver of premium rider?

To keep the policy in force despite missed premium payments.

What does the waiver of premium rider include?

A waiting period before the benefits start.

What allows premiums to be waived in the event of the premium payer's disability?

Payor Benefit.

What occurs to the death benefit under an accelerated benefit rider?

The benefit will be reduced by the amount paid under the rider.

Which rider covers spouses and children with term insurance?

Family Term Rider.

If an insured dies post-accident from a heart attack, what is the result?

The insurer pays $0, as death resulted from illness, not an accident.

What allows additional insurance to be purchased without evidence of insurability?

Guaranteed Insurability rider.

What does the cost of living rider do?

Adjusts the death benefit by an inflation index.

What disability rider is added to a universal life policy?

Waiver of Cost of Insurance.

What rider pays premiums back to the beneficiary upon the insured's death?

Return of Premium.