Health life insurance quiz
During partial withdrawal from a universal life policy, which portion will be taxed? A Cash value B Principal C Loan D Interest
D Interest During the withdrawal, the interest earned on the withdrawn cash value may be subject to taxation.
6 The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the A Entire contract. B Total contract. C Aleatory contract. D Complete contract.
A Entire contract. The policy, together with the attached application, constitutes the entire contract. This provision limits the use of evidence other than the contract and the
15 What is the term for how frequently a policyowner is required to pay the policy premium? A Mode B Schedule C Grace period D Consideration
A Mode The premium mode is the manner or frequency that the policyowner pays the policy premium.
5 Which of the following individuals must have insurable interest in the insured? A Underwriter B Producer C Policyowner D Beneficiary
C Policyowner The policyowner must have an insurable interest in the insured (his/her own life if the policyowner and the insured is the same person), or in the life of a family member or a business partner.
5 Which nonforfeiture option has the highest amount of insurance protection? A Conversion B Decreasing Term C Reduced Paid-up D Extended Term
D Extended Term The Extended Term nonforfeiture option has the same face amount as the original policy, but for a shorter period of time.
15 Which of the following best describes an insurance company that has been formed under the laws of this state? A Sovereign B Alien C Foreign D Domestic
D Domestic A company is domestic when doing business within the state in which it is incorporated.
2 Pertaining to insurance, what is the definition of a fiduciary responsibility? A Offering additional coverage to clients B Promptly forwarding premiums to the insurance company C Helping insureds to file claims D Performing reviews of insured's coverage
C Helping insureds to file claims Fiduciary refers to a position of trust. When an agent is handling the premiums that belong to an insurance company, they are acting in a fiduciary capacity.
10 Which of the following terms is used to name the nontaxed return of unused premiums? A Surrender B Dividend C Premium return D Interest
B Dividend The return of unused premiums is called a dividend. Dividends are not considered to be income for tax purposes, since they are the return of unused premiums.
2 Children's riders attached to whole life policies are usually issued as what type of insurance? A Adjustable life B Whole life C Term D Variable life
C Term Children's term riders provide term insurance with coverage expiring when the minor reaches a certain age.
2 An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? A Aleatory B Good health C Adhesion D Conditional
A Aleatory In an aleatory contract, unequal amounts are exchanged between payments and benefits. In this instance, the insured receives a large benefit for a small price.
4 All of the following are duties and responsibilities of producers at the time of application EXCEPT A Change any incorrect statement on the application by personally initialing next to the corrected statement. B Explain the nature and type of any receipt the producer is giving to the applicant. C Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information. D Check to make sure that there are no unanswered questions on the application.
A Change any incorrect statement on the application by personally initialing next to the corrected statement. Any changes to information on an application must be initialed by the applicant.
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a A Decreasing Term Policy. B Whole Life Policy. C Convertible Term Policy. D Renewable Term Policy.
C Convertible Term Policy. A convertible term policy has a provision that allows the policyowner to convert to permanent insurance.
12 The insured is also the policyowner of a whole life policy. What age must the insured attain in order to receive the policy's face amount? A 65 B 70 1/2 C 90 D 100
D 100 Whole life insurance policies mature when the insured reaches the age of 100. The cash value at that time is scheduled to equal the face amount; therefore, when the insurance company pays the face amount, it also, in effect, pays the cash value.
15 The death benefit under the Universal Life Option B A Decreases by the amount that the cash value increases. B Increases for the first few years of the policy, and then levels off. C Remains level. D Gradually increases each year by the amount that the cash value increases.
D Gradually increases each year by the amount that the cash value increases. Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases.
Which of the following best describes the aleatory nature of an insurance contract? A Ambiguities are interpreted in favor of the insured B Policies are submitted to the insurer on a take-it-or-leave-it basis C Exchange of unequal values D Only one of the parties being legally bound by the contract
C Exchange of unequal values An aleatory contract is a contract in which unequal amounts or values are exchanged. The amount of premium the insured pays is much less than the potential loss assumed by the insurer.
4 Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another? A Switching B False advertising C Rebating D Twisting
D Twisting "Twisting" is a misrepresentation that persuades an insured/owner, to his or her detriment, to cancel, lapse, or switch policies from one to another.
