Everything About Insurance In This Quiz!

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Everything About Insurance In This Quiz! - Quiz

Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.
If you wanna know more in detail or test your knowledge about insurance, take this quiz!


Questions and Answers
  • 1. 

    Which services are associated with standard & poors and AM best?

    • A.

      Investigating violation of the fair credit reporting act

    • B.

      Providing employmetn histories for investigative consumer reports

    • C.

      Storing medical information collected by insurance companies

    • D.

      Rating the financial strength of the insurance companies

    Correct Answer
    D. Rating the financial strength of the insurance companies
    Explanation
    Standard & Poor's and AM Best are both well-known rating agencies in the insurance industry. They specialize in evaluating and rating the financial strength of insurance companies. This involves assessing various factors such as the company's ability to meet its financial obligations, its profitability, and its overall stability. By providing these ratings, Standard & Poor's and AM Best help consumers and investors make informed decisions about which insurance companies to trust and invest in.

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  • 2. 

    Pertaining to insurance, what is the definition of a fiduciary responsibility?

    • A.

      Helping insured to file claims

    • B.

      Performing reviews of insured coverage

    • C.

      Offering additional coverage to clients

    • D.

      Promptly forwarding premiums to the insurance company

    Correct Answer
    D. Promptly forwarding premiums to the insurance company
    Explanation
    A fiduciary responsibility in insurance refers to the obligation of promptly forwarding premiums to the insurance company. This means that the person or entity responsible for collecting insurance premiums must ensure that they are promptly and accurately forwarded to the insurance company. This is important because it ensures that the insurance policy remains in effect and that the insured individual or entity is properly covered. By promptly forwarding premiums, the insurance company can continue to provide coverage and fulfill its obligations to the insured.

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  • 3. 

    What term best describes the act of withholding material information that would be crucial to an underwriting decision?

    • A.

      Concealment

    • B.

      Withholding 

    • C.

      Leading 

    • D.

      Breach of warranty

    Correct Answer
    A. Concealment
    Explanation
    Concealment is the term that best describes the act of withholding material information that would be crucial to an underwriting decision. Concealment refers to intentionally hiding or not disclosing important information that could impact the outcome of an underwriting decision. This can be considered a form of fraud or misrepresentation as it prevents the underwriter from making an informed decision. Withholding, leading, and breach of warranty do not accurately capture the concept of intentionally withholding crucial information.

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  • 4. 

    The requirement that agents not commingle insurance monies with their own funds is known as 

    • A.

      Premium accountability

    • B.

      Express authority

    • C.

      Accepted accounting principal

    • D.

      Fiduciary responsiblity

    Correct Answer
    D. Fiduciary responsiblity
    Explanation
    Fiduciary responsibility refers to the legal and ethical obligation of an agent or trustee to act in the best interests of their clients or beneficiaries. In the context of insurance, this means that agents must handle insurance monies separately from their own funds and ensure that the funds are used solely for the benefit of the policyholders. This requirement helps to protect the interests of policyholders and maintain the integrity of the insurance industry.

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  • 5. 

    Which of the following would qualify as a competent party in an insurance contract

    • A.

      The applicant is under the influence of a mind-impairing medication at the time of application 

    • B.

      The applicant has a prior felony conviction 

    • C.

      The applicant is intoxicated at the time of application 

    • D.

      The applicant is 12 year old student

    Correct Answer
    B. The applicant has a prior felony conviction 
    Explanation
    A competent party in an insurance contract is someone who has the legal capacity to enter into a contract. A person with a prior felony conviction would still be considered a competent party in an insurance contract as long as they meet other requirements such as being of legal age and having the mental capacity to understand the terms and conditions of the contract. The prior felony conviction does not automatically disqualify them from being a competent party in this context.

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  • 6. 

    Not all losses are insurable and there are certain requirement that must be met before a risk is a proper subject for insurance. these requirements include all of the following except

    • A.

      The loss produced by the risk must be definite

    • B.

      The lost may be intentional

    • C.

      The loss must not be catastrophic

    • D.

