WebCE (General Insurance & Life Insurance) Exam Questions and Answers, Exams of Insurance law

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WebCE (General Insurance &

Life Insurance) Exam Questions

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2023/2024 | Graded

WebCE Quizzes: General Insurance & Life Insurance

Buying life or health insurance is an example of which risk management technique? risk avoidance risk reduction risk retention risk transfer - answers-risk transfer What is the mathematical concept of probability that helps insurers estimate the statistical likelihood of mortality or morbidity losses at any given age? law of large numbers underwriting principle law of probability actuarial principle - answers-law of large numbers A person who refuses to engage is risky activities like rock climbing for fear of injury or death is demonstrating which risk management technique? risk avoidance risk reduction risk retention risk sharing - answers-risk avoidance Which of the following is an insurable risk? the possibility of losing money in stock investments the possibility of losing money gambling in Las Vegas the possibility of becoming disabled and unable to earn an income the possibility of one's home value decreasing due to a drop in market prices - answers-the possibility of becoming disabled and unable to earn an income All the following statements regarding reinsurance are correct EXCEPT: Reinsurance is a risk-sharing process used by insurance companies. Claims are paid to the policyowner separately by each insurer participating in the reinsurance agreement.

The insurer accepting some of the risk being transferred from another insurer is known as the reinsuring company. The insurer seeking to transfer some of its risk to another insurer is known as the ceding company. - answers-Claims are paid to the policyowner separately by each insurer participating in the reinsurance agreement. All of the following are characteristics of a stock insurance company EXCEPT: They are governed by a board of directors. They may issue dividends. They have minimum financial capital requirements that must be met before they can conduct business. They are owned by policyowners. - answers-They are owned by policyowners. All of the following statements regarding the career agency distribution system are correct EXCEPT: The managerial form of career agency system uses company employees as the agency managers. There are two types, the general agency system and the managerial system. It uses agents who primarily if not exclusively represent one insurer. Personal producing general agents (PPGAs) are commonly hired to manage career agencies. - answers-Personal producing general agents (PPGAs) are commonly hired to manage career agencies. The federal Risk Retention Act of 1986 contains guidelines for which of the following entities? reinsurance companies surplus lines insurance companies Fraternal insurance companies risk retention groups - answers-risk retention groups Which of the following best describes an agent's responsibilities? An agent has no fiduciary duty toward insurers, applicants, or insureds. An agent has to act in the best interests of insureds, applicants, and insurers. An agent only has to act in the best interests of the insured or applicant, but not the insurer. An agent only has to act in the best interests of the insurer he or she represents. - answers-An agent has to act in the best interests of insureds, applicants, and insurers.

An insurance producer tells a life insurance applicant that he has the authority to waive the medical exam that is normally required by the insurer with every application. The insurer may be required to accept the application without a medical exam due to the producer's: implied authority express authority apparent authority imputed authority - answers-apparent authority All of the following are part of a producer's responsibilities to an applicant EXCEPT: avoiding replacing an insurance policy unless doing so will clearly benefit the applicant research other insurance companies' insurance products if requested by the applicant disclose all important information about a proposed policy recommend insurance products that are suitable for the customer's needs - answers-research other insurance companies' insurance products if requested by the applicant The purpose for the Policy Summary, which must be given to every insurance applicant before an application is signed, is to: explain the step-by-step process involved in purchasing the recommended product explain the general features, benefits, and conditions of the type of insurance being considered disclose all the hidden costs associated with the policy being applied for provide buyers with details of the specific insurance contract they are considering for purchase - answers-provide buyers with details of the specific insurance contract they are considering for purchase If an applicant for an insurance policy submits an application without the first premium, which of the following is correct? The insurer may not make a counteroffer to the applicant. The applicant has invited the insurer to make an offer. The insurer has made an offer to the applicant. The applicant has made an offer to the insurer. - answers-The applicant has invited the insurer to make an offer. How long from when an insurance contract is issued does an insurance company have to void a life insurance policy on the basis of fraud?