14 An insured submits a proof of loss form within 10 days of a loss. The insurer, however, does not acknowledge the form for 3 months. Which of the following violations has the insurer committed? A Unfair claims settlement B Rebating C Inappropriate delay D Dragging
A Unfair claims settlement Failing to affirm or deny coverage of claims within a reasonable time after proof of loss statements are completed and submitted by insureds is an example of unfair claims settlement.
14 Which of the following insurance products will be subject to the regulation on life insurance solicitation? A An annuity B A term life policy C A credit life policy D A group life policy
B A term life policy The regulation on life insurance solicitation does not apply to the sale of annuities, credit life and group life insurance, variable life insurance policies, and life insurance policies issued in connection with pension and welfare plans that are subject to ERISA.
11 During replacement of life insurance, a replacing insurer must do which of the following? A Guarantee a replacement for each existing policy B Designate a new producer for a replaced policy C Send a copy of the Notice Regarding Replacement to the Department of Insurance D Obtain a list of all life insurance policies that will be replaced
D Obtain a list of all life insurance policies that will be replaced The replacing insurance company must require from the producer a list of the applicant's life insurance policies to be replaced and a copy of the replacement notice provided to the applicant, and send each existing insurance company a written communication advising of the proposed replacement.
11 life insurance policy that provides coverage on the insured's family members is called the A Payor rider. B Other-insured rider. C Change of insured rider. D Juvenile rider.
B Other-insured rider. The other-insureds rider is useful in providing insurance for more than one family member. The type of insurance offered by this rider is usually term insurance, with the right to convert to permanent insurance.
4 Under a group plan, Certificates of Insurance must include all of the following EXCEPT A A description of the insurance protection. B The name of the insured. C The name of the writing agent. D The group policy number.
B The name of the insured. Incorrect! Certificate of insurance for a group plan requires the policy number, description of insurance protection and the name of the insured. The name of the writing agent is not a requirement.
5 Social Security was created to provide all of the following benefits EXCEPT A Retirement income. B Unemployment income. C Survivor's benefits. D Disability income.
B Unemployment income. Social Security is designed to provide protection against financial loss due to old age, disability, or death. It also provides income during retirement.
14 All of the following are TRUE statements regarding the accumulation at interest option EXCEPT A The interest is credited at a rate specified by the policy. B The policyholder has the right to withdraw the accumulations at any time. C The interest is not taxable since it remains inside the insurance policy. D The annual dividend is retained by the company.
C The interest is not taxable since it remains inside the insurance policy. The interest credited under this option is TAXABLE, whether or not the policyowner receives it.
1 The president of a manufacturing company has offered one of the company's officers a special individual annuity plan that is unavailable to lower-echelon employees. This plan would be funded with before-tax corporate dollars, and it does not meet government approval standards. This annuity plan is A Subject to government standards. B Illegal. C A nonqualified annuity plan. D An executive annuity plan.
A Subject to government standards. Nonqualified plans are a perfectly legal way for selected employees to receive certain types of benefits. Before-tax corporate dollars can be used for these plans, and they are not subject to government standards. Because of this, however, nonqualified plans contributions are not tax-deductible, unlike with qualified plans.
9 The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the A Reinstatement clause. B Insuring clause. C Misstatement of Age clause. D Incontestability clause.
D Incontestability clause. If an insurer wishes to contest any statements on an application, they must do so within the first two years.
3 What is the major difference between a stock company and a mutual company? A Ownership B Amount of death benefit C Number of producers D Types of whole life policies
A Ownership Mutual companies are owned by policyholders, while stock companies are owned by stockholders.
10 Under special circumstances, continuing education requirements may be extended beyond the 2-year period for a maximum period of A 12 months. B 3 months. C 6 months. D 9 months.
12 months. Correct! Excess classroom hours accumulated during any 2-year period may be carried forward to the next 2-year period. If good cause is shown, the department may grant an extension not to exceed 1 year.
12 If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select? A Fixed period B Life with period certain C Fixed amount D Interest only
A Fixed period Under the fixed-period installments option (also called period certain), a specified period of years is selected, and equal installments are paid to the recipient. The payments will continue for the specified period even if the recipient dies before the end of that period.
3 The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? A Reduction of premium B Paid-up addition C Accumulation at interest D Cash option
A Reduction of premium The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.
12 Which of the following documents must be provided to the policyowner or applicant during policy replacement? A Policy illustrations B Notice Regarding Replacement C Disclosure Authorization Form D Buyer's Guide and Policy Summary
B Notice Regarding Replacement Incorrect! During policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.
