Life & Health Insurance Insurance Regulation and Ethics Flashcards
7 cards from real Life & Health Insurance Exam practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Life & Health Insurance Insurance Regulation and Ethics flashcards as text
Which of the following is an example of a material misrepresentation on a life insurance application?
Answer: Failing to disclose a history of cancer treatment
Failing to disclose a significant medical history such as cancer treatment is a material misrepresentation that would affect the insurer's underwriting decision.
An insurance guaranty association protects policyholders primarily by:
Answer: Paying claims when an insurer becomes insolvent
State guaranty associations are funded by assessments on licensed insurers and pay covered claims when a member insurer becomes insolvent.
The 'suitability' standard in life and health insurance sales requires producers to:
Answer: Recommend products appropriate for the client's needs and financial situation
Suitability requires that a producer only recommend insurance products that are appropriate given the client's specific needs, financial situation, and objectives.
A producer who co-mingles client premium funds with their personal bank account is violating:
Answer: Fiduciary and licensing laws
Commingling client funds with personal funds violates the producer's fiduciary duty and is a serious licensing violation that can result in license revocation.
Under most state laws, when must an applicant receive a Life Insurance Buyer's Guide?
Answer: At or before the time the application is taken
State regulations typically require that the Buyer's Guide and policy summary be delivered to the applicant at or before the time of application to aid in their purchasing decision.
Which of the following actions would most likely trigger an investigation for money laundering under insurance regulations?
Answer: Buying a large single-premium life policy with cash and then quickly surrendering it
Purchasing a large single-premium policy with cash and rapidly surrendering it is a classic 'placement and layering' money laundering technique using insurance products.
The primary purpose of the 'incontestability clause' in a life insurance policy is to:
Answer: Protect the beneficiary by limiting the insurer's right to void the policy after two years
The incontestability clause typically limits the insurer's right to rescind the policy based on misrepresentation to a period of one to two years after issue.