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Answers |Actual Complete Update |Already Graded A+
Representations are statements the applicant makes on an application that are deemed to be
true to the applicant's best knowledge. Warranties are statements the insurer makes in the
contract. ✔Correct Answer-Representations and Warranties
Two related insurance company functions. Through the process of _________, applications are
assessed for insurability and to assign premium rates. The ________ department analyzes data
to help estimate future losses and to produce rate tables. ✔Correct Answer-Underwriting vs.
Actuarial Departments
Two variations of the career agency system in which producers represent a single company. One
is headed by a company employee called a general manager (GM), the other by an independent
contractor called a general agent (GA). ✔Correct Answer-Managerial System vs. General
Agency System
A non-profit form of insurance provider sponsored by an organization of people who share a
common ethnic, religious, or vocational affiliation. ✔Correct Answer-Fraternal Insurance
Company
Two related general insurance terms:
Peril is the immediate cause of a loss (and the event that is insured against).
Hazard is any condition that increases the risk of incurring a loss. ✔Correct Answer-Peril and
Hazard
A type of contract in which one party (the offeror) drafts the terms that must be accepted as-is
by the offeree. Insurance policies are this type. ✔Correct Answer-Contract of adhesion
A form of insurance company that is owned by policyowners. May distribute policy dividends
(non-taxable) through participating policies. ✔Correct Answer-Mutual Insurance Company
An insurance distribution system in which the manager and producers are fully independent
and not affiliated with any single insurer. ✔Correct Answer-Independent Agency System
Two related disclosure documents that are required by most states to be presented to life and
health insurance applicants at some point during the buying process. ✔Correct Answer-
Buyer's Guide and Policy Summary
A basic insurance term referring to the possibility of incurring a loss. ✔Correct Answer-Risk
,A mathematical principle that is the basis for predicting the odds of a loss occurring in a certain
population in any given year. ✔Correct Answer-Law of Large Numbers
A federal insurance program that provides disability, death, and retirement benefits to covered
workers and their qualifying beneficiaries. ✔Correct Answer-Social Security (OASDI)
Two basic types of insurance producer: an ______ represents a single insurer and a _____ sells
policies from multiple insurers. ✔Correct Answer-Agents vs. Brokers
The process through which insurance companies spread large risks among other insurers.
✔Correct Answer-Reinsurance
Insurers can be categorized by their state of domicile. There are three categories, known as
_____, _____, and _____. ✔Correct Answer-Domestic, Foreign, and Alien Insurers
A form of insurance company that is owned by stockholders who may or may not also be
policyowners. May distribute stock dividends (taxable). ✔Correct Answer-Stock Insurance
Company
An insurer that has a certificate of authority in a given state is said to be an___________ insurer
in that state. ✔Correct Answer-Admitted Insurer
Express authority—The right to sign an application as an agent for the insurer.
Implied authority—Using a computer program to identify insurance needs and to recommend
solutions.
Apparent authority—Advising the applicant to not disclose on the application any important
health facts that might reduce his or her insurability. ✔Correct Answer-Express, Implied, and
Apparent Authority
Two forms of insurance contract. An indemnity contract bases policy benefits on reimbursement
of actual losses. A valued contract bases benefits on a stated amount without regard for the
value of the loss. ✔Correct Answer-Indemnity vs. Valued Contract
An unplanned reduction in economic value resulting from the occurrence of a covered peril.
✔Correct Answer-Loss
A federal insurance program that provides medical care benefits to covered workers (retirees).
✔Correct Answer-Medicare
The process by which an insurance company assesses an application to determine if it
represents an insurable risk. ✔Correct Answer-Underwriting
The natural process by which people contend with the perils faced daily, of which there are five
common techniques. ✔Correct Answer-Risk Management
,Offer, acceptance, consideration, competent parties, and legal purpose ✔Correct Answer-The
five basic elements of a valid contract
The willful nondisclosure of material facts on an application for the purpose of obtaining
insurance. ✔Correct Answer-Concealment
Loss must be definable and measurable.
The covered peril must be accidental or outside the insured's control.
The risk must be shared by a large group of similar risks.
The loss must not be catastrophic.
The risk must not be generally excluded from coverage. ✔Correct Answer-Insurable Risk (5
Criteria)
The needs approach to determining life insurance needs is based on a detailed review of a
person's specific situation. It examines personal and family income, liabilities, and assets, as well
as future financial goals, to calculate the right amount of life insurance. ✔Correct Answer-
Needs Approach
In estate planning, this rule requires life insurance policies transferred from the insured within 3
years before death to be returned to the decedent's estate for valuation purposes. ✔Correct
Answer-Bring-Back Rule
Living benefits are made possible by the policy's cash value, which is always available to the
policyowner through policy loans, withdrawals, and partial surrenders. The funds may be used
for any purpose. ✔Correct Answer-Life Insurance "Living Benefits"
If a key employee ends his or her employment, the employer can continue the policy in force.
However, many employers choose to:
sell the policy to the insured for an amount equal to its cash value
surrender the policy or
change insureds if allowed by the insurance company and applicable state law ✔Correct
Answer-Key Person Life Insurance
An insurance contract between a person and an insurer to distribute an accumulated sum of
money over a certain period, including the person's lifetime.