14 All of the following would be different between qualified and nonqualified retirement plans EXCEPT A IRS approval requirements B Taxation on accumulation C Taxation of withdrawals D Taxation of contributions
B Taxation on accumulation Taxation on accumulation is deferred in both types of plans. The rest of the characteristics would differ.
If an insurer requires a medical examination of an applicant in connection with the application for life insurance, who is responsible for paying the cost of the examination? A The examiner B The applicant C The insurer D The cost of the examination will be waived.
B The applicant During the underwriting process, an insurer may require that an applicant receive a medical examination. The insurer is responsible for the associated costs of the examination.
13 An annuity contract is issued to a senior consumer over age 65. What is the maximum surrender charge for a withdrawal of money allowed on this annuity? A 5% B 8% C 10% D 12%
C 10% An annuity contract issued to a senior consumer age 65 or older may not contain a surrender or deferred sales charge for a withdrawal of money from an annuity exceeding 10% of the amount withdrawn.
5 An agent delivers a life insurance policy to the proposed insured. The insured makes a decision not to accept the policy. The insured may return the policy for a full refund of premium within how many days? A 7 B 10 C 14 D 21
C 14 The free-look provision in Florida allows the insured to return a life policy or annuity after 14 days if dissatisfied for any reason.
9 Which of the following will NOT be considered unfair discrimination by insurers? A Cancelling individual coverage based on the insured's marital status B Assigning different risk classifications to applicants based on gender identity C Discriminating in benefits and coverages based on the insured's habits and lifestyle D Charging applicants with similar health histories different premiums based on their ethnicity
C Discriminating in benefits and coverages based on the insured's habits and lifestyle Discriminating between individuals of the same class with equal life expectancies, or by reason of race, nationality, or ethnic group would be considered unfair discrimination. Insurers are also not allowed to cancel individual coverage due to a change in marital status. Discriminating in benefits based on the insured's habits and lifestyle (such as smoking or dangerous hobbies) is acceptable.
13 An insured has a Modified Endowment Contract. He wants to withdraw some money in order to pay medical bills. Which of the following is true? A He will not have to pay a penalty, regardless of his age. B He cannot withdraw money from his MEC before age 59½. C He will have to pay a penalty if he is younger than 59½. D He will have to pay a penalty regardless of his age.
C He will have to pay a penalty if he is younger than 59½. Any cash value life insurance policy that develops cash value faster than a seven-pay whole life contract is called a Modified Endowment Contract. It loses the benefits of a standard life contract. All withdrawals are subject to taxation on a LIFO basis, and if withdrawals are made earlier than the age of 59½, a 10% penalty is imposed.
Annually renewable term policies provide a level death benefit for a premium that A Remains level. B Fluctuates. C Increases annually. D Decreases annually.
C Increases annually. Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.
1 Which of the following best describes the unfair trade practice of defamation? A Issuing false advertising material B Refusing to deal with other insurers C Making derogatory oral statements about another insurer's financial condition D Assuming the name and identity of another person
C Making derogatory oral statements about another insurer's financial condition Making oral or written statements directly or indirectly which are derogatory or maliciously critical of another insurer would be an example of the unfair trade practice of defamation.
8 In what way can an agent demonstrate a high standard of ethics? A Setting and meeting monthly production goals B Recommending qualified retirement plans to each client C Putting the client's best interests before their own D Making enough commissions to cover personal expenses
C Putting the client's best interests before their own The needs of the client(s) are the priority to a highly ethical agent.
If an employer decides to change its life insurance policy to a similar one with a different insurer, which of the following describes the extent that replacement regulations will be exercised? A 3 The type of life insurance policy obtained will determine which replacement regulations will be required. B The number of employees covered by the policy will determine which replacement regulations will be required. C Replacement regulations will not apply in this situation. D Special corporate replacement regulations will apply. Incorrect! If a new life insurance policy is provided under a group life insurance policy covering employees or members of an association, replacement regulations do not apply.
C Replacement regulations will not apply in this situation. If a new life insurance policy is provided under a group life insurance policy covering employees or members of an association, replacement regulations do not apply.
3Which of the following statements is correct about a standard risk classification in the same age group and with similar lifestyles? A Standard risk requires extra rating. B Standard risk is also known as high exposure risk. C Standard risk is representative of the majority of people. D Standard risk pays a higher premium than a substandard risk.
