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Tennessee Life Insurance State LATEST 2 025
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What is the purpose of the agent's report during the application process? - ✔✔The agent's report discusses the agent's personal observations about the proposed insured that may help in the underwriting process. At what point does coverage begin when an agent issues a conditional receipt for a life insurance policy? - ✔✔Either on the date of the application or the date of the medical exam (whichever occurs last) What is insurance underwriting? - ✔✔The process of risk selection and classification In health insurance contracts, the insured is not legally bound to any particular action; however, the insurer is obligated to pay for losses covered by the policy. What contract element does this describe? - ✔✔Unilateral If an agent fails to obtain the applicant's signature on the insurance application, what must the insurer do? - ✔✔Send the application back to the applicant for signature If an applicant for a life insurance policy and the potential insured are two different people, what would be the underwriter's main concern? - ✔✔The existence of insurable interest between the applicant and the insured When would a misrepresentation on an insurance application be considered fraud? - ✔✔When it is intentional and material
What document describes the specific information about a policy? - ✔✔Policy summary What entities make up the Medical Information Bureau? - ✔✔Insurers Health contracts are prepared by insurers and must be accepted by the insured on an 'as is' basis. This describes what aspect of a health insurance contract? - ✔✔Contact of adhesion What is a warranty in an insurance contract? - ✔✔An absolutely true statement upon which the validity of the insurance contract is based During which stage in the insurance process do insurers evaluate information that identifies adverse selection risks? - ✔✔Underwriting What risk classification would typically qualify for lower premiums? - ✔✔Preferred risk Insurance is a contract that protects the insured from what? - ✔✔Loss What is policy replacement? - ✔✔A new policy is issued while an existing policy is terminated or reissued with a reduction in cash value What is the main responsibility of a company's underwriting unit? - ✔✔Risk selection What is the name of the process that insurance companies use to determine whether or not an applicant is insurable? - ✔✔Underwriting
What is the best way to handle incomplete insurance applications? - ✔✔Return the application to the applicant for completion Health insurance contracts are unilateral. What does that mean? - ✔✔Only one party makes a legally enforceable promise When must the policy summary for a life insurance policy be delivered to the policy owner? - ✔✔At the time of policy delivery In insurance, when is the offer usually made on a contract? - ✔✔When the insurance application is submitted What are the four elements of an insurance contract? - ✔✔Agreement (offer and acceptance), consideration, competent parties, and legal purpose What do individuals use to transfer their risk of loss to a larger group? - ✔✔Insurance What report is used to assess risk associated with a health insurance applicant's lifestyle and character? - ✔✔Investigative Consumer Report What type of report provides information about the applicant's hobbies, habits and financial status? - ✔✔Investigative consumer report How is the information obtained for an investigative consumer report? - ✔✔Through interviews with the applicant's associates, friends, and neighbors
How can health insurance policies be delivered to the insured? - ✔✔Personally delivered by the agent or mailed What two elements are necessary for a life insurance contract to have a legal purpose? - ✔✔ What law protects consumers from the circulation of inaccurate or obsolete information? - ✔✔The Fair Credit Reporting Act What are the three main instances when insurable interest exists in life insurance? - ✔✔Insuring your own life, the life of a family member, or the life of a business partners or someone who has a financial obligation to the policyowner What are the three types of risk rating classifications in life insurance? - ✔✔Standard, substandard and preferred What term describes the fee a person pays an insurance company to receive coverage? - ✔✔Premium When does an insurance policy go into effect? - ✔✔When the policy is delivered and the premium is paid When must insurable interest exist in a life insurance policy? - ✔✔At the time of application What does the term "level" refer to in level term insurance? - ✔✔Face amount With a single premium deferred annuity, when will the annuity payments become available? - ✔✔No sooner than 1 year after the annuity purchase