12 months 24 months 18 months 6 months - answers-24 months Statements made on a life insurance application are considered: conditional promises representations warranties unconditional promises - answers-representations An applicant for a $500,000 whole life insurance policy pays the initial premium along with his application. In this case, what has the applicant done? accepted an offer from the insurer accepted a counteroffer from the insurer made a counteroffer to the insurer made an offer to the insurer - answers-made an offer to the insurer All the following statements regarding perils and hazards are correct EXCEPT: A hazard is a condition that raises the chance of a peril occurring. Smoking cigarettes is an example of a peril. A peril is the immediate cause of a loss and is the event that insurance protects against. Indifference to loss is an example of a hazard. - answers-Smoking cigarettes is an example of a peril. The tendency of a person diagnosed with a serious illness to try to buy life or health insurance is known as: adverse selection concealment risk avoidance exposure reduction - answers-adverse selection All of the following are elements of an insurable risk EXCEPT: Any losses resulting from the insured peril must be definable as to time, cause, and location. The loss must be measurable. The insured peril must be outside of the insured's control.

Losses resulting from the insured peril must be potentially catastrophic. - answers-Losses resulting from the insured peril must be potentially catastrophic. From an insurance perspective, the term "loss exposure" means: the extent to which an insurer discloses its marketing practices the extent to which insurers are required to open their financial books for public inspection the extent to which an insurer is subject to a possible loss the extent to which an insurer discloses the components making up its policy premium rates - answers-the extent to which an insurer is subject to a possible loss A not-for-profit insurance provider operated by an organization that has a representative form of leadership, operates on a lodge system, and exists solely for the benefit of its members and their beneficiaries is called a: mutual insurance company home service insurance company risk retention group fraternal insurance company - answers-fraternal insurance company Which of the following is an example of an unauthorized insurance company in Illinois? Company C, a Florida-based company that does not hold a certificate of authority Illinois but whose products are approved by the Illinois insurance department Company A, an Illinois-based company that holds a certificate of authority in Illinois and 32 other states Company B, an Iowa-based company that does not hold a certificate of authority in Illinois and sells products that are not approved by the Illinois insurance department Company D, a Canadian company that holds a certificate of authority in Illinois - answers-Company B, an Iowa-based company that does not hold a certificate of authority in Illinois and sells products that are not approved by the Illinois insurance department The Excalibur Insurance Company, domiciled in Iowa, transacts business legally in Nebraska. In Nebraska, Excalibur is a(n): non-admitted insurance company alien insurance company foreign insurance company domestic insurance company - answers-foreign insurance company

The Royale Insurance Company, domiciled in Toronto, Canada, transacts business legally in New York. In New York, Royale is classified as a(n): unauthorized insurance company domestic insurance company alien insurance company foreign insurance company - answers-alien insurance company The contract between the producer and insurer, setting forth certain acts and duties the producer is specifically authorized to perform, describes the producer's: express authority implied authority agency authority apparent authority - answers-express authority The main purpose for errors and omissions insurance (E&O) is to: cover damages that arise due to services a producer non-willfully failed to render allow the producer to be less diligent in complying with insurance sales disclosure requirements provide legal protection to the producer who is charged with willfully engaging in an unfair trade practice pay for an insurance company executive to meet with a policyowner to correct an error made by the producer during the sales process - answers-cover damages that arise due to services a producer non-willfully failed to render With respect to the field of insurance, who are the two parties bound by the law of agency? the producer and the policyowner the insurance company and the producer the insurer and the insured the state insurance department and the insurer - answers-the insurance company and the producer In its fiduciary responsibility to its principal, a producer is required to do all the following EXCEPT: fully disclose to the insurer all pertinent information that affects the placement of an insurance policy solicit business that is certain to be profitable to the insurer fully account for premiums and submit them to the insurer on a timely basis

