XCEL Life Only Final Exam CO
(2022/2023) Rated A+
What type of insurance company sells insurance for a profit? ✔✔Commercial Insurers (Private
Insurance Companies)
What type of insurance company sells more than one li
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XCEL Life Only Final Exam CO
(2022/2023) Rated A+
What type of insurance company sells insurance for a profit? ✔✔Commercial Insurers (Private
Insurance Companies)
What type of insurance company sells more than one line of insurance? ✔✔Multi-line insurer
What type of companies are organized and incorporated under state laws for the purpose of
making a profit for its stockholders? (shareholders) ✔✔Stock Companies
What type of companies are owned by their policyholders? ✔✔Mutual Companies (Mutual
insurers, Participating Insurers)
a sum of money paid regularly (typically quarterly) by a company to its shareholders out of its
profits (or reserves). ✔✔Dividend
Why are dividends from a mutual insurer not subject to taxation? ✔✔Because this type of
dividend is considered to be a return of premium.
If a company operates as both a participating and nonparticipating insurer, they known as a
_________. ✔✔Mixed Insurer
What is a mutual company that operates based on loss-sharing by group members where no
premium is payable in advance? ✔✔Pure Assessment Mutual Company
What is a mutual company that charges a premium at the beginning of the policy period?
✔✔Advance Premium Assessment Mutual
What is a mutual company that is a "special type"? (nonprofit religious, ethnic or charitable
organizations that provide insurance solely to their members). ✔✔Fraternal Benefit Societies
What is a mutual company formed by a group of people in the same industry or profession?
✔✔Risk Retention Groups
What type of insurers are unincorporated groups of individual members that provide insurance
for other members through indemnity contracts? (Members providing insurance for other
members) ✔✔Reciprocal Insurers
What type of insurers make arrangements with other insurance companies to transfer a portion of
their risk to the reinsurer ? ✔✔Reinsurer (the reinsurer is the company taking the risk, the ceding
company is the company giving the risk.)
What type of insurer is established and owned by the parent company to insure the parent
company's loss exposure? ✔✔Captive insurer
What type of insurer sells industrial insurance? ✔✔Home Service Insurer
What types of insurance are Social Security (OASDI), Medicare, Medicaid, SGLI/VGLI, and
Tri-Care? ✔✔Government Insurance
How is insurance sold? ✔✔Through distribution systems.
What is the system in which career agents are hired to work at a specific location to sell
insurance? ✔✔Career Agency System
What is the system in which agents work for an independent agency selling policies from several
insurance companies? ✔✔Personal Producing General Agency System
What is the system in which independent agents represent a number of insurance companies
under separate contractual agreements? ✔✔Independent Agency System (American Agency
System)
What is the system in which branch offices are established in several locations instead of a
general agent? ✔✔Managerial System
What is the method of selling policies through advertisements? ✔✔Mass Marketing
What is the organization composed of insurance comissioners from all 50 states? ✔✔The
National Association of Insurance Commissioners (NAIC)
Who is responsible for assisting in the administration of in state insurance laws and regulations,
encouraging uniformity in state insurance laws and regulations, protecting the interest of
policyowners and consumers, and preserving state regulation of the insurance business? ✔✔The
NAIC
What code specifies certain words and phrases that are NOT to be used in advertising because
they are misleading? ✔✔Advertising Code
What Act gives chief financial officers the power to investigate insurance companies and
producers and impose penalties? ✔✔Unfair Trade Practices Act
Who created the Code of Ethics detailing the expectations of agents in their duties towards
clients? ✔✔NAIFA (National Association of Insurance and Financial Advisors) and NAHU
(National Association of Health Underwriters).
What are some of the standards and ethics to sell insurance? ✔✔Selling to needs, suitability of
recommended products, full and accurate disclosure, documentation, client services, buyer's
guide, policy summary.
What are funds that are set aside by an insurance company and designated for the payment of
future claims? ✔✔Reserves
What is the term for an insurer's ability to make unpredictable payouts to policyowners?
✔✔Liquidity
What protects insureds in the event of an insurer insolvency, or inability to pay claims up to a
certain limit? ✔✔Guaranty Associations
What agencies rate or "grade" the financial strength and stability of insurers? ✔✔Independent
Rating Services/Agencies
What is a contractual arrangement that transfers exposure from one insurer to another insurer?
✔✔Reinsurance
What is the method of determining the financial value of a person's life based on the value of
their future earnings? ✔✔Human Life Value Approach
What is the method of determining a person's financial value based on the amount of money
needed for current and future expenses? ✔✔Needs Based Value Approach
What are the four elements of an insurance contract? ✔✔Consideration, Legal Purpose, Offer
and Acceptance, Competent Parties
What is special about a contract of adhesion? ✔✔It is written only by the insurance company
with no negotiation.
What is a contract wherein there is an unequal exchange? ✔✔Aleatory Contract
What is a once sided agreement where only the insurer is legally bound? ✔✔Unilateral Contract
What type of insurance contract pays a stated amount? ✔✔Valued Contract
What type of insurance contract only reimburses the actual cost of a loss? ✔✔Indemnity
Contract
Statements made by the applicant guaranteed to be true (name, DOB) ✔✔Warranties
Statements made by the applicant believed to be true (height, weight) ✔✔Representations
When a consumer purchases a life insurance policy with the agreement that a third-party
agent/broker or investor will purchase the consumer's policy, this is called a: ✔✔StrangerOriginated Life Insurance Policy (STOLI)
The legal process of preventing one party from reclaiming a right that was wavied. ✔✔Estoppel
What rule disallows changing the meaning of a written contract by introducing verbal or written
evidence made prior to the formation of the contract? ✔✔Parol Evidence Rule
The right for an insurer to pursue a third party that caused an insurance loss. ✔✔Subrogation
What Life policy type issues very small death benefits (1k-2k). Designed for burial coverage.
✔✔Industrial Life
What Life policy type is written for members of a group? ✔✔Group Life
What Life policy gives you the greatest amount of coverage for a limited period of time?
✔✔Term Life
What Life policy has a level death benefit and level premiums? ✔✔Level Term
What Life policy provides an annually decreasing death benefit (face value) with level
premiums? ✔✔Decreasing Term
What Life policy provides an annually increasing death benefit (face value) over time based on
specific amounts of a percentage of the original amount? ✔✔Increasing Term
What Life policy allows policyowners to convert their term insurance into permanent policies
without showing proof of insurability? ✔✔Convertible Term
What Life policy guarantees the insured the right to continue term coverage after the expiration
of the initial policy period without having to prove insurability? ✔✔Renewable Term
What life insurance product covers children under their parent's policy? ✔✔Term Riders
What Life policy provides death benefits for the entire life of the insured? ✔✔Whole Life
A policy that covers two or more people where the age of the insureds are averaged and a single
premium is charged. ✔✔Joint Life Policy
A policy that covers two or more people where the age of the insureds are averaged and a single
premium is charged, and the second to die receives the benefit. ✔✔Joint and Survivor Policy
Life insurance that is written on the lives of a minor. ✔✔Juvenile Insurance
What type of provision is typically attached to juvenile policies? ✔✔Payor Provision
Insurance designed to cover the life of a debtor where if they die before the loan is repaid, the
loan is paid with the policy. ✔✔Credit Life Insurance
What Life policy allows the policyowner to determine the amount and frequency of premium
payments which will adjust the policy face amount? ✔✔Universal Life
The process used by an insurance company to determine whether or not an applicant is insurable.
✔✔Underwriting
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