AD Banker Life Insurance Exam Answered 100% Correct, Exams of Nursing

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AD Banker Life Insurance Exam Answered 100% Correct Insurers - ANSWER (Insurance Companies or Carriers) provide insurance coverage by issuing particular insurance policies or contracts Insurance Agencies - ANSWER Independent sales organizations that provide service and distribute insurance policies to consumers Insurance Agents or Producers - ANSWER are licensed individuals representing an insurance company when transacting insurance business Who primarily regulates the insurance industry? - ANSWER The insurance industry is regulated primarily at the state level through the legislative, judicial, and executive branches Legislative Branch - ANSWER Writes and passes state insurance laws or statues designed to protect the insuring public Judicial Branch - ANSWER responsible for interpreting and determining the constitutionality of the statues (interprets the law and makes sure it is constitutionally allowed) Executive Branch - ANSWER (executes/enforces the law) has the power to issue rules and regulations to help enforce statues NAIC - ANSWER National Association of Insurance Commissioners National Association of Insurance Commissioners (NAIC) - ANSWER Provides resources, research, legislative and regulatory recommendations and interpretations for state insurance regulators. Members may accept or reject recommendations. It has no legal authority to enact or enforce insurance laws. The primary goal of the association is to promote state uniformity. Stock Insurance Company - ANSWER Owned by its stockholders/shareholders who elect a Board of Directors to manage the company, the board then elects officers to handle day-to-day activities. Stockholders share in the company's profits and may receive corporate dividends taxable as ordinary income IF declared by the directors. (Dividends not guaranteed) Traditionally, this type of insurer issue non-participating policies, since the policyholders are not entitled to dividends Mutual Insurance Company - ANSWER Owned by policyholders/members who are considered the owners but do not directly manage the company. Board of directors elected by the policyholders/members to manage the company and officers are elected by the board to handle day-to-day operations. When and if declared by the Board, policyholders may receive non-taxable dividends as a return of unused premium. (not guaranteed) This type of insurer typically issues participating policies. Fraternal Insurers or Fraternal Benefit Societies - ANSWER Primarily social organizations that engage in charitable and benevolent activities that primarily provide life insurance to its members. Usually organized on a nonprofit basis. Members are typically from a religious organization, lodge, order, or society. Domestic Insurer - ANSWER An insurer doing business in the jurisdiction in which it is incorporated. Ex. GA incorporated insurer operating in GA Foreign Insurer - ANSWER An insurer licensed to operate in a state but incorporated in another state. Ex. GA Incorporated Insurer operating in TX Alien Insurer - ANSWER An insurance company that is incorporated outside the United States. Ex. Canadian Insurer operating in GA Admitted/Authorized Insurer - ANSWER Insurer who is approved to transact insurance via a Certificate of Authority from the state's Department of Insurance. Non-Admitted/Unauthorized Insurer - ANSWER Insurer not authorized to transact insurance in a given state by not complying with state requirements or by not seeking admission Fair Credit Reporting Act - ANSWER protects the consumer's right to the privacy of credit and financial information, ensuring that all collected data is confidential, accurate, relevant and properly used. FCRA - ANSWER Fair Credit Reporting Act Fair Credit Reporting Act - ANSWER protects the consumer's right to the privacy of credit and financial information, ensuring that all collected data is confidential, accurate, relevant and properly used. credit reports may be obtained only to determine the financial and moral status of an applicant, such as for employment screening or loan approval, or to assist in underwriting by an insurer. pre-notification - ANSWER the insurer must notify the insurance applicant (consumer) that a credit report may be requested as part of the insurer's underwriting requirements, and must have pre-authorization by obtaining the applicant's written consent to request the report. The contract is written by one party, the insurance company, without any input from the applicant. The insurer prepares the contract and presents it to the applicant on a "take- it-or-leave-it" basis. Aleatory Contract - ANSWER Both parties agree to the terms of the contract, despite the uncertainty. It is very likely that there will be an unequal exchange of consideration by either party, depending on if a loss actually occurs and to what extent. Ex. consumer paying insurance every month but doesn't actually use it or insurance company