Life Insurance Basics - Key Concepts

life Question Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation? Chapter: Life Insurance Basics Which of the following is NOT an example of insurable interest? ABusiness partners in each other BEmployer in employee CChild in parent DDebtor in creditor The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as An insurer invests the money it receives from premiums paid by its insureds. Which of the following is TRUE regarding the interest earned on these investments? A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then The mode of premium payment Insurance producers must ensure that contracts they recommend are in the best interest of the insured. This is called An applicant who receives a preferred risk classification qualifies for For what reason may a life insurance producer backdate a life insurance policy? Why should the producer personally deliver the policy when the first premium has already been paid? A A producer agent must do all of the following when delivering a new policy to the insured EXCEPT An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin? The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What should the insurer do with the application? Which of the following statements is NOT true concerning insurable interest as it applies to life insurance? Types of Life Policies Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy? An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium? When would a 20-pay whole life policy endow? An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? Which of the following is called a "second-to-die" policy? Answer Human life value approach DDebtor in creditor f the application date ASurvivor protection CIt is used to lower premiums. The benefit is received tax free. Is defined as the frequency and the amount of the premium payment. ASuitability ALower premiums than a person who receives a standard risk. To avoid an increase in premium rate for the insured To help the insured understand all aspects of the contract C Disclose commissions earned from the sale of the policy. When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health Return to the applicant for completion A debtor has an insurable interest in the life of a lender. Universal Life – Option A Lower It will increase because the insured will be 5 years older than when the policy was originally purchased. AWhen the insured reaches age 100 The insured may choose to convert to term or permanent individual coverage. Survivorship life All of the following are true about variable products EXCEPT In which of the following cases will the insured be able to receive the full face amount from a whole life policy? A Universal Life insurance policy has two types of interest rate that are called Which of the following is NOT allowed in credit life insurance? A A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? If an agent wishes to sell variable life policies, what license must the agent obtain? Which of the following types of insurance policies is most commonly used in credit life insurance? Both Universal Life and Variable Universal Life have a Which of the following would be the beneficiary in credit life insurance? A key person insurance policy can pay for which of the following? A When must insurable interest exist in a life insurance policy? Which of the following is the best reason to purchase life insurance rather than annuities? Which of the following individuals must have insurable interest in the insured? The premiums are invested in the insurer’s general account. If the insured lives to age 100 Guaranteed and Current Creditor requiring that a debtor buys insurance from a certain insurer DLevel term Securities Decreasing term AFlexible premium. Creditor Costs of training a replacement At the time of application To create an estate Policyowner The key employee is the insured. CThere is no limitation on the number of key employee plans in All of the following are true of key person insurance force at any one time. DThe employer is the owner, payor and beneficiary of the policy. Upon policy delivery, the producer may be required to obtain APayment of premium. BDelivery receipt. any of the following DStatement of good health. Which of the following information about the applicant is Medical background NOT included on Part 1 of the application for insurance? A prospective insured receives a conditional receipt but dies BPay the policy proceeds only if it would have before the policy is issued. The insurer will issued the policy. If an applicant for a life insurance policy and person to be Whether an insurable interest exists between the insured by the policy are two different people, the individuals. underwriter would be concerned about Which term describes a situation in which people who are the most likely to have claims are also the most likely to seek Adverse selection insurance?