carry out authorized activities with reasonable care - answers-solicit business that is certain to be profitable to the insurer When first meeting prospective insurance applicants, a producer must give them a document that explains the general features, benefits, and conditions of the type of insurance being considered, which is called a policy summary buyer's guide key points document prospectus - answers-buyer's guide In addition to the fiduciary responsibility they have with all customer premiums and assets, producers are expected to do all the following EXCEPT: avoid all forms of rebating disclose all pertinent information concerning a proposed policy seek opportunities to replace existing policies with newer products make sure all product recommendations are suitable for the customer - answers-seek opportunities to replace existing policies with newer products All the following statements regarding apparent authority are correct EXCEPT: The agent's contract does not create it. The insurer does not intend it. The insurer is not liable for an agent's acts when he or she is acting under apparent authority. A third party reasonably believes that the producer has it based on the reasonable statements and actions by the insurer and agent. - answers-The insurer is not liable for an agent's acts when he or she is acting under apparent authority. The purpose for the Buyer's Guide, which must be given to every insurance prospect in the first meeting with a producer, is to: advise the buyer to consider an alternative to the insurance product being considered explain the general features, benefits, and conditions of the type of insurance being considered provide buyers with details of the insurance policy they are considering for purchase explain the step-by-step process involved in purchasing the recommended product - answers-explain the general features, benefits, and conditions of the type of insurance being considered All the following types of insurance involve a personal contract EXCEPT:

a life insurance policy an automobile policy a disability income insurance policy a medical expense insurance policy - answers-a life insurance policy What is the term for voluntarily giving up a known right? estoppel waiver conditional voidable - answers-waiver Tim had paid only four premiums totaling $1000 on his health insurance policy when he was diagnosed with cancer. The insurance company paid more than $100,000 to cover the medical bills for his treatment during the next year. This situation demonstrates which of the following characteristics of insurance contracts? They are contracts of adhesion. They are unilateral. They are personal. They are aleatory. - answers-They are aleatory. Which of the following statements about representations and warranties is most correct? Promises made by the insurer in the insurance contract are deemed representations. Insurers can rescind (cancel) an insurance contract if a misrepresentation is discovered on the application during the contestability period. A statement made on the application which is true to the applicant's best knowledge is deemed a misrepresentation if it is later discovered to be inaccurate. Statements made by the applicant on the application are deemed warranties. - answers-Insurers can rescind (cancel) an insurance contract if a misrepresentation is discovered on the application during the contestability period. If the Texas insurance commissioner asks an insurer or producer for information about its financial condition or any matter involving its business transactions, the insurer or agent must reply in writing within: 45 days 48 hours 30 days 10 days - answers-10 days

To a consumer in Texas, an insurance company that is headquartered in Missouri but admitted to do business in Texas is a(n): nonresident insurer domestic insurer alien insurer foreign insurer - answers-foreign insurer It is illegal for an insurance company to transact insurance business in Texas without: selling all types insurance maintaining its corporate home office in Texas a certificate of authority maintaining both a career agency and independent broker distribution system - answers-a certificate of authority The Texas Department of Insurance regulates the state's insurance industry. Which of the following is NOT one of its responsibilities? issuing certificates of authority to insurers licensing producers imposing civil and criminal penalties on producers who violate the state's insurance laws overseeing the marketing practices of insurers - answers-imposing civil and criminal penalties on producers who violate the state's insurance laws Harvey and Jim want to set up an insurance partnership that would advertise and place insurance. They both will sell policies in the partnership. How many licenses are required? three licenses-one for each partner and one for the partnership two licenses only-one each for Jim and Harvey one license, for the partnership only one agent's license for either Jim or Harvey - answers-three licenses-one for each partner and one for the partnership Abby, who lives in New Mexico where she is a licensed life insurance agent, wants to apply for a nonresident license in Texas. To do so, she must submit which of the following to TDI? a copy of her criminal history records an application, fee and letter of certification from her home state a set of her fingerprints

