California Financing License Practice Exam 1
Which of the following is considered to be a morale hazard?
Driving recklessly
Any person who engages in any unfair method of competition or deceptive act is liable to the state for a civil penalty and a fine of $5,000 for each act. In addition, if it is determined that the act is willful the fine will NOT exceed
$10,000
An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?
$200,000
Group life insurance is a single policy written to provide coverage to members of a group. Which of the following statements concerning group life is CORRECT?
100% participation of members is required in noncontributory plans.
All insurance policies and annuity contracts delivered to senior citizens in the State of California are subject to a cancellation period of at least
30 days
The Commissioner may suspend an applicant's license without a hearing if the applicant has had another professional license suspended or revoked within what time period?
5 years
According to the Code, how many separate requirements should an insurance policy have?
6
When transacting business in this state an insurer formed under the laws of another country is known as a/an
Alien insurer
The minimum interest rate on an equity indexed annuity is often based on
An index like Standard or Poor's 500
Who can make a fully deductible contribution to a traditional IRA?
An individual who has earned income
Any insurance agent who engages in the insurance business and violates the Code with respect to insurance replacement shall on the first violation
Be fined a sum of $1,000
All of the following statements are correct regarding credit life insurance EXCEPT
Benefit's are paid to the borrower's beneficiary
Which of the following statements regarding Business Overhead Expense policies is NOT true?
Benefits are usually limited to six months
All of the following are personal uses of life insurance EXCEPT
Buy-sell agreement
Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner?
Cash surrender
An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable?
Charitable Organization
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a
Convertible Term Policy
A key person insurance policy can pay for which of the following?
Costs of training a replacement
The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called
Credit Life
Which of the following is NOT fundable by annuities?
Death benefits
Concerning AIDS and HIV risks, all of the following acts may subject an insurer to liability claims or fines EXCEPT
Declining applicant for positive HIV results
If an annuitant dies before annuitization occurs, what will the beneficiary receive?
Either the amount paid into the plan or the cash value of the plan, whichever is the greater amount
A young father would like a life insurance policy to provide coverage for all five family members at the lowest cost. Which type of policy would he most likely buy?
Family Protection Policy
Which is TRUE about the cash surrender nonforfeiture option?
Funds exceeding the premium paid are taxable as ordinary income.
Events or conditions that increase the chances of an insured loss occurring are referred to as
Hazards
Which of the following is true regarding a policy with a face value less than $10,000?
If it's returned during the free look period, the agreement will be void.
A life insurance policy has a legal purpose if both of which of the following elements exist?
Insurable Interest and Consent
Which of the following best describes the MIB?
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance.
Which of the following is TRUE regarding the annuity period?
It may last for the lifetime of the annuitant.
Variable Whole Life insurance is based on what type of premium?
Level Fixed
Which of the following settlement options in life insurance is known as straight life?
Life income
Insurance is a contract by which one seeks to protect another from
Loss
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an
Modified Endowment Contract
What is the official name for the Social Security program?
Old Age Survivors Disability Insurance
Profitable distribution of exposures serves the purpose of
Protecting the insurer against adverse selection.
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to
Purchase a single premium policy for a reduced face amount.
According to California Insurance Code, which of the following can be classified as an insurable event?
Pure Risks
Another name for a substandard risk classification is
Rated
If an agent wishes to sell variable life policies, what license must the agent obtain?
Securities
Every long-term care insurer in California must submit to the Commissioner a list of all agents or other insurer representatives authorized to solicit individual consumers for the sale of long-term care insurance. These submitted agent lists must be updated at least
Semiannually
Which settlement option provides a single beneficiary with income for the rest of his/her life?
Single Life
Which two terms are associated directly with the way an annuity is funded?
Single payment or periodic payments
The California Insurance Code is
Statutes established by the State Legislature.
A fee charged to the insured when a policy or annuity is exchanged for its cash value is
Surrender Charge
The advantage of qualified plans to employers is
Tax deductible contributions.
What method is used to determine the taxable portion of each annuity payment?
The exclusion ration
A licensee is NOT required to comply with continuing education requirements in the state of California if which conditions are met?
The licensee has been in good standing for 30 continuous years, and is at least 70 years old.
If an insured continually uses the automatic premium loan option to pay the policy premium,
The policy will terminate when the cash value is reduced to nothing.
Why should the producer personally deliver the policy when the first premium has already been paid?
To help the insured understand all aspects of the contract
Who is responsible for equitably evaluating insurable risks and selecting and distributing to the insurer those that are profitable to the insurer?
Underwriter
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death