PHP Agency Licensing Prep Quiz

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PHP Agency Licensing Prep Quiz - Quiz

This quiz will test your insurance topic knowledge after studying on your own or taking online classes that may be mandatory in your state. Ready? Let's begin!


Questions and Answers
  • 1. 

    What did the Licensing Team say about studying for the state exam

    • A.

      You can pass without much studying - a friend of a friend said that... I think.

    • B.

      Study when you get a chance - no worries.

    • C.

      Make a study plan, take it seriously and pass the test ASAP!

    • D.

      Tests are over-rated. I can drive pretty well with out a driver license, so what’s the difference?

    • E.

      I heard Amour Noubarentz takes Compliance very seriously and it’s dangerous to piss him off.

    Correct Answer
    C. Make a study plan, take it seriously and pass the test ASAP!
    Explanation
    Everyone needs to take licensing preparation seriously and study hard. PHP's Home Office Licensing Team is here to help!

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  • 2. 

    When an insurer issues a policy that refuses to cover certain risks, this is referred to as a(n)

    • A.

      Elimination

    • B.

      Exclusion

    • C.

      Limitation

    • D.

      Exception

    Correct Answer
    B. Exclusion
    Explanation
    The correct answer is exclusion. The exclusion section of an insurance policy specifies the conditions, times, and circumstances under which the insured is NOT covered by the policy. There are five common exclusions found in all life and health insurance policies. They are: Intoxicants and Narcotics, Commitment of Felony, Aviation, War, and Suicide. If a loss is not excluded in the policy, it will be covered by the insurance company.

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  • 3. 

    Insurance benefits NOT covered due to an act of war are

    • A.

      Excluded by the insurer

    • B.

      Assigned to a reinsurer

    • C.

      Given a longer probationary period

    • D.

      Charged a higher premium

    Correct Answer
    A. Excluded by the insurer
    Explanation
    The correct answer is excluded by the insurer. All life and health insurance policies will exclude coverage for anything that happens while they are on active military duty. While someone is actively serving in the military they are covered by life and health benefits provided by the military. This is why acts of war are excluded.

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  • 4. 

    D was actively serving in the Marines when he was killed in an automobile accident while on leave. His $100,000 Whole life policy contains a War Exclusion clause. How much will D's beneficiary's receive?

    • A.

      Refund of premiums paid plus interest

    • B.

      Nothing, due to actively serving in the armed forces

    • C.

      Double the face amount because cause of death was accidental

    • D.

      The full face amount

    Correct Answer
    D. The full face amount
    Explanation
    The correct answer is The full face amount. As you learned, any loss resulting out of an act of war will be excluded from an insurance contract. However, if the death or injury is not a direct result of actively engaging in war, it will not be excluded.

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  • 5. 

    N is a student pilot with a large life insurance policy. Which of these features would limit the insurer's obligation in the event N was killed while flying as a student pilot?

    • A.

      Misrepresentation

    • B.

      Exclusion

    • C.

      Collateral assignment

    • D.

      Concealment

    Correct Answer
    B. Exclusion
    Explanation
    The correct answer is Exclusion. As you learned, the insurance company will EXCLUDE or not cover any injuries sustained while piloting a small aircraft. This exclusion specifically applies to those piloting a small aircraft while commercial airline pilots are covered.

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  • 6. 

    What is the Suicide provision designed to do?

    • A.

      Decline an applicant who is contemplating suicide

    • B.

      Safeguard the insurer from an applicant who is contemplating suicide

    • C.

      Protect the insurer from ever paying a claim that results from suicide

    • D.

      Allows the insurer the option to pay a death benefit in the event of suicide

    Correct Answer
    B. Safeguard the insurer from an applicant who is contemplating suicide
    Explanation
    The correct answer is safeguard the insurer from an applicant who is contemplating suicide. The suicide provision is only in effect for the first 2 years of a policy. For example if there was no suicide provision a person could buy a 1 million dollar policy and then kill himself they next day and the insurance company would have to pay his beneficiaries the 1 million.

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  • 7. 

    With any insurance policy, what is the purpose of the Grace Period?

    • A.

      Gives the policyowner additional time to pay past due premiums

    • B.

      Gives the policyowner additional time to file a lawsuit

    • C.