      There must be sufficient number of homogeneous exposure units to make losses reasonably predictable

    Correct Answer
    B. The lost may be intentional
    Explanation
    The explanation for the given correct answer is that one of the requirements for a risk to be a proper subject for insurance is that the loss must not be intentional. Insurance is designed to provide coverage for unforeseen and accidental losses, not losses that are intentionally caused by the insured. Intentional losses are considered fraudulent and are not insurable. Therefore, the requirement that the loss may be intentional contradicts the principles of insurance.

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  • 7. 

    For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become

    • A.

      More active

    • B.

      Larger

    • C.

      Smaller 

    • D.

      Older

    Correct Answer
    B. Larger
    Explanation
    In order for the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become larger. This is because as the group size increases, the likelihood of experiencing losses that align with the statistical probability also increases. With a larger group, there is a greater chance of experiencing a variety of different losses, which helps to balance out the statistical probability and make it more likely for the reported losses to align with it.

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  • 8. 

    What method do insurers use to protect themselves against catastrophic losses?

    • A.

      Pro rata liability 

    • B.

      Risk management

    • C.

      Reinsurance

    • D.

      Indemnity

    Correct Answer
    C. Reinsurance
    Explanation
    Insurers use reinsurance as a method to protect themselves against catastrophic losses. Reinsurance involves transferring a portion of the insurance risk to another insurer, known as the reinsurer. This helps spread the risk and reduces the financial burden on the primary insurer in the event of a large-scale or catastrophic loss. By purchasing reinsurance, insurers can mitigate their exposure to extreme events and ensure their financial stability in challenging situations.

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  • 9. 

    Courts will interpret any ambiguity in an insurance contract

    • A.

      Based on the prudent person rule

    • B.

      In favor of the insured

    • C.

      In favor of the insurer

    • D.

      Through arbitration

    Correct Answer
    B. In favor of the insured
    Explanation
    When there is ambiguity in an insurance contract, courts will interpret it based on the prudent person rule. This means that they will consider what a reasonable person would have understood from the contract. In such cases, the courts tend to interpret the ambiguity in favor of the insured. This means that any doubts or uncertainties will be resolved in a way that benefits the policyholder rather than the insurance company. This interpretation is done to ensure that the insured party is protected and receives the intended benefits from the insurance contract.

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  • 10. 

    What insurance concept is associated with the names Weiss and Fitch

    • A.

      Guides describing company financial integrity

    • B.

      Policy dividends

    • C.

      Types of mutual companies

    • D.

      Index used by stock companies

    Correct Answer
    A. Guides describing company financial integrity
    Explanation
    The names Weiss and Fitch are associated with guides that describe a company's financial integrity. These guides provide information about the financial stability and reliability of insurance companies. They are commonly used by consumers and investors to evaluate the financial health of an insurance company before making any decisions. These guides may include ratings and assessments of the company's financial strength, creditworthiness, and ability to meet its obligations.

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  • 11. 

    Which of the following types of agent authority is also called "perceived authority"

    • A.

      Fiduciary

    • B.

      Apparent

    • C.

      Express 

    • D.

      Implied

    Correct Answer
    B. Apparent
    Explanation
    Apparent authority is also known as "perceived authority" because it refers to a situation where a person is perceived to have authority to act on behalf of another, even if they do not actually possess such authority. This perception may arise from the actions, words, or conduct of the person in question, leading others to believe that they have the power to act on behalf of someone else. In other words, apparent authority is based on the appearance or perception of authority rather than actual legal authority.

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  • 12. 

    What do individuals use to transfer their risk of loss to larger group?

    • A.

      Insurable interest

    • B.

      Exposure

    • C.

      Indemnity

    • D.

      Insurance

    Correct Answer
    D. Insurance
    Explanation
    Individuals use insurance to transfer their risk of loss to a larger group. Insurance allows individuals to pay a premium in exchange for coverage against potential losses or damages. By pooling together the resources of many individuals, insurance companies are able to provide financial protection and compensation in the event of an unforeseen event or loss. This helps individuals mitigate the financial impact of unexpected events and provides them with peace of mind.

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  • 13. 

    An insurance company sells an insurance policy over the phone in response to a TV ad 

    • A.

      Independent agency marketing 

    • B.

      Illegal 

    • C.

