Insurance Exam: Chapter 3, Life Insurance Test, LIFE INSURANCE POLICIES

An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

$100,000

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?

$3,000

How much is an agents appointment fee?

$5

If an insurer wishes to appoint a producer, it must file a notice of appointment within how many days of the date that the contract is executed

15 days

How many days does a licensee have to inform commissioner of change of address

30 days

How many policies are necessary to cover a cross purchase (buy/sell agreement) between 3 people?

6, Since each person would have a policy on each of the other people, among the 3 owners, the total number of policies would be six.

What company produces evaluations of insurer financial status often used by the Insurance Department?

AM Best & Company

Example of apparent authority

Accepting late premiums after grace period

An insured pays a small $100 premium every month, yet the insurer promises to pay a high percentage of all medical costs. What element of an insurance contract does this describe?

Aleatory

A Universal Life Insurance policy is best described as

An Annually Renewable Term policy with a cash value account

Rebating is an unfair trade practice and is regulated by law. ALl of the following would be considered to be rebating EXCEPT

An agent uses misrepresentation to convince a person to cancel an existing policy and take a new policy from him

All other factors being equal, the least expensive first year premium payment is found in

Annual Renewable Term

All other factors being equal, the least expensive first-year premium payment is found in

Annually Renewable Term

The death protection component of Universal Life Insurance is always

Annually Renewable Term

The death protection component of Universal Life insurance is always

Annually Renewable Term

person who receives benefits or payments from the annuity, and for whom the annuity is written and whose life expectancy is taken into consideration

Annuitant

Which concept is associated with "exclusion ratio"?

Annuities payments

All of the following are true of the federal tax advantages of a qualified plan, EXCEPT

At distribution, all amounts received by the employee are free of taxes.

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his

Attained age

All of the following statements about Credit Life insurance are true EXCEPT:

Benefits are paid to the borrowers beneficiary (The creditor IS the beneficiary)

Which of the following best describes fixed period settlement option?

Both the principal and interest will be liquidated over a selected period of time.

Which of the following could be used when a corporation, association, partnership, or limited liability partnership acts as a producer?

Business entity

What limits the amount that a policyowner may borrow from a whole life insurance policy?

Cash value plus loan interest

M, who is not licensed as an insurance agent works part-time in her father's insurance agency. M may perform all of the following duties EXCEPT

Collect premium for in-force policies and explain coverages to clients that have existing policies written by her father

Which of the following would be considered an illegal inducement to purchase insurance?

Confirming future dividends in a life insurance proposal

The President of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

Corporations are never legal annuitants

Which of following about Group Life is correct

Cost of coverage is based on ratio of men and women

And inv. applied for policy and paid premium and insurer issued conditional receipt. Five days later applicant submitted to medical exam. If policy is issued what would the policy's effective date be?

Date of medical exam

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation?

Decreasing term

What life insurance policy provision states that both the policy and a copy of the application form the contract between the policyowner and the insurer?

Entire contract

Which policy component decreases in decreasing term insurance?

Face amount (death benefit)

When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file bankruptcy. Which of the following terms best describes the advertisement?

False financial statment

Which of the following is not a government insurance program?

Federal Deposit Insurance Corporation ( FDIC )

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

For 20 years or until death, whichever occurs first

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

For 20 years or until death, whichever occurs first.

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid

For 20 years or until the insureds death

When an employee terminates coverage under a group insurance policy, coverage continues in force

For 31 days

Which is true about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income.

The death benefit under the Universal Life Option B

Gradually increases each year by the amount that the cash value increases

Cameron is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he feels he can afford at this time, he wants to be sure that additional coverage will be available in the future. He should include in this policy a

Guaranteed insurability option

A projection of insurance needs that is based upon the capitalization of a applicant's future earnings is:

Human life value approach- is determined by the loss of income that would result with the death of the insured, after making adjustments for expenses, inflation, etc.

the commissioner may waive pre licensing requirements for examinations for someone who has been licensed insurance producer

In preceding 12 months

State law specifically prohibits using illegal inducements in the marketing of insurance. All of the following would be considered illegal inducements EXCEPT

Inviting prospective clients to the grand opening of the company's new office.

Which of the following best describes annually renewable term insurance?

It is level term insurance

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?

It will increase because the insured will be 5 years older than when the policy was originally purchased.

Which statement is NOT true regarding a Straight Life policy?

Its premium steadily decreases over time, in response to its growing cash value

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy

If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?

Jumping juvenile policy

The ________ option guarantees an income for two or more recipients for as long as they live.

Life Income Joint and Survivor

Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?

Limited pay whole life

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

Limited-pay Life

All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy?

