Chapters 1-4 Review Exam

Bill purchased a $250,000 5yr. Non-renewable term life policy and named his wife as the beneficiary. If he dies 8 yrs later, how much will his wife receive from the policy? a. $0 b. $250,000 c. It depends on the cause of death d. It depends if he renews the policy or not

a. $0

John's employment was terminated on August 14, 2007. He was covered under a group life insurance policy for $100,000. John died of a heart attack on August 29, 2007. He did not elect to convert his group life policy to an individual one. How much will his beneficiary receive from his group life policy? a. $100,000 b. $50,000 c. $25,000 d. $0

a. $100,000

A report of previously submitted life insurance applications to other insurers is known as a. A Medical Information Bureau report b. an Attending Physicians Statement C. an agent report d. a credit report

a. A Medical Information Bureau report

Two businesses partners own life insurance on each other. If one person dies, which of the following contracts will allow the other partner to buy 100% of the business interest? a. Buy and Sell Agreement b. Key Employee Life policy c. Survivorship life d. Joint and Survivor annuity

a. Buy and Sell Agreement

Which of the following group life plans requires at least 75% of the eligible members to participate? a. Contributory b. Noncontributory c. Participating d. Nonparticipating

a. Contributory

Which of the following amounts must decrease in a decreasing term policy? a. Death benefit b. Non-forfeiture values c. Interest Rate d. Premium

a. Death benefit

In which of the following are proceeds left with the insurer and earnings sent to the beneficiary? a. Life income b. Interest-only c. Fixed period d. Fixed-amount

a. Life income

The primary purpose of an annuity is to a. Provide income for retirement b. Satisfy creditors debts c. Create an estate d. Provide income for a beneficiary

a. Provide income for retirement

Which of the following statements regarding a revocable beneficiary is CORRECT: a. The policyowner may change the beneficiary without his or her knowledge or approval b. All policy rights are relinquished when a revocable beneficiary is named c. a revocable beneficiary may not be changed by the policyowner without the consent of the beneficiary d. a revocable beneficiary receives policy proceeds in the event that the primary beneficiary predeceases the insured

a. The policyowner may change the beneficiary without his or her knowledge or approval

An insurer that shares its profits with its' policyowners is known as a. a mutual insurer b. a domestic insurer c. a charitable insurer d. a stock insurer

a. a mutual insurer

Statements made by an applicant for insurance on the application are considered to be a. representations b. conditions c. warranties d. misrepresentations

a. representations

All of the following are true statements regarding policy dividends paid on a life insurance contract EXCEPT: a. they are considered taxable income b. they can be used to purchase additional amounts of insurance c. they can be used to reduce future premium payments d. they can be left with the insurer to accumulate interest

a. they are considered taxable income

Michael owns a $50,000 whole life policy with a $50,000 Accidental Death benefit rider. While driving to work, Michael has a heart attack then crashes his car and dies. How much will the policy pay to his beneficaiary? a. $0 b. $50,000 c. $100,000 d. $200,000

b. $50,000

All of the following are true statements regarding representations EXCEPT: a. A statement made to the insurer for the purpose of giving information b. A statement that is guaranteed to be true c. A statement that is true to the best knowledge of the applicant d. A statement made to the insurer as an inducement to accept the risk

b. A statement that is guaranteed to be true

In a life policy, a special benefit that prepays a portion of a death benefit during the lifetime of an insured in the event of a specified illness: a. An accidental death and dismemberment benefit b. An acceleration of life insurance benefit c. A major medical benefit d. A waiver of premium disability benefit

b. An acceleration of life insurance benefit

The provision that addresses misstatements made by applicant on an application is a. Grace Period b. Incontestability clause c. Consideration clause d. Insurability clause

b. Incontestability clause

Interest paid on a policy loan is a. Tax deductible b. Not tax deductible c. Tax deferred d. Not tax deferred

b. Not tax deductible

Which of the following provisions in a life policy specifies the manner in which proceeds will be paid to a beneficiary on the death of the insured? a. Nonforfeiture options b. Settlement options c. Change of Beneficiary d. Modes of Payment

b. Settlement options

Which of the following states the terms of coverage during the underwriting process? a. The insurance contract b. The conditional receipt c. The agent's statement d. The insuring clause

b. The conditional receipt

An insurance producer takes an application for a life policy but does not collect the initial premium. On delivery of the policy to the proposed insured, the producer must collect the initial premium and which of the following? a. A copy of the MIB report b. The insured's signed statement of continued good health c. A copy of the conditional receipt d. A copy of the temporary insurance agreement that covered the period between the application date and the delivery date

b. The insured's signed statement of continued good health

All of the following are true about a stock insurance company EXCEPT: a. It is a publicly owned, private organization with shareholders b. Their policy holders vote for the members of the board of directors c. Stockholders may or may not be policyholders d. When declared, stock dividends are paid to stockholders

b. Their policy holders vote for the members of the board of directors

If an insurer wants to obtain an HIV test from an applicant a. They can not use the applicant's HIV status to deny the application b. They must obtain the applicant's written consent c. They must notify the applicant's family of the results d. They are not permitted to do an HIV test for life insurance

b. They must obtain the applicant's written consent

Reinstatement of a life insurance policy requires an insured to take all of the following actions EXCEPT: a. provide evidence of insurability b. make collateral assignment to the insurer c. pay back interest on any outstanding policy loan d. pay all past-due premiums