      Insurance telemarketing

    • D.

      Direct response marketing

    Correct Answer
    D. Direct response marketing
    Explanation
    The correct answer is direct response marketing. This is because the insurance company is selling their insurance policy directly to customers in response to a TV ad. Direct response marketing refers to any form of marketing that elicits an immediate response from the customer, such as making a purchase or requesting more information. In this case, the company is using the TV ad as a means to generate immediate sales over the phone.

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  • 14. 

    Which of the following is true regarding a risk retention group?

    • A.

      It is a benefit society formed to provied insurance for members of an affiliated lodge

    • B.

      It is a company owned by the stockholders that provides nonparticipating policies

    • C.

      It is a liability insurance company owned by it members

    • D.

      It provides support for underwriters and is not an insurance company

    Correct Answer
    C. It is a liability insurance company owned by it members
    Explanation
    A risk retention group is a liability insurance company owned by its members. This means that the members of the group are also the owners of the company. The purpose of a risk retention group is to provide liability insurance coverage to its members, who are typically businesses or professionals in the same industry. By pooling their resources and sharing the risk, the members can obtain insurance coverage at potentially lower costs compared to purchasing individual policies from traditional insurance companies.

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  • 15. 

    Insurance is the transfer of

    • A.

      Peril

    • B.

      Risk

    • C.

      Loss

    • D.

      Hazard

    Correct Answer
    B. Risk
    Explanation
    Insurance is the transfer of risk from an individual or entity to an insurance company. By purchasing insurance, individuals or entities transfer the potential financial burden of a loss or peril to the insurance company. Therefore, risk is the correct answer as it accurately represents the concept of transferring the potential for loss or peril to an insurance company.

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  • 16. 

    Which of the following terms is used to describe a person, other than a viator, that enters into or effectuates a viatical settlemet contract?

    • A.

      Viatical settlement broker

    • B.

      Viatical settlement effectuator

    • C.

      Viatical settlement provider

    • D.

      Viatical settlement purchaser

    Correct Answer
    C. Viatical settlement provider
    Explanation
    A viatical settlement provider is the correct term used to describe a person, other than a viator, that enters into or effectuates a viatical settlement contract. They are responsible for facilitating the transaction between the viator (the person selling their life insurance policy) and the purchaser (the person buying the policy). The provider typically assesses the policy's value, negotiates the terms of the settlement, and handles the necessary paperwork and legalities involved in the process.

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  • 17. 

    Which of the following statement is not true concerning insurable interest as it applies to life insurance?

    • A.

      Business partners have an insurable interest in each other

    • B.

      A husband or wife has an insurable interest in their spouse 

    • C.

      An individual has an insurable interest in his or her own life

    • D.

      A debtor has an insurable interest in the life of a lender

    Correct Answer
    D. A debtor has an insurable interest in the life of a lender
    Explanation
    A debtor does not have an insurable interest in the life of a lender. Insurable interest refers to the financial or emotional interest that a person has in the life or property being insured. In the case of a debtor and a lender, the debtor would not benefit financially or emotionally from the lender's life being insured. Therefore, it is not true that a debtor has an insurable interest in the life of a lender.

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  • 18. 

    If an agent fails to obtain an applicant signature on the application, the agent must

    • A.

      Sign the application for the applicant

    • B.

      Sign the application, stating it was by agent

    • C.

      Send the application to the insurer with a note explaining the absence of signature

    • D.

      Return the application to the applicant for a signature

    Correct Answer
    D. Return the application to the applicant for a signature
    Explanation
    If an agent fails to obtain an applicant signature on the application, it is necessary to return the application to the applicant for a signature. This ensures that the applicant has the opportunity to review and provide their consent by signing the application themselves. By returning the application to the applicant, it allows for the proper completion of the application process and ensures that all necessary signatures are obtained.

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  • 19. 

    An insured has a life insurance policy with a face amount of 500. he pay a premium each week to the agent who sold him policy. what kind of policy does insured have?

    • A.

      Industrial life

    • B.

      Credit life 

    • C.

      Ordinary life 

    • D.