paying large amounts for indemnity Unilateral Contract - ANSWER .Contract where only one party is legally bound to the contractual obligations. As long as all the conditions are met by the insured, the insurer makes an enforceable promise of future performance and can be charged with a breach of contract if those obligations are not met. The insured has the right to cancel the policy at any time and cannot be legally forced to pay the premiums. Conditional Contract - ANSWER one in which both parties must perform certain duties to make the contract enforceable. The insured can only collect if there has been a covered loss, and the insurer has a list of conditions stated in the contract that must be met before a claim will be paid. As long as the specified conditions or duties are performed, the insurer must pay the claim. Representations - ANSWER Statements made by the applicant on the application applicant is required to make statements that are substantially true, or believed to be true, to the best of the applicant's knowledge at the time of application. Material Representation - ANSWER Statements that impact the acceptance of an insurable risk (whether involving the rating of an acceptable risk, or the decision as to whether to accept or decline a risk) Misrepresentation - ANSWER A false statement contained in the application is considered a misrepresentation. Immaterial Representation - ANSWER representations that do not affect the acceptance or rating of the risk Warranties - ANSWER material statements in the application or stipulations in the policy that are guaranteed true in all respects if warranties are later discovered to be untrue or breached, coverage and the contract may be voided What is a warranty? - ANSWER Statement in the application that is guaranteed to be true Representations - ANSWER Statements on the application that are substantially true, or believed to be true, to the best of the applicant's knowledge at the time of application Warranties - ANSWER Material statements in the application or stipulations in the policy that are guaranteed true in all aspects. Misrepresentation - ANSWER A false statement contained in the application Aleatory Contract - ANSWER Based on the uncertainty of a loss, there will likely be an unequal exchange of consideration by either party Contract of Adhesion - ANSWER One party, the insurer, prepares the contract and it is not negotiable Conditional Contract - ANSWER Both parties must perform certain duties and follow rules of conduct to make the contract enforceable Unilateral Contract - ANSWER Only one party, the insurer, is legally bound to the contractual obligations Legal contract - ANSWER Requires 4 elements that include competent parties, legal purpose, offer and acceptance, and consideration A relationship that must exist at the time of application in which a potential for financial hardship exists in the event of a loss - ANSWER A relationship that must exist at the time of application in which a potential for financial hardship exists in the event of a loss Insurable interest for life insurance is necessary only at the time of: - ANSWER Application The ___________ branch writes and passes state insurance laws, or statutes, to protect the insuring public - ANSWER Legislative When the exchange of value is unequal, the contract is considered: - ANSWER Aleatory The State's __________ branch enforces the existing statutes that have been put in place. - ANSWER Executive Before an insurer can operate in this state, it must have which of the following? - ANSWER Certificate of Authority issued by the state Insurance Department A statement that a person makes and guarantees to be true is a: - ANSWER Warranty The ____________ has the power to issue rules and regulations to help enforce insurance statutes. - ANSWER Commisioner The insurance industry is primarily regulated at the _________ level. - ANSWER State When the owner of the policy and insurer must meet certain conditions in order for the health insurance policy to be enforceable, it is referred to as a(n): - ANSWER Conditional contract Which of the following is correct-The National Association of Insurance Commissioners (NAIC): - Has no legal authority over insurance regulation - Sets legislation and policy - Requires only 30 Commissioners to be members at any time - Requires each legislature to accept recommendations - ANSWER Has no legal authority over insurance regulation ______ are primarily social organizations that engage in charitable and benevolent activities consisting of members of a given faith, lodge, or order, and are usually organized as non-profits. - ANSWER Fraternal Benefit Societies A contract that is drafted by an insurer and receives no input or alteration from the insured, is considered a(n): - ANSWER Contract of Adhesion A(n)____________ is the person or entity that is covered by an insurance policy. - ANSWER Insured The insurable interest on one's own life is generally regarded as: - ANSWER Unlimited Insurable interest - ANSWER having a relationship