      Gives the policyowner additional time to file a claim

    • D.

      Gives the policyowner additional time to provide proof of loss

    Correct Answer
    A. Gives the policyowner additional time to pay past due premiums
    Explanation
    The correct answer is Gives the policyowner additional time to pay past due premiums. The purpose of a grace period is to give a policyholder extra time to pay a premium after the due date. Insurance companies understand people are busy and they may forget to pay a bill; so they give you a 31 day Grace Period so you don’t lose your coverage.

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  • 8. 

    Which of the following provisions specifies how long a policyowner's insurance coverage will remain in effect if the policyowner does not pay the premium when it is due?

    • A.

      Grace Period

    • B.

      Consideration

    • C.

      Waiver of Premium

    • D.

      Reinstatement

    Correct Answer
    A. Grace Period
    Explanation
    The correct answer is Grace Period. If a policy does not pay the premium by the due date, the policyowner can make the premium payment during the grace period. As you learned, this ensures they don't lose their insurance coverage because they forgot to pay a bill for a few days.

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  • 9. 

    M had an annual life insurance premium payment due January 1. She died January 10 without making the premium payment. What action will the insurer take?

    • A.

      Collect premium from M's estate

    • B.

      Deny the claim

    • C.

      Pay the face amount minus the past due premium

    • D.

      Subtract past due premium from cash value

    Correct Answer
    C. Pay the face amount minus the past due premium
    Explanation
    The correct answer is Pay face amount minus the past due premium. All life insurance policies have a 31-day grace period. This allows the policy owner to forget to pay their premium for an entire month without losing their coverage. However, if the insured dies during that grace period, without making the premium payment, the insurance company will subtract the past-due premium from the benefit or face value BEFORE paying the beneficiary.

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  • 10. 

    N is covered by a Term Life policy and does not make the required premium payment which was due August 1. N dies September 15. What action will the insurer take?

    • A.

      Claim will be denied

    • B.

      Claim will be paid in full

    • C.

      Claim will be partially paid

    • D.

      Claim will be decided by an arbitrator

    Correct Answer
    A. Claim will be denied
    Explanation
    The correct answer is Claim will be denied. If the policyowner exceeds their grace period by not paying their premium for longer than 31-days and does not have any other fail-safe in place, the policy will be terminated and any future claims will not be paid.

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  • 11. 

    An insured is past due on his life insurance premium, but is still within the Grace Period. What will the beneficiary receive if the insured dies during this Grace Period?

    • A.

      Refund of all premiums paid, plus interest

    • B.

      Refund of all premiums paid

    • C.

      Full face amount minus any past due premiums

    • D.

      Full face amount

    Correct Answer
    C. Full face amount minus any past due premiums
    Explanation
    The correct answer is Full face amount minus any past due premiums. Since the insured died during the 31 day Grace Period the beneficiaries will the money from the insurance policy minus the past due payment.

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  • 12. 

    Monthly-premium Individual health insurance policies must provide a grace period of at least

    • A.

      7 days

    • B.

      10 days

    • C.

      14 days

    • D.

      21 days

    Correct Answer
    B. 10 days
    Explanation
    The correct answer is 10 days. If an insured pays their individual health insurance premium once a month, their grace period is 10 days.

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  • 13. 

    An insured pays premiums on an annual basis for an individual health insurance policy. What is the MINIMUM number of days for the Grace Period provision?

    • A.

      7 days

    • B.

      10 days

    • C.

      20 days

    • D.

      31 days

    Correct Answer
    D. 31 days
    Explanation
    The correct answer is 31. If an insured pays their individual health insurance premium less frequently than monthly, for example: quarterly, semi-annually, or annually, the usual grace period is 31 days.

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  • 14. 

    Which of the following provisions is NOT required in HMO contracts/certificates?

    • A.

      Enrollment

    • B.

      Rates shall not be excessive

    • C.

      No pre-existing exclusions for children

    • D.

      Seven-day grace period

    Correct Answer
    D. Seven-day grace period
    Explanation
    The correct answer is Seven-day grace period. HMOs must provide for a grace period of at least 10 days.

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  • 15. 

    Which of the following statements describes the purpose of the Insuring clause in an insurance policy

    • A.