proof that she has completed an insurance pre-license education course - answers-an application, fee and letter of certification from her home state Which of the following persons must obtain a life and health insurance counselor's license? a licensed life insurance agent who sells policies for a commission a licensed lawyer a salaried employee of an insurance company a financial advisor who offers insurance recommendations for a fee - answers-a financial advisor who offers insurance recommendations for a fee Tom, Henry, Stacey, and Alison are licensed agents in Texas. Given the following circumstances, which of them will NOT be subject to disciplinary action by the Texas Department Insurance? Alison, who was convicted of a misdemeanor traffic violation Tom, who misrepresented the terms of an insurance policy to induce a prospect to buy the policy Stacey, who is primarily engaged in controlled business Henry, who willfully violated Texas insurance laws by misappropriating premiums - answers-Alison, who was convicted of a misdemeanor traffic violation Samantha has a life insurance license in Missouri and wants to sell life insurance part-time in Texas. Which of the following describes what she can or cannot do given her licenses? She can sell in Texas using her Missouri license. She must work full-time as an agent in Texas for Texas to grant a license to her. She must submit a letter of certification and an application. She cannot sell in Texas unless she establishes a residence here. - answers-She must submit a letter of certification and an application. Larry, Brian, Susan, and Jennifer just started working for AllPro Insurance Company in Texas. Based on their job descriptions below, which of them is NOT an agent? Jennifer, who advertises insurance policies for AllPro Larry, who receives insurance applications from the public Susan, who collects insurance premiums for AllPro Brian, who is a vice president in AllPro's human resources department and does not receive commissions - answers-Brian, who is a vice president in AllPro's human resources department and does not receive commissions

Molly, Lisa, Andy, and Chris want to become licensed agents in Texas. Which of them would be eligible to obtain a license? Andy, who only wants to work part-time as an agent but otherwise meets the licensing requirements Chris, who passed the licensing examination 18 months ago and otherwise meets the licensing requirements to become a resident agent Molly, who is 17 years old and will be graduating from high school this year Lisa, who failed the licensing examination but completed an insurance prelicense education course - answers-Andy, who only wants to work part-time as an agent but otherwise meets the licensing requirements In Texas, a person is considered to be an agent (producer) if he or she does any of the following on behalf of an insurance company, EXCEPT: distributes information relating to coverage or rates adjusts a claim or loss writes and submits an insurance application to the insurer processes applications as a salaried employee in the insurer's home office - answers-processes applications as a salaried employee in the insurer's home office Janet has been continuously licensed as an agent in Texas for the past 25 years. Her friend Steven is a nonresident licensee in Texas and every year completes his state's continuing education requirements. When they ask you for advice on meeting the Texas continuing education requirements, you inform them that: only Steven must complete Texas's continuing education requirements neither Steven nor Janet needs to comply with Texas's continuing education requirements only Janet must complete Texas's continuing education requirements both Steven and Janet must comply with Texas's continuing education requirements

• answers-neither Steven nor Janet needs to comply with Texas's continuing education requirements Janet is a licensed life insurance agent in Texas and was so busy with her insurance practice that she forgot to complete all of her continuing education credits. How long is the grace period she has to make up the missing credits? six months 45 days She cannot make up the missing credits. 90 days - answers-She cannot make up the missing credits.

To maintain their license, resident insurance producers in Texas must meet a continuing education (CE) requirement: once, before the end of their initial two-year license renewal cycle once, within five years of becoming licensed every year in every two-year license renewal cycle - answers-in every two-year license renewal cycle Fred's license was revoked on January 15, 2019 because he had engaged in controlled business on a regular basis. If he did not seek a judicial review of the license revocation, what is the earliest date that he can re-apply for an agent's license? January 15, 20 24 January 15, 2023 January 15, 2021 Fred cannot re-apply for an agent's license. - answers-January 15, 2024 Which of the following is NOT a penalty that TDI may impose? reprimand suspension of license imprisonment for up to 5 years administrative penalty - answers-imprisonment for up to 5 years Harry meant to complete his CE courses on time but was just too busy to do it. How long of an extension is available to Harry to make up the missing credits? 6 months one year none 90 days - answers-none Agents who willfully violate a Texas insurance law may be subject to disciplinary action. Which of the following is NOT a remedy available to the insurance commissioner? requiring the agent to make restitution assessing an administrative penalty suspending or revoking the agent's license imposing a jail sentence - answers-imposing a jail sentence

