Life Insurance Basics — New York exam
19% of the scored questions — about 19 of 100. This section is general life insurance knowledge, shared with every state's exam.
1 / 8
A business owner needs cash within days and holds a whole life policy with substantial value. How does liquidity serve here?
Answer and explanation
Answer: D. Liquidity means the owner can reach the cash value during life, by loan or by surrender, without the delay of selling other assets. The face amount is payable at death, and an exchange or assignment does not put cash in hand in the same way.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, liquidity
2 / 8
A client has a large mortgage and wants the family to stay in the house. How is that reflected in the lump-sum calculation?
Answer and explanation
Answer: D. Clearing the mortgage at death is a one-time obligation, so the outstanding balance enters the lump-sum column and the family's monthly outlay falls away. The house is not a liquid resource, and lender-arranged cover is not to be assumed.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, lump-sum needs
3 / 8
A client needs the largest immediate death benefit the budget allows for the next fifteen years. Which is indicated?
Answer and explanation
Answer: A. Term buys the most death benefit per premium dollar because none of the premium funds a reserve, which suits a temporary need of defined length. The permanent forms cost more for the same face amount because they build value.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, permanent versus term
4 / 8
A closely held corporation funds a buy-sell agreement so that the company itself buys a deceased shareholder's stock. What is this plan called?
Answer and explanation
Answer: D. In an entity purchase the business is the owner, payer, and beneficiary of one policy on each owner, and it redeems the deceased owner's interest. Only one policy per owner is needed.Source: Internal Revenue Service — IRS Pub. 541, entity purchase and cross-purchase agreements
5 / 8
A company buys life insurance on its chief engineer to protect against the financial loss if she dies. Who is the owner, premium payer, and beneficiary?
Answer and explanation
Answer: A. In key person insurance the business applies for, owns, pays for, and is the beneficiary of the policy. The key employee is the insured and must consent to the coverage.Source: Internal Revenue Service — IRS Pub. 535, key person life insurance owned by the business
6 / 8
A company insures its chief engineer, paying the premiums and naming itself beneficiary. What is the purpose of that arrangement?
Answer and explanation
Answer: A. Key person insurance compensates the business for the disruption a key employee's death causes, including lost profits and the cost of recruiting a successor. Family income, buy-sell funding and deferred compensation are separate arrangements with different ownership and beneficiary designations.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, key person insurance
7 / 8
A family will need income for the twelve years until the youngest child finishes school. What is that period usually called?
Answer and explanation
Answer: D. The dependency period is the span during which children rely on the family's income, and planning covers it separately from the surviving spouse's later needs. Elimination and contestable periods belong to disability and contract law, and accumulation describes an annuity phase.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, planning for income needs
8 / 8
A parent buys life insurance so the family can keep the house if he dies. Which personal use is that?
Answer and explanation
Answer: A. Survivor protection replaces the income the family would lose at the insured's death, which is what keeps the household running. Estate conservation addresses taxes and costs at death, cash accumulation is the build-up inside a permanent policy, and liquidity is the availability of cash when it is needed.Source: PSI — New York DFS Insurance Candidate Information Bulletin — Outline, survivor protection
All 107 life insurance basics questions
- A planner totals a family's final expenses, mortgage balance, and income needs, then subtracts savings and Social Security benefits. Which method is being used?
- A producer adopts the title 'Certified Senior Retirement Specialist', which no organisation confers. How does Regulation 199 treat that?
- A variable whole life owner reallocates policy value among available stock and bond choices. Which account description should the producer use?
- A young professional with modest savings buys a large policy. Which personal use does that serve?
- An adverse underwriting decision rests on an HIV related test result. What does section 2611 require of the insurer?
- An advertisement describes a life policy chiefly as a savings and investment plan. Why is that a problem?
- An applicant applies without paying any premium. The insurer issues the policy exactly as requested. When is the contract formed?
- An applicant believes the personal information an insurer holds is inaccurate. What recourse is provided?
- An applicant pays the premium with the application and receives a conditional receipt, then dies before the policy is issued. What governs the claim?
- An applicant presents better than average health and habits. Into which class is she ordinarily placed?
- An estate consists chiefly of illiquid farmland facing settlement costs. Why is life insurance suited to conserving it?
- An estate consists largely of a family business and will face costs at death. How does life insurance serve estate conservation?
- An illustration shows a bonus credited in the twentieth policy year. When is that permitted?
- An insurer mails a policy to its producer for unconditional delivery to the owner. What is the significance of that?
- An owner paying annually dies four months into the policy year. What happens to the unearned part of that premium?
- An underwriter wants records from the applicant's doctor. What must be in place first?
- At delivery the applicant discloses a hospital admission that occurred after the application was signed. What follows?
- During a sales presentation a producer urges a client to drop an existing policy for a new one using incomplete comparisons. What practice is that?
- During policy delivery, the owner notices a typo in the beneficiary's middle name. How should the producer assist?
- From what event does the free look period on a delivered life policy run?
- How does a business use the death benefit it receives from a key person policy?