      Franchise life

    Correct Answer
    A. Industrial life
    Explanation
    The insured has an industrial life insurance policy. This type of policy is typically characterized by small face amounts and frequent premium payments, often collected by an agent on a weekly basis. It is designed to provide coverage for individuals with lower incomes or those who may have difficulty obtaining other types of life insurance policies.

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  • 20. 

    Which of the following best describes gross annual premium

    • A.

      Basic insurance rate plus commissions

    • B.

      Expense premium

    • C.

      Net premium

    • D.

      Annual loading

    • E.

      Option 5

    Correct Answer
    C. Net premium
    Explanation
    The gross annual premium refers to the total amount of money paid by the policyholder for an insurance policy before any deductions or expenses are taken into account. It represents the full cost of the insurance coverage without any additional fees or commissions. The net premium, on the other hand, is the amount that remains after deducting any expenses or commissions from the gross premium. Therefore, the correct answer is net premium.

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  • 21. 

    Which of the following statement concerning buy-sell agreements is ture?

    • A.

      Benefits received are considered income taxable

    • B.

      Buy-sell agreements pay in the event of a medical emergency

    • C.

      Buy-sell agreement are normally funded with a life insurance policy

    • D.

      Premiums paid are deductible as a business expense

    Correct Answer
    C. Buy-sell agreement are normally funded with a life insurance policy
    Explanation
    Buy-sell agreements are typically funded with a life insurance policy. This means that the business owners involved in the agreement will take out a life insurance policy on each other. In the event of one owner's death, the proceeds from the life insurance policy will be used to buy out the deceased owner's share of the business. This ensures a smooth transition of ownership and provides financial security for the remaining owners.

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  • 22. 

    Which of the following applicants could the insurer charge a higher rate of premium and not violate reugulations regarding unfair discrimination

    • A.

      An applicant who is a smoker

    • B.

      An applicant who was born in another country

    • C.

      An applicant who is legally blind

    • D.

      An applicant who has been a victim of domestic abuse

    Correct Answer
    A. An applicant who is a smoker
    Explanation
    The insurer could charge a higher rate of premium for an applicant who is a smoker because smoking is a known risk factor for various health conditions. Insurers are allowed to differentiate premiums based on risk factors as long as it does not violate regulations regarding unfair discrimination.

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  • 23. 

    Which of the following may not be included in an insurance company advertisement

    • A.

      That it policies are covered by a state guaranty association

    • B.

      The policies limitation or exclusion

    • C.

      The name of a specific agent 

    • D.

      An identification of a limited policy as limit policy

    Correct Answer
    A. That it policies are covered by a state guaranty association
    Explanation
    An insurance company advertisement may not include the information that its policies are covered by a state guaranty association. This is because the inclusion of this information may mislead potential customers into thinking that their policies are fully protected by the state guaranty association, which may not always be the case. The purpose of an advertisement is to attract customers and promote the benefits of the insurance policies, so including information about limitations or exclusions, the name of a specific agent, or identifying a limited policy as such would be more relevant and informative for potential customers.

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  • 24. 

    What does "liquidty" refer to in a life insurance policy

    • A.

      The policyowner recieves dividend check each year

    • B.

      The insured recieves payment each month in retirement

    • C.

      Cash values can be borrowed at any time

    • D.

      The death benefit replaces the assets that would have accumulated if the insured had not died

    Correct Answer
    C. Cash values can be borrowed at any time
    Explanation
    "Liquidity" refers to the ability to access cash values from a life insurance policy at any time. This means that the policyholder can borrow money against the cash value of the policy whenever needed. This provides a level of flexibility and financial security, as it allows the policyholder to tap into the policy's value for various purposes such as emergencies, investments, or other financial needs.

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  • 25. 

    Which of the following types of insurance policies would perform the function of cash accumulation

    • A.

      Credit life

    • B.

      Increasing term

    • C.

      Whole life

    • D.

      Term life

    Correct Answer
    C. Whole life
    Explanation
    Whole life insurance policies have a cash accumulation feature. A portion of the premium paid into the policy is set aside in a cash value account, which grows over time. This cash value can be accessed by the policyholder through policy loans or withdrawals. The cash accumulation feature allows the policy to build up a savings component, providing a source of funds that can be used for various purposes such as supplementing retirement income or paying for unexpected expenses. Unlike term life insurance, which only provides coverage for a specific period, whole life insurance offers both a death benefit and a cash value component.