In Texas, holders of limited lines and county mutual licenses must complete how many hours of continuing education (CE) every two years? five hours 24 hours 10 hours two hours - answers-10 hours The Commissioner issued a cease and desist order against Nether Insurance Company for committing certain practices when settling claims. Nether ignores the order. The Commissioner may refer the case to which of the following for enforcement? State attorney general State supreme court Sheriff Governor - answers-State attorney general An insurer's record of complaints must include all of the following information EXCEPT: The total number of complaints received A classification of complaints by line of insurance The time spent processing each complaint The commissions paid on policies for which complaints were received - answers-The commissions paid on policies for which complaints were received Superior Insurance Company receives a claim and proof of loss from an insured on April 1. It investigates the claim on April 5 and determines that the claim is a valid one on April 12. The insured submits additional information in support of the claim on May 1. On which date did Superior first become obligated to settle the claim? May 1 April 1 April 5 April 12 - answers-April 12 Which of the following practices may an insurer adopt for lawfully settling its claims? Compelling insureds to sue the insurer first before it offers a settlement. Requiring the insured to sign a full release after getting payment on part of a claim. Requiring the insured to provide his or her federal income tax records with a claim.

Requiring a prompt investigation of a claim, even if the insured has not submitted all proofs of loss. - answers-Requiring a prompt investigation of a claim, even if the insured has not submitted all proofs of loss. KLM Insurance has a policy of promptly responding to policyholder communications regarding claims. That means it probably responds within how many days? 30 days 45 days 90 15 days - answers-15 days State Insurance Company keeps a record of all complaints it receives from its policyholders. State is required to maintain this record for no less than: Five years One year Three years, or three years since the date of their last examination by the Department, whichever is shorter Three years, or three years since the date of their last examination by the Department, whichever is longer - answers-Three years, or three years since the date of their last examination by the Department, whichever is shorter The Texas Department of Insurance has found that ABT Insurance has consistently failed to promptly respond to policyholder communications regarding claims. This means that it typically fails to respond within: 60 days 90 days 15 days 30 days - answers-15 days Which of the following does NOT constitute an unfair claims settlement practice in Texas? Failing to pay a claim for which the insurer's liability is uncertain. Failing to respond to a claim promptly. Routinely denying claims as a matter of company policy. Denying liability when the policy calls for payment of the claim. - answers-Failing to pay a claim for which the insurer's liability is uncertain. Wanda suggests to a client that his credit rating might suffer if he does not purchase a life insurance contract from her. This is an unfair trade practice known as:

twisting defamation rebating coercion - answers-coercion If a producer believes or suspects that a fraudulent insurance act has been or is about to be committed, he or she must report it in writing to the TDI insurance fraud unit within what time period of making this determination? 14 days 7 days 30 days 48 hours - answers-30 days Jack, an insurance agent, offers free season football tickets to anyone who buys a life insurance policy from him. This sales practice is called: twisting disparagement replacement rebating - answers-rebating Steven was having lunch with a group of agents when he made some false statements about a competitor's financial condition in order to hurt their reputation. In this case, Steven has committed: unfair discrimination misrepresentation false information defamation - answers-defamation Gwen knows that there is a limit to the amount of insurance she can place on herself and her family each year. How much business must she place with persons outside her family and business associates? 25 percent of the number of contracts sold each year 50 percent of the first year premium 25 percent of the total premium volume 50 percent of the annual premium - answers-25 percent of the total premium volume Ella is an agent for State Industry Insurance Company in Texas. After meeting with several family members, she learns that they would like to buy some life and health insurance contracts from her company. Which of the following statements is correct?

