LIFE INSURANCE -GENERAL

an insurer's ability to make unpredictable payouts to policyowners?

Liquidity

Which one among those mandates that insurers reveal when they are investigating an applicant's consumer or credit history?

1970- fair credit reporting act

The specified quantity of liquid assets that an insurer is required to maintain to ensure it can meet its future commitments to policy holders is known as?

Reserves

In the context of insurance, what does captive insurer refer to?

 An insurance company established by a parent company to insure its own loss exposure 

Which law mandates insurance companies to divulge their data collection methods and the sources of their acquired information?

1970 fair credit reporting act 

What is a key feature of a “risk” considered to be insurable? 

The risk must be predictable in terms of occurrence and severity

What characterizes a Mutual company in the insurance industry?

It is owned by policyholders and may issue participating insurance.

In insurance, what does risk retention imply?

Accepting the risk and being responsible for its consequences. 

An insurance company owned by a group, established to take on and distribute the liability risks among its members is referred to as?

Risk retention group

What is the principle of indemnity in insurance language?

To restore the insured to the same financial condition as before a loss

Which contractual element has been breached by a STOLI (stranger originated life insurance)?

Consideration

What does the concept of insurable interest ensure in an insurance contract?

The applicant must suffer a financial loss upon the insured’s death

What does the principal of indemnity aim to do in insurance? 

Restore the insured to their financial position before the loss 

What is the primary difference between an agent and a broker?

An agent represents the insurance company 

A broker represents the applicant 

What does the aleatory nature of an insurance contract imply?

Inequality in exchange contingent on a specific event

What is a warranty in insurance contracts?

A statement that must be true and becomes part of the contract

What is considered in an insurance contract?

The exchange of something of value between the parties

Which is NOT typically covered under Errors and Omissions (E&O) insurance?

Intentional violation of laws 

What is the main responsibility of a fiduciary agent?

To handle all financial matters with high trust and integrity 

What is meant by the “contract of adhesion” in insurance?

The applicant must adhere to the insurer’s pre-set terms

Which of the following is NOT a typical duty of an insurance agent? 

Assessing medical reports 

 

An attending physicians statement (APS) is requested when:

The insurer needs detailed information about a specific medical condition

Errors and Omissions Insurance is recommended for? 

Insurance Agents because it protects them against liability for mistakes 

Which party is typically the first point of contact in the insurance application process?

Agent/ Producer 

A conditional receipt in insurance?

Temporary coverage subjected to conditions

Insurers are prohibited from engaging in?

Unfair discrimination

The medical Information Bureau (MIB) provides:

Medical History information shared among insurers 

What is the primary role of an underwriter?

To protect the insurer against adverse selection

A ____________ Provides immediate, albeit temporary, coverage until the insurer formally rejects the application?

Binding receipt 

An agent submits an application without collecting the initial premium. 

This type of application is known as…

A trial Application 

A single premium whole life policy offers ______________ cash value from the start

Immediate

The __________ feature in a term policy allows the policyholder to renew without proving insurability.

Renewable 

What is the primary difference between option A and Option B in a universal life policy? 

Death Benefit structure

Lisa is considering a policy that will provide a large lump sum at a specific future date for her child's college education. Which policy type is suited for her needs?

Endowment Policy

Which policy type is ideal for providing coverage for a specific future need, such as funding a child's education?

Endowment Policy

Which type of policy is known for its rapid cash value growth and early maturity?

Endowment Policy

What is the term for the test that ensures a life insurance policy does not become overfunded within the first seven years?

 7- pay test

In an increasing term insurance policy, how is the death benefit structured?

It increases over time

Which of the following policies provides immediate cash value right from the start? 

Single premium whole life

What is required for the automatic premium loan provision to function?

Sufficient cash value in the policy

The ___________ rider waives premium payments if the insured becomes totally disabled.

Waiver of premium 

Which provision states that the life insurance policy consists of all policy documents and the original application?

Entire contract provision

How can a policy owner transfer ownership of a life insurance policy? 

Through policy assignment 

What does the suicide clause stipulate about death caused by suicide within the inital policy period?

It is excluded from coverage

What is the effect of a premium payment mode provision on policy cost?

 It varies the premium payment frequency 

The _______________ clause protects the policyholder from the insurer contesting the policy after a specific period.

Incontestable 

How is the death benefit affected if there is an outstanding policy loan?

It is reduced by the loan amount plus interest 

Lisa has a policy with a misstatement of age provision. She stated her age as 40 instead of 45. What adjustment will the insurer make upon discovering the error?

Adjust the premium and /or death benefit to reflect the correct age

Who has the authority to modify a life insurance policy before its approval?