b. make collateral assignment to the insurer

An employer paid life insurance policy is called a. group credit life b. non-contributory group life c. defined contribution plan d. 401k

b. non-contributory group life

The right to change a beneficiary is reserved for the a. beneficiary b. policyowner c. insurer d. insured

b. policyowner

Fred owns a $100,000 term life policy with a monthly premium of $100, due on the 1st of each month. Fred failed to make his July 1st premium and died on July 2011 How much will his beneficiary receive? a. $100,000 b. $100,100 c. $ 99,900 d. $0

c. $ 99,900

A tax free exchange of one life insurance policy or annuity for another is called a. SIMPLE transfer b. defined contribution c. 1035 exchange d. KEOGH

c. 1035 exchange

A policy that provides lifetime protection for an insured with premiums payable for 20 years is called a a. 20-year Endowment b. 20-year term c. 20-pay Life d. 20-year renewable and Convertible term

c. 20-pay Life

Under a Traditional IRA, owners must begin to receive payments from their accounts by the time they reach age a. 59 1/2 b. 65 c. 70 1/2 d. There is no required age to begin distributions

c. 70 1/2

A payor benefit rider provides which of the following benefits? a. A disability income benefit payable to the payor if the payor becomes disabled b. A permanent waiver of premium should the payor die c. A temporary waiver of premium should the payor die, until the insured reaches a predetermined age d. A double indemnity Death benefit payable to the beneficiary upon the death of the payor

c. A temporary waiver of premium should the payor die, until the insured reaches a predetermined age

An insurance company incorporated in Indiana, with it's home office in Texas, is licensed to conduct business in all states except Pennsylvania, In Texas, this company would best be described as which of the following types of insurers? a. Domestic b. Alien c. Foreign d. Regional

c. Foreign

Which of the following features allows an insurance policy to remain in force for a specified number of days beyond the premium due date? a. Reinstatement provision b. Nonforfeiture option c. Grace period provision d. Consideration clause

c. Grace period provision

R has just graduated from law school. R knows his future earnings will be much higher than they are now, but wants to purchase a permanent policy now to cover future needs. Which of the following policies would BEST suit R's needs? a. Increasing term b. Life Paid-up at 65 c. Modified Whole Life d. Annual Renewable Term

c. Modified Whole Life

Which of the following makes Universal Life insurance different from other forms of permanent insurance? a. Settlement options b. Free look period c. Premium schedule d. Beneficiary provisions

c. Premium schedule

If a policy contains a Guaranteed Insurability rider, the insured has the right to purchase: a. additional coverage when the insured reaches retirement age b. additional coverage whenever the insured changes jobs c. additional coverage at specified ages d. coverage on the insured's children within 15 days after they are born

c. additional coverage at specified ages

A company decides to purchase Key Employee Life Insurance for its vice president of operations. All of the following statements are correct EXCEPT the a. company is the policyowner b. company is the applicant c. employee names the beneficiary d. employee gives consent to be insured

c. employee names the beneficiary

In life insurance, insurable interest must exist at the time the a. producer delivers a policy b. proposed insured has a medical exam c. producer writes an application on a proposed insured d. beneficiary files a claim

c. producer writes an application on a proposed insured

Standard non-forfeiture benefits include a. a return of premiums b. a 10-day free look period c. reduced paid up insurance d. deferred payment of cash surrender value for 9 months

c. reduced paid up insurance

John owns a $100,000 policy with a $40,000 cash value and a 6% interest rate. On January 1, he borrows $5,000 and pays one year's interest in advance. During the year, he does not repay any part of the loan or the interest. If he dies on December 31, the beneficiary is entitled to a MAXIMUM of: a. $35,000 b. $60,000 c. $94,700 d. $95,000

d. $95,000

Which of the following prevents the producer from unilaterally amending a policy? a. Policyowners rights b. Consideration clause c. Adhesive clause d. Entire Contract

d. Entire Contract

The term used to indicate that a policy beneficiary cannot be changed is: a. Contingent b. Secondary c. Permanent d. Irrevocable

d. Irrevocable

A contract that promises to pay an income to an insured until their death is called? a. Family income b. Modified Endowment c. Survivorship life d. Life Annuity

d. Life Annuity

Which of the following would best be used for estate planning purposes? a. Endowments b. Term Life c. Joint Life d. Survivorship Life

d. Survivorship Life

The grace period in a life insurance policy begins a. When the policy is delivered to the applicant b. When the policy is delivered to the agent c. When the claim is submitted d. When the premium is due

d. When the premium is due

A life insurance policy that fails to meet the seven-pay test is called a a. limited-pay policy b. single-premium pay policy c. variable universal life d. a modified endowment contract

d. a modified endowment contract

All of the following are modes of payment in a life policy EXCEPT a. Annual b. 3mos c. monthly d. bi-weekly

d. bi-weekly

Mr. Towns a $100,000 term life policy with a $100,000 AD&D rider. Mr. has an accident and loses his leg. Which of the following would Mr. Treceive? a. $200,000 b. $100,000 c. principal sum d. capital sum

d. capital sum

An applicant makes an offer to the insurer when they a. accept the terms of the contract b. take the medical exam c. pay a rating d. pay an initial premium with the application

d. pay an initial premium with the application

A modification to a life policy is called a a. declaration b. rating c. provision d. rider

d. rider

Social Security retirement benefits are determined by all of the following EXCEPT? a. age b. PIA c. currently insured or fully insured status d. sex

d. sex