Ella cannot sell any policies to her own family because it is considered controlled business. Another agent from her company must be involved in the sale in order to prevent it from being considered controlled business. Ella can sell insurance to her family members provided at least 25 percent of the total volume of her premiums comes from non-family members. Ella will not be engaged in controlled business if she gets at least 50 percent of her total business from non-family members. - answers-Ella can sell insurance to her family members provided at least 25 percent of the total volume of her premiums comes from non-family members. Raphael is an agent for ABC Insurers and refers a prospective client to Dana, an agent at XYZ Insurers. Which of the following statements about commissions in this case is correct? Dana will be engaged in controlled business if she shares her commissions with Raphael. It is considered rebating for Dana to share her commission with Raphael. It is illegal for Dana to share her commission with Raphael. Dana can legally share her commission with Raphael under Texas law. - answers-Dana can legally share her commission with Raphael under Texas law. In Texas, a producer will avoid charges of engaging in controlled business as long as at least what percentage of the agent's total premiums is derived from persons other than the producer's work associates or family? 25 percent 50 percent 15 percent 10 percent - answers-25 percent All the following statements regarding the Texas Life and Health Guaranty Association are correct EXCEPT The purpose of the Insurance Guaranty Association is to protect policyholders when an insurance company becomes insolvent. An agent may use the existence of the Guaranty Association to assure a claimant that his policy will be protected even if the insurer becomes insolvent. All insurance companies licensed to sell insurance in Texas must be members of the Texas Life, Accident, Health and Hospital Service Insurance Guaranty Association. Benefits paid to claimants and policyholders are subject to limits - answers-An agent may use the existence of the Guaranty Association to assure a claimant that his policy will be protected even if the insurer becomes insolvent

Which of the following statements regarding the Texas Life, Accident, Health and Hospital Service Insurance Guaranty Association is correct? A producer may tell applicants their purchase of a life insurance policy will be protected even if the insurer becomes insolvent. An insurer may not use the existence of the guaranty association to market insurance, but producers are permitted to do so when meeting with an applicant for insurance. A producer may not use the existence of the guaranty association to sell insurance, but insurers are permitted to do so in their advertising. Neither a producer nor an insurer may use the existence of the guaranty association to sell insurance covered by the association. - answers-Neither a producer nor an insurer may use the existence of the guaranty association to sell insurance covered by the association. Which of the following statements regarding the Texas Life, Accident, Health and Hospital Service Insurance Guaranty Association is correct? While producers may not use the existence of the guaranty association to sell insurance, insurers are permitted to do so in their advertising with prior approval by TDI. If the topic is mentioned, a producer must tell an applicant that the guaranty association is not a substitute for a well-managed, financially stable insurance company. A producer may tell applicants their purchase of a health insurance policy will be protected even if the insurer becomes insolvent. While insurers may not use the existence of the guaranty association to market insurance, a producer is permitted to tell applicants the Guaranty Association will protect them if the insurer becomes insolvent. - answers-If the topic is mentioned, a producer must tell an applicant that the guaranty association is not a substitute for a well-managed, financially stable insurance company. Which association protects owners of life and health insurance policies issued by insurers who become financially unable to pay claims and benefits? Life, Accident, Health and Hospital Service Insurance Guaranty Association Texas Health Insurance Risk Pool Texas Insurance Fraud Unit Texas Department of Insurance - answers-Life, Accident, Health and Hospital Service Insurance Guaranty Association All of the following are automatically deemed to represent an insurable interest EXCEPT:

Karen (the disabled applicant, age 28), and her father who cares for her. Sue (the applicant) and her husband Frank (the applicant) and his elderly neighbor ABC Corp. (the applicant) and its key executive - answers-Frank (the applicant) and his elderly neighbor When must insurable interest exist for a life insurance policy to be valid? Insurable interest is never required for a life insurance policy to be valid. Insurable interest must exist only at the time of the insured's death for a life insurance policy to be valid. Insurable interest must always exist for a life insurance policy to be valid. It is only necessary for insurable interest to exist at the time the applicant applies for a life insurance contract. - answers-It is only necessary for insurable interest to exist at the time the applicant applies for a life insurance contract. Which of these personal relationships does NOT automatically constitute insurable interest? people in themselves neighbors in each other spouses in each other children in their parents or grandparents - answers-neighbors in each other Which of the following most accurately describes "insurable interest" in a life insurance policy? Insurable interest is the relationship between the person applying for insurance and the insured at the time of the insured's death. Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured. Insurable interest is the primary factor in determining how much life insurance the insurer will issue on a person. Insurable interest is the relationship between the person paying for the insurance and the designated beneficiary. - answers-Insurable interest is the financial relationship at the time of application between the person applying for life insurance and the person whose life is to be insured. All the following uses for life insurance in a business represent a valid insurable interest, EXCEPT: Life insurance bought by businesses to cover the lives of their key employees or owners.

