Life Insurance Basics

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5. A written statement summarizing the features and elements of a policy is

Suitability

Comparative method

Policy summary

Replacement

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7. LA state rules indicate that illustrations must state that policy issuance may depend on answers to health questions.

True

False

8. The two types of partnership funding methods include the cross purchase method and the entity purchase method.

True

False

9. A replacing insurer is the company that issues the new policy.

True

False

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11. A ________________________ life insruance policy is any poclicy that distributes its non-taxable divdends to policyowners by cash payments, reduced premiums, units of paid up insurance, a savings program, or by the purchase of term insurance. (This permits the insurer to establish a more generous margin in the form of an intentional overcharge which will be returned to the policyholder if not needed.)

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13. A non-participating (stock) life insurance policy does NOT pay dividends to policyowners.

True

False

However, tax dividends are paid to stockholders. Narrower safety margins because the cost of the insurance to the policyholder cannot be adjusted at a later time.

Explanation

However, tax dividends are paid to stockholders. Narrower safety margins because the cost of the insurance to the policyholder cannot be adjusted at a later time.

14. The employee would need to give permission for "Key Person" coverage.

True

False

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17. Buy-sell funding is a personal use of life insurance.

True

False

18. A physical exam is not required for ordinary life insurance.

True

False

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20. When insurers plans to seek and use information from investigartors, they must first provide the applicatnt or insured with a written ___________________________________________.

Field Underwriter

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Disclosure of Insurance Information

Disclosure Authorization Notice

21. Industrial or Home Service Insurance are written in small amount (less than 1000)

True

False

22. The cost of 1 year of mortality + (commissions + taxes+ advertising + profit margin) =

Net Premium

Gross Annual Premium

Net Annual Premium

Higher Premium

23. As a general rule, the lower your frequency of payments, the higher your premium.

True

False

24. Determining Lump Sum Needs includes does not include which of the following:

Bequests or charity

Retirement Income

Insurance Against Suicide

Spousal Education

25. Debt Concellation does not pay off debts.

True

False

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27. Estate tax, day care, and insurance premiums are considered lump sum needs.

True

False

28. Which Person Use of Life Insurance is NOT correctly matched wit the explanation

Estate Conversion-- important for young families that have not yet had time to accumulate assets.

Survivor Protection- Survivors maintain their lifestyle in the event of death.

Cash Accumulation--Guarantees that the amount of money will be available when needed (ie. whole life policy).

Liquidity-- availability of cash to the policy owner.

29. A stock purchase method is

When the corporation buys on policy on each shareholder.

When each partner buys a policy on the other.

When the partnerships buys the policies on the partners.

When each stockholder buys a policy on each of the others.

30. The agent (field underwriter) must complete the following:

Help prevent adverse selection

Complete the application

Collect the Initial Premium (and issuing receipt if applicable)

Properly solicit applicants.

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31. Which of the following are lump sum needs associated with death

Charity

Final Medical Expenses

Children's Education

Rent or Mortgage Payments

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