What type of annuity requires an agent to have a securities license? - ✔✔Variable annuity When does an adjustable life policy accumulate cash value? - ✔✔When premiums paid are more than the cost of the policy An individual has just borrowed $10,000 on a 5-year note from his bank. The note is due in installments. What type of life insurance policy would be best suited to this situation? - ✔✔Decreasing term Can a business or a corporation be an annuitant? - ✔✔No, an annuitant must always be a natural person What is the purpose of establishing the target premium for a universal life policy? - ✔✔To prevent the policy from lapsing Regarding annuity payments, what is the difference between the annuitant and the beneficiary of an annuity? - ✔✔The annuitant receives payments from the annuity during the annuitization period; the beneficiary receives benefits after the annuitant's death A policy states that it will pay a specified face amount if the insured dies during the 20-year premium-paying period and nothing id death occurs after the 20-year period. What type of policy is this? - ✔✔ 20 - year level term What is the main reason for purchasing an annuity? - ✔✔To provide income that the annuitant cannot outlive
How is the premium determined in a joint life insurance policy? - ✔✔The premium is based on the average age of the insureds An annuity purchased with multiple payments that begins income payments after one year from the moment of purchase is known as what type of annuity? - ✔✔Flexible premium deferred annuity Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid - ✔✔For 20 years or until the insured's death, whichever occurs first What type of whole life insurance policy generates immediate cash value? - ✔✔Single premium whole life What type of annuity can be purchased with a single premium? - ✔✔Immediate annuity In a joint life policy, when is the death benefit paid? - ✔✔Upon the first death What type of life insurance offers an applicant a cash value element? - ✔✔Permanent insurance (usually, whole life) What happens to the cash value when a whole life insurance policy matures? - ✔✔Cash value is paid to the policyowner Mortality tables are used by insurance companies to predict what? - ✔✔Life expectancy and the death rather for specific groups of individuals
During partial withdrawal from a universal life policy, what portion, if any, will be taxed? - ✔✔Interest earned on the withdrawn cash value When would a 20 - pay whole life policy endow? - ✔✔When the insured reaches age 100 A whole life policy that requires that the policy owner only pays premiums for a specified number of years is known as what kind of policy? - ✔✔Limited-pay whole life If an annuity provides a set amount of income for two or more persons with the income ceasing upon the first death, what type of annuity is that? - ✔✔Joint life annuity What type of annuity credits its interest based upon a index such as S&P 500? - ✔✔Equity indexed annuity Whole life policies provide protection until the insured reaches what age? - ✔✔Age 100 The death protection component of a universal life policy is expressed as what type of coverage? - ✔✔Annually renewable term What are the death benefit options in universal life policies? - ✔✔Option A- level death benefit, and Option B - increasing death benefit Who receives income payments from an annuity? - ✔✔Annuitant
What are the two phases of an annuity? - ✔✔Accumulation and annuitization (or pay-in and pay-out) Why are policy loans not available on term insurance? - ✔✔There is no cash value to borrow against What type of whole life insurance policies only requires a payment of premium at its inception, and in addition to providing insurance protection for the life of the insured, endows at the insured's age 100? - ✔✔Single premium whole life If the annuitant dies during the accumulation period, who will receive the annuity benefits? - ✔✔Beneficiary In annually renewable term policies, what is the annual premium based upon? - ✔✔The insured's attained age What type of life insurance is best suited to cover a mortgage? - ✔✔Decreasing term What type of life insurance policy offers pure death protection? - ✔✔Term In what type of life insurance policies can the policy owner skip premium payments without the policy lapsing? - ✔✔Universal life Whose life expectancy is taken into consideration in an annuity contract? - ✔✔Annuitant
What provision in a life insurance policy extends coverage beyond the premium due date? - ✔✔Grace period What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer? - ✔✔Entire contract What nonforfeiture option provides coverage for the longest period of time? - ✔✔Reduced paid-up In the fixed-period settlement option, how will the number of installments for the death period proceeds determine the amount of the installments? - ✔✔The longer the period selected, the smaller each installment will be What type of beneficiary is next in line after the primary beneficiary? - ✔✔Contingent beneficiary The sole beneficiary of a life insurance policy dies before the insured. If the policyowner does not amend the beneficiary designation, what will happen to the policy's death benefit? - ✔✔It will be paid to the insured's estate What are the three nonforfeiture options in life insurance policies? - ✔✔Cash surrender, reduced paid up, and extended term A policyowner borrowed a portion of cash value from his whole life policy. If the loan is not repaid, how will that affect the death benefit to the beneficiary? - ✔✔The amount of the loan will be subtracted from the death benefit