Lower

An insured stated on her application for life insurance that she had never had a heart attack, when in fact she had a series of minor heart attacks last year for which she sought medical attention. Which of the following will explain the reason a death benefit claim is denied?

Material misrepresentation

What is the name of a clause that is included in a policy that limits or eliminates the death benefit if the insured dies as a result of war or while serving in the military?

Military service or war

Bill just bought a new car,which he anticipates will be paid for 4 years from now. He also wants to buy a life insurance policy, but is financially limited until the car is paid off. Which of the following types of policies would be best for Bill?

Modified life

Out-of-state producer wants to start selling insurance in this state. What type of license should he obtain?

Nonresident

Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?

Option A

Which option for Universal life allows the beneficiary to collect both death benefit and cash value when he dies

Option B

A rider attached to a life insurance policy that provides coverage on the insured's family memebers is called the

Other-insured rider

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?

Paid up option

Who may complete a paramedical report

Paramedic or registered nurse

An insured has a Level Term Life Insurance policy that is guaranteed renewable and also includes a re-entry provision. The re-entry provision would allow the insured to renew the policy and

Pay lower renewal premium by proving insurability.

An insured purchases a policy in 2000 and dies and 2005. The insurance company discovers at the time that the insured concealed information during the application process. What can they do?

Pay the death benefit- the incontestability clause prevents an insurer from denying a claim due to statements in an application after the policy has been in force for 2 years, even on the basis of a material misstatement of facts or concealment of a material fact.

Which of the following rider would not cause the death benefit to increase

Payor Benefit Rider

An applicant wants to buy a life insurance policy that has a cash value element. Which type should she buy

Permanent

All of the following are examples of risk retention EXCEPT

Premiums

Which of the following is NOT consideration on the part of an insured?

Promise to submit timely claims

Which non-forfeiture option provides coverage for the longest period of time

Reduced paid-up

If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may

Require evidence of insurability

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

Required a premium increase each renewal

Abigail's father dies leaving her the designated beneficiary on his life insurance policy. She is surprised to see that in addition to the face amount of the policy, she will also receive a refund of all the of the premiums he had paid. Which rider is attached to the policy?

Return of premium

Taking a defensive driving course or installing deadbolt locks on the doors of a home are examples of which of the following?

Risk Reduction

To sell variable life insurance policies, an agent must receive all of the following EXPECT

SEC registration

A term insurance policy, with level premium and level death benefits, that provides coverage until the insured's 65th birthday, is what kind of contract?

Term-to-65

The policy owner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?

The death benefit can be increased by providing evidence of insurability.

Which of the following individuals could qualify for a temporary insurance license?

The designee of a producer that is called to active service with the Navy

Randy transfers his life insurance policy to his son Andy two years before Randy's death. Which of the following is true?

The entire face value of the policy will be included in Randy's taxable estate.

An employee quits his job on May 15 and doesn't convert his Group Life policy to an individual policy for 2 weeks. He dies in a freak accident on June 1. Which of the following statements best describes what will happen?

The insurer will pay the full Death Benefit to the beneficiary.

Which of the following is true regarding a modified guaranteed annuity?

The owner is guaranteed a fixed interest rate over a specified period of time

The policy owner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as

The policy contains sufficient cash value to cover the cost of insurance

Which of the following is the best reason to purchase life insurance rather than annuities?

To create and estate

Which type of misrepresentation persuades an insured, to his or her detriment, to cancel, lapse, or switch policies from one to another?

Twisting

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered

Unfair trade practice

In a survivorship life policy, when does the insurer pay the death benefit?

Upon the last death

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Waiver of premium

When would a 20-pay whole life policy endow?

When insured reaches age 100

What will happen to my license if I do not complete all 24 credit hours by my CE review date?

Your license will be suspended for a period of 90 days or until your 24-hour requirement is met.

A policyowner of a universal life insurance policy must receive a policy status report from the insurer at least

annually

A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following?

b) Nonforfeiture option guarantees that the owner will receive a surrender value of the contract.

What qualifications must an agent hold in order to sell variable life insurance policies?

both state and federal licensing-agents selling variable life products must be registered with the Financial Industry Regulatory Authority (FINRA) and must be licensed within the state to sell life insurance and variable products

Amy's insurance premium has decreased slightly, despite the fact that her level of health has remained the same. Which of the following most likely caused the premium decrease?

her insurer used interest earned on premiums to lower premium amounts

a man decides to purchase a $100,000 annually renewable term insurance life policy to provide additional protection until his children finished college, he discovered that this policy

required a premium increase at each renewal

Adverse selection is a concept best described as:

risks with higher probability of loss seeking insurance more often than other risks

If an applicant for a lief insurance policy and person to be insured by the policy are two different people, the underwriter would be concerned about

whether an insurable interest exists between the individuals