which would result in a financial or economic loss if the insured dies. A neighbor is not an example of a party that meets this definition. policyowner - ANSWER the purchaser of a life insurance policy Who controls the policy and maintains the right to make all decisions regarding coverages? - ANSWER Policy Owner Providing copies of the Notice Regarding Replacement and any sales proposals to the applicant and replacing insurer Replacing Insurer's responsibilities (policy replacement) - ANSWER Notifying the existing insurer of the planned replacement upon receiving proper notification with the new application Maintaining copies of the information regarding replacement for a specified period of time Producer's Responsibilities - ANSWER -Solicitation -Negotiation -Execution of Contract -Transacting of matters subsequent to a contract MIB - ANSWER Medical Information Bureau Medical Information Bureau - ANSWER An organization that stores information from insurance companies and makes it available to other companies during the underwriting process. Its purpose is to help prevent fraud and concealment by insurance applicants. *Member owned organization* *MIB's coded reports represent general medical information and other conditions (typically hazardous hobbies and adverse driving records) affecting the insurability of the applicant.* All of the following statements regarding sources of underwriting are correct, except: A The applicant may be denied coverage based solely on the MIB report B A medical exam may be requested based on the amount of coverage being applied for C The agent's report is confidential between the producer and the insurer D A consumer investigative report may include a credit report - ANSWER The applicant may be denied coverage based solely on the MIB report Underwriting Factors - ANSWER analysis of the applicant to determine if he/she is acceptable for the proposed insurance doesn't include marital status: Age Gender Tobacco use (smoker/nonsmoker) Occupation Hobbies (avocation) Physical condition (height and weight) Health history Rating Applicants - ANSWER Upon receipt of the information, such as the application, medical exam, blood and urine test results, etc., underwriters analyze the information and determine if the applicant is an acceptable risk. If acceptable, underwriters then determine the classification to be used in the calculation of the premium. Risk classifications - ANSWER Standard Risks: Individuals who have the same health, habits, sex/gender, and occupational characteristics as those reflected in the mortality table. Individuals in this category have an average life expectancy Preferred Risks: Individuals who meet certain requirements and qualify for lower premiums because of ideal health, height and weight. Individuals in this category have a longer than average life expectancy. Substandard Risks (Higher Risk Exposure): Individuals who are not acceptable at standard rates because of poor health, bad habits or occupational hazards. Individuals in this category are issued "rated policies," known as surcharges. Declined - This is not a rating classification; consumer deemed uninsurable What factors determine premium? - ANSWER Mortality, interest, and expense Mortality - ANSWER Estimate of amount needed to pay the death claims Mortality table determines average life expectancy Interest - ANSWER Earnings on invested premiums reduce the amount needed to pay future death benefits Expenses - ANSWER The amount charged to cover each policy's share of expenses of operation (salaries commission premium taxes and cost of doing business) Premium Payment Mode - ANSWER the annual mode results in the lowest premium outlay while monthly premiums result in the highest. The more frequently the premiums are paid, the more expensive the mode of payment. (monthly, quarterly, semiannually, or annually) Which of these modes would result in the insured paying the least annual outlay for life insurance? -Quarterly -Monthly automatic bank draft -Semi-annual payroll deduction -Annual - ANSWER Annual Standard Risk (classification of risks) - ANSWER average risk, as reflected in the mortality table Preferred Risk (classification of risks) - ANSWER better than average risk will qualify for lower premiums Substandard Risk (classification of risks) - ANSWER rated policy surcharges based on higher risk Declined (classification of risks) - ANSWER refusal to issue coverage and policy is declined Underwriting - ANSWER process of selection classification and rating determines if someone is insurable, classifying risk and determining the rate or premium charged Adverse selection - ANSWER The selection of unhealthy or high risk applicants Sources of Underwriting - ANSWER Application Medical Exams Attending Physician's Statment The Medical Information Bureau (MIB) Inspection Report Agent's Report Application (Life Insurance) - ANSWER Primary Source of Underwriting Underwriter first determines insurable interest exists on May 20 and the producer delivered the policy on May 22. The