Life Insurance Basics
Life Insurance Lesson
- 1.
What is a viatical settlement?
- 2.
What is an emergency reserve for determining lump sum needs?
- 3.
When is the social security blackout periond?
- 4.
What are the two corporate funding methods?
- 5.
What are the two classes of life insurance policies?
- 6.
What is a fixed life insruance or annuity?
- 7.
What is the net single premium?
- 8.
What is a substandard (high exposure) risk?
- 9.
Which Person Use of Life Insurance is NOT correctly matched wit the explanation
- A.
Estate Conversion-- important for young families that have not yet had time to accumulate assets.
- B.
Survivor Protection- Survivors maintain their lifestyle in the event of death.
- C.
Cash Accumulation--Guarantees that the amount of money will be available when needed (ie. whole life policy).
- D.
Liquidity-- availability of cash to the policy owner.
Correct Answer
A. Estate Conversion-- important for young families that have not yet had time to accumulate assets. -
- 10.
During Human Life Value Apporach, you determine insured's after-tax income from ___________ to retirement.
Correct Answer
present - 11.
The predicted needs of family after the premature death of the insured is referred to as the _______ approach.
Correct Answer
needs - 12.
Which of the following are lump sum needs associated with death
- A.
Charity
- B.
Final Medical Expenses
- C.
Children's Education
- D.
Rent or Mortgage Payments
Correct Answer(s)
B. Final Medical Expenses
D. Rent or Mortgage Payments -
- 13.
Estate tax, day care, and insurance premiums are considered lump sum needs.
- A.
True
- B.
False
Correct Answer
A. True -
- 14.
Debt Concellation does not pay off debts.
- A.
True
- B.
False
Correct Answer
B. False -
- 15.
Determining Lump Sum Needs includes does not include which of the following:
- A.
Bequests or charity
- B.
Retirement Income
- C.
Insurance Against Suicide
- D.
Spousal Education
Correct Answer
C. Insurance Against Suicide -
- 16.
The two types of partnership funding methods include the cross purchase method and the entity purchase method.
- A.
True
- B.
False
Correct Answer
A. True -
- 17.
Buy-sell funding is a personal use of life insurance.
- A.
True
- B.
False
Correct Answer
B. False -
- 18.
___________________________ method is when the partnership buys the policies on the partners (better for more than 2 partners).
Correct Answer
Entity Purchase
Entity - 19.
A stock purchase method is
- A.
When the corporation buys on policy on each shareholder.
- B.
When each partner buys a policy on the other.
- C.
When the partnerships buys the policies on the partners.
- D.
When each stockholder buys a policy on each of the others.
Correct Answer
D. When each stockholder buys a policy on each of the others. -
- 20.
The employee would need to give permission for "Key Person" coverage.
- A.
True
- B.
False
Correct Answer
A. True -
- 21.
For executive bonuses (aka IRS section 162 Plan)-- the amount of the raise is tax-deductible to the employer and income is ________ to the employee.
Correct Answer
taxable - 22.
Industrial or Home Service Insurance are written in small amount (less than 1000)
- A.
True
- B.
False
Correct Answer
A. True -
- 23.
A physical exam is not required for ordinary life insurance.
- A.
True
- B.
False
Correct Answer
B. False -
- 24.
Permanent policies remain in effect until age _____________.
Correct Answer
100 - 25.
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.)
Correct Answer
Participating
Mutual - 26.
A non-participating (stock) life insurance policy does NOT pay dividends to policyowners.
- A.
True
- B.
False
Correct Answer
A. TrueExplanation
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.Rate this question:
-
- 27.
Cash values accumulate based upon a specific portfolio of stocks without guarantees of performance. Keep pace with inflation--determined by the value of the securities backing it.
Correct Answer
Variable
Variable life insurance
Variable life insurance or annuities
Variable annuities
Variable life insurance and annuities
Variable annuity
Variable life insurance or annuity
Variable life insurance and annuity - 28.
Agents performing transaction involving any variable products are required to be registered with the _____________
Correct Answer
FINRAExplanation
Financial Industry Regulatory AuthorityRate this question:
- 29.
Formulata for Net Premium= Mortality - ____________
Correct Answer
Interest - 30.
Net Premium + Expense (Loading) = ________________________
Correct Answer
Gross Premium
Gross - 31.
The cost of 1 year of mortality + (commissions + taxes+ advertising + profit margin) =
- A.
Net Premium
- B.
Gross Annual Premium
- C.
Net Annual Premium
- D.
Higher Premium
Correct Answer
B. Gross Annual Premium -
- 32.
As a general rule, the lower your frequency of payments, the higher your premium.
- A.
True
- B.
False
Correct Answer
B. False -
- 33.
Retention of advertisement files is ________ years.
Correct Answer
4 - 34.
LA state rules indicate that illustrations must state that policy issuance may depend on answers to health questions.
- A.
True
- B.
False
Correct Answer
A. True -
- 35.
A written statement summarizing the features and elements of a policy is
- A.
Suitability
- B.
Comparative method
- C.
Policy summary
- D.
Replacement
Correct Answer
C. Policy summary -
- 36.
A replacing insurer is the company that issues the new policy.
- A.
True
- B.
False
Correct Answer
A. True -
- 37.
When insurers plans to seek and use information from investigartors, they must first provide the applicatnt or insured with a written ___________________________________________.
- A.
Field Underwriter
- B.
Subpoena
- C.
Disclosure of Insurance Information
- D.
Disclosure Authorization Notice
Correct Answer
D. Disclosure Authorization Notice -
- 38.
The risk selection and classifaction process is referred to as ___________________.
Correct Answer
underwriting. - 39.
The agent (field underwriter) must complete the following:
- A.
Help prevent adverse selection
- B.
Complete the application
- C.
Collect the Initial Premium (and issuing receipt if applicable)
- D.
Properly solicit applicants.
Correct Answer(s)
A. Help prevent adverse selection
B. Complete the application
C. Collect the Initial Premium (and issuing receipt if applicable)
D. Properly solicit applicants. -
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Current Version
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Feb 11, 2013Quiz Edited by
ProProfs Editorial Team -
Dec 06, 2011Quiz Created by
Cshawnpujol
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