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CA LIFE AND HEALTH CHAPTER 3 TEST EXAM|| ACCURATE AND
FREQUENTLY TESTED QUESTIONS AND 100% CORRECT ANSWERS WITH
RATIONALES|| LATEST AND COMPLETE UPDATE WITH EXPERT
VERIFIED SOLUTIONS
When the partners of a business develop an arrangement whereby should one of them
die or become permanently disables, the other partners would purchase the interest
of the deceased or disabled partner at a predetermined price, this is called a/an
A) Executive bonus plan
B) Business continuation plan
C) Key person plan
D) Business overhead expense plan - ANSWER: B) Business continuation plan
An investor buys a life policy on an elderly person in order to sell it for a life settlement.
This is an example of
A) Third-party ownership
B) A STOLI Policy
C) A prearranged funeral plan
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D) A viatical settlement - ANSWER: B) A STOLI Policy
All of the following are personal uses of life insurance EXCEPT
A) Estate creation
B) Cash accumulation
C) Buy-sell agreement
D) Survivor protection - ANSWER: C) Buy-sell agreement
Which of the following would NOT fall into the category of costs associated with death?
A) Day to day expenses of maintaining the family
B) The expense of a vacation for surviving family members
C) Funeral expenses
D) Final medical expenses of the insured - ANSWER: B) The expense of a
vacation for surviving family members
Which of the following methods of calculating the amount of life insurance needed takes
into account the insured's wages, years until retirement, and inflation?
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A) Blackout approach
B) Lump-sum approach
C) Human life value approach
D) Needs approach - ANSWER: C) Human life value approach
Which of the following would be least likely to be considered a legitimate need that
would be paid by insurance proceeds?
A) Travel expenses for family to come to the funeral
B) Debt cancellation
C) Day care
D) Vacation travel expenses - ANSWER: D) Vacation travel expenses
Which of the following would provide an underwriter with information concerning an
applicant's health history
A) The Medical Information Bureau
B) A medical examination
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C) The agent's report
D) The inspection report - ANSWER: A) The Medical Information Bureau
Which of the following is NOT true regarding the needs approach method of determining
the value of an individual's life?
A) Need is predicted using the number of years until the insured's retirement
B) Coverage is based on the predicted needs of that family
C) The death of an insured must be premature
D) It must be assumed that the death of the insured will occur immediately -
ANSWER: A) Need is predicted using the number of years until the insured's
retirement
A prospective insured receives a conditional receipt but dies before the policy is issued.
The insurer will
A) Pay the policy proceeds only if it would have issued the policy
B) Pay the policy proceeds up to an established limit
C) Not pay the policy proceeds under any circumstances
CA LIFE AND HEALTH CHAPTER 3 TEST EXAM|| ACCURATE AND
FREQUENTLY TESTED QUESTIONS AND 100% CORRECT ANSWERS WITH
RATIONALES|| LATEST AND COMPLETE UPDATE WITH EXPERT
VERIFIED SOLUTIONS
When the partners of a business develop an arrangement whereby should one of them
die or become permanently disables, the other partners would purchase the interest
of the deceased or disabled partner at a predetermined price, this is called a/an
A) Executive bonus plan
B) Business continuation plan
C) Key person plan
D) Business overhead expense plan - ANSWER: B) Business continuation plan
An investor buys a life policy on an elderly person in order to sell it for a life settlement.
This is an example of
A) Third-party ownership
B) A STOLI Policy
C) A prearranged funeral plan
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D) A viatical settlement - ANSWER: B) A STOLI Policy
All of the following are personal uses of life insurance EXCEPT
A) Estate creation
B) Cash accumulation
C) Buy-sell agreement
D) Survivor protection - ANSWER: C) Buy-sell agreement
Which of the following would NOT fall into the category of costs associated with death?
A) Day to day expenses of maintaining the family
B) The expense of a vacation for surviving family members
C) Funeral expenses
D) Final medical expenses of the insured - ANSWER: B) The expense of a
vacation for surviving family members
Which of the following methods of calculating the amount of life insurance needed takes
into account the insured's wages, years until retirement, and inflation?
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A) Blackout approach
B) Lump-sum approach
C) Human life value approach
D) Needs approach - ANSWER: C) Human life value approach
Which of the following would be least likely to be considered a legitimate need that
would be paid by insurance proceeds?
A) Travel expenses for family to come to the funeral
B) Debt cancellation
C) Day care
D) Vacation travel expenses - ANSWER: D) Vacation travel expenses
Which of the following would provide an underwriter with information concerning an
applicant's health history
A) The Medical Information Bureau
B) A medical examination
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C) The agent's report
D) The inspection report - ANSWER: A) The Medical Information Bureau
Which of the following is NOT true regarding the needs approach method of determining
the value of an individual's life?
A) Need is predicted using the number of years until the insured's retirement
B) Coverage is based on the predicted needs of that family
C) The death of an insured must be premature
D) It must be assumed that the death of the insured will occur immediately -
ANSWER: A) Need is predicted using the number of years until the insured's
retirement
A prospective insured receives a conditional receipt but dies before the policy is issued.
The insurer will
A) Pay the policy proceeds only if it would have issued the policy
B) Pay the policy proceeds up to an established limit
C) Not pay the policy proceeds under any circumstances
