(NEW) Chapters 1-5 Exam #1

Insurable Interest

When a policy owner faces the possibility of losing money or something of value in the event of a loss, what must exist at the time of application for a life insurance policy?

Contract of Adhesion

A contract prepared by an insurer and is accepted or rejected by another party where terms are non negotiable and offered on a “take it or leave it basis” is called _______.

Aleatory Contract

A contract in which the performance of one or both parties is contingent upon the occurrence of a particular event and there is an exchange of unequal amounts or values is called ______.

Misrepresentation

Making untrue statements about a policy and what it consists of that can alter underwriting decisions and sometimes be considered fraud is called _____.

honor the contract

If an insurer accepts an incomplete application and issues a policy, they must _____.

Premium Receipt

A receipt given by a producer showing that coverage is in force immediately or based on certain received conditions and is issued when agent collects the premium is called _____.

Initial Premium

What must be obtained with the application once verified the applicant is in continued good health when delivering the policy if not originally collect?

Risk Classification

A type of underwriting involving evaluating information such as past medical history, physical condition, habits and morals on a life insurance application that could cause the premium to go higher in cost is called ____.

Loss Experience

Higher risk faced by an insurance company. For example, a company may charge a higher premium to an insured who pays a policy quarterly rather than annually because the quarterly premium results in an increase in the company's loss experience.

Policy Delivery

the transfer of the policy document (paper or electronic) to the insured. It often involves explaining policy provisions and initiating the “free-look” period is called ____?

Fair Credit Reporting Act (FCRA)

An act requiring disclosure that an investigating consumer report may be obtained for a prospective insured and protects customer information to ensure their information is confidential, relevant, and properly used is called _____.

Surrendering a policy and requesting proceeds to be paid to a third party

What may raise a “red flag” with regards to the Anti Money Laundering rules?

both producer and firm

Who is required to report suspicious activity to FINRA?

Policy Delivery Receipt

A receipt given when a document is signed by the policyholder acknowledging and understanding the policy terms?

Representations

The insured/applicant statements that are believed to be true are called ____.

Consideration

An insurer’s promise to pay for losses that underwriters use to evaluate information on a life insurance application and is a binding force is called ____

Conditional Receipt

A receipt used only when an applicant submits a prepaid application and the applicant may be covered as early as the date of application is called ____.

Replacement

Involves surrendering/terminating an old policy and obtaining a new one is called _____.

USA Patriot Act

An act aimed at detecting criminal activities including money laundering and terrorism is called ____.

Suspicious Activity Report (SAR) Rules

Rules that state that procedures and plans must be in place and designed to identify activity that would raise concern of money laundering, terrorist financing, and other illegal activities is called ____.

Term Life Policy for Limited Financial Resources

A policy that provides the highest coverage for those with budget minimums is called _____.

Renewable Term Policy

A type of policy where premium is based on insured's attained age; guarantees the right to continue coverage after initial policy period is called _____.

Convertible Term Policy

A type of policy that offers the advantage of changing to a whole life policy without evidence of insurability is called ____.

Limited-Pay Life Policy

A type of policy that allows the insured to pay premiums for a shorter predetermined period, after which no further premiums are required is called ____.

Universal Life

A type of life insurance policy that provides for flexible premium payments is called ____.

Variable Life Policy

A type of life insurance policy that allows the policy owner to select where cash values are invested is called ___.

Variable Universal Life

A type of life insurance policy that offers flexibility in premium payments, payment period, and death benefit is called ____.

Variable Annuity

A type of annuity that pays based on units rather than specific dollar amounts is called ______.

Immediate Annuity

A type of annuity that requires a single premium and provides immediate income payments one period after purchase is called ____.

Straight Life Annuity

Type of annuity that pays the highest monthly payout is called _____.

Joint and Survivor Life Annuity

A type of annuity that ensures level income for the lifetime of two annuitants is called _____.

Insuring Clause

Which type of clause promises to pay certain benefits in a life insurance policy?

Consideration Clause

Which type of clause states that the policy owner's consideration includes completing the application and paying the initial premium?

Contestability Period

The expired time frame in which after 2 years in force, insurer likely pays face amount even if undisclosed condition led to death is called what?

Policy Loan Collateral

A benefit in which the insured is allowed to assign the life insurance policy to a bank as a pledge to borrow against is called _____.

Free Look Provision

A benefit allowing the policy owner to return a newly issued policy within a specified period for a refund is called _____.

Exclusion

A provision in a policy that restricts coverage under a life insurance policy in which the death benefit will not be paid is called ____.

Aviation Exclusion

A type of provision that may apply to student airplane pilots under an insurance policy to purchase at regular price is called ____.

Suicide Clause

A type of clause that protects insurer from high-risk applicants through policy provision is called _____.

Beneficiary Designation

Process of naming the person or entity who will receive the death benefit upon the policy owner’s death without consent of receiving party is called _____.

Irrevocable Beneficiary Designation

The process in which the policyholder's rights are limited to changing the beneficiary is called ____.

Estate

In case of a common disaster, proceeds are paid to the insureds _____.

Waiver of Premium Provision

A type of provision that guarantees payment of premiums by the insurance company during a disability after a waiting period is called _____.

Term Rider

A type of additional coverage added for children under a life insurance policy is called a _____.

Accidental Death and Dismemberment (AD&D) Benefit

A type of benefit that pays only if death results from a specific incident, often a motor vehicle accident is called _____.

Accelerated Death Benefit Provision

A type of provision that provides advanced payment for life insurance benefits due to terminal illness is called ___.

Long Term Care Rider

Type of rider that is triggered by insured's inability to perform activities of daily living is called ____.

Key Employee Policy

A type of policy where an affiliate leaves a company and dies while the policy is in force, the proceeds are paid to the company is called ____.

Buy and Sell Agreement

In a business scenario, partners may enter into a _____, ensuring business continuity in the event of a partner's death.

Life Settlements

A situation that occurs when a transfer of ownership and change of beneficiary of a life insurance policy and any insured is eligible to enter into one is called ____.

Group Term Conversion Period

During what time frame must the death benefit be paid in the event of a loss with one or multiple affiliates?

75%

In contributory plans, what % of employees are typically included?

Contributory Plan

Type of group life insurance where employees share the cost of insurance is called _____.

Individual Retirement Account (IRA)

A type of retirement plan that may be established by an employee, regardless of any other retirement plan they have is called ____.

not tax deductible

Life insurance premiums are _____.

tax free

Death benefits from group term life insurance plans are generally income ___ to named beneficiaries when it comes to taxes.

Modified Endowment Contract (MEC)

A policy becomes a ____ if too much premium is paid in the initial policy year, leading to tax implications?

Domestic Company

A type insurance company incorporated under state laws

Foreign Insurance Company

A type of company formed under laws of a different state is called ____?

Life and Health Guaranty Association

What group protects public from insurance company insolvency?

Commissioner of Insurance Authority

Who approves a producer's license applications?

Order

A document issued for insurance law violations is called an ____

Examination

What is a required test for insurance producer license?

Producer

Individual transacting business for an insurer is called a ____.

Insurance Fraud

Submission with material misrepresentation is an act of _____.

30

A denial of a license requires a hearing within how many days?

35

In a controlled business, a producer earns over ___% from family sales?

Misrepresentation of Pertinent Facts

What can lead to a cease-and-desist order?

Unfair Claims Settlement Practice

Failure to investigate claims promptly is called?

Notice of Fraudulent Claim

What allows commissioner to request more info?

Replacement of Life Insurance

Surrendering old policy for a new one and requires a form to be filled out is called____?

Notice of Replacement

What requires mandatory notification to existing insurer?