Life insurance purchased by business partners to provide funds that can be used to buy out the business interest of the one who dies. Life insurance used to provide funds in the event an insured key employee or partner dies. Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies. - answers-Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies. In life insurance, for how long must insurable interest exist? Insurable interest must exist only at the time the applicant enters into a life insurance contract. If no insurable interest exists when a policyowner buys a life insurance policy, the contract may still be enforced. It must exist when a claim is submitted. It must continue for the life of the policy. - answers-Insurable interest must exist only at the time the applicant enters into a life insurance contract. Life insurance has been purchased by ABC Company on the lives of two partners, Hugh and Danny, and three key employees Eileen, Vern, and June. Which of the following would apply if Hugh and June were to leave the business? The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there. The company can only retain its coverage on June because she is not a principal of the company. The company would have to drop its coverage for both Hugh and June within 30 days of their departures. The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not. - answers-The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there. All the following reasons that a business might buy life insurance represent a valid insurable interest, EXCEPT: to insure liquidity in case one of the owners or key employees dies to insure the lives of key employees or owners to insure partners' lives to provide funds to buy out a deceased partner's interest to provide insurance coverage for large-volume customers - answers-to provide insurance coverage for large-volume customers Which of the following best describes insurable interest?

It describes the basic relationship between the insurance company and the policyowner. It refers to the financial relationship between the policyowner and the insured person or property. It refers to the role life insurance can play in protecting policyowners from investment fraud. It refers to the maximum amount of insurance that may be purchased on the insured person or property. - answers-It refers to the financial relationship between the policyowner and the insured person or property. The requirement that an insurable interest must exist when life insurance is purchased is intended to prevent people from doing which of the following? using life insurance as a speculative investment on another person's life designating an ineligible person as the policy beneficiary overusing life insurance using life insurance to fund future cash needs - answers-using life insurance as a speculative investment on another person's life In a participating life insurance policy, the insurance company pays the policyowner a dividend out of which of the following? set amounts prescribed in the policy the policyowner's life insurance policy cash value the company's cash reserves the insurer's divisible surplus - answers-the insurer's divisible surplus Dan owns a fixed whole life insurance policy. What type of death benefit is Dan guaranteed? The policy guarantees a fixed death benefit amount. The policy has no guaranteed death benefit. The amount depends on the number of premium payments Dan has made. The policy guarantees a death benefit will be paid, but not the amount. - answers-The policy guarantees a fixed death benefit amount. If the Alpha-Omega Corporation wants to provide cost-effective life insurance for all its full-time employees, it will most likely buy which of the following? group term life insurance individual term life insurance whole life insurance business life insurance - answers-group term life insurance

Sylvia's insurer guarantees a fixed death benefit for the policy she owns. Based on this, which one of the following benefits is also most likely guaranteed with this policy? the policy's cash value policy dividends her ability to borrow an interest-free loan from the cash value payment of premiums on Sylvia's behalf in the event of emergencies - answers-the policy's cash value Which one of the following best describes a policy that has a relatively low face amount and has premiums that are paid to an insurance agent who generally calls on the policyowner at home to collect them? group life insurance ordinary whole life insurance industrial life insurance ordinary term insurance - answers-industrial life insurance Which of the following play a role in the regulation of variable insurance product sales? both FINRA and state insurance departments the Securities Exchange Commission (SEC) only Financial Industry Regulatory Authority (FINRA) only state insurance departments only - answers-both FINRA and state insurance departments All of the following statements about the regulation of the sale of variable products are correct, EXCEPT: The sale of variable products is regulated by the Financial Industry Regulatory Authority (FINRA). Agents who only sell variable life products and do not sell fixed life products are not required to hold a life insurance license. Many states also require a state-issued variable life or variable producer's license. Agents who sell variable life products are required to comply with all state laws and regulations dealing with the sale of life insurance. - answers-Agents who only sell variable life products and do not sell fixed life products are not required to hold a life insurance license. Which of the following best describes how the insured's money is handled in a variable life insurance policy?