What are the most common exclusions in life insurance policies? - ✔✔War and military service, hazardous occupation, and aviation An applicant for life insurance misstated her age on the policy application. How will this affect the death benefit? - ✔✔The death benefit will be adjusted to the amount that the insured could obtain for her correct age What is the name for a lift insurance policy rider that provides coverage on the insured's family members? - ✔✔Other-insured rider What are policy dividends? - ✔✔Return of unused premiums What nonforfeiture option is automatically selected by the company if not chosen by the policyowner? - ✔✔Extended term Who has the right to the cash value of a life insurance policy? - ✔✔Policy owner If a settlement option is not chosen by the policy owner or the beneficiary, what option will be used by the insurer? - ✔✔Lump-sum payment With the interest only settlement option, what happens to the policy's death benefit? - ✔✔Policy proceeds are retained by the insurance company; only the interest is paid to the beneficiary What dividend option is automatically selected by the company if not chosen by the policyowner? - ✔✔Paid-up additions
What dividend option can increase the death benefit of the existing life policy? - ✔✔Paid-up additions What happens to the proceeds of a life insurance policy if there is no named beneficiary? - ✔✔The proceeds are paid to the insured's estate What required provision protects against unintentional policy lapse? - ✔✔Grace period An insurer has discovered a representation on a life insurance policy application regarding the insured's age. The insured is 10 years older than he stated on the application. What will the insurer do regarding the death benefit? - ✔✔Pay a reduced death benefit What is the purpose of the Automatic Premium Loan provision? - ✔✔To prevent the unintentional lapse of a policy because of nonpayment of the premium What type of assignment is used to secure the payment of a debt with an existing life insurance policy? - ✔✔Collateral assignment What is the purpose of settlement options in life insurance policies - ✔✔To determine how the death benefit will be paid to the beneficiary When can an insurance company use suicide as a defense against paying a death claim? - ✔✔When a suicide is committed within a specified period of time after the policy is purchased (usually two years)
Is the beneficiary required to have insurable interest in the insured? - ✔✔No. Beneficiates do not have insurable interest in the insured What does the term double indemnity mean? - ✔✔The insurer will pay a benefit of twice the face amount Which of the two types of policy assignments requires transfer of all ownership rights in the policy to a third party? - ✔✔Absolute assignment What life insurance policy rider allows the company to forgo collecting the premium if the insured becomes disabled? - ✔✔Waiver of premium What provision allows the policyowner to reactivate a lapsed life insurance policy within a specified period of time with proof of insurability? - ✔✔Reinstatement What is the advantage of reinstating a life insurance policy as opposed to applying for a new one? - ✔✔Policy premium in a reinstated policy will be set according to the insured's original age Who controls changes in premium payments, face values, and loans in a life insurance policy? - ✔✔Policyowner With the reduction of premium dividend option, how is the dividend used? - ✔✔The dividend is applied to the next year's premium (it reduces the next year's premium) What term is used to describe methods of payment of the death benefit to the beneficiary upon the insured's death? - ✔✔Settlement options
What does liquidity mean in a life insurance policy? - ✔✔Availability of cash value What is the name for an overfunded life insurance policy? - ✔✔A Modified Endowment Contract (MEC) What are the characteristics of the group that underwriters will consider before issuing a group life policy? - ✔✔Group's purpose, size, financial strength and turnover What is the primary purpose of a 401(k) plan? - ✔✔Provide retirement income Who qualifies for tax-sheltered annuities, or 403(b) plans? - ✔✔Employees of nonprofit organization under Section 501(c)(3) and employees of public school systems Group life insurance policies are written as what type of insurance? - ✔✔Annually renewable term Upon surrender of a life insurance policy, what portion of the cash value will be taxed? - ✔✔Only the portion in excess of the premium paid What qualified plan is suitable for the self-employed? - ✔✔HR-10 or Keogh What are some examples of qualified plans? - ✔✔IRA, 401(k), HR10 (Keogh), SEP, SIMPLE If a retirement plan is qualifies, what does that mean? - ✔✔The plan has favorable tax treatment
What is the main purpose of the 7-pays Test? - ✔✔To determine if a life insurance policy is a Modified Endowment Contract What is the general taxation rule for death benefits payable to the beneficiary of a life insurance policy? - ✔✔Death benefits are generally not subject to income taxes Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called? - ✔✔Estate conservation If the beneficiary of a life insurance policy receives death benefit payments that consist of principal and interest, which portion, if any, will be taxed? - ✔✔Interest only Who may contribute to an HR- 10 plan? - ✔✔A self-employed individual What is the main advantage of converting from group life insurance to individual coverage? - ✔✔Evidence of insurability is not required In qualified plans, are employer contributions taxed as income to the employees? - ✔✔No, employer contributions are not taxed as income to the employees What is the penalty for excessive contributions to a traditional IRA? - ✔✔6% What are three types of Social Security benefits? - ✔✔Retirement, disability and survivors
