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Primerica - Life Insurance Basics (AZ)
correctly answered 2023
All of the following are duties and responsibilities of producers at the time of application EXCEPT A - Change any incorrect statement on the application by personally initialing next to the corrected statement. B - Explain the nature and type of any receipt the producer is giving to the applicant. C - Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. D - Check to make sure that there are no unanswered questions on the application. - correct answer A - Change any incorrect statement on the application by personally initialing next to the corrected statement. Any changes to information on an application must be initialed by the applicant. Which of the following is NOT among the accounts that the Life and Disability Insurance Guaranty Fund maintains? A - Annuity account B - Group insurance account C - Disability insurance account D - Life insurance account - correct answer B - Group insurance account The Fund maintains the following 3 accounts: the disability insurance account, the life insurance account, and the annuity account. The Medical Information Bureau (MIB) was created to protect A - Insureds from unreasonable underwriting requirements by the insurance companies. B - Medical examiners that perform insurance physical examinations. C - Insurance companies from adverse selection by high risk persons. D - Insurance departments from lawsuits by policyowners. - correct answer C - Insurance companies from adverse selection by high risk persons. The MIB makes information available to underwriters to assist them in the underwriting process. It is a nonprofit trade organization which receives adverse medical information from insurance companies and maintains confidential medical impairment information on individuals. Which of the following premium modes would result in the highest annual cost for an insurance policy?
A - Monthly B - Quarterly C - Semi-annual D - Annual - correct answer A - Monthly If the policyowner chooses to pay the premium more frequently than annually, there will be an additional charge (loading) because the company will not have the premium to invest for a full year, and the company will have additional expenses in billing the premium. Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? A - Effect of inflation on income over time. B - Predicted needs of the family after the insured's death. C - Insured's current and future income. D - Insured's annual expenses. - correct answer B - Predicted needs of the family after the insured's death. The Human Life Value Approach to determining the value of an individual's life requires the calculation of probable future earnings of the insured, which involves wages, expenses, inflation, amount of time until retirement, and the time value of money. Predicted needs of the family after the insured's death are used in the needs approach. Which is generally true regarding insureds who have been classified as preferred risks? A - They can decide when to pay their monthly premiums. B - They keep a higher percentage of any interest earned on their policies. C - Their premiums are lower. D - They can borrow higher amounts off of their policies. - correct answer C - Their premiums are lower. The preferred risk classification indicates that an insured is in excellent physical condition and employs healthy lifestyles and habits. These individuals qualify for lower premiums than those in the other categories. Who makes up the Medical Information Bureau? A - Former insured B - Physicians and paramedics C - Insurers D - Hospitals - correct answer C - Insurers The Medical Information Bureau is made up of insurers so the companies can compare the information they have collected on a potential insured with information other insurers may have discovered.
An inspection report may be ordered about an applicant from an independent investigating firm or credit agency. It is a general report of the applicant's finances, character, work, hobbies, and habits. Who is the owner and who is the beneficiary on a Key Person Life Insurance policy? A - The employer is the owner and the key employee is the beneficiary. B - The key employee is the owner and beneficiary. C - The key employee is the owner and the employer is the beneficiary. D - The employer is the owner and beneficiary. - correct answer D - The employer is the owner and beneficiary. With the key-person coverage, the business (the employer) is the applicant, owner, premium payer, and beneficiary. What is the purpose of key person insurance? A - To maintain an account that insures the owner of a company remains solvent B - To lessen the risk of financial loss because of the death of a key employee C - To provide health insurance to the families of key employees D - To insure retirement benefits are available to all key employees - correct answer B - To lessen the risk of financial loss because of the death of a key employee A business can suffer a financial loss because of the premature death of a key employee that has specialized knowledge, skills or business contacts. A business can lessen the risk of such loss by the use of key person insurance. The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? A - As of the policy delivery date B - As of the first of the month after the policy issue C - As of the policy issue date D - As of the application date - correct answer D - As of the application date If the full premium was submitted with the application and the policy was issued as requested, the policy coverage effective date would generally coincide with the date of application. What does "liquidity" refer to in a life insurance policy? A - The policyowner receives dividend checks each year. B - The insured is receiving payments each month in retirement. C - Cash values can be borrowed at any time.