Premiums are placed in the insurance company's general account. Premiums are placed in investment subaccounts selected by the policyowner. Premiums are invested in certificates of deposit issued by the insurance company. Premiums are placed in investment subaccounts selected by the insurance company. - answers-Premiums are placed in investment subaccounts selected by the policyowner. Permanent life insurance can also provide funds, through its cash value, that may be used during the insured's lifetime. What is that feature called? permanent values capital accumulation the money feature living benefits - answers-living benefits Bob's insurance goal is to provide additional death benefit protection for his family in case he dies while his children are young. What type of life insurance is best suited to this need? group life insurance whole life insurance term life insurance business life insurance - answers-term life insurance Under group insurance coverage, one policy covers a number of people. Who owns these group polices? the organization that represents the group and which sponsors the coverage the insurance company who issues the policy the insureds representatives of the sponsoring companies - answers-the organization that represents the group and which sponsors the coverage Kevin tells his insurance agent that he wants a life insurance policy that will last for his entire lifetime as long as he pays the premiums, will maintain a level premium, and will generate a cash value. This may describe any of the following types of policy, EXCEPT: industrial whole life insurance variable life insurance ordinary whole life insurance term life insurance - answers-term life insurance

All of the following statements about participating policies are correct EXCEPT: Participating life policies pay the policyowner a policy dividend out of its divisible surplus. They are generally issued only by mutual insurance companies. They may also be called par policies. Though not required to do so, insurers may guarantee their participating policy dividends. - answers-Though not required to do so, insurers may guarantee their participating policy dividends. Which one of the following statements about term life insurance is correct? A cash value accumulates in term life policies. The policy pays a death benefit only if the insured dies during the term. It is permanent insurance. It is intended to cover the insured to age 120. - answers-The policy pays a death benefit only if the insured dies during the term. All of the following statements about fixed whole life insurance cash values are correct EXCEPT: Withdrawing or borrowing from the cash value will have no impact of the policy's death benefit. Cash values grow over the life of the policy and are calculated to equal the policy's face amount at the insured's age 120 (age 95 in the case of universal life insurance). The policyowner owns the cash value in the policy and can access it. As long as premiums are paid, the insurance stays in force, the cash values grow, and the policy is guaranteed to pay its specified death benefit. - answers-Withdrawing or borrowing from the cash value will have no impact of the policy's death benefit. Harry and Connie each want to buy life insurance that will provide a guaranteed death benefit whenever they die, will generate a guaranteed cash value they can access while living, and even return excess premiums to them. Which of the following would best fit this couple's needs? variable life insurance participating whole life insurance term life insurance group life insurance - answers-participating whole life insurance Which of the following is the actuary's first step in determining the premium charged for a policy?

calculate the expected profit calculate the net premium calculate the gross premium calculate the annual policy dividend - answers-calculate the net premium All the following statements about the net premium for a traditional life insurance policy are correct EXCEPT: The net premium is the insurer's estimated cost to provide the policy benefits without accounting for the insurer's expenses. The net single premium for a traditional life insurance policy is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment. The net premium reflects two of the three premium factors: mortality and interest. Calculating the net single premium is the first step in calculating the gross premium charged to the policyowner. - answers-The net single premium for a traditional life insurance policy is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment. In setting premiums for a new policy, when do actuaries assume those premiums will be paid? They will be paid monthly. They will be paid in full at the beginning of the policy year. They will be paid in full at the end of the policy year. They will be paid in full in the middle of the policy year. - answers-They will be paid in full at the beginning of the policy year. An insurance company is developing a new product. Which of the following is the actuaries' most important responsibility? designing the product's features and benefits determining the actual premium to be charged to an applicant for the new product assuring that the new product will appeal to average consumers determining the basic premium rates for the new product - answers-determining the basic premium rates for the new product Which of the following most accurately describes the basic function of a life insurance policy's net premium? The net premium represents the insurer's mortality charge. The net premium is the amount an individual actually pays to provide all the benefits promised in the policy regardless of premium mode. The net premium is the amount actually charged to the policyowner.