Illinois Life Insurance Exam
What is the purpose of the Fair Credit Reporting Act? - ANSWER-The act established
procedures that consumer-reporting agencies must follow in order to ensure that
records are confidential, accurate, relevant, and properly used. It also protects
consumers against the circulation of inaccurate or obsolete information
What is the difference between a consumer report and an investigative consumer
report? - ANSWER-Investigative consumer reports are similar to consumer reports in
that they also provide information on the consumer's character, reputation, and habits.
The primary difference is that the information is obtained through an investigation and
interviews with associates, friends and neighbors of the consumer
How can an insurance company use the information it obtains from the MIB? -
ANSWER-It can use MIB information to conduct further investigation into an applicant's
current insurability
How does a substandard risk policy differ from a standard risk? - ANSWER-
Substandard risk applicants are not acceptable at standard rates because of physical
condition, personal or family history of disease, occupation, or dangerous habits. These
policies could be issued with the premium rated-up (higher than the standard risk)
What are the four elements of an insurance contract? - ANSWER-AGREEMENT-
offer/acceptance, consideration, competent parties, legal purpose
What does representation mean and how does it differ from a warranty? - ANSWER-
Representations are statements believed to be true to the best of one's knowledge. A
warranty is an absolutely true statement upon which the validity of the insurance policy
depends.
What information is gathered in Parts 1 & 2 of the application? - ANSWER-Part 1 of the
application includes the general questions about the applicant, including name, age,
address, birth date, gender, income, marital status, and occupation. Part 2 includes
medical information about prospective insured.
What is the purpose of the agent's report? - ANSWER-The agent's (producer's) report is
used by the agent to discuss his or her personal observations concerning the proposed
insured.
Who is required to sign an application for life insurance? - ANSWER-Both the agent and
the proposed insured (usually the applicant) must sign the application
, What is insurance? - ANSWER-The transfer of the risk of loss from the individual or
business entity to an insurance company
What is included under the term insurance transaction? - ANSWER-Solicitation,
negotiating prior to execution of a contract, execution of a contract, and the transaction
of any matters that arise as a result of the contract, as well as the actual process of
insuring.
What is the difference between an authorized/admitted and unauthorized/nonadmitted
insurer? - ANSWER-An admitted or authorized insurer is qualified and received a
Certificate of Authority from the Department of Insurance to transact insurance in the
state. A nonadmitted or nonauthorized insurer is an insurance company that has not
applied for, or has been denied a Certificate of Authority and may not transact
insurance.
When does the insurance policy go in effect? - ANSWER-The policy will go into effect
when the first premium is paid and the policy has been delivered
What is underwriting? - ANSWER-Underwriting is the risk selection and classification
process
In a life insurance policy, when must insurable interest exist? - ANSWER-Insurable
interest must exist between the policyowner and the insured at the time of application
(or time of policy issue), but NOT at the time of loss
What is stranger-originated life insurance (STOLI)? - ANSWER-STOLI is an
arrangement in which a person purchases an insurance policy on another without
having insurable interest with the insured. STOLIs are purchased with the intent to sell
policies for life settlements
What information does a Buyer's Guide provide? - ANSWER-Basic information about
life insurance policies and comparison of policy cost
When would an insured be required to sign a statement of good health? - ANSWER-If
the initial premium is not paid with the application, the agent may need to obtain the
statement of good health at policy delivery
What are the characteristics of term life insurance? - ANSWER-It provides temporary,
pure death protection, with no cash value
What is annually renewable tern insurance? - ANSWER-Annually renewable term (ART)
is the purest form of term life insurance in which the death benefit remains level; the
policy may be guaranteed renewable each year without proof of insurability, but the
premium increases annually according tp the attained age
What is the purpose of the Fair Credit Reporting Act? - ANSWER-The act established
procedures that consumer-reporting agencies must follow in order to ensure that
records are confidential, accurate, relevant, and properly used. It also protects
consumers against the circulation of inaccurate or obsolete information
What is the difference between a consumer report and an investigative consumer
report? - ANSWER-Investigative consumer reports are similar to consumer reports in
that they also provide information on the consumer's character, reputation, and habits.
The primary difference is that the information is obtained through an investigation and
interviews with associates, friends and neighbors of the consumer
How can an insurance company use the information it obtains from the MIB? -
ANSWER-It can use MIB information to conduct further investigation into an applicant's
current insurability
How does a substandard risk policy differ from a standard risk? - ANSWER-
Substandard risk applicants are not acceptable at standard rates because of physical
condition, personal or family history of disease, occupation, or dangerous habits. These
policies could be issued with the premium rated-up (higher than the standard risk)
What are the four elements of an insurance contract? - ANSWER-AGREEMENT-
offer/acceptance, consideration, competent parties, legal purpose
What does representation mean and how does it differ from a warranty? - ANSWER-
Representations are statements believed to be true to the best of one's knowledge. A
warranty is an absolutely true statement upon which the validity of the insurance policy
depends.
What information is gathered in Parts 1 & 2 of the application? - ANSWER-Part 1 of the
application includes the general questions about the applicant, including name, age,
address, birth date, gender, income, marital status, and occupation. Part 2 includes
medical information about prospective insured.
What is the purpose of the agent's report? - ANSWER-The agent's (producer's) report is
used by the agent to discuss his or her personal observations concerning the proposed
insured.
Who is required to sign an application for life insurance? - ANSWER-Both the agent and
the proposed insured (usually the applicant) must sign the application
, What is insurance? - ANSWER-The transfer of the risk of loss from the individual or
business entity to an insurance company
What is included under the term insurance transaction? - ANSWER-Solicitation,
negotiating prior to execution of a contract, execution of a contract, and the transaction
of any matters that arise as a result of the contract, as well as the actual process of
insuring.
What is the difference between an authorized/admitted and unauthorized/nonadmitted
insurer? - ANSWER-An admitted or authorized insurer is qualified and received a
Certificate of Authority from the Department of Insurance to transact insurance in the
state. A nonadmitted or nonauthorized insurer is an insurance company that has not
applied for, or has been denied a Certificate of Authority and may not transact
insurance.
When does the insurance policy go in effect? - ANSWER-The policy will go into effect
when the first premium is paid and the policy has been delivered
What is underwriting? - ANSWER-Underwriting is the risk selection and classification
process
In a life insurance policy, when must insurable interest exist? - ANSWER-Insurable
interest must exist between the policyowner and the insured at the time of application
(or time of policy issue), but NOT at the time of loss
What is stranger-originated life insurance (STOLI)? - ANSWER-STOLI is an
arrangement in which a person purchases an insurance policy on another without
having insurable interest with the insured. STOLIs are purchased with the intent to sell
policies for life settlements
What information does a Buyer's Guide provide? - ANSWER-Basic information about
life insurance policies and comparison of policy cost
When would an insured be required to sign a statement of good health? - ANSWER-If
the initial premium is not paid with the application, the agent may need to obtain the
statement of good health at policy delivery
What are the characteristics of term life insurance? - ANSWER-It provides temporary,
pure death protection, with no cash value
What is annually renewable tern insurance? - ANSWER-Annually renewable term (ART)
is the purest form of term life insurance in which the death benefit remains level; the
policy may be guaranteed renewable each year without proof of insurability, but the
premium increases annually according tp the attained age
