POL California Life: Life Insurance- Basics

Kayla's husband died in a plane crash . She needs a new source of funding that will help put her child through daycare. Which of the following would be the best source?

Life insurance proceeds.

What is the term used when a person sells his assets as a way to gain money?


Which of the following is NOT a type of information that need to be gathered in order to determine the value of someone's life when using the needs approach?

Estimated longevity

A family's need for income is great during the...

Family Dependency Period

Which of the following would be least likely to be considered a legitimate need that would be paid by insurance proceeds?

Vacation travel expenses

Which of the following would NOT fall into the category of costs associated with death?

The expense of a vacation for surviving family members.

All of the following are personal uses of life insurance EXCEPT...

Estate liquidation
Survivor protection
Estate creation
Cash accumulation

Which of the following is an example of liquidity in a life insurance contract?

The cash value available to the policy owner.

What does "liquidity" refer to in a life insurance policy?

Cash values can be borrowed at any time

Which of the following types of insurance policies would preform the function of cash accumulation?

Whole life

Which of the following is the best reason to purchase life insurance rather than annuities?

To create an estate

A corporation is the owner and beneficiary of the key person life policy. If the corporation collects the policy benefit, then...

The benefit is recieved tax free

A key person insurance policy can pay for which of the following?

Costs of training and replacement

Who is the owner and beneficiary on a Key Person Life Insurance Policy?

The employer is the owner and beneficiary

Attempting to determine how much insurance an individual would require based upon their financial objectives is known as...

Needs Approach

Which of the following is NOT an example of a business use of Life Insurance?

Workers Compensation

Which of the following is NOT true regarding the Needs Approach method of determining the value of an individual's life?

Need is predicted using the number of years until the insured's retirement

All of the following are business uses of life insurance EXCEPT...

Funding against general company financial loss.

Which of the following methods of calculating the amount of life insurance needed takes into the account the insured's wages, years until retirement and inflation?

Human life value approach

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value?

Predicted needs of the family after the insured's death

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

Premiums are not tax deductible as a business expense

All of the following are true of key person insurance EXCEPT...

The plan is funded by permanent insurance only

What is the purpose of key person insurance?

To lessen the risk of financial loss because of the death of a key employee

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be

Any form of life insurance

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?

Buy-sell agreement

Which of the following statements concerning buy-sell agreements is true?

Buy-sell agreements are normally funded with a life insurance policy

When the partners of a business an arrangement whereby should one of them die or become permanently disabled, the other partners would purchase the interest of the deceased or disabled partner at a predetermined price, this is called a/an...

Business continuation plan

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)...

Executive bonus

Joe, Larry and Curly own a small business. They have made a legal arrangement which states that if one of them dies or becomes disabled, the other two will be able to buy the partner's shares. Which term best describes this arrangement?

Business Continuation

A small hardware store owner is involved in a car accident that renders him totally disabled for half a year. Which type of insurance would help him pay for expenses of the company during the time of his disability?

Business overhead expense policy

An insurer's liability shall be limited to:

The face amount of an individual insurance policy, subject to any exclusions and riders as applicable, minus any outstanding policy loans and interest payments due the insurer.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

The policy is owned by the company
It is considered a non qualified employee benefit
Any type of insurance policy may be used
The employer pays a bonus to a selected employee to fund the policy.

The term "illustration" in a life insurance policy refers to...

A presentation of non-guaranteed elements of a policy

In the Executive Bonus plan, who is the owner of the policy, and who pay the premium?

Executive is the owner, and the executive pays the premium

All of the following are requirements for life insurance illustrations EXCEPT...

They must be part of the contract
They may only be used as approved
They must identify non-guaranteed values
They must differentiate between guaranteed and projected amounts

What is the purpose of a disclosure statement in life insurance policies?

To explain features and benefits of a proposed policy to the consumer

Which of the following is NOT required on an illustration used in the sale of a life insurance policy?

The name of the primary and secondary beneficiaries
Generic name of policy
Name of insurer
Underwriting or rating classification upon which the illustration is based.

Which of the following is a generic consumer publication that explains life insurance in general terms in order to assist the applicant in the decision-making process?

Buyer's Guide

What is the purpose of the buyers guide?

To allow the consumer to compare costs of different policies

Which of the following will be included in a policy summary?

Premium amounts and surrender values

Which of the following documents delivered to the policy-owner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years?

A policy summary

Which of the following CANNOT be included along with illustrations used to sell life insurance?

Vanishing premium information

Which of the following must be disclosed in an all advertisements and policies of term life insurance for individuals 55 years of age or older?

Insurance monetary value index

The agent is known as the "Field Under-Writer" because of the information he/she gathers for the insurer. This helps the insurer...

Pre-select applicants that would present the lowest risk of loss for the insurer

What is the main responsibility of a company's underwriting unit?

Risk selection

What describes the specific information about a policy?

Policy summary

Underwriters review applications for insurance and the information contained therein so as to NOT ...

Issue a policy that would insure a pending loss.

As a field underwriter, a producer is responsible for all of the following tasks EXCEPT...

Issue the policy that is requested
Solicit business that will fall within the insurer's underwriting guidelines
Obtain appropriate signatures on the application for insurance
Help prevent adverse selection

Which employees of an insurance company are responsible for the final risk selection?


Which of the following information about the applicants is NOT included on Part 1 of the application for insurance?

Medical background

The responsibility of making certain that an application for the insurance is filled out completely, correctly and to the best of his or her knowledge is the responsibility of whom?

The producer

All of the following information about the applicant is identified in the general Information selection of a life insurance application EXCEPT...


All of the following are duties and responsibilities of producers at the time of application EXCEPT...

Change any incorrect statement on the application by personally initiating next to the corrected statement.
Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information
Check to make sure that there ar

Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT...

Other insurance coverages

If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?

The policy will be interpreted as if the insurer waived its right to have an answer on the application

If an agent fails to obtain an applicant's signature on the application, the agent must...

Return the application to the applicant for a signature.

Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application?

Return the application to the applicant for completion

Which of the following would be considered a non medical insurance application?

An application on which the medical information is completed by the applicant and the agent only

A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will...

Pay the policy proceeds only if it would have issued the policy.

When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in a

Issue the policy anyway and pay the face value to the beneficiary

When an insurer receives a written binder...

The insured's coverage will be effective immediately

What is the purpose of a conditional receipt?

It is intended to provide coverage on a date earlier than the date of the inssuance of the policy

In regards to life insurance contracts, the temporary term is...

The period of time during which a binding receipt covers a policy holder

The process of "post-selection" refers to which of the following?

An insurer is investing the cilent's risk profile

Each of the following factors are used in determining insurance rates EXCEPT...


Who is protected by a Temporary Insuring Agreement?

The applicant and the insurer

Which of the following is true regarding an application for a large amount of insurance?

The insurer might require a medical examination by a professional

Which of the following id NOT a type of Temporary Insuring Agreement?

Bridge Coverage Receipt
Acceptance Form of Receipt
30-day Interim Term Receipt
Conditional Receipt

What is an advantage of the Temporary Insuring Agreement to the applicant?

It gives the applicant immediate coverage