      Specifies the additional time given to pay past due premiums

    • B.

      States the scope and limits of the coverage

    • C.

      Specifies a claim will be paid immediately upon receipt of proof of loss

    • D.

      Prohibits the insured from suing the insurer for at least 60 days after filing a written proof of loss

    Correct Answer
    B. States the scope and limits of the coverage
    Explanation
    The correct answer is States the scope and limits of the coverage. The insuring clause or insuring agreement in an insurance contract establishes the insurance companies promise in regards to the amounts of coverage and it’s promise to pay out the policy if premiums are being paid.

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  • 16. 

    Which of the following insurance policy provisions specifies the benefits or services a policy will provide?

    • A.

      Insuring clause

    • B.

      Usual, Customary, and Reasonable clause

    • C.

      Consideration clause

    • D.

      Benefit clause

    Correct Answer
    A. Insuring clause
    Explanation
    The correct answer is Insuring clause. The insuring clause specifies the services or amount of benefits to be paid. This clause is basically the insurance company stating; I promise to provide this coverage under these circumstances.

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  • 17. 

    The agreement in an insurance contract that states a specific sum of money will be paid to a designated person upon an insured's death is called a(n)

    • A.

      Entire Contract provision

    • B.

      Consideration clause

    • C.

      Insuring agreement

    • D.

      Assignment agreement

    Correct Answer
    C. Insuring agreement
    Explanation
    The correct answer is Insuring agreement. In a Life insurance contract, an insurance company's promise to pay stated benefits is called the insuring agreement, or clause.

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  • 18. 

    The Consideration clause in an insurance policy indicates that a policy owner's consideration consists of a completed application and

    • A.

      The initial premium

    • B.

      Agreeing to a physical examination

    • C.

      Delivery of policy

    • D.

      disclosure of any medical conditions

    Correct Answer
    A. The initial premium
    Explanation
    The correct answer is the initial premium. The consideration clause states that a policyowner’s consideration consists of a completed application and initial premium. It also states the amount and frequency of premium payments. It basically is the policyowner saying, “Please CONSIDER me for insurance. Here is my completed application, my first premium, and I agree to pay this amount, this often to keep the policy.”

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  • 19. 

    The Consideration clause in an insurance contract contains what pertinent information?

    • A.

      Summary of benefits

    • B.

      Offer and acceptance

    • C.

      Entire Contract

    • D.

      Amount of premium payments and when they are due

    Correct Answer
    D. Amount of premium payments and when they are due
    Explanation
    The correct answer is Amount of premium payments and when they are due. The policyowner’s consideration is agreeing to pay a set premium at set intervals.

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  • 20. 

    An insurance company receive‘s application for an individual health policy. E did not complete all of the medical history questions because she could not remember the exact dates. E signed the policy and submitted it to the insurance company anyway. A few weeks later, E suffers a heart attack and is hospitalized without completing the medical history questions and paying the initial premium. E is not insured. Which of the following clauses details the conditions that E did not meet?

    • A.

      Entire Contract clause

    • B.

      MIB clause

    • C.

      Insuring clause

    • D.

      Consideration clause

    Correct Answer
    D. Consideration clause
    Explanation
    The correct answer is Consideration clause. The insured’s consideration given for an insurance policy is the first or initial premium payment and the completed application. If an applicant or policyowner does not provide the insurance company with a completed application and initial premium, they have not given proper consideration and in turn are not covered.

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  • 21. 

    Which health policy clause stipulates that an insurance company must attach a copy of the application to the policy to ensure that it is part of the contract?

    • A.

      Consideration

    • B.

      Entire Contract

    • C.

      Free-look

    • D.

      Insuring

    Correct Answer
    B. Entire Contract
    Explanation
    The correct answer is Entire Contract. The entire contract clause, or provision, requires that the application becomes part of the policy. Entire contract includes the application, any addendums or endorsements, and the policy itself. Just like it sounds everything need to be included and provided to the customer in the contract which is why it’s called the entire contract.

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  • 22. 

    When an insurance company sends a policy to the insured with an attached application, the element that makes the application part of the contract between the insured and the insurer is called the

    • A.

      Entire Contract provision

    • B.

      Insuring clause

    • C.

