Exam Fx Insurance Test 2023 with 100% correct questions and answers

agent/producer a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer Applicant or proposed insured a person applying for insurance Broker an insurance producer not appointed by an insurer and is deemed to represent the client Insurance policy a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events Insured A person covered by an insurance policy. This person may or may not be the policyowner Insurer (principal) the company who issues an insurance policy Policyowner the person entitled to exercise the rights and privileges in the policy Premium the money paid to the insurance company for the insurance policy Reciprocity/Reciprocal a mutual interchange of rights and privileges Loss Insurance is a contract by which one seeks to protect another from... Risk Insurance is the transfer of... Insurance What do individuals use to transfer their risk of loss to a larger group? The uncertainty or chance of loss For the purpose of insurance, risk is defined as... Pure risk A situation in which a person can only lose or have no change represents... Something that increases the risk of loss Hazard is best defined as... Speculative risk Events in which a person has both the change of winning or losing are classified as... Pure risk and speculative risk The risk of loss may be classified as... Morale A person who does not lock the doors or does not repair leaks shows an indifferent attitude. This person presents what type of hazard? Moral Hazard An individual's tendency to be dishonest would be indicative of a... Hazards Events or conditions that increase the chances of an insured loss occurring are referred to as... Agent's contract with the prinicpal What documentation grants express authority to an agent? Homogeneous Units with the same or similar exposure to loss are referred to as... Domestic What describes an insurance company that has been formed under the laws of this state? Unilateral If only one party to an insurance contract has made a legally enforceable promise, what kind of contract is it? Certificate of authority A state-issued document empowering an insurance company to become an admitted insurer is called... Apparent Which type of agent authority is also called "perceived authority"? Race Which is NOT considered by an underwriter which determining the premium rates for an individual seeking insurance? The application given to a prospective insured Which of the following is NOT the consideration in a policy? Unilateral In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contact element does this describe? "Not taxable" since the IRS treats them as a return of a portion of the premium paid. On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are... Consideration An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. What insurance principle has the insurer violated? Aleatory What describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? Adverse Selection tendency of individuals with higher probability of loss to purchase insurance more often than those who present a lower risk Beneficiary a person who receives the benefits of an insurance policy Death benefit the amount paid upon the death of the insured in a life insurance policy Cash value equity amount accumulated in permanent life insurance Estate a person's net worth Illustrations presentation or deception of nonguaranteed elements of a life insurance policy Life insurnace coverage on human lives Liquidation selling assets in order to raise capital Lump-sum payment of the entire benefit in one sum Minor a person under legal age Solvency ability to meet financial obligations (e.g. an insurance company maintains enough assets to pay claims) It will likely be higher because the applicant is a substandard risk In the underwriting process, it was determined that the applicant for life insurance is in poor health and has some dangerous habits. What is true concerning the policy premium? Buyer's Guide What is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process? Attending Physician's Statement (APS) An underwrite is reviewing the medical questions in the application and needs further information due to a medical situation the applicant had in the past. What will the underwrite require? The receipt of delivery must contain the policy number and the date of delivery An individual policy was delivered to the policyowner by an agent in person. What is true? Cash values can be borrowed at any time What does "liquidity" refer to in a life insurance policy? Buy-sell agreements are normally funded with a life insurance policy What concerning buy-sell agreements is true? The employer is the owner and beneficiary Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? Whether an insurable interest exists between the individuals If an applicant for a life insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about... They must differentiate between guaranteed and projected amounts, they may only be used as approved, and the must identify non guaranteed values What are the requirement for life insurance illustrations? Application An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information? Expenses The factor added to the net premium to cover the costs of the insurer in obtaining and maintaining the business is called... Survivor protection A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as... A presentation of nonguaranteed elements of a policy The term "illustration" in a life insurance policy refers to... Policyowner What individuals must have an insurable interest in the insured? Gross Premium Mortality - Interest + Expense = Executive Bonus When an employer offers to give an employee a wage increase in the amount of the premium on a new life insurance policy, this is called a(n)... To create an estate What is the best reason to purchase life insurance rather than annuities? Pay the policy proceeds only if it would have issued the policy. A prospective insured recieves a conditional receipt but dies before the policy is issued. The insurer will... Substandard Risk What type of risk will result in the highest premium? The benefit is received tax free A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then... Survivor protection, estate creation, cash accumulation What is a personal use of life insurance? Insurers Who makes up the Medical Information Bureau? Yes, but not unfairly Are insurance company underwriters allowed to discriminate? With the policy If a policy includes a free-look period at least 10 days, the Buyer's Guide may be delivered to the applicant no late than... Human Life Value Approach (HLVA) 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? Buy-Sell Agreement Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount? To help the insured understand all aspects of the contract Why should the producer personally deliver the policy when the first premium has already been paid? Insurer All advertisements are the responsibility of the... Check to make sure that there are no unanswered questions on the application, explain the nature and type of any receipt the producer is giving to the applicant, and prove beyond the stated questions if the producer feels the applicant is misrepresenting or concerning information All of the following are duties and responsibilities of producers at the time of the application...