effective date of coverage is: -May 22 -May 15 -May 20 -May 5 - ANSWER May 22 Since the policy was not issued as applied for, coverage is not effective until the producer delivers the policy on May 22 and explains the changes in coverage or increased premium due to a substandard risk. The applicant must accept the counteroffer. Survivor Protection - ANSWER Providing funds for surviving spouses and dependents. Estate Creation - ANSWER Life insurance proceeds paid in a lump sum provide financial assets to create an immediate estate the insured can pass on to survivors. Estate Conservation - ANSWER provides money to pay any estate taxes or loans which must be satisfied upon the death of the estate owner preserving the insured's estate Cash Accumulation - ANSWER An amount of cash accessible to the policyowner. Liquidity - ANSWER Immediate funds available upon death to pay creditors, taxes and final expenses as well as cash values available for policy loans, withdrawals, and full surrenders. Buying life insurance so that the death benefit will be available for paying estate taxes due upon the death of the insured is known as: - ANSWER Estate conservation *Estate taxes are due nine months after the insured's death. Life insurance can provide the proceeds in which to pay the tax thereby conserving the estate for the heirs.* The MIB obtains its information from who? -Physicians -Hospitals -Insurers -Producer's agencies - ANSWER Insurers Which underwriting source is primarily used when an application reveals conditions for which more medical information is required? -Medical Information Bureau Report -Attending Physician's Statement -Inspection Report -Agent's Report - ANSWER Attending Physician's Statement On the day a newly-issued policy was to be delivered and the initial premium collected, the producer discovers that the insured is in the hospital with a heart condition pending surgery. What should the producer do? -Collect additional premium at the time of delivery to reflect the higher risk the insurer now faces -Return the policy to the insurer with a letter of explanation -Hold onto the policy until the insured is discharged from the hospital and then deliver the policy -Deliver the policy to an immediate family member and collect any outstanding premium - ANSWER Return the policy to the insurer with a letter of explanation *Producers must return the policy to the insurer if they know that the insured's health status has materially changed since the time of application.* An applicant claims they have no hazardous hobbies, but the agent sees a plaque proclaiming the applicant as president of a local skydiving club. The agent would need to include this information on the _________ report. - ANSWER Agent's Report Why should a producer collect a premium at the time the application is completed? - ANSWER Without it, coverage cannot go into effect, as there would be a lack of consideration *Collecting the premium at the time of application allows the producer to issue a conditional coverage receipt, which can bring coverage into effect as early as the date of the application, provided all the conditions have been satisfied.* If a home office underwriter obtains MIB codes inconsistent with information provided on the application, what is the underwriter required to do? - ANSWER Conduct further investigation to obtain more information prior to making a decision *When the home office underwriter receives MIB codes that are inconsistent with information provided on the application, the underwriter is required to conduct a further investigation to obtain more information prior to making an underwriting decision. Underwriting decisions cannot be based solely on MIB codes since there could be a reasonable explanation for the discrepancy.* What is used by an insurer to collect information from the applicant/insured for underwriting purposes? - ANSWER An application The cost of any required medical exams in the underwriting process is paid by the: - ANSWER Insurer XYZ Insurer has decided to issue a policy to a particular applicant. What is the next step in this insurance transaction? -XYZ will send the policy to the producer for delivery to the insured -XYZ will notify the applicant by mail that a policy is on its way -XYZ will mail a certificate of insurance to the applicant -The applicant will have to send a premium check to XYZ - ANSWER XYZ will send the policy to the producer for delivery to the insured *After a policy is issued, it must be sent to the producer, who will then deliver it to the insured.