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  • 26. 

    An insured purchased an individual life insurance policy with a face amount of 15,000. he pay a premium each month. what type of policy is that?

    • A.

      Home service insurance

    • B.

      Commercial life 

    • C.

      Ordinary life

    • D.

      Industrial life

    Correct Answer
    C. Ordinary life
    Explanation
    The given policy can be classified as an ordinary life insurance policy. This type of policy provides coverage for the entire life of the insured and requires monthly premium payments. The face amount of $15,000 indicates the death benefit that will be paid out to the beneficiary upon the insured's death. Unlike other options listed, such as home service insurance, commercial life insurance, or industrial life insurance, ordinary life insurance is typically more comprehensive and offers a higher coverage amount.

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  • 27. 

    Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles?

    • A.

      Standard risk requires extra rating

    • B.

      Standard risk is also known as high exposure risk

    • C.

      Standard risk is representative of the majority of people 

    • D.

      Standard risk pay a higher premium than a substandard risk

    Correct Answer
    C. Standard risk is representative of the majority of people 
    Explanation
    The correct answer is "standard risk is representative of the majority of people". This means that a standard risk classification is the typical or average risk level for people in the same age group and with similar lifestyles. It does not require extra rating, it is not the same as high exposure risk, and it does not necessarily pay a higher premium than a substandard risk.

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  • 28. 

    Which of the following would provide an underwriter with information concerning an applicant health history?

    • A.

      The medical information bureau

    • B.

      Medical examination

    • C.

      The agents report

    • D.

      The inspection report

    Correct Answer
    A. The medical information bureau
    Explanation
    The correct answer is the medical information bureau. The medical information bureau is a centralized database that collects and stores medical information on individuals. Underwriters can access this database to obtain information about an applicant's health history, including any pre-existing conditions, past medical treatments, and medication usage. This information is crucial for underwriters to assess the risk associated with insuring an individual and determine appropriate coverage and premiums.

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  • 29. 

    Which is the primary source of information used for insurance underwriting 

    • A.

      Applicant interviews

    • B.

      Medical record

    • C.

      Private investigation

    • D.

      Application

    Correct Answer
    D. Application
    Explanation
    The application is the primary source of information used for insurance underwriting. This is because it contains all the necessary details about the applicant, including their personal information, medical history, and lifestyle habits. Insurance underwriters rely on this information to assess the risk associated with insuring the individual and determine the appropriate coverage and premium rates. While applicant interviews, medical records, and private investigations may provide additional information, the application is the initial and most comprehensive source used in the underwriting process.

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  • 30. 

    What is the purpose of the buyers guide?

    • A.

      To provide the name and address of the agent/ producer issuing the policy

    • B.

      To list all policy rider

    • C.

      To provide information about the issued policy

    • D.

      To allow the consumer to compare the cost of different policies

    Correct Answer
    D. To allow the consumer to compare the cost of different policies
    Explanation
    The purpose of the buyer's guide is to allow the consumer to compare the cost of different policies. This means that the guide provides information on the pricing of various policies, enabling the consumer to make an informed decision by comparing the costs and benefits of different options. It helps the consumer understand the financial implications of each policy and choose the one that best suits their needs and budget.

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  • 31. 

    If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may

    • A.

      Prolong the open enrollment period

    • B.

      Increase medical requirements on existings members

    • C.

      Require evidence of insurability

    • D.

      Require a higher premium

    Correct Answer
    C. Require evidence of insurability
    Explanation
    To reduce adverse selection, insurers may require evidence of insurability when an employee wants to enter the group outside of the open enrollment period. This means that the employee would need to provide proof that they are in good health and insurable. By doing so, the insurer can ensure that only individuals who are relatively healthy and low-risk are allowed to join the group outside of the designated enrollment period. This helps to balance the risk pool and prevent individuals with pre-existing conditions or higher health risks from disproportionately enrolling in the group.

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  • 32. 

    An individual purchased a 100,000 joint life policy on himself and his wife. Eight year later, he died in an automobile accident. how much will his wife receive from the  policy?