      Time Limit on Certain Defense provision

    • D.

      Legal Contract clause

    Correct Answer
    A. Entire Contract provision
    Explanation
    The correct answer is Entire Contract provision. The entire contract is a standard provision which requires that any addendums, endorsements, and the application, must be delivered with the policy itself once the policy is approved and that together, all of these documents make up the entire contract.

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  • 23. 

    Which of the following policy provisions states that the producer does NOT have the authority to change the policy or waive any of its provisions?

    • A.

      Time Limit on Certain Defenses

    • B.

      Reinstatement

    • C.

      Entire Contract

    • D.

      Change of Beneficiary

    Correct Answer
    C. Entire Contract
    Explanation
    The correct answer is Entire Contract. The entire contract provision in an individual insurance policy states that the agent does NOT have the authority to change the policy or waive its provisions; every single part of the contract is included and bound together in the CONTRACT originally sent by the insurance company.

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  • 24. 

    Which provision prevents an insurer from changing the terms of the contract with the policyowner by referring to documents not found within the policy itself?

    • A.

      Policy Exclusion

    • B.

      Incontestable

    • C.

      Entire Contract

    • D.

      Assignment

    Correct Answer
    C. Entire Contract
    Explanation
    The correct answer is Entire Contract. An insurance company is not allowed to reference a document not originally provided to the policyowner because by definition, it is NOT part of the contract.

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  • 25. 

    A life insurance policy that provides a policyowner with cash value along with a level face amount is called

    • A.

      Whole life

    • B.

      Level term

    • C.

      Credit life

    • D.

      Ordinary life

    Correct Answer
    A. Whole life
    Explanation
    The correct answer is, Whole life. Remember, two of the features of a whole life policy that are ALWAYS true are cash value and a level face amount that does not change from the date the policy is issued. For example, if you purchase a life insurance policy with a $20,000 face value or coverage amount, that $20,000 coverage amount will be level from day 1 until the end of the contract.

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  • 26. 

    When is the face amount of a Whole Life policy paid?

    • A.

      At the policy's maturity date only

    • B.

      When the insured dies or at the policy's maturity date, whichever happens first

    • C.

      Only when the insured dies

    • D.

      When the policy is surrendered

    Correct Answer
    B. When the insured dies or at the policy's maturity date, whichever happens first
    Explanation
    The correct answer is When the insured dies or at the policy's maturity date, whichever happens first. Remember a whole life policy will always pay the face value or coverage amount when the insured dies or at the policy’s maturity date, whichever happens first. Most whole life policies have a maturity date of age 100.

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  • 27. 

    What kind of premium does a Whole Life policy have?

    • A.

      Decreasing

    • B.

      Adjustable

    • C.

      level

    • D.

      Deferred

    Correct Answer
    C. level
    Explanation
    The correct answer is level. Once a whole life policy is issued, the premium is level. This means if you take out a life a whole life insurance policy and agree to pay $50 per month in premium, your premium will always be $30.

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  • 28. 

    What type of insurance offers permanent life coverage with premiums that are payable for life?

    • A.

      Credit Life

    • B.

      Renewable Term Life

    • C.

      Whole Life

    • D.

      Endowment

    Correct Answer
    C. Whole Life
    Explanation
    The correct answer is Whole Life. Whole life is considered permanent coverage because the coverage is permanent for your whole life. In turn, you also usually make payments on a whole life policy for your whole life. For example, if you take out a $20,000 whole life insurance policy and agree to pay a premium of $30 a month. The $20,000 of coverage will last your whole life, and you will be required to make the $30 a month premium payment for your whole life.

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  • 29. 

    Which statement about a whole life policy is correct?

    • A.

      Beneficiary may be changed only with the consent of the premium payor

    • B.

      Death benefit can usually be adjusted

    • C.

      Cash value may be borrowed against

    • D.

      Premiums are flexible

    Correct Answer
    C. Cash value may be borrowed against
    Explanation
    The correct answer is Cash value may be borrowed against. The cash value of a whole life policy offers the policyowner a savings account available to borrow against while the insured is alive. Any money borrowed from this account and not paid pack before the insured’s death will be subtracted from the face value prior to the beneficiary being paid.

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  • 30. 