Annuities come in many forms, but they all have two common purposes:
to accumulate money on a tax-deferred basis
to distribute the accumulated money as income in a guaranteed amount for a guaranteed
period (including the annuitant's life) ✔Correct Answer-Annuity
This form of term life features a death benefit that diminishes over time and premium that
remains level for the term of the policy. ✔Correct Answer-Decreasing Term Life Insurance
, To be considered fully insured, a worker must have 40 quarters of coverage. A fully insured
worker is eligible for disability, retirement, and death benefits. ✔Correct Answer-Fully Insured
Status (Social Security)
A type of buy-sell agreement in which each owner purchases a life insurance policy on each of
the other owners. ✔Correct Answer-Cross-Purchase Buy-Sell Agreement
The Employee Retirement Income Security Act of 1974 (ERISA) protects the rights of employees
covered under an employer-sponsored plan by stipulating minimum participation, vesting, and
funding requirements. ✔Correct Answer-ERISA
This beneficiary designation cannot be changed by the policyowner without that beneficiary's
permission. ✔Correct Answer-Irrevocable Beneficiary
This life policy rider guarantees that additional coverage can be added to a whole life policy
even if the insured has become uninsurable. ✔Correct Answer-Guaranteed Insurability Rider
The person the annuity owner chooses to receive the annuity contract's values if either the
owner or the annuitant dies before annuitization. ✔Correct Answer-Annuity Beneficiary
Whole life insurance features a guaranteed cash value, a fixed guaranteed death benefit, level
premiums, and coverage that can remain in effect as long as the insured lives (up to age 120). Its
most basic form is called straight (or ordinary) whole life insurance. ✔Correct Answer-Whole
Life Insurance
A legal agreement through which two or more owners of a business arrange for the disposition
of each owner's share of the business upon death. ✔Correct Answer-Buy-Sell Agreement
The load factor reflects the costs the insurer expects to incur on the policy. In determining its
load factor, an insurer is generally guided by three objectives:
to cover total operating costs
to provide a safety margin
to contribute to profits or surplus ✔Correct Answer-Expense Charge (Load Factor)
This basic form of life insurance provides temporary protection and does not include a cash
value while the insured is alive. ✔Correct Answer-Term Life Insurance
The financial interest a policyowner has in a person or property being insured, justifying the
purchase of insurance. ✔Correct Answer-Insurable Interest
The process through which a sum of money is converted into periodic payments through an
annuity contract.
Answers |Actual Complete Update |Already Graded A+
Representations are statements the applicant makes on an application that are deemed to be
true to the applicant's best knowledge. Warranties are statements the insurer makes in the
contract. ✔Correct Answer-Representations and Warranties
Two related insurance company functions. Through the process of _________, applications are
assessed for insurability and to assign premium rates. The ________ department analyzes data
to help estimate future losses and to produce rate tables. ✔Correct Answer-Underwriting vs.
Actuarial Departments
Two variations of the career agency system in which producers represent a single company. One
is headed by a company employee called a general manager (GM), the other by an independent
contractor called a general agent (GA). ✔Correct Answer-Managerial System vs. General
Agency System
A non-profit form of insurance provider sponsored by an organization of people who share a
common ethnic, religious, or vocational affiliation. ✔Correct Answer-Fraternal Insurance
Company
Two related general insurance terms:
Peril is the immediate cause of a loss (and the event that is insured against).
Hazard is any condition that increases the risk of incurring a loss. ✔Correct Answer-Peril and
Hazard
A type of contract in which one party (the offeror) drafts the terms that must be accepted as-is
by the offeree. Insurance policies are this type. ✔Correct Answer-Contract of adhesion
A form of insurance company that is owned by policyowners. May distribute policy dividends
(non-taxable) through participating policies. ✔Correct Answer-Mutual Insurance Company
An insurance distribution system in which the manager and producers are fully independent
and not affiliated with any single insurer. ✔Correct Answer-Independent Agency System
Two related disclosure documents that are required by most states to be presented to life and
health insurance applicants at some point during the buying process. ✔Correct Answer-
Buyer's Guide and Policy Summary
A basic insurance term referring to the possibility of incurring a loss. ✔Correct Answer-Risk
,A mathematical principle that is the basis for predicting the odds of a loss occurring in a certain
population in any given year. ✔Correct Answer-Law of Large Numbers
A federal insurance program that provides disability, death, and retirement benefits to covered
workers and their qualifying beneficiaries. ✔Correct Answer-Social Security (OASDI)
Two basic types of insurance producer: an ______ represents a single insurer and a _____ sells
policies from multiple insurers. ✔Correct Answer-Agents vs. Brokers
The process through which insurance companies spread large risks among other insurers.
✔Correct Answer-Reinsurance
Insurers can be categorized by their state of domicile. There are three categories, known as
_____, _____, and _____. ✔Correct Answer-Domestic, Foreign, and Alien Insurers
A form of insurance company that is owned by stockholders who may or may not also be
policyowners. May distribute stock dividends (taxable). ✔Correct Answer-Stock Insurance
Company
An insurer that has a certificate of authority in a given state is said to be an___________ insurer
in that state. ✔Correct Answer-Admitted Insurer
Express authority—The right to sign an application as an agent for the insurer.