    • A.

      Nothing 

    • B.

      50,000

    • C.

      100,000

    • D.

      200,000

    Correct Answer
    C. 100,000
    Explanation
    The wife will receive 100,000 from the policy because it is a joint life policy, meaning that the coverage continues even after the death of one of the insured individuals.

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  • 33. 

    Which policy component decreases in decreasing term insurance

    • A.

      Cash value

    • B.

      Dividend

    • C.

      Premium

    • D.

      Face amount

    Correct Answer
    D. Face amount
    Explanation
    In decreasing term insurance, the face amount decreases over time. This means that the amount of coverage provided by the policy decreases as the policyholder pays off their debts or as they age. The cash value, dividend, and premium do not decrease in this type of policy. The cash value refers to the savings component of a permanent life insurance policy, which is not applicable in decreasing term insurance. Dividends are typically associated with participating policies, not term insurance. The premium is the amount paid by the policyholder to maintain the coverage, and it remains the same throughout the term of the policy.

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  • 34. 

    Which of the following is not allowed in credit life insurance

    • A.

      Creditor requiring that a debtor buys insurance from a certain insurer

    • B.

      Creditor having collateral assignement on the policy

    • C.

      Creditor requiring that a debtor has a life insurance

    • D.

      Creditor becoming a policy beneficiary

    Correct Answer
    A. Creditor requiring that a debtor buys insurance from a certain insurer
    Explanation
    In credit life insurance, it is not allowed for the creditor to require that a debtor buys insurance from a certain insurer. This would limit the debtor's choice and may lead to higher premiums or unfavorable policy terms. The debtor should have the freedom to choose the insurance provider that best suits their needs and offers the most favorable terms.

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  • 35. 

    Your client wants both protection and saving from the insurance, and is willing to pay premiums until retirement at age 65. what would be the right policy for this client?

    • A.

      Interest-sensitive whole life

    • B.

      Life annuity with period certain 

    • C.

      Increasing term

    • D.

      Limited pay whole life

    Correct Answer
    D. Limited pay whole life
    Explanation
    The limited pay whole life policy would be the right choice for this client because it offers both protection and savings. With this policy, the client will pay premiums only until retirement at age 65, after which the coverage will continue for the rest of their life. This allows the client to have the security of insurance coverage while also building up cash value over time. The policy provides a combination of lifelong protection and the ability to accumulate savings, making it a suitable option for the client's needs.

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  • 36. 

    Which of the following is an example of a limited-pay life policy

    • A.

      Life paid up at 65

    • B.

      Renewable term to age 70

    • C.

      Level term life 

    • D.

      Straight life

    Correct Answer
    A. Life paid up at 65
    Explanation
    A limited-pay life policy refers to a life insurance policy where the policyholder pays premiums for a limited period of time, after which the policy remains in force without any further premium payments. "Life paid up at 65" is an example of a limited-pay life policy because the policyholder pays premiums until the age of 65, and after that, no additional premiums are required to keep the policy active.

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  • 37. 

    An insured has a level term life insurance policy that is guaranteed renewable and also includes a re-entry provision. the re-entry provision would allow the insured to renew the policy and

    • A.

      Pay a lower renewal premium without evidence of insurablilty 

    • B.

      Change the type of insurance without evidence of insurability

    • C.

      Pay a lower renewal premium by proving insurability

    • D.

      Change the type of insurance by proving insurability

    Correct Answer
    C. Pay a lower renewal premium by proving insurability
    Explanation
    The re-entry provision in the insured's level term life insurance policy allows them to renew the policy and pay a lower renewal premium by proving insurability. This means that the insured would need to provide evidence that they are still insurable in order to qualify for the lower renewal premium. This provision provides the insured with the opportunity to continue their coverage at a reduced cost if they can demonstrate that they are still in good health and insurable.

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  • 38. 

    A straight life policy has what type of premium

    • A.

      A decreasing annual premium for the life of the insured

    • B.

      A variable annual premium for the life of the insured

    • C.

      A level annual premium for the life of the insured

    • D.

