Insurance Question Review #1

if $100,000 of life insurance proceeds were used in a settlement option that paid $13,000 per year for ten years, what would be taxable annually?

$3,000

what nonforfeiture option allows a policy owner to use the existing cash value to purchase a policy of the same face amount as the original policy for as long as the policy will buy?

extended term insurance

an insurer invests the cash value of a fixed annuity in what type of account?

general account

an employee wants to join a group insurance plan. In order to avoid proving insurability, what must the applicant do?

join during the enrollment period

a beneficiary decided to take a settlement option that will pay the largest amount per payment, knowing that after the beneficiary death no monies will be paid out to any descendants. the settlement option is....

life income (straight life)

list the dividend options in life insurance policies

reduction of premium, accumulation at interest, one-year term

when an applicant makes a material statement on the insurance application, the statement is considered to be a what?

representation

if a life agent wants to sell variable life policies, what license must the agent obtain?

securities

An usurer is issued a cease and desist order for a misrepresentation. what is the insurer required to do to comply with the order?

stop the action violation

What three things must be included in an application for life insurance?

the agent's statement, if applicable - medical information about the applicant - life insurance with other insurers

If the agent feels that there could be misrepresentation on the part of the applicant for insurance, what must the agent do?

inform the insurance company

who are members of the medical information bureau?

insurers

what is the default settlement option for life insurance policy proceeds

lump sum

what is the usual federal income tax treatment of individual life insurance?

nondeductible premiums, nontaxable death benefits

under a straight life annuity, if the annuitants dies before the principal amount is paid out, the beneficiary will receive ....

nothing; the payments will cease

what best describes "agreement" as it relates to insurance contracts?

one party accepts the exact terms of the other party's offer

a person is required to be licenses to do what?

receive commissions

when the insured becomes disabled under the requirements of a life insurance policy, which of the following provisions keeps the policy in force even though the owner stops making the premium payments?

the waiver of premium

what is the purpose of settlement options in life insurance?

they determine how death proceeds will be paid

what is the purpose of the agent's report in the application process?

to provide additional information about the applicant to the underwriters

which division of an insurance company is responsible for the selection, evaluation, and distribution of risks?

underwriting

an insured's flexible premium is invested into a separate account. What type of insurance product does the insured have?

variable universal life

under the terms of the 10-day free-look period, a claim will be paid....

if the premium has been paid and the policy has not been returned

which of the following would be considered a peril? a. fire b.playing golf in a thunderstorm c. smoking d.driving too fast for conditions

a. fire fire is a peril (cause of loss). hazards increase the chance a peril could occur

which statement about reinstatement is FALSE regarding a policy reinstatement provision? a. reinstatement will require proof of continued insurability b.a reinstated policy is incontestable c. a reinstated policy's premium is based upon the insured's original age d. reinstatement requires payment of past due premium plus interest

b. a reinstated policy is incontestable. a reinstated policy will be contestable again for another 2 years

list four features of a whole life policy

cash value, level premium, permanent protection, nonforfeiture values

what is the default nonforfeiture option when the policy owner neglects to select an option>

extended term

for an insurance contract, the principle of utmost good faith means...

each party relies upon the truthfulness of the other

which of the following would be the most likely to start a tax-sheltered annuity? a. low-income individuals b. a self-employed business owner c. military personnel d. public school teachers

d. public school teachers

an insured, age 45, has a paid-up at age 65 whole life insurance policy with a death benefit of $150,000. the policy's cash value will be $150,000 at what age of the insured?

100

an insured has a terminal illness and needs access to half of his death benefit to pay for the medical expenses. Which rider would meet the insured's current needs?

accelerated (living) benefit

for a flexible premium deferred annuity, the time during which the owner makes premium payments and the time before benefit payments begin is known as the...

accumulation period

Under the cost of living adjustment rider, what will happen to the face amount in the policy?

an increase with the inflation rate

When agents, brokers, or solicitors handle premiums for an insurer, they are acting in which capacity?

as a fiduciary

what distribution from a qualified retirement plan will incur a 10% tax penalty?

before the participant's age 59 1/2

decreasing term insurance is often used to...

cover a mortgage

All of the following statements describe unfair trade practices EXCEPT.. a.making maliciously critical statements about the financial condition of another insurer b. offering special favors not specified in policy c. misrepresenting pertinent facts about coverage d. discrimination against a group of individuals because of poor risk

d. discrimination against a group of individuals because of poor risk Discrimination against a group of individuals because the preset a poor risk is not an unfair trade practice

the president of a company is starting an annuity and decides that his cooperation will be the annuitant. what must the annuitant be?

the annuitant must be a natural person -the annuitant's life expectance is taken into consideration for the annuity

Who must insurance producers report changes of business or residence address?

the department of insurance

when a life insurance policy continues because of a payor benefit clause, it means...

the owner of the policy is disabled or has died

an individual owns a participating whole life policy and uses her policy dividend to buy more of the same type of courage for herself. she has chosen which option?

the paid-up option

list four things that are requirements of a qualified plan.

the plan must be approved by the IRS - the plan must haha vesting requirement - the plan's benefit cannot discriminate in favor of the top employees - qualified plans must be permanent

when is the earliest a life policy may go into effect?

when the application is signed and a check is given to the agent