    What type of policy would offer a 40-year old the quickest accumulation of cash value?

    • A.

      Paid-up at 65

    • B.

      20-pay life

    • C.

      30-pay life

    • D.

      Straight whole life

    Correct Answer
    B. 20-pay life
    Explanation
    The correct answer is 20-pay life. The quicker you pay-up your policy the quicker you will accumulate cash value. If you are 40 years old and pay until age 60 you will pay a total of 25 years. With a 20-pay life you are only paying for 20 years. As this is the shortest payment period, you would begin to build cash value the quickest.

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  • 31. 

    A potential client, age 40, would like to purchase a Whole Life policy that will accumulate cash value at a faster rate in the early years of the policy. Which of these statements made by the producer would be correct?

    • A.

      Straight life accumulates faster than Limited-pay Life

    • B.

      20-Pay Life accumulates cash value faster than Straight Life

    • C.

      Cash value accumulation of both 20-Pay Life and Straight Life depend on the insurer's financial rating

    • D.

      20-Pay Life and Straight Life accumulate cash value at the same rate

    Correct Answer
    B. 20-Pay Life accumulates cash value faster than Straight Life
    Explanation
    The correct answer is 20-Pay Life accumulates cash value faster than Straight Life. Remember, the quicker you agree on having a whole life policy paid up, the quicker you will accumulate cash value.

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  • 32. 

    Which of these characteristics is consistent with a Straight Life policy?

    • A.

      Owner can adjust both premium and death benefit

    • B.

      Premiums are lower for the first five years, increase the sixth year, then levels off for the remaining length of the contract

    • C.

      Owner has the option of converting to term insurance

    • D.

      Premiums are payable for as long as there is insurance coverage in force

    Correct Answer
    D. Premiums are payable for as long as there is insurance coverage in force
    Explanation
    The correct answer is Premiums are payable for as long as there is insurance coverage in force. With straight life, you are agreeing to pay on your whole life policy for as long as coverage is in force. Said differently, you will be paying until death, or age 100, whichever occurs first.

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  • 33. 

    Life insurance that covers an insured's whole life with level premiums paid over a limited time is called

    • A.

      Adjustable Life

    • B.

      Renewable Term

    • C.

      Limited-Pay Life

    • D.

      Joint Life

    Correct Answer
    C. Limited-Pay Life
    Explanation
    The correct answer is Limited-Pay Life. Since a limited-pay life is whole life, we know coverage will last for your entire life, you will have cash value, a level premium, and a level face value. With a limited-pay life, you are agreeing to pay for your whole life policy in its entirety by a predetermined date, LIMITING how long YOU PAY for the policy.

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  • 34. 

    How long does the coverage normally remain on a limited-pay life policy?

    • A.

      Age 65

    • B.

      Age 100

    • C.

      When premium payments stop

    • D.

      At the discretion of the insurer

    Correct Answer
    B. Age 100
    Explanation
    The correct answer is age 100. A limited-pay policy is a whole life policy where you are LIMITING the amount of time you are required to PAY PREMIUMS. Since limited-pay policies are whole life, coverage on a limited pay policy lasts until death or age 100.

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  • 35. 

    N is a 40-year old applicant who would like to retire at age 70. He is looking to buy a life insurance policy with level premiums, permanent protection, and be paid-up at retirement. Which of these should N purchase?

    • A.

      30 Pay Life

    • B.

      Term to Age 70

    • C.

      Universal Life

    • D.

      Adjustable Life

    Correct Answer
    A. 30 Pay Life
    Explanation
    The correct answer is 30 Pay Life. Since a limited-pay life is whole life, we know coverage will last for your entire life, you will have cash value, a level premium, and a level face value. If N is 40 years old, will retire at age 70, and wants to have his life insurance policy paid up by the time he retires, he should purchase a 30 pay life.

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  • 36. 

    T would like to be assured $10,000 is available in 10 years to replace a roof on his house. What kind of $10,000 policy should T purchase?

    • A.

      Interest-Sensitive Whole Life

    • B.

      Ten-Year Endowment

    • C.

      Variable Universal Life

    • D.