      An increasing annual premium for the life of the insured

    Correct Answer
    C. A level annual premium for the life of the insured
    Explanation
    A straight life policy has a level annual premium for the life of the insured. This means that the premium amount remains the same throughout the entire duration of the policy, regardless of any changes in the insured's age or health. This type of premium structure provides stability and predictability for the policyholder, as they can budget for the same premium amount each year.

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  • 39. 

    What are the two components of a universal policy

    • A.

      Mortality cost and interest

    • B.

      Separate account and policy loans

    • C.

      Insurance and cash account

    • D.

      Insurance and investments

    Correct Answer
    C. Insurance and cash account
    Explanation
    The two components of a universal policy are insurance and cash account. Insurance refers to the coverage provided by the policy, which pays out a death benefit to the beneficiaries upon the insured's death. The cash account, on the other hand, is a separate account within the policy where the policyholder can accumulate cash value over time. This cash value can be used for various purposes such as borrowing against it or withdrawing it. Together, these two components make up a universal policy, providing both insurance protection and a cash accumulation feature.

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  • 40. 

    In group life insurance policy, the employer may select all of the following except

    • A.

      The type of insurance

    • B.

      The amount of insurance

    • C.

      The premium payor

    • D.

      The beneficiary

    Correct Answer
    D. The beneficiary
    Explanation
    In a group life insurance policy, the employer has the authority to select various aspects of the policy, such as the type of insurance, the amount of insurance, and the premium payor. However, the employer does not have the power to choose the beneficiary. The beneficiary is typically chosen by the insured individual and is the person who will receive the insurance proceeds upon the insured's death.

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  • 41. 

    The premium of a survivorship life policy compared with that of a joint policy would be 

    • A.

      Half the amount

    • B.

      Lower

    • C.

      Higher

    • D.

      As high

    Correct Answer
    B. Lower
    Explanation
    The premium of a survivorship life policy is lower compared to that of a joint policy because in a survivorship policy, the death benefit is paid out only after both insured individuals pass away. This reduces the risk for the insurance company, resulting in a lower premium. In contrast, a joint policy pays out the death benefit when the first insured individual passes away, which increases the risk for the insurance company and leads to a higher premium.

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  • 42. 

    What is the purpose of establishing the target premium for a universal life policy

    • A.

      To accumulate cash value faster

    • B.

      To pay up the policy faster 

    • C.

      To cover all policy expenses

    • D.

      To keep the policy in force

    Correct Answer
    D. To keep the policy in force
    Explanation
    The purpose of establishing the target premium for a universal life policy is to keep the policy in force. The target premium is the amount of premium needed to ensure that the policy remains active and the coverage continues. By paying the target premium, the policyholder can maintain the policy and its benefits, such as death benefit protection and potential cash value accumulation. Failing to pay the target premium may result in the policy lapsing or becoming insufficient to meet the policyholder's needs.

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  • 43. 

    All of the following are true regarding a decreasing term policy execpt

    • A.

      The death benefit is 0 at the end of the policy term

    • B.

      The contracts pays only in the event of death during the term and there is no cash value

    • C.

      The face amount steadily declines throughout the duration of the contract

    • D.

      The payable premium amount steadily declines throughout the duration of the contract

    Correct Answer
    D. The payable premium amount steadily declines throughout the duration of the contract
    Explanation
    A decreasing term policy is a type of life insurance where the death benefit decreases over time. This means that the face amount steadily declines throughout the duration of the contract. The policy pays out only in the event of death during the term and there is no cash value. However, the payable premium amount does not steadily decline throughout the duration of the contract. The premium amount remains the same throughout the term of the policy.

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  • 44. 

    Which of the following types of policies allows the policyowner to skip premium payments, provieded that there is enough cash value in the policy to cover the premium amount

    • A.

      Flexible life

    • B.

      Variable life

    • C.

      Adjustable life 

    • D.

      Universal life

    Correct Answer
    D. Universal life
    Explanation
    Universal life insurance policies allow the policyowner to skip premium payments as long as there is enough cash value in the policy to cover the premium amount. This flexibility is one of the key features of universal life insurance, as it allows policyholders to adjust their premium payments according to their financial situation. The cash value in the policy can be built up over time through the accumulation of premiums and can be used to cover future premium payments or be withdrawn by the policyholder.