- How does a cross-purchase buy-sell agreement use life insurance?
- How does an attending physician statement differ from a medical examination arranged by the insurer?
- How does an insurer usually issue a policy to an applicant classified as substandard?
- How does the needs approach differ from the human life value approach?
- How may a New York policyholder learn what the guaranty corporation protects?
- How may an insurer use a Medical Information Bureau record in underwriting an application?
- How must a producer handle a premium collected from an applicant?
- If an insurer's expected investment return rises, what happens to the premium, other things being equal?
- In a corporate key-person life insurance arrangement, who is the policyowner, premium payor, and beneficiary?
- May a New York producer point to the Life Insurance Company Guaranty Corporation as a reason to buy?
- On what must a recommendation under Regulation 187 be based?
- Two clients need the same monthly survivor income. Why does the capital retention approach require a larger death benefit than capital liquidation?
- Two partners agree that on the death of either, the survivor will buy the deceased's share. How does life insurance support that?
- Under FCRA, if an insurer orders an investigative consumer report involving personal interviews regarding an applicant's character and lifestyle, when must written notice be sent to the applicant?
- What determines the effective date of coverage where no premium accompanies the application?
- What distinguishes an investigative consumer report from an ordinary consumer report?
- What do the two principal parts of a life insurance application contain?
- What does a policyowner receive under a participating policy that a nonparticipating policy does not provide?
- What does liquidity mean in the context of a permanent life policy?
- What does the human life value approach measure?
- What gives a permanent policy its cash accumulation feature?
- What is a participating life insurance policy?
- What is an attending physician statement used for in underwriting?
- What is life insurance used for in estate conservation?
- What is required when an insurer issues a policy on terms different from those applied for?
- What is the blackout period in survivor income planning?
- What is the chief drawback for an employee of relying on group life insurance alone?
- What is the dependency period in planning for income needs?
- What is the essential difference between term and permanent life insurance?
- What is the function of the buyer's guide given to a life insurance applicant?
- What is the governing requirement for life insurance advertising?
- What is the Medical Information Bureau?
- What is the position of the Life Insurance Company Guaranty Corporation of New York in a sales presentation?
- What is the producer's core obligation in a sales presentation?
- What is the producer's responsibility for the answers recorded on a life insurance application?
- What is the standing of the agent's report accompanying a life insurance application?
- What key feature distinguishes a variable annuity from a fixed annuity?
- What licensing does the sale of a variable life insurance policy require?
- What makes a distinction between applicants unfair discrimination rather than lawful underwriting?
- What must a life insurance illustration be labelled under New York's illustration rules?
- What must a producer disclose at the outset of a life insurance sales presentation?
- What must an insurer give an applicant when personal information may be collected from third parties?
- What must an insurer obtain before requiring an HIV related test of a proposed insured in New York?
- What must the written informed consent for an HIV related test contain under section 2611?
- What ordinarily distinguishes group life insurance from individual coverage?
- What primary guarantee is provided to the owner of a fixed annuity contract during the accumulation phase?
- What problem does business continuation planning address?
- What right does an applicant have in respect of a Medical Information Bureau record?
- What separates permanent life insurance from term insurance?
- What should a producer do when delivering an issued life insurance policy?
- What standard does New York's Regulation 187 apply to a producer's recommendation on a life policy or annuity?
- What underwriting difference distinguishes group life from individual life insurance?
- What use of a senior-specific certification does New York's Regulation 199 prohibit?
- When is a statement of good health obtained on delivery of a life insurance policy?
- When may an insurer disclose an applicant's personal information without a specific authorization?
- Where are the assets supporting a variable life policy held, and who bears the investment risk?
- Which characteristic of the granting organisation makes a senior designation a prohibited one under Regulation 199?
- Which deductions are made from gross earnings when computing a human life value?
- Which factor may an insurer properly use in classifying a life insurance risk?
- Which information belongs in a needs analysis for a New York client?
- Which information is gathered when a producer applies the needs approach?
- Which items are counted among the lump-sum needs a death benefit must cover?
- Which measure of survivor protection asks what income the family loses at the insured's death?
- Which New York section governs advertising by an insurance producer?
- Which of these is a cash need rather than a continuing income need in a personal needs analysis?
- Which of these is a lump-sum need in a life insurance analysis?
- Which term does New York's illustration rule prohibit in describing the application of nonguaranteed elements?
- Which three factors determine a life insurance premium?
- Which three factors determine the premium an insurer charges for a life policy?
- Who bears the investment risk in a variable life policy?
- Who owns, pays for, and benefits from key person life insurance?
- Whose interests may a producer weigh when making a recommendation under Regulation 187?
- Why can the human life value approach and the needs approach produce different amounts for the same client?
- Why does paying premium monthly usually cost more in total than paying annually?
- Why does paying premiums monthly cost more over a year than paying annually?
- Why is a copy of the application attached to the life insurance policy when it is issued?
- Why is a variable life policy regulated by more than the state insurance department?
- Why is the premium on a participating policy commonly higher than on a comparable nonparticipating policy?
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