C Standard risk is representative of the majority of people. Standard risks are representative of the majority of people in their age and with similar lifestyles. They are the average risk.
9 All of the following employees may use a 403(b) plan for their retirement EXCEPT A A part-time classroom aide. B The vice president of a charitable organization. C The CEO of a private corporation. D A school bus driver.
C The CEO of a private corporation. Not all public employees are eligible for 403(b) plans, or tax-sheltered annuities, only employees of public education (local, state, or federal), as well as employees of charitable organizations.
1 Which of the following dates must be contained in a policy summary? A The date that the policy was issued B The date that the producer was licensed C The date the summary was prepared D The date the application was signed
C The date the summary was prepared A policy summary must contain the date that the summary was prepared.
4 An insured decides to surrender his $100,000 Whole Life policy. The premiums paid into the policy added up to $15,000. At policy surrender, the cash surrender value was $18,000. What part of the surrender value would be income taxable? A $50,000 B $18,000 C $15,000 D $3,000
D $3,000 The difference between the premiums paid and the cash value would be taxable. In this example, the difference between the premiums paid ($15,000) and the cash value ($18,000) is $3,000.
9 If a claim is made on a policy during the grace period, an insurer is allowed to deduct the overdue premium and to charge interest. What is the maximum allowed interest rate? A 2% B 4% C 6% D 8%
D 8% The time that may elapse between a premium's due date and its eventual payment is called the grace period. If a claim is made on a policy during one of these grace periods, an insurer may deduct the amount of the premium due and up to 8% of interest per year from the settlement.
5 If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary? A A death benefit equal to the cash value of the policy B 50% of the death benefit C The face amount minus the premiums that would have been collected until the insured reached the age of 100 D A full death benefit
D A full death benefit Whole life insurance policies guarantee the death benefit. If the insured lives to the age of 100, the insurance company pay the owner the face amount (equal the cash value). However, if the insured dies prior to the policy maturity date, the death benefit is paid to the beneficiary.
15 Representations are written or oral statements made by the applicant that are A Guaranteed to be true. B Found to be false after further investigation. C Immaterial to the actual acceptability of the insurance contract. D Considered true to the best of the applicant's knowledge.
D Considered true to the best of the applicant's knowledge. Representations are statements made by an applicant that they believe to be true.
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report A Are entitled to obtain a copy of the report from the party who ordered it. B Must be advised that a copy of the report is available to anyone who requests it. C May sue the reporting agency in order to get inaccurate data corrected. D Must be informed of the source of the report.
D Must be informed of the source of the report. Under the Fair Credit Reporting Act, if an insurance policy is declined or modified because of information contained in a consumer report, the consumer must be advised and provided with the name and address of the reporting agency.
7 Which term describes the benefits of a life insurance policy that the policyowner does not automatically relinquish even if the policy lapses? A Permanent values B Cash values C Guaranteed values D Nonforfeiture values
D Nonforfeiture values Nonforfeiture values are the benefits of a life insurance policy that the policyowner does not forfeit (lose) even if the policy lapses.
15 If a life insurer holds the proceeds of any policy it issues, which of the following is true? A The proceeds will be more likely to be subject to a creditor's claims against a beneficiary. B Death benefits will be increased as an incentive. C Premiums will be decreased as an incentive. D The proceeds may be exempt from any creditor's claims against a beneficiary other than the policy owner.
D The proceeds may be exempt from any creditor's claims against a beneficiary other than the policy owner. A life insurer may hold the proceeds of any policy it issues, provided the insured agrees. These proceeds may be exempt from any creditor's claims against a beneficiary other than the policy owner.
3 Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated? A Those who have worked in the company for at least 3 years B Those who have dependents C Those who have no history of claims D Those who have been insured under the plan for at least 5 years
D Those who have been insured under the plan for at least 5 years If the master contract is terminated, every individual who has been on the plan for at least 5 years will be allowed to convert to individual insurance of the same coverage.
in insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe? A Unilateral B Unidirectional C Aleatory D Conditional In a unilateral contract, the insured is not legally bound to do anything. The insurer, however, must pay losses covered by the policy.
In a unilateral contract, the insured is not legally bound to do anything. The insurer, however, must pay losses covered by the policy.