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  • 45. 

    All of the following could own group life insurance except 

    • A.

      A debtor group

    • B.

      A group needing low-cost life insurance

    • C.

      A group sponsored by an employer

    • D.

      An alumni group

    Correct Answer
    B. A group needing low-cost life insurance
    Explanation
    Group life insurance is typically offered to groups such as employees of a company, members of an alumni group, or individuals sponsored by an employer. These groups usually have a common bond or affiliation. A debtor group, on the other hand, may not meet the criteria for group life insurance as their primary need is to cover their debts rather than provide life insurance coverage. Therefore, a group needing low-cost life insurance may also be eligible for group life insurance, making it the exception in this list.

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  • 46. 

    An insured owns a life insurance policy. To be able to pay some of her medical bills, she withdraw a portion of the policy cash value. there is a limit for a withdrawal and the insurer charges a fee. what type of policy dos the insured most likely have?

    • A.

      Adjustable life

    • B.

      Term life

    • C.

      Limited pay

    • D.

      Universal life

    Correct Answer
    D. Universal life
    Explanation
    The insured most likely has a universal life insurance policy. Universal life insurance policies typically have a cash value component that can be accessed by the policyholder. This allows the insured to withdraw a portion of the policy's cash value to pay for medical bills. Additionally, universal life policies often have flexibility in premium payments and death benefit amounts, making them a likely choice for someone needing access to cash while still maintaining their life insurance coverage.

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  • 47. 

    An applicant for insurance misstates her age at the time her life insurance application is taken. this misstatement may result in

    • A.

      Adjustment in the death benefit

    • B.

      No change 

    • C.

      Automatic lapse

    • D.

      Recession of the policy

    Correct Answer
    A. Adjustment in the death benefit
    Explanation
    When an applicant for insurance misstates her age at the time of applying for life insurance, it can result in an adjustment in the death benefit. This means that the amount of coverage provided by the policy may be modified based on the correct age of the applicant. The insurance company will typically recalculate the premium and coverage based on the accurate age information provided. This adjustment ensures that the policy remains fair and accurately reflects the risk associated with the insured individual.

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  • 48. 

    If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy

    • A.

      The death benefit will be forfeited

    • B.

      The death benefit will be same as the original face amount

    • C.

      The death benefit will be larger

    • D.

      The death benefit will be smaller

    Correct Answer
    D. The death benefit will be smaller
    Explanation
    If an insured withdraws a portion of the face amount in the form of accelerated benefits due to a terminal illness, it will affect the payable death benefit from the policy by making it smaller. This means that the amount paid out to the beneficiaries upon the insured's death will be reduced because the insured has already received a portion of the face amount while still alive.

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  • 49. 

    An insured has had a life insurance policy that he purchased 3 years age when he was 40 years old. he is killed in an automobile accident and it is discovered that he is actually 45 years old and not 43, as stated on the application. what will the company do?

    • A.

      Pay the full death benefit and refund excess premium

    • B.

      Pay a reduced death benefit

    • C.

      Pay the full death benefit

    • D.

      Pay noth, there was a misrepresentation on the application

    Correct Answer
    B. Pay a reduced death benefit
    Explanation
    The insurance company will pay a reduced death benefit because the insured provided false information on the application. Since the insured stated that he was 43 years old when he was actually 45 years old, this misrepresentation can affect the terms of the policy. The insurance company may adjust the payout based on the correct age of the insured at the time of purchasing the policy.

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  • 50. 

    The waiver of cost of insurance rider is found in what type of insurance

    • A.

      Juvenile life

    • B.

      Universal life

    • C.

      Whole life

    • D.

      Joint and survivor

    Correct Answer
    B. Universal life
    Explanation
    The waiver of cost of insurance rider is found in universal life insurance. This rider allows the policyholder to waive the payment of insurance premiums in the event of a disability. This means that if the policyholder becomes disabled and unable to work, they will not have to pay the premiums for their insurance coverage. This can provide financial relief during a difficult time and ensure that the policy remains in force.

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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
  • Mar 22, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 29, 2021
    Quiz Created by
    Themes
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