Implied authority—Using a computer program to identify insurance needs and to recommend
solutions.
Apparent authority—Advising the applicant to not disclose on the application any important
health facts that might reduce his or her insurability. ✔Correct Answer-Express, Implied, and
Apparent Authority
Two forms of insurance contract. An indemnity contract bases policy benefits on reimbursement
of actual losses. A valued contract bases benefits on a stated amount without regard for the
value of the loss. ✔Correct Answer-Indemnity vs. Valued Contract
An unplanned reduction in economic value resulting from the occurrence of a covered peril.
✔Correct Answer-Loss
A federal insurance program that provides medical care benefits to covered workers (retirees).
✔Correct Answer-Medicare
The process by which an insurance company assesses an application to determine if it
represents an insurable risk. ✔Correct Answer-Underwriting
The natural process by which people contend with the perils faced daily, of which there are five
common techniques. ✔Correct Answer-Risk Management
,Offer, acceptance, consideration, competent parties, and legal purpose ✔Correct Answer-The
five basic elements of a valid contract
The willful nondisclosure of material facts on an application for the purpose of obtaining
insurance. ✔Correct Answer-Concealment
Loss must be definable and measurable.
The covered peril must be accidental or outside the insured's control.
The risk must be shared by a large group of similar risks.
The loss must not be catastrophic.
The risk must not be generally excluded from coverage. ✔Correct Answer-Insurable Risk (5
Criteria)
The needs approach to determining life insurance needs is based on a detailed review of a
person's specific situation. It examines personal and family income, liabilities, and assets, as well
as future financial goals, to calculate the right amount of life insurance. ✔Correct Answer-
Needs Approach
In estate planning, this rule requires life insurance policies transferred from the insured within 3
years before death to be returned to the decedent's estate for valuation purposes. ✔Correct
Answer-Bring-Back Rule
Living benefits are made possible by the policy's cash value, which is always available to the
policyowner through policy loans, withdrawals, and partial surrenders. The funds may be used
for any purpose. ✔Correct Answer-Life Insurance "Living Benefits"
If a key employee ends his or her employment, the employer can continue the policy in force.
However, many employers choose to:
sell the policy to the insured for an amount equal to its cash value
surrender the policy or
change insureds if allowed by the insurance company and applicable state law ✔Correct
Answer-Key Person Life Insurance
An insurance contract between a person and an insurer to distribute an accumulated sum of
money over a certain period, including the person's lifetime.
Annuities come in many forms, but they all have two common purposes:
to accumulate money on a tax-deferred basis
to distribute the accumulated money as income in a guaranteed amount for a guaranteed
period (including the annuitant's life) ✔Correct Answer-Annuity
This form of term life features a death benefit that diminishes over time and premium that
remains level for the term of the policy. ✔Correct Answer-Decreasing Term Life Insurance
, To be considered fully insured, a worker must have 40 quarters of coverage. A fully insured
worker is eligible for disability, retirement, and death benefits. ✔Correct Answer-Fully Insured
Status (Social Security)
A type of buy-sell agreement in which each owner purchases a life insurance policy on each of
the other owners. ✔Correct Answer-Cross-Purchase Buy-Sell Agreement
The Employee Retirement Income Security Act of 1974 (ERISA) protects the rights of employees
covered under an employer-sponsored plan by stipulating minimum participation, vesting, and
funding requirements. ✔Correct Answer-ERISA
This beneficiary designation cannot be changed by the policyowner without that beneficiary's
permission. ✔Correct Answer-Irrevocable Beneficiary
This life policy rider guarantees that additional coverage can be added to a whole life policy
even if the insured has become uninsurable. ✔Correct Answer-Guaranteed Insurability Rider
The person the annuity owner chooses to receive the annuity contract's values if either the
owner or the annuitant dies before annuitization. ✔Correct Answer-Annuity Beneficiary
Whole life insurance features a guaranteed cash value, a fixed guaranteed death benefit, level
premiums, and coverage that can remain in effect as long as the insured lives (up to age 120). Its
most basic form is called straight (or ordinary) whole life insurance. ✔Correct Answer-Whole
Life Insurance
A legal agreement through which two or more owners of a business arrange for the disposition
of each owner's share of the business upon death. ✔Correct Answer-Buy-Sell Agreement
The load factor reflects the costs the insurer expects to incur on the policy. In determining its
load factor, an insurer is generally guided by three objectives:
to cover total operating costs
to provide a safety margin
to contribute to profits or surplus ✔Correct Answer-Expense Charge (Load Factor)
This basic form of life insurance provides temporary protection and does not include a cash
value while the insured is alive. ✔Correct Answer-Term Life Insurance
The financial interest a policyowner has in a person or property being insured, justifying the
purchase of insurance. ✔Correct Answer-Insurable Interest
The process through which a sum of money is converted into periodic payments through an
annuity contract.