8 What is the purpose of a disclosure statement in life insurance policies? A To explain features and benefits of a proposed policy to the consumer B To obtain important underwriting information from the applicant C To help consumers compare policy prices D To protect agents and insurers against lawsuits
A To explain features and benefits of a proposed policy to the consumer Disclosure statements will help the applicants to make more informed and educated decisions about their choice of insurance.
A man purchased a $90,000 annuity with a single premium, and began receiving payments 2 months after that. What type of annuity is it? A Flexible B Deferred C Variable D Immediate D Immediate
D Immediate With an immediate annuity, distribution starts within 1 year of purchase.
2 In a life settlement contract, whom does the life settlement broker represent? A The insurer B The beneficiary C The life settlement intermediary D The owner
D The owner Life Settlement Broker is a person who, for compensation, solicits, negotiates, or offers to negotiate a life settlement contract. Life settlement brokers represent only the policyowners.
12 If an agent does not notify the insurer of an address change, what is the maximum penalty that can be imposed for a one-time offense? A $180 B $250 C $500 D $1,500
B $250 If the department is not notified within the required time period, a maximum fine of $250 will be imposed for the first offense; for subsequent offenses, either a minimum fine of $500 will be imposed or the agent's license will be suspended or revoked.
4 A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy A Decreased death benefit at each renewal. B Required a premium increase each renewal. C Built cash values. D Required proof of insurability every year.
B Required a premium increase each renewal. Annually Renewable Term policies' premiums are adjusted each year to the insured's attained age; however, the policy may be guaranteed renewable. Death benefits remain level, and as with any term policy, there are no cash values.
8 Which of the following is NOT true regarding the annuitant? A The annuitant must be a natural person. B The annuitant cannot be the same person as the annuity owner. C The annuitant's life expectancy is taken into consideration for the annuity. D The annuitant receives the annuity benefits.
B The annuitant cannot be the same person as the annuity owner. While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.
In terms of parties to a contract, which of the following does NOT describe a competent party? A The person must be mentally competent to understand the contract. B The person must have at least completed secondary education. C The person must not be under the influence of drugs or alcohol. D The person must be of legal age.
B The person must have at least completed secondary education. The parties to a contract must be capable of entering into a contract in the eyes of the law. Generally, this requires that both parties be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol.
Which of the following is an example of a limited-pay life policy? A Level Term Life B Straight Life C Life Paid-up at Age 65 D Renewable Term to Age 70
D Renewable Term to Age 70 Limited Pay Whole Life premiums are all paid by the time the insured reaches age 65. The policy endows when the insured turns 100. It is the premium paying period that is limited, not the maturity.
12 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? A Premiums are determined by age, occupation, and individual underwriting. B 100% participation of members is required in noncontributory plans. C Each member covered receives a policy. D Coverage cannot be converted when an individual leaves the group. Incorrect! If the employer pays all of the premium, then all employees must be included.
B 100% participation of members is required in noncontributory plans. If the employer pays all of the premium, then all employees must be included.
13 All of the following are requirements for life insurance illustrations EXCEPT A They must identify nonguaranteed values. B They must differentiate between guaranteed and projected amounts. C They must be part of the contract. D They may only be used as approved.
C They must be part of the contract. An illustration may not be altered by an agent and must clearly state that it is not part of the contract. It is legal to list nonguaranteed values in the contract, but they must be specifically labeled as projected, not guaranteed values.
7 Which of the following is true regarding taxation of dividends in participating policies? A Dividends are taxable only after a certain amount is accumulated annually. B Dividends are taxable in some life insurance policies and nontaxable in others. C Dividends are considered income for tax purposes. D Dividends are not taxable.
D Dividends are not taxable. Dividends are not considered to be income for tax purposes, since they are the return of unused premiums. The interest earned on the dividends, however, is subject to taxation as ordinary income.
10 An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use? A One-year term B Reduction of premium C Accumulation at interest D Paid-up option
D Paid-up option With the paid-up option, the insurer can accumulate dividends at interest and then use them, in addition to interest and the policy's cash value, to pay the policy earlier than planned. This is different from paid-up additions, in which the dividends are used to buy additional policies that increase the face amount of the original policy.
11 Which of the following would qualify as a competent party in an insurance contract? A The applicant is a 12-year-old student. B The applicant is under the influence of a mind-impairing medication at the time of application. C The applicant has a prior felony conviction. D The applicant is intoxicated at the time of application.
