Insurance chapter 2

Front

Back

In classifying a risk, underwriters will look at all of the following information about the applicant EXCEPT A. Medical history B. Occupation C. Past income D. Current physical condition

C. Past income

When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information? A. Application B. Medical records C. Interviews D. State records

A. Application

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? A. It will likely be higher because the applicant is a substandard risk. B. It will likely be the average premium issued to standard risks. C. The applicant's habits and health do not affect the premiums. D. It will likely be lower because the applicant is a preferred risk.

A. It will likely be higher because the applicant is a substandard risk.

When J. applied for a life insurance policy, the agent informed him that a medical exam would be required. The exam may be completed by A. The agent B. A paramedic or examining physician at the insurer's expense C. A physician of the applicant's choice and at his expense D. A home office underwriter

B. A paramedic or examining physician at the insurer's expense

An applicant signs an application for a $25,000 life insurance policy, pays the initial premium, and receives a conditional receipt. If the applicant dies the following day, which of the following is TRUE? A. The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy B. The premium would be returned to the insured's estate because the policy was not issued C. The application will be voided D. The death claim will be rejected

A. The beneficiary will receive the full death benefit if it is determined that the applicant qualified for the policy

An applicant who receives a preferred risk classification qualifies for A. Dividends payable for lack of claims B. Higher premiums than a person who receives a standard risk C. Lower premiums than a person who receives a standard risk D. Higher premiums than a person who receives a sub-standard risk

C. Lower premiums than a person who receives a standard risk

For what reason may a life insurance producer backdate a life insurance policy? A. To secure a lower premium rate for the insured B. To make a policy effective during a period when the agent's appointment was in force C. To meet sales quotas established by the insurer D. To shorten the period of contestability

A. To secure a lower premium rate for the insured

Which of the following applicants could the insurer charge a higher rate of premium and not violate regulations regarding unfair discrimination? A. An applicant who is a smoker B. An applicant who is legally blind C. An applicant who has been a victim of domestic abuse D. An applicant who was born in another country

A. An applicant who is a smoker

If a life insurance agent wants to affect a savings of premium rates by backdating an application for life insurance, what is the maximum time period that an application may be backdated? A. 6 months B. It varies from insurer to insurer. C. Backdating is not allowed. D. One year

A. 6 months

What must happen when an individual policy or annuity has been personally delivered to the policyowner? A. A notary public must witness the exchange. B. The policyowner must pay the annual premium in full. C. The policyowner must sign a delivery receipt. D. The producer must go over the policy with the policyowner.

C. The policyowner must sign a delivery receipt.

A producer must do all of the following when delivering a new policy to the insured EXCEPT A. Collect any premium due. B. Explain the policy provisions, riders, and exclusions. C. Explain the rating procedures if the policy is rated differently than applied for. D. Disclose commissions earned from the sale of the policy.

D. Disclose commissions earned from the sale of the policy.

Whose responsibility is it to make certain that an application for insurance is filled out completely and correctly? A. The insurance company B. The applicant C. The beneficiary of the applicant D. The producer

D. The producer

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will A. Issue the policy anyway and pay the face value to the beneficiary. B. Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued. C. Return the premium to Y's estate, since it has no obligation to pay the death claim. D. Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved.

A. Issue the policy anyway and pay the face value to the beneficiary.

What does liquidity refer to in a life insurance policy? A. The insured receives payments each month in retirement. B. The death benefit replaces the assets that would have accumulated if the insured had not died. C. The policyowner receives dividend checks each year. D. Cash values can be borrowed at any time.

D. Cash values can be borrowed at any time.

If an insured changes the premium payment mode from monthly to annually, what happens to the total premium? A. Stays the same B. Doubles C. Decreases D. Increases

C. Decreases

An underwriter is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had in the past. What will the underwriter require? A. Sworn health affidavit from the applicant B. Attending Physician Statement C. A complete medical record D. Statement of Continued Good Health

B. Attending Physician Statement

The mode of premium payment A. Does not affect the amount of premium paid. B. Is the factor that determines the amount of dividends in a policy. C. Is the method used to compute the cash surrender value of the policy. D. Is defined as the frequency and the amount of the premium payment.

