ALAHI - Arizona Life Accident and Health Insurance Exam

Question 1: A married couple in Chandler with two young children buys a life policy so that the surviving spouse could replace lost earnings and keep the household running if either parent died. Which of the following personal uses of life insurance does this purchase serve?

Liquidity for an estate

Cash accumulation for retirement

Funding a business buyout

Survivor protection

Question 2: An estate consists mostly of farmland and a closely held business, and the owner worries that heirs will have to sell assets quickly to pay settlement costs. Which of the following uses of life insurance addresses this particular concern?

Survivor income replacement

Executive bonus funding

Providing estate liquidity

Key person indemnification

Question 3: A woman applies for a life insurance policy on the life of her business partner, naming herself as beneficiary because the partner's sudden death would seriously damage the Tempe firm's finances. Which of the following supports the validity of this application?

The partner's written objection

The applicant paying all premiums

The size of the death benefit

A genuine economic relationship

Question 4: A producer estimates a client's coverage need by projecting the client's remaining working years, current earnings and expected raises, then discounting that stream of future income to a present value. Which of the following approaches is the producer using?

The human life value approach

The estate conservation approach

The capital retention approach

The needs approach

Question 5: A producer sits with a widow and totals the mortgage balance, the children's expected education costs, final medical bills and an emergency fund, then subtracts existing assets. Which of the following methods of determining coverage does this represent?

Human life value approach

Modified endowment calculation

Rule of thumb multiple of salary

Needs approach

Question 6: A technology company purchases a life policy on its lead engineer, pays the premium itself, and names itself as both owner and beneficiary because losing that employee would disrupt revenue. Which of the following arrangements does this describe?

Key person insurance

A buy and sell agreement

Group term life insurance

An executive bonus plan

Question 7: Three partners in a Tucson accounting firm sign an agreement obligating the survivors to purchase a deceased partner's interest at an agreed price, and they fund that obligation with life policies on one another. Which of the following describes this funding arrangement?

Key person coverage

A deferred compensation plan

A cross purchase buy and sell plan

A split dollar arrangement

Question 8: An actuary explains that three variables drive the calculation of a life insurance premium, and that one of them works to lower the premium while the other two push it upward. Which of the following lists those three factors?

Mortality, interest and expense

Age, gender and occupation

Interest, inflation and taxation

Mortality, morbidity and inflation

Question 9: A policyowner considering how often to pay premium learns that choosing monthly instead of annual payment will increase the total amount paid over a year. Which of the following explains why the insurer charges more for frequent payments?

Monthly payments trigger higher commissions

State law requires a surcharge

Mortality risk rises with payment frequency

Lost investment earnings and added administration

Question 10: A producer meeting an applicant asks health questions, records the answers accurately, and forms an early judgment about whether the insurer is likely to accept the risk on standard terms. Which of the following describes the role the producer is performing?

Claims adjudication

Policy administration

Field underwriting

Company underwriting

Question 11: A policy was issued without the initial premium having been paid at application, and the producer now delivers it and collects the premium. Which of the following documents must the producer obtain confirming nothing has changed since the application?

An attending physician statement

A statement of good health

A conditional receipt

An investigative consumer report

Question 12: An applicant completes an application, pays the initial premium and receives a document providing coverage as of that date if the applicant proves insurable on the insurer's normal terms. Which of the following describes the document the applicant received?

A binding receipt

A certificate of insurability

A conditional receipt

A statement of good health

Question 13: An underwriter consults a member organization that maintains coded records of medical conditions previously reported by other insurers, using it during review to check whether an applicant disclosed everything. Which of the following sources of underwriting information is being used here?

An attending physician statement

An inspection report

The producer's report

The Medical Information Bureau

Question 14: An underwriter reviews a Scottsdale applicant whose health history, occupation and personal habits are all noticeably better than average, and who therefore qualifies for the insurer's lowest available premium rates. Which of the following classifications does this applicant receive?

Preferred

Substandard

Standard

Declined

Question 15: An applicant with a significant heart condition is offered a life policy at a premium higher than the insurer's ordinary rate rather than being turned away entirely. Which of the following classifications has the underwriter assigned to this applicant?

Standard

Uninsurable

Substandard

Preferred

Question 16: A borrower buys a policy that pays the same face amount whether death occurs in the first year or the tenth, charges a level premium throughout, and builds no cash value. Which of the following types of coverage does this describe?

Level term life insurance

Decreasing term life insurance

Whole life insurance

Universal life insurance

Question 17: A homeowner in Gilbert buys a policy whose death benefit declines each year in rough step with the mortgage balance, while the premium stays level for the full term of the coverage. Which of the following describes this policy?

Increasing term

Decreasing term

Renewable term

Convertible term

Question 18: A policyowner holds term coverage that may be continued for an additional term and may also be exchanged for a permanent policy, in both cases without submitting new evidence of insurability. Which of the following describes these two rights?

Guaranteed and reduced paid up

Participating and nonforfeitable

Adjustable and indexed

Renewable and convertible

Question 19: A client buys permanent coverage that guarantees a level premium for life, a guaranteed death benefit and a guaranteed cash value that reaches the face amount at the end of the mortality table. Which of the following describes this policy?

Universal life

Level term life

Whole life

Variable universal life

Question 20: A client wants permanent coverage that lasts a lifetime but wishes to finish paying for it by age sixty five, so that the retirement years carry no premium obligation at all. Which of the following policy designs meets this objective?

Continuous premium whole life

Annually renewable term

Single premium whole life

Limited payment whole life

ALAHI Arizona Life Accident and Health Insurance Exam - Set 3 - Part 1