      Ten-Year Renewable Term

    Correct Answer
    B. Ten-Year Endowment
    Explanation
    The correct answer is Ten-Year Endowment. Is basically a whole life policy with a small face value and a short maturity date, for example 10 years. Once the policy matures, the policyowner will receive the face value.

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  • 37. 

    K pays on a $20,000 20-Year Endowment policy for 10 years and dies from an automobile accident. How much will the insurance company pay the beneficiary?

    • A.

      Return of premiums paid

    • B.

      Cash value plus interest

    • C.

      $20,000 death benefit

    • D.

      Face amount plus interest

    Correct Answer
    C. $20,000 death benefit
    Explanation
    The correct answer is $20,000 death benefit. Remember, endowment policies are basically whole life policies with a short maturity date. If the insured dies before the maturity date, the beneficiary will receive the face value, just like any other whole life policy.

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  • 38. 

    K buys a policy where the premium stays fixed for the first 5 years. The premium then increases in year 6 and stays level thereafter, all the while the death benefit remains the same. What kind of policy is this?

    • A.

      Variable Life

    • B.

      Adjustable Life

    • C.

      Graded Premium Whole Life

    • D.

      Modified Whole Life

    Correct Answer
    D. Modified Whole Life
    Explanation
    The correct answer is Modified Whole Life. Since a modified whole life is whole life, we know coverage will last for your entire life, you will have cash value, a level premium, and a level face value or coverage amount. The only special feature of a modified whole life policy is; the insurance company gives you a premium discount for the first 5 years.

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  • 39. 

    Which type of policy is considered to be overfunded, as stated by IRS guidelines?

    • A.

      Modified Whole Life

    • B.

      Modified Endowment Contract

    • C.

      Variable Universal Life

    • D.

      Interest-Sensitive Whole Life

    Correct Answer
    B. Modified Endowment Contract
    Explanation
    The correct answer is Modified Endowment Contract. The 7-pay test was developed by the IRS to determine if excess premiums were being paid in to a whole life insurance policy to take advantage of the favorable tax benefits incorporated in to whole life policies.

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  • 40. 

    Which of these statements describe a Modified Endowment Contract (MEC)?

    • A.

      Falls below the minimum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract

    • B.

      Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract

    • C.

      The 7-pay test is used to determine the minimum death benefit of the policy

    • D.

      The 7-pay test is used to determine the maximum death benefit of the policy

    Correct Answer
    B. Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract
    Explanation
    The correct answer is Exceeds the maximum amount of premium that can be paid into a policy and still have it recognized as a life insurance contract. A policy is considered OVERFUNDED by the IRS’s 7-PAY TEST if more than 7-years of PREMIUMS are paid in to the insurance account at once. If this happens, the IRS no longer allows the policy to be recognized as a life insurance contract. It is now viewed as an investment and loses the favorable tax benefits of an insurance policy.

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  • 41. 

    Term insurance has which of the following characteristics?

    • A.

      Expires at the end of the policy period

    • B.

      Builds cash value

    • C.

      Has nonforfeiture options

    • D.

      Endows at the end of the policy period

    Correct Answer
    A. Expires at the end of the policy period
    Explanation
    The correct answer is Expires at the end of the policy period. Remember, all TERM insurance TERMINATES or expires at the end of the policy period. For example, if you took out at 10-year term policy at age 30, that policy would expire at age 40.

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  • 42. 

    What type of life insurance gives the greatest amount of coverage for a limited period of time?

    • A.

      Term life

    • B.

      Graded Premium Whole life

    • C.

      Whole life

    • D.

      Endowment policy

    Correct Answer
    A. Term life
    Explanation
    The correct answer is Term life. Term life is typically able to provide an insured a large amount of coverage with low premiums for a limited amount of time. The premiums are kept low in term insurance because there is no cash value and the policy always terminates.

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  • 43. 

    D needs life insurance that provides coverage for only a limited amount of time while also paying the lowest possible premium. What kind of policy is needed?

    • A.

      Limited-pay life

    • B.

      Graded Premium

    • C.

      Level term

    • D.

      Endowment

    Correct Answer
    C. Level term
    Explanation
    The correct answer is Level term. Level term will offer a level face value or coverage amount and LOW level premiums, but since all TERM insurance TERMINATES, the coverage will only last for a limited amount of time.