D. Is defined as the frequency and the amount of the premium payment.

Which of the following would NOT fall into the category of costs associated with death? A. Day to day expenses of maintaining the family B. The expense of a vacation for surviving family members C. Funeral expenses D. Final medical expenses of the insured

B. The expense of a vacation for surviving family members

Most agents try to collect the initial premium for submission with the application. When an agent collects the initial premium from the applicant, the agent should issue the applicant a A. Backdated receipt. B. Premium receipt. C. Statement of good health. D. Warranty.

B. Premium receipt.

Which of the following statements is NOT true concerning insurable interest as it applies to life insurance? A. An individual has an insurable interest in their own life. B. A married person has an insurable interest in their spouse. C. Business partners have an insurable interest in each other. D. A debtor has an insurable interest in the life of a lender.

D. A debtor has an insurable interest in the life of a lender.

An insurer receives a report regarding a potential insured that includes the insured's financial status, hobbies and habits. What type of a report is that? A. Agent's Report B. Inspection Report C. Medical Information Bureau's report D. Underwriter's Report

B. Inspection Report

The Medical Information Bureau (MIB) was created to protect A. Insureds from unreasonable underwriting requirements by the insurance companies. B. Medical examiners that perform insurance physical examinations. C. Insurance companies from adverse selection by high risk persons. D. Insurance departments from lawsuits by policyowners.

C. Insurance companies from adverse selection by high risk persons.

Which of the following is a risk classification used by underwriters for life insurance? A. Normal B. Excellent C. Poor D. Standard

D. Standard

Which of the following types of risk will result in the highest premium? A. Substandard risk B. Standard risk C. Preferred risk D. All risks pay equal premiums

A. Substandard risk

When must insurable interest exist in a life insurance policy? A. At the time of loss B. At the time of application C. At the time of policy delivery D. When there is a change of the beneficiary

B. At the time of application

Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT A. Family health history B. Alcohol and tobacco consumption C. Recent surgeries D. Other insurance coverages

D. Other insurance coverages

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT A. Note on the application the reason for the change. B. Draw a line through the first answer, record the correct answer, and have the applicant initial the change. C. Erase the incorrect answer and record the correct answer. D. Destroy the application and complete a new one.

C. Erase the incorrect answer and record the correct answer.

Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds? A. Vacation travel expenses B. Debt cancellation C. Day care D. Travel expenses for family to come to the funeral

A. Vacation travel expenses

A key person insurance policy can pay for which of the following? A. Hospital bills of the key employee B. Workers compensation C. Loss of personal income D. Costs of training a replacement

D. Costs of training a replacement

Which of the following would provide an underwriter with information concerning an applicant's health history? A. The inspection report B. The Medical Information Bureau C. The agent's report D. A medical examination

B. The Medical Information Bureau

When is the earliest a policy may go into effect? A. When the insurer approves the application B. When the application is signed and a check is given to the agent C. When the first premium is paid and the policy has been delivered D. After the underwriter reviews the policy

B. When the application is signed and a check is given to the agent

Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called A. Underwriting B. Client protection C. Approval D. Suitability

D. Suitability

If an agent fails to obtain an applicant's signature on the application, the agent must A. Send the application to the insurer with a note explaining the absence of signature B. Return the application to the applicant for a signature C. Sign the application, stating it was by the agent D. Sign the application for the applicant

B. Return the application to the applicant for a signature

Which of the following would be the best option that would help the surviving spouse of the insured to put her child through daycare after the insured's death? A. Viatical settlement B. State Education Waiver C. Estate conservation D. Life insurance proceeds

D. Life insurance proceeds

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then A. IRS has no jurisdiction B. The benefit is received as taxable income C. The benefit is subject to the exclusionary rule D. The benefit is received tax free

D. The benefit is received tax free

Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? A. The employer is the owner and beneficiary. B. The key employee is the owner and beneficiary. C. The key employee is the owner and the employer is the beneficiary. D. The employer is the owner and the key employee is the beneficiary.

A. The employer is the owner and beneficiary.