Insurance test
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
Cash option
Which of the following includes information regarding a person's credit, character, reputation, and habits?
Consumer report
An insurance company sells an insurance policy over the phone in response to a T.V. ad. Which of the following best describes this act?
Direct response marketing
The death benefit under the Universal Life Option B
Gradually increases each year by the amount the cash value increases
Events or conditions that increases the chances of an insured loss occurring are referred to as
Hazards
If an insurance company issues a policy even though some questions on the application were unanswered, where can the insurer get the answer to those questions?
Never; the insurer has waived its right to those answers by issuing the policy
Which of the following best details the underwriting process for life insurance?
Selection, classification, and rating of risks
What is the name of the insured who enters into a viatical settlement?
Viator
A person convicted of willfully violating an Insurance Law of Alabama is subject to
A fine up to 1,000, imprisonment, and a sentence to hard labor for a period of one year
what are the five characteristics of an ideally insurable risk?
A. Loss must be 1)due to chance, 2)definite and measurable, 3) Statistically predictable, 4) not catastrophic, and 5) coverage cannot be mandatory
Who has the ability to request the change of a life policy's beneficiary?
Insured
Which of the following is Not true regarding a nonqualified retirement plan?
It needs IRS approval
Which of the following refers to the amount of retirement benefits a worker receives under social security based on the worker's earnings and retirement age?
PIA(Primary Insurance Amount)
Based on Human Life Approach, which of the following is NOT used to calculate an individual's life value?
Predicted needs of the family after the insured's death. Based on insured's income and expenses
Which of the following applicants would NOT qualify for a Keogh Plan?
Someone who works 400 hours per year. A person must have worked at least 1,000 hours per year to be eligible for Keogh plan
Should an insurer accept business from a producer who is not appointed as that insurer's agent, what penalty may be exacted?
The insurer is fined 3 times the amount of the premium received on that business
Who must have insurable interest in the insured?
The policyowner
The amount of premium payment
Which of the following will be stated in the consideration clause of a life insurance policy?
Option A
Which universal life option has a gradually increasing cash value and a level death benefit?
Who is a third-party owner?
A policy owner who is not the insured
an insurance producer who by contract is bound to write insurance for only one company is classified as a/an
captive agent
A tax-sheltered annuity is a special tax-favored retirement plan available to
certain groups of employees only
With a Single Premium Deferred Annuity (SPDA), when are the benefits paid?
After more than 1 year
Contracts that are prepared by one party and submitted to the other party on a take-it or leave-it basis are classifies as
Contracts of adhesion
Which of the following entities established the DO-NOT-CALL registry?
Federal trade commission
Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?
Human life approach
Which of the following is correct concerning the taxation of premiums in a key person life insurance policy?
Premiums are not tax deductible as a business expense
All of the following are true of annually renewable term insurance EXCEPT
Proof of insurability must be provided at each renewal
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
Univeral Life-option A
A policy will pay the death benefit if the insured dies during the 20-year-premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this?
level term
A situation in which a person can only lose or have no change represents
pure risk
Which of the following policies typically combine insurance and savings with a date of maturity earlier than age 100 at great expense to the policyholder?
Endowment at age 65
According to the Law of Agency, a principal is represented by whom?
Agent or producer
What documentation grants express authority to the agent?
Agent's contract with a principal
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices?
making comparisons between different policies
What happens to the face amount of a whole life policy if the insured reaches age 100?
the face amount is paid to the insured
To maintain their license in this state, how many hours of continuing education must producers complete every 2 years?
24
Who can make a fully deductible contribution to a traditional IRA?
An individual covered by an employer sponsored plan who has earned income
The death protection component of Universal Life insurance is always
Annually renewable term
Which statement is INCORRECT regarding the type of term insurance that fits best with the applicant's needs?
Applicants who may require a larger death benefit should buy convertible term insurance
What is the cost of coverage based on for group life insurance
Average age and the ratio of men to women
When must an IRA be completely distributed when a beneficiary is not named?
December 31 of the year that contains the fifth anniversary of the owner's death
A resident of another state wishing to transact insurance in Alabama may obtain a nonresident producer license, without examination, upon meeting one of the following EXCEPT
Be an executive officer of an insurance company
Which of the following would not trigger the payment of Accelerated Death Benefits?
Being permanently disabled
What is the purpose of life insurance?
Create an estate immediately
What does "level" refer to in level term insurance?
Face amount
What are illustrations in a life insurance policy?
Presentations of non guaranteed elements of the policy
A person who does not lock the doors to his or her house shows an indifferent attitude. This person presents what type of hazard?
Morale. Person does not care about his belongings.
What is the official name for the social security program?
Old Age Survivors Disability Insurance
How are contributions to a tax-sheltered annuity treated with regards to taxation?
They are not included as income for the employee, but are taxable upon distribution
Which of the following statements regarding the taxation of Modified Endowment Contracts is False?
Withdrawals are not taxable
All of the following apply to defined benefit plans EXCEPT
Contributions are tied to company profits
What are the two components of a universal policy?
Insurance and cash account
Which of the following insurance options would be considered a risk-sharing arrangement?
Reciprocal
The National Do NOT Call Registry was created to regulate
Telemarketing
To which of the following do replacement rules apply?
Whole life
Which of the following produces evaluations of insurers' financial status often used by state departments of insurance?
AM best
Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
Adhesion
What are the four elements of an insurance contract?
Agreement (offer and acceptance), consideration, competent parties, and legal purpose
All of the following are examples of third-party ownership of a life insurance policy EXCEPT
An insured borrows money from the bank and makes a collateral assignment of a part of the death benefit to secure the loan.
When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is
Conditional. The contract is formed on the basis that certain conditions are met
All of the following are lines of insurance that may be transacted under a life and accident/health producer license except
Consequential loss insurance
If an insurance producer is to charge to the client a fee that is in addition to
Disclose the fee to the client, in writing, and be agree upon prior to the issuance of the policy
A policy matures and pays the face amount if the insured lives to a specified date. This best describes
Endowment policy. Can endow at any time specified in the contract.
Life insurance may be used to pay state inheritance taxes and federal estate taxes eliminating the need to sell assets from the estate. What is this called?
Estate conservation
Which of the following is NOT a type of information that needs to be gathered in order to determine the value of someone's life when using the needs approach?
Estimated longevity
In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?
Executive is the owner, and the executive pays the premium
Using names or titles that have tendency to misrepresent the true nature of a policy is an example of what illegal practice?
False advertising
Both Universal Life and Variable Universal Life has a
Flexible premium
Which authority is NOT stated in an agent