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  • 44. 

    What kind of life insurance starts out as temporary coverage but can be later modified to permanent coverage without evidence of insurability?

    • A.

      Endowment policy

    • B.

      Limited-Pay Whole life

    • C.

      Convertible Term

    • D.

      Decreasing Term

    Correct Answer
    C. Convertible Term
    Explanation
    The correct answer is Convertible Term. When a term policy allows you to convert to a whole life, you can do so without providing proof of good health. For example, if you have a convertible term policy, and then got diagnosed with diabetes, you can convert that term life policy to a whole life policy even though your health has changed.

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  • 45. 

    Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?

    • A.

      Owner's Rights clause

    • B.

      Incontestable Period

    • C.

      Insuring Agreement

    • D.

      Conversion privilege

    Correct Answer
    D. Conversion privilege
    Explanation
    The correct answer is Conversion privilege. The conversion privilege is the feature that allows an individual to convert a group life policy to an individual policy without providing evidence of insurability. For example, if you are covered under a group life policy and then change jobs, you can take that group policy with you by converting it to an individual policy and you will not have to prove you are in good health.

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  • 46. 

    The most important factor to consider when determining whether to convert term insurance at the insured's attained age or the insured's original age is

    • A.

      The cost

    • B.

      The health of the insured

    • C.

      The amount of coverage being converted

    • D.

      Who will be beneficiary

    Correct Answer
    A. The cost
    Explanation
    The correct answer is the cost. When converting a policy, the insureds health and insurability are locked in from the original application. However, the age used to determine the premiums for the new policy will usually be the insureds attained, or current age. For example, if you applied for a term policy at age 20 and wanted to convert it at age 40. Using your attained age of 40 would cost you more in premium than using your original age of 20.

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  • 47. 

    What type of life insurance are credit policies issued as?

    • A.

      Whole

    • B.

      Variable

    • C.

      Term

    • D.

      Universal

    Correct Answer
    C. Term
    Explanation
    The correct answer is Term. Credit life policies are issued to cover paying off a debt if an insured or group of insured dies before the debt is paid. As no one plans on being in debt for ever, you must use temporary or term insurance, which can terminate after the debt is paid off.

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  • 48. 

    Credit Life insurance is

    • A.

      Issued in any amount at the discretion of the applicant

    • B.

      Used in the event of loss of income

    • C.

      Issued in an amount not to exceed the amount of the loan

    • D.

      Coverage that waives the premiums on a loan payment in the event of total disability

    Correct Answer
    C. Issued in an amount not to exceed the amount of the loan
    Explanation
    The correct answer is issued in an amount not to exceed the amount of the loan. A bank or lender is not allowed to profit if the borrower dies. They can only receive the money that is owed to them as that is their only insurable interest on that person or group. For example if you wanted to take out an insurance policy to pay off a $20,000 car loan in the event you die before paying off the loan, the insurance policy could not be worth more than $20,000.

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  • 49. 

    T has a term policy that allows him to continue the coverage after expiration of the initial policy period. What type of term coverage is this?

    • A.

      Renewable

    • B.

      Increasing

    • C.

      Level

    • D.

      Decreasing

    Correct Answer
    A. Renewable
    Explanation
    The correct answer is Renewable. Renewable term allows you to renew the policy after the termination date usually for a set number of years or until a specific age. For example, if you took out a 5-year renewable term policy at age 20, you would be allowed to renew the policy after the five years instead of letting it expire. However, since you are now 25, when you renew the policy, the premiums would be higher than before.

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  • 50. 

    What type of life policy has a death benefit that adjusts periodically and is written for a specific period of time?

    • A.

      Modified whole life

    • B.

      20-year paid up policy

    • C.

      Endowment

    • D.

      Decreasing term

    Correct Answer
    D. Decreasing term
    Explanation
    The correct answer is Decreasing term. A decreasing term is a term policy where the face value decreases on a set schedule. Once the face value decrease to zero, the policy terminates.

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Quiz Review Timeline +

Our quizzes are rigorously reviewed, monitored and continuously updated by our expert board to maintain accuracy, relevance, and timeliness.

  • Current Version
  • May 02, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Jul 07, 2016
    Quiz Created by
    Tnellsworth
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