AD Banker Life Insurance Exam
Questions with Correct Answers
Insurers - ANSWERS(Insurance Companies or Carriers) provide insurance coverage by
issuing particular insurance policies or contracts
Insurance Agencies - ANSWERSIndependent sales organizations that provide service
and distribute insurance policies to consumers
Insurance Agents or Producers - ANSWERSare licensed individuals representing an
insurance company when transacting insurance business
Who primarily regulates the insurance industry? - ANSWERSThe insurance industry is
regulated primarily at the state level through the legislative, judicial, and executive
branches
Legislative Branch - ANSWERSWrites and passes state insurance laws or statues
designed to protect the insuring public
Judicial Branch - ANSWERSresponsible for interpreting and determining the
constitutionality of the statues
(interprets the law and makes sure it is constitutionally allowed)
Executive Branch - ANSWERS(executes/enforces the law) has the power to issue rules
and regulations to help enforce statues
NAIC - ANSWERSNational Association of Insurance Commissioners
National Association of Insurance Commissioners (NAIC) - ANSWERSProvides
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 - ANSWERSOwned 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 - ANSWERSOwned 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 - ANSWERSPrimarily 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 - ANSWERSAn insurer doing business in the jurisdiction in which it is
incorporated. Ex. GA incorporated insurer operating in GA
Foreign Insurer - ANSWERSAn insurer licensed to operate in a state but incorporated in
another state. Ex. GA Incorporated Insurer operating in TX
Alien Insurer - ANSWERSAn insurance company that is incorporated outside the United
States. Ex. Canadian Insurer operating in GA
Admitted/Authorized Insurer - ANSWERSInsurer who is approved to transact insurance
via a Certificate of Authority from the state's Department of Insurance.
Non-Admitted/Unauthorized Insurer - ANSWERSInsurer not authorized to transact
insurance in a given state by not complying with state requirements or by not seeking
admission
Fair Credit Reporting Act - ANSWERSprotects 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 - ANSWERSFair Credit Reporting Act
Fair Credit Reporting Act - ANSWERSprotects 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 - ANSWERSthe 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.
signature obtained at the time of application
post-notification - ANSWERSIf adverse action is taken, such as denial of coverage, the
insurer must notify the applicant by stating the reasons for the adverse action and the
right to request a copy of the credit report. The insurer must provide the information as
to how the applicant can request a copy of the report from the consumer agency that
compiled the report.
USA Patriot Act - ANSWERSWith the increase of drug trafficking and acts of terrorism,
the desire and demand for laundered money has also increased. The PATRIOT Act was
passed to help detect and prevent this illegal activity.
AML - ANSWERSAnti-Money Laundering
Anti-Money Laundering (AML) - ANSWERSA set of procedures, laws or regulations
designed to stop the practice of generating income through illegal actions. Training for
this is required under the patriot act.
Currency Transaction Report (CTR) - ANSWERSMust be filed with FINCEN(Financial
Crimes Enforcement Network) through the department of Treasury for every cash
transaction that exceeds $10,000 and wire transfers in excess of $3,000
A federal regulation called the ______________ protects consumer privacy. -
ANSWERSFair Credit Reporting Act
Insurable Interest - ANSWERSrequires a financial or economic hardship in the event of
a loss due to an accident, sickness, or death of the insured.
interest must exist between the person buying the insurance, the policyowner, and the
person insured under the policy. Most family relationships qualify as insurable interest.
In the case of life and health insurance, contract law requires that insurable interest
must exist at the time of the application, not the time of the loss.
indemnify - ANSWERSto compensate for a loss, or to make one whole again
Principle of Indemnity - ANSWERSinsurance is designed to restore an insured to the
same physical or financial condition which existed prior to the loss, without a profit or
gain
For life and health insurance, insurable interest must exist at the time of ____________.
- ANSWERSApplication
Questions with Correct Answers
Insurers - ANSWERS(Insurance Companies or Carriers) provide insurance coverage by
issuing particular insurance policies or contracts
Insurance Agencies - ANSWERSIndependent sales organizations that provide service
and distribute insurance policies to consumers
Insurance Agents or Producers - ANSWERSare licensed individuals representing an
insurance company when transacting insurance business
Who primarily regulates the insurance industry? - ANSWERSThe insurance industry is
regulated primarily at the state level through the legislative, judicial, and executive
branches
Legislative Branch - ANSWERSWrites and passes state insurance laws or statues
designed to protect the insuring public
Judicial Branch - ANSWERSresponsible for interpreting and determining the
constitutionality of the statues
(interprets the law and makes sure it is constitutionally allowed)
Executive Branch - ANSWERS(executes/enforces the law) has the power to issue rules
and regulations to help enforce statues
NAIC - ANSWERSNational Association of Insurance Commissioners
National Association of Insurance Commissioners (NAIC) - ANSWERSProvides
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 - ANSWERSOwned 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 - ANSWERSOwned 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 - ANSWERSPrimarily 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 - ANSWERSAn insurer doing business in the jurisdiction in which it is
incorporated. Ex. GA incorporated insurer operating in GA
Foreign Insurer - ANSWERSAn insurer licensed to operate in a state but incorporated in
another state. Ex. GA Incorporated Insurer operating in TX
Alien Insurer - ANSWERSAn insurance company that is incorporated outside the United
States. Ex. Canadian Insurer operating in GA
Admitted/Authorized Insurer - ANSWERSInsurer who is approved to transact insurance
via a Certificate of Authority from the state's Department of Insurance.
Non-Admitted/Unauthorized Insurer - ANSWERSInsurer not authorized to transact
insurance in a given state by not complying with state requirements or by not seeking
admission
Fair Credit Reporting Act - ANSWERSprotects 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 - ANSWERSFair Credit Reporting Act
Fair Credit Reporting Act - ANSWERSprotects 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 - ANSWERSthe 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.
signature obtained at the time of application
post-notification - ANSWERSIf adverse action is taken, such as denial of coverage, the
insurer must notify the applicant by stating the reasons for the adverse action and the
right to request a copy of the credit report. The insurer must provide the information as
to how the applicant can request a copy of the report from the consumer agency that
compiled the report.
USA Patriot Act - ANSWERSWith the increase of drug trafficking and acts of terrorism,
the desire and demand for laundered money has also increased. The PATRIOT Act was
passed to help detect and prevent this illegal activity.
AML - ANSWERSAnti-Money Laundering
Anti-Money Laundering (AML) - ANSWERSA set of procedures, laws or regulations
designed to stop the practice of generating income through illegal actions. Training for
this is required under the patriot act.
Currency Transaction Report (CTR) - ANSWERSMust be filed with FINCEN(Financial
Crimes Enforcement Network) through the department of Treasury for every cash
transaction that exceeds $10,000 and wire transfers in excess of $3,000
A federal regulation called the ______________ protects consumer privacy. -
ANSWERSFair Credit Reporting Act
Insurable Interest - ANSWERSrequires a financial or economic hardship in the event of
a loss due to an accident, sickness, or death of the insured.
interest must exist between the person buying the insurance, the policyowner, and the
person insured under the policy. Most family relationships qualify as insurable interest.
In the case of life and health insurance, contract law requires that insurable interest
must exist at the time of the application, not the time of the loss.
indemnify - ANSWERSto compensate for a loss, or to make one whole again
Principle of Indemnity - ANSWERSinsurance is designed to restore an insured to the
same physical or financial condition which existed prior to the loss, without a profit or
gain
For life and health insurance, insurable interest must exist at the time of ____________.
- ANSWERSApplication