* What is an insurer permitted to do if and when it discovers during the underwriting process that a proposed insured has AIDS? -Insurers may refuse to issue a policy to individuals based on positive HIV test results -Insurers can share the test results with the insured's immediate family members and any health professionals listed on the application -The insurer can share information discovered during the underwriting process with the Center for Disease Control as well as state and local health authorities -Insurers can discriminate between individuals of the same class in underwriting for the risk of AIDS - ANSWER Insurers may refuse to issue a policy to individuals based on positive HIV test results The policyowner retains all rights in the policy up to and including receiving the endowment proceeds. All of the following about Universal Life are true, except: - ANSWER Increases in face amount do not require proof of insurability if under $100,000 The insured can increase or decrease the face amount. Any increase in the face amount will require evidence of insurability Which of the following is TRUE of a term rider when attached to a permanent life policy? - ANSWER It can provide additional temporary coverage on the insured or on other members of the family A term rider provides additional death benefit on the primary insured or other named insureds. At some point, the coverage becomes unaffordable, can be converted, or it expires. C has a $100,000 traditional whole life insurance policy with a $30,000 cash surrender value. What is the maximum loan C can obtain from the insurer using the policy as collateral for the loan? - ANSWER $30,000 The policy can be used as collateral for a loan from the insurance company, but the loan amount is limited to the amount of cash value in the policy. How is a Variable Universal Life Insurance policy different from a Universal Life Insurance policy? - ANSWER The ability to invest the cash values in various separate accounts The policy has a variable component, meaning that the cash values can be invested outside of the insurer's general account in various separate accounts. A participating life insurance policy has a long-term care rider. The insured qualifies for the benefit. Where does the initial benefit money come from? - ANSWER It is an advance of the face amount of the policy In the event total disability continues beyond a specified period of time, future premiums will not be required to be sent in to the insurer for the duration of the disability. This optional rider is called the _________ rider. - ANSWER Waiver of premium If a client owns an indexed product, what happens if the market falls in value by a large amount? - ANSWER The policy's values can never decline due to negative index performance With a Current Assumption Whole life policy, what can happen if the cash values increase too quickly? - ANSWER The policy could mature sooner than expected The purchase of a policy from a terminally ill insured by a third party who becomes the new owner is considered a ___________. - ANSWER Viatical settlement Which of the following traditional whole life policies has the highest first-year annual premium, all other factors being equal? - ANSWER 10-pay life The shorter the premium paying period, the higher the premium. A Limited Pay Life policy of 10 years would have a higher premium than a 20-pay, 30-pay, or 40-pay life policy. Which of the following Whole Life insurance policies has the highest annual premium payment per $1,000 of coverage for a 35-year-old, all other factors being equal? - ANSWER 20-Pay Ordinary Whole Life The shorter the premium-paying period, the higher the annual premium. All of the following are characteristics of Ordinary Whole Life Insurance, except: - ANSWER If insured lives to age 100, the total amount of premium paid over the lifetime of the insured is returned to the policyowner If the insured lives to age 100, the face amount of the policy is paid to the owner of the policy. At age 100 the cash value equals the face value. The Double Indemnity Rider requires that the insured die within _____ days of the accident. - ANSWER 90 As the cash value increases in a traditional whole life policy, the net amount at risk ____________, but the face amount of the policy would remain the same. - ANSWER Decreases As the cash value increases, the net amount at risk decreases, but the face amount of the policy would remain the same. The face amount of an Ordinary Whole Life Policy _________ over the life of the policy. - ANSWER Remains the same The face amount is the same as the death benefit and is the amount payable to the beneficiary upon the insured's death. Over the life of the policy it remains level. Each of the following choices are true of whole life, except: A As an insured ages, the premiums remain the same B The policy can be converted into a term life insurance plan at anytime C Endowment occurs at age 100 D The death benefit and cash values are guaranteed - ANSWER B The policy can be converted into a term life insurance plan at anytime Term can be converted into a permanent plan of life insurance, if convertible, but a whole life plan cannot be converted into a term plan. All of the following riders will waive the premiums in the event of a disability, except: A Guaranteed Insurability B Waiver of Monthly Deduction C Payor Benefit D Waiver of Premium - ANSWER A Guaranteed Insurability Guaranteed insurability provides the insured with the right to buy coverage at specified times in the future.