Authorized company officers 

Which classification of risk is associated with higher premiums due to higher health risks? 

SubStandard Risk

Who can be the policy owner in group life insurance?

The employer or plan sponsor

Lisa’s employer offers a noncontributory group life insurance plan. What does this mean for Lisa?

She does not contribute to premium payments

What must a terminated employee do within 31 days to maintain coverage?

Convert the group policy to an individual policy 

How long is the typical enrollment period for new employees to sign up for group insurance?

31 days

Which type of insurance is always temporary in a group life insurance plan?

Term life insurance 

A _________ Plan is where the employer bears the entire cost of insurance premiums.

Non - contributory

John is considering naming his three children as beneficiaries of his life insurance policy. If he wants the proceeds to be evenly distributed among his children, what designation should he use?

Per capita 

What does the common disaster provision ensure? 

Policy proceeds are paid to the contingent beneficiary if the primary beneficiary does not outlive the insured by a specified period

The _____ Option allows the insurance company to hold the death proceeds and pay only the interest earned to the benficiary.

Interest only

_______ is the frequency with which a policy owner elects to pay premiums.

Premium mode

What is an irrevocable beneificiary?

A beneficiary that cannot be changed without their consent 

Who determines an insurance company's premium rates?

Actuaries 

Sarah is terminally ill and wants to access her life insurance benefits to cover her medical expenses.  Which option allows her to do this?

 Accelerated benefit rider

What is the purpose of the expense factor in premium calculations?

 to account for the insurance company's operating cost

Which term refers to the frequency with which a policy owner elects to pay premiums ?

Premium mode

What does the net payment cost index calculate?

The true cost of a policy for a policy owner

What type of plan is fully funded by the employer and ensures income payments upon death disability or retirement ?

Salary continuation plan

An executive bonus plan provides a compensation bonus to an employee who  uses it to pay  ______  on a life insurance policy

Premiums 

What is the first step in the process of determining the proper amount of Life Insurance?

Information gathering

A client wants to ensure that their  children's education is funded if they passed away which approach should the insurance producer considered to determine the necessary coverage 

Needs approach

Which of the following is a purpose of the human life value approach ?

Replacing lost income to protect dependents

What is the blackout period in the context of Life Insurance?

the period from the insurance death until the surviving spouse is eligible for retirement benefits 

the period from the insurance death until the surviving spouse is eligible for retirement benefits 

blackout period

What is the key feature of using life insurance for charitable gifting ?

Taxable benefits for the policy owner

In the human life value approach what is subtracted from projected earning to determine the necessary coverage amounts 

Expected expenses such as taxes and living costs

What does the needs approach help to prevent by ensuring adequate coverage ?

Liquidation of assets 

Which approach does not account for individuals who benefit financially from the insured continued life 

Human life value approach 

What happens if the annuitant of a straight life annuity dies before receiving their initial investment back?

No further payments are made

John purchases a deferred annuity at age 55 and begins receiving payments at age 65 he is made total contributions of $120,000 what will happen to the  annuity value if John Dies at the age 63? 

The accumulated value is paid to his beneficiary

Who is the contract owner in an annuity?

an individual who purchases in funds the annuity.

The primary regulatory body for variable in  annuities at a federal level is

THE SEC

Who must register with finra to sell variable annuities

A sales representative with a Series 6 or 7 Securities registration 

Which annuity option provides payments for the lifetimes of two individuals

Joint and Survivor annuity

During the_______  phase, the individual makes contributions to the annuity 

Accumulation 

The _____________ Ratio is used to determine  detoxable portion of each annuity payment

Exclusion 

Who assumes the investment risk in a variable annuity

 the contract owner 

How is the annuity period defined?

The phase when the annuities receives income payments. 

An annuity is designed to protect individuals from the risk of 

Out living their income

What is the  guaranteed minimum withdrawal benefit (GMWB)

A benefit that guarantees a steady stream of income regardless of market conditions

Which type of annuity is designed to protect against inflation 

An equity indexed annuity 

What is the primary future of an immediate annuity

Payments begin shortly after purchase 

Which type of annuity provides guaranteed payments with fixed interest rates 

Fixed annuity 

What is a flexible premium deferred annuity (FDPA)

An annuity allowing variable premium payments

What is a single premium immediate annuity (SPIA)

An annuity that begins payments  immediately after a lump sum payment

What is the exclusion ratio used in annuities?

Calculating the taxable portion of each annuity payment 

Which type of annuity is backed by the insurance general account 

A fixed annuity 

Which regulatory bodies oversee the variable annuities

SEC AND FINRA

A ____________ Annuity begins payment immeditly after a lump sum payment is made 

Immediate

How are contributions to non-qualified annuities taxed 

They were made with after tax dollars