Life Insurance Exam-Illinois Exam with
complete solutions 2024/2025
Pooling of Risks - ANSWER-A large group of people contribute money to a fund
out of which their losses can be paid
Policyowner - ANSWER-is the person or org that applies for the policy and pays
the premium
Actuarial Tables - ANSWER-Are statistical tables that are used when calculating
premium rates and mortality loss reserves
Life Insurance Policies transfer: - ANSWER-financial risks of premature death on
a defined amount
Loss of income - ANSWER-the face amount of life insurance is determined as a
multiple of income
Life annuity - ANSWER-contract which is issued by a life insurance company
protects an individual against the financial risk of outliving a normal life
expectancy according to the mortality actuarial tables and running out of money
in old age
Life annuity - ANSWER-guarantees monthly income benefits to the annuitant for
the rest of his/her life no matter how long he/she lives
Insurable interest - ANSWER-a person must be in a position where he/she will
lose money should loss occur only at the time the policy is issued
,Who must have insurable interest? - ANSWER-the policy owner; he/she will lose
money should hte insured die prematurely
tax qualified plans - ANSWER-contributions can be deducted
non qualified plans - ANSWER-contributions cannot be deducted
tax deferred plans - ANSWER-tax on the interest and/or earnings is postponed as
it compounds and accumulates until it is withdrawn
tax free - ANSWER-no tax on benefits
cost basis - ANSWER-total contributions made to the plan
Tax: premiums paid on individual life insurance policies... - ANSWER-cannot be
deducted (non-qualified)
Tax: the benefits paid to the beneficiary at the insured's death... - ANSWER-is
usually not taxed (tax free)
Participating policy - ANSWER-pays a dividend
Tax: dividends paid to the policyowner on participating policies... - ANSWER-are
usually not taxed (tax free)
Modified Endowment Contract - ANSWER-The IRS has written rules that define
when a life insurance policy does not have a real, valid life insurance purpose
and is in substance an investment or savings plan
If a cash value life insurance policy does not have a valid life insurance purpose,
the IRS classifies it as a - ANSWER-modified endowment contract
Underwriter - ANSWER-is an insurance company employee who reviews
applications and additional information and decides whether the applicant is
acceptable and what the correct premium rate should be
, Application includes (7 items) - ANSWER-age, sex, occupation, dangerous
recreational activities, aviation, smoking, agent's report
Medical reports can be (3 items) - ANSWER-health questionare, paramedic
examiner's report, and physician's report
Who completes the health questionnaire? - ANSWER-the agent and the applicant
with questions about applicant's health history as well as the applicant's parents'
health history
Errors and changes on the application - ANSWER-if an error on an application
occurs, underwriter may require that it be correct and changes must be approved
and initialed by the applicant
Medical Information Bureau Report (MIB) - ANSWER-it is a CLEARINGHOUSE for
medical information for insurance companies that belong to it
Inspection Report - ANSWER-does by an outside firm to verity that the producer
completed the application accurately and completely and to determine if the
applicant has any moral or character risks
Fair Credit Reporting Act (4 items) - ANSWER-1. applicant has a right to be
advised that there may be information collected from outside sources
2. the applicant has a right to the name and address of the inspecting firm if rated
or rejected
3. the applicant has a right to see the inspection report
4. the applicant has the right to have medical information sent to his or her
physician
Representations must be - ANSWER-concealed/false and material and intentional
Warranties - ANSWER-guaranteed statements in an application attachment
regarding extra risk upon which the insurance company can contest the policy
within the first 2 years of the policy if the statement is in anyway concealed or
false
complete solutions 2024/2025
Pooling of Risks - ANSWER-A large group of people contribute money to a fund
out of which their losses can be paid
Policyowner - ANSWER-is the person or org that applies for the policy and pays
the premium
Actuarial Tables - ANSWER-Are statistical tables that are used when calculating
premium rates and mortality loss reserves
Life Insurance Policies transfer: - ANSWER-financial risks of premature death on
a defined amount
Loss of income - ANSWER-the face amount of life insurance is determined as a
multiple of income
Life annuity - ANSWER-contract which is issued by a life insurance company
protects an individual against the financial risk of outliving a normal life
expectancy according to the mortality actuarial tables and running out of money
in old age
Life annuity - ANSWER-guarantees monthly income benefits to the annuitant for
the rest of his/her life no matter how long he/she lives
Insurable interest - ANSWER-a person must be in a position where he/she will
lose money should loss occur only at the time the policy is issued
,Who must have insurable interest? - ANSWER-the policy owner; he/she will lose
money should hte insured die prematurely
tax qualified plans - ANSWER-contributions can be deducted
non qualified plans - ANSWER-contributions cannot be deducted
tax deferred plans - ANSWER-tax on the interest and/or earnings is postponed as
it compounds and accumulates until it is withdrawn
tax free - ANSWER-no tax on benefits
cost basis - ANSWER-total contributions made to the plan
Tax: premiums paid on individual life insurance policies... - ANSWER-cannot be
deducted (non-qualified)
Tax: the benefits paid to the beneficiary at the insured's death... - ANSWER-is
usually not taxed (tax free)
Participating policy - ANSWER-pays a dividend
Tax: dividends paid to the policyowner on participating policies... - ANSWER-are
usually not taxed (tax free)
Modified Endowment Contract - ANSWER-The IRS has written rules that define
when a life insurance policy does not have a real, valid life insurance purpose
and is in substance an investment or savings plan
If a cash value life insurance policy does not have a valid life insurance purpose,
the IRS classifies it as a - ANSWER-modified endowment contract
Underwriter - ANSWER-is an insurance company employee who reviews
applications and additional information and decides whether the applicant is
acceptable and what the correct premium rate should be
, Application includes (7 items) - ANSWER-age, sex, occupation, dangerous
recreational activities, aviation, smoking, agent's report
Medical reports can be (3 items) - ANSWER-health questionare, paramedic
examiner's report, and physician's report
Who completes the health questionnaire? - ANSWER-the agent and the applicant
with questions about applicant's health history as well as the applicant's parents'
health history
Errors and changes on the application - ANSWER-if an error on an application
occurs, underwriter may require that it be correct and changes must be approved
and initialed by the applicant
Medical Information Bureau Report (MIB) - ANSWER-it is a CLEARINGHOUSE for
medical information for insurance companies that belong to it
Inspection Report - ANSWER-does by an outside firm to verity that the producer
completed the application accurately and completely and to determine if the
applicant has any moral or character risks
Fair Credit Reporting Act (4 items) - ANSWER-1. applicant has a right to be
advised that there may be information collected from outside sources
2. the applicant has a right to the name and address of the inspecting firm if rated
or rejected
3. the applicant has a right to see the inspection report
4. the applicant has the right to have medical information sent to his or her
physician
Representations must be - ANSWER-concealed/false and material and intentional
Warranties - ANSWER-guaranteed statements in an application attachment
regarding extra risk upon which the insurance company can contest the policy
within the first 2 years of the policy if the statement is in anyway concealed or
false
