Life Insurance Study Guide
10. Which of the following is NOT a benefit of insurance? Losses due to fraud are eliminated
11. An insurer's ability to make unpredictable payouts to policyowners is called Liquidity
9. Which of the following is NOT considered to be a definition of the term "loss"? Probability that an event will occur
10. All of the following circumstances must be met for loss retention to be an effective risk management technique, EXCEPT: Probability of loss is unknown
14. Which of the following would NOT be accomplished with the purchase of an insurance policy? Risk is eliminated
15. Restoring an insured to the same condition as before a loss is known as: Principle of indemnity
1. Which of the following contracts is defined as "one that restores an injured party to the condition that was present before the loss"? Indemnity contract
2. A contract requires: an offer and acceptance of the contract terms
10. Which principle is accurately described with the statement "Insureds are entitled to recover an amount NOT greater than the amount of their loss"? Indemnity
4 - Life Insurance Policies - Provisions, Options and Riders
3. What is the proper order of initial life insurance premiums, from lowest to highest? Modified premium, ordinary life, single premium
4. A life insurance policy where the insured can choose where the cash value can be invested is called: variable life
7. Which of the following types of life insurance combines a savings element along with a flexible premium option? Universal life
8. A life insurance policy's limit of liability would be: the policy's face amount
11. Which of the following statements do NOT apply to child coverage in a family policy? Only children born prior to policy's issue date may be included
12. An insurance policy written after 1988 that fails to pass the seven-pay test is known as: a modified endowment contract
15. Which of the following is NOT true regarding a family policy that covers children? Conversion of child's coverage to permanent insurance requires evidence of insurability
Chapter Exam 2 - Life Provisions
14. Which of the following is NOT a common life insurance policy rider? extended term
15. In a life insurance policy, the entire contract consists of: policy and attached application
20. A life insurance policy can be surrendered for its cash value under which policy provision? Nonforfeiture options
5 - Life Insurance Premiums, Proceeds, and Beneficiaries
8. Naming a contingent beneficiary as "all surviving children" is described by which term? Class designation
9. Mortality is calculated by using a large risk pool of people and time
11. When calculating life insurance premium rates, which component would an agent's commission fall under? Insurer's expenses
12. Premiums are best described as: money paid by the insured to acquire a policy's benefits
14. Over the course of a year, which premium payment mode is most expensive? Monthly
15. The premium payment mode that results in the highest overall cost would be Monthly
3. Which of the following types of information is NOT required for a life insurance application? Ethnicity
4. Underwriters can acquire information from all of the following sources EXCEPT genetic testing
6. In which of the following relationships would there NOT be an insurable interest? Business owner to business customer
7. Most U.S. life insurance companies belong to the: Medical Information Bureau
9. How does a conditional receipt differ from a binding receipt? Binding receipts always provide insurance which starts from the date of receipt
10. When an applicant applies for insurance, the process by which the insurer determines whether to issue a policy is called: Underwriting
1. How is the cost of employer-provided group life insurance with coverage amounts above $50,000 treated for tax purposes? Taxable income to the employee
2. A terminated employee that has exercised the conversion privilege is able to convert: term group life coverage into permanent insurance
3. Tim was recently terminated from his employment and opted to change his existing group term life insurance to individual permanent life insurance. What is this process called? Conversion
4. All of the following are considered characteristics of group life insurance, EXCEPT: individual policies
8. Which of the following is NOT a characteristic of the conversion privilege? Employer pays the premium for the converted policy
9. All of the following are characteristics of a Group Life Insurance Plan EXCEPT Individual underwriting
10. Which of the following is NOT a requirement for a terminated employee that has exercised the conversion privilege? Provide proof of insurability
8 - Annuities
2. Which of these will have the highest monthly payout upon annuitization? Straight life
3. Fixed period settlement options are considered to be a form of a(n) Annuity
9. Which type of annuity guarantees a stated number of income payments, whether or not the annuitant is still alive to receive them? Life annuity certain
10. An annuity which is backed by a life insurer's separate account is called a(n): variable annuity
6. At what age is a surviving spouse without dependents eligible for Social Security survivor benefits? 60
7. According to Social Security, an individual with 6 credits of coverage during the previous 13-quarter period is considered to be: currently insured
10. Rob has a benefit at work which enables him to defer his current receipt of income and have it paid at a later date, when he will probably be in a lower tax bracket. Which benefit fits this description? Deferred compensation option
11 -Uses of Life Insurance
2. Which approach predicts a person's earning potential and determines how much of that amount would be devoted to dependents? Human life value approach
3. "Life insurance creates an immediate estate". This phrase means: when the insured dies, a death benefit is paid