D - The death benefit replaces the assets that would have accumulated if the insured had not died. - correct answer C - Cash values can be borrowed at any time. Liquidity in life insurance refers to availability of cash to the insured through cash values. An insurer has placed a notice on its advertising stating that its policies are protected by the Life and Disability Insurance Guaranty Fund. This practice is A - Optional: each insurer makes its own decision about this. B - Illegal: insurers cannot advertise protection by the Fund. C - Legal: applicants have the right to know about policy guarantees. D - Required by the Life and Disability Insurance Guaranty Fund. - correct answer B - Illegal: insurers cannot advertise protection by the Fund. Stating that an insurer's policies are guaranteed by the existence of the Life and Disability Guaranty Fund is an unfair trade practice. The insurance company underwriter could find information concerning the personal activities and character of an applicant from which of the following reports? A - Attending physician B - Insurance company who provided the prior coverage C - Medical Information Bureau D - Producer's report - correct answer D - Producer's report The agent communicates his/her observations concerning an applicant in the producer's report. Which of the following would provide an underwriter with information concerning an applicant's health history? A - The Medical Information Bureau B - A medical examination C - The agent's report D - The inspection report - correct answer A - The Medical Information Bureau An agent's report and inspection report provides personal information. Medical exams provide information on current health. Only the MIB will provide information about an applicant's medical history. What is the name of the insured who enters into a viatical settlement? A - Contingent B - Viatical broker C - Viator
A - An unfair trade practice. B - A misrepresentation. C - A required disclosure. D - A legal representation of the Association. - correct answer A - An unfair trade practice. It is an unfair trade practice to make any statement that an insurer's policies are guaranteed by the existence of the Insurance Guaranty Association. Though it is illegal to advertise, the statement is still true and would not be considered a misrepresentation. Which of the following information about the applicant is NOT included on Part 1 of the application for insurance? A - Occupation B - Marital status C - Medical background D - Gender - correct answer C - Medical background Part 1 of the application includes the general questions about the applicant, including name, age, address, birth date, gender, income, marital status, and occupation. The applicant's medical background is addressed in Part 2 - Medical Information. An underwriter 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 underwriter require? A - Sworn health affidavit from the applicant B - Statement of Continued Good Health C - Attending Physician Statement D - A complete medical record - correct answer C - Attending Physician Statement The APS is used to obtain medical DETAILS about a specific condition which has shown up in the application; the insurance company orders the information directly from the physician, using a signed authorization which was part of the application. Which of the following is usually true of a participating life insurance policy? A - Pays dividends to policyowners. B - May be converted to a term life policy. C - Pays dividends to stockholders. D - Assesses premiums against stockholders. - correct answer A - Pays dividends to policyowners. Participating is a term used to refer to any insurance policy that distributes its dividends by cash payments, reduced premiums, units of paid-up life insurance, a savings program, or by the purchase of term insurance.
An applicant wants to buy a policy that has a cash value element. Which type should she buy? A -Investment B - Term C - Permanent D - Stock - correct answer C - Permanent Unlike term insurance, permanent insurance provides lifetime death protection and a savings or cash value option. 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 - Survivorship insurance B - Juvenile protection provision C - Survivor protection D - Life planning - correct answer C - Survivor protection Life insurance can provide the funds necessary for the survivors of the insured to be able to maintain their lifestyle in the event of the insured's death. This is known as survivor protection. Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? A - Premiums are not tax deductible as a business expense. B - Premiums are tax deductible by the key employee. C - Premiums are tax deductible as a business expense. D - Premiums are taxable to the employee. - correct answer A - Premiums are not tax deductible as a business expense. The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free. What is the purpose of the buyer's guide? A - To allow the consumer to compare the costs of different policies B - To provide the name and address of the agent/producer issuing the policy C - To list all policy riders D - To provide information about the issued policy - correct answer A - To allow the consumer to compare the costs of different policies
Which of the following types of insurance policies would perform the function of cash accumulation? A - Term life B - Credit life C - Increasing term D - Whole life - correct answer D - Whole life Life insurance is unique from other types of insurance in that it could perform the function of cash accumulation. Cash values are available in whole life policies. Stranger-originated life insurance policies are in direct opposition to the principle of A - Indemnity. B - Insurable interest. C - Law of large numbers. D - Good faith. - correct answer B - Insurable interest. Because the purchaser of a stranger-originated life insurance policy doesn't know the insured, or have any interest in the insured's longevity, STOLI policies violate the principle of insurable interest. Another name for a substandard risk classification is A - Controlled. B - Declined. C - Elevated. D - Rated. - correct answer D - Rated. Substandard risk classification is also referred to as "rated" since these policies could be issued with the premium rated-up, resulting in a higher premium. Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds? A - Travel expenses for family to come to the funeral B - Debt cancellation C - Day care D - Vacation travel expenses - correct answer D - Vacation travel expenses There are many legitimate need-based expenses that can be paid by life insurance proceeds, from groceries to retirement income. Vacation travel expenses are most likely to be considered a luxury and not a need. Circulating deceptive sales material to the public is what type of Unfair Trade Practice?
A - False advertising B - Defamation C - Coercion D - Misrepresentation A - False advertising This is considered to be false, deceptive or misleading advertising. - correct answer A - False advertising This is considered to be false, deceptive or misleading advertising. All of the following are requirements for producer license renewal EXCEPT A - Renewal fees. B - Record of fingerprints. C - Renewal examination. D - Continuing education. - correct answer C - Renewal examination. In order to renew a producer's license, proper renewal forms must be submitted, accompanied by payment of the required fees, and proof of the completion of continuing education. The Director may also require a producer to submit a full set of fingerprints. Producers do not have to take any special renewal exams. How many hours of training is a producer required to take before soliciting annuity products? A - 4 hours B - 8 hours C - 15 hours D - There are no special requirements. - correct answer A - 4 hours Prior to selling annuity products, producers must take a one-time 4-hour annuity training course. Insurers are responsible for verifying a producer's completion of the required training.