C The applicant has a prior felony conviction. When an insurer and insured enter into a contract, both parties must be of legal age and mentally competent. It is legal for a person convicted of a felony to buy an insurance contract. An intoxicated person, however, may not be mentally competent, a 12-year-old student is considered to be underage in most states and a person under mind-impairing medication most likely would not be mentally competent.
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit? A Universal Life - Option A B Universal Life - Option B C Equity Indexed Universal Life D Variable Universal Life Correct! Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.
A Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.
6 When a life insurance policy stipulates that the beneficiary will receive payments in specified installments or for a specified number of years, what provision prevents the beneficiary from changing or borrowing from the planned installments? A Settlement option B Accelerated benefit provision C Loan provision D Spendthrift provision
D Spendthrift provision When a life insurance policy contains a spendthrift provision, all rights of the beneficiary to change time of payment or amount of installments, surrender for cash, borrow against, or assign for any purpose, are withdrawn and those parts of the policy that may give the beneficiary such rights are declared inoperative and void.
2 How will a life insurance beneficiary designation naming a spouse be changed by divorce? A The beneficiary will be changed to revocable. B Insurer's own policy rules will determine the result. C The beneficiary designation will be voided. D There will be no change.
C The beneficiary designation will be voided. If a former spouse of the policyowner is designated as the life insurance policy beneficiary, the beneficiary designation will be void at the time the policyowner's marriage is legally dissolved (divorce) or declared invalid by court order if the designation was made prior to the divorce.
2 Which of the following is TRUE regarding the premium in term policies? A The premium in term policies is not based on the insured's age. B Decreasing term policy will have a decreasing premium. C The premium is level. D Only level term policy has a level premium.
C The premium is level. Regardless of the type of term insurance purchased, the premium is level throughout the term of the policy. Only the amount of the death benefit may change.
11 Who can make a fully deductible contribution to a traditional IRA? A Someone making contributions to an educational IRA B A person whose contributions are funded by a return on investment C An individual not covered by an employer-sponsored plan who has earned income D Anybody; all IRA contributions are fully deductible regardless of income level
C An individual not covered by an employer-sponsored plan who has earned income Individuals who are not covered by an employer-sponsored plan may deduct the amount of their IRA contributions regardless of their income level.
13 Which of the following is NOT typically excluded from life policies? A Self-inflicted death B Death that occurs while a person is committing a felony C Death due to war or military service D Death due to plane crash for a fare-paying passenger
D Death due to plane crash for a fare-paying passenger Generally, policies do not exclude conditions in which an insured is a fare-paying passenger on a commercial airline.
7 An individual has been making periodic premium payments on an annuity. The annuity income payments are scheduled to begin after 1 year since the annuity was purchased. What type of annuity is it? A Fixed B Flexible premium C Immediate D Deferred
D Deferred Deferred annuities may be purchased with either a single lump sum or periodic payments, but they do not begin the income payments until sometime after 1 year from the date of purchase.
5 Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of A Rebating. B Twisting. C Defamation. D Misrepresentation. Incorrect! Twisting is a misrepresentation that persuades an insured or a policyowner, to his or her detriment, to cancel, lapse, or switch policies.
B Twisting. Twisting is a misrepresentation that persuades an insured or a policyowner, to his or her detriment, to cancel, lapse, or switch policies.
10 A paid-up nonforfeiture benefit will become effective as specified in the policy, unless the person entitled elects another available option within how many days after the due date of the premium in default? A 15 B 30 C 60 D 90
C 60 A paid-up nonforfeiture benefit will become effective as specified in the policy, unless the person entitled elects another available option within 60 days after the due date of the premium in default
6 Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income? A Pay-out period B Liquidation period C Depreciation period D Annuitization period
C Depreciation period The "annuitization period" is the time during which accumulated money is converted into an income stream. It is also referred to as the annuity, liquidation or pay-out period.
1 Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death? A The wife of the deceased insured B The former wife of the deceased insured C A minor son of the insured D A business partner of the insured
C A minor son of the insured Because a minor does not have the legal capacity to release the insurer from further obligation, benefits normally have to be passed through a guardian or trustee.
6 Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? A Term insurance only B Permanent insurance only C Universal life insurance only D Any form of life insurance
D Any form of life insurance Any form of Life insurance may be used to fund a buy-sell agreement.
4 Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid? A Entire contract clause B Beneficiary clause C Consideration clause D Insuring clause
D Insuring clause The insuring clause states that the insurer agrees to provide life insurance for the named insured which will be paid to a designated beneficiary when proof of loss is received by the insurer. It states the party to be covered by the policy and names of the beneficiary who will receive the policy proceeds in the event of the insured's death. If no beneficiary is named, the policy proceeds will be paid to the insured's estate.
7 An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of A Coercion. B Twisting. C Controlled business. D Rebating.
D Rebating. When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.
1. If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT A Erase the incorrect answer and record the correct answer. B Draw a line through the first answer, record the correct answer, and have the applicant initial the change. C Note on the application the reason for the change. D Destroy the application and complete a new one.
D Destroy the application and complete a new one. - An agent should not use white-out, erase or obliterate any answers given to a question on an application. It could prevent an insurer from contesting the application, should it be necessary.
14 Which of the following information about the applicant is NOT included in the General Information section of the application for insurance? A Gender B Occupation C Marital status D Medical background
D Medical background Part 1 - General Information of the application includes the general questions about the applicant, including name, age, address, birth date, gender, income, marital status, and occupation.
6 Which of the following would NOT be a violation of state insurance regulations? A Agent C uses her license to write only business other than controlled. B Agent D collects premiums due on policies and deposits the funds in his own personal account. C Agent A uses her license to write only insurance for herself and her immediate family. D Agent B charges his clients a consulting fee, in addition to the premium for placing a policy.
A Agent C uses her license to write only business other than controlled. The purpose of a license is to primarily write business other than controlled business.
15 Which type of retirement account does not require the owner to start taking distributions at age 72? A Traditional IRA B Roth IRA C Nonqualified IRA D Standard IRA
B Roth IRA Roth contributions can continue regardless of the account owner's age, and in contrast with a traditional IRA, distributions do not have to begin at age 72.
If an agent wishes to sell variable life policies, what license must the agent obtain? A Securities B Adjuster C Surplus Lines D Personal Lines
A Securities Variable products are governed in part by the Securities and Exchange Commission; therefore, agents selling variable life policies must also secure a securities license
8 All of the following are business uses of life insurance EXCEPT A Funding against financial loss caused by the death of a key employee. B Funding business continuation agreements. C Funding against company's general financial loss. D Compensating executives.
C Funding against company's general financial loss. Both life and health insurance can be used for a variety of purposes in a business setting, including the funding of business continuation agreements, compensating executives, and protecting the firm against financial loss resulting from the death or disability of key employees.
8 The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive? A $0 B $50,000 (50% of the policy value) C $100,000 D $300,000 (triple the amount of policy value)
C $100,000 The triple indemnity accidental death rider obligates the company to pay three times the face amount of the policy if the insured dies as a result of an accident. The death must be accidental and not contributed to by any other factors and must occur within 90 days of the accident. In this case, since the insured contributed to his own death, the triple indemnity rider is void, but the beneficiary will still receive the policy's death benefit.
6 Part 2 of the application for life insurance provides questions regarding all of the following EXCEPT A Family health history. B Alcohol and tobacco consumption. C Recent surgeries. D Other insurance coverages.
D Other insurance coverages. Part 2 of the application contains questions regarding the applicants' health history. Part I of the application includes questions regarding current coverage being applied for as well as any other insurance coverage with the same or other insurers.
13 A participating insurance policy may do which of the following? A Provide group coverage B Pay dividends to the stockholder C Require 80% participation D Pay dividends to the policyowner
D Pay dividends to the policyowner A participating insurance policy will pay dividends to the owner based upon actual mortality cost, interest earned and costs.
11 An insurance agent X has been found guilty of a felony and was sentenced to 3 years in prison. What would be the appropriate plan of action? A Immediately turn in his license B Appeal to a higher court C Do nothing D Send a written notification to the department of insurance
D Send a written notification to the department of insurance Agents must notify the Department of Insurance in writing 30 days after being found guilty of a felony or a crime punishable by imprisonment of 1 year or more.
7 Which is true about a spouse term rider? A Coverage is allowed for an unlimited time. B The rider is decreasing term insurance. C Coverage is allowed up to age 75. D The rider is usually level term insurance.
D The rider is usually level term insurance. The spouse term rider allows a spouse to be added for coverage. It is available for a limited amount of time, typically expiring at age 65. A spouse term rider (just like any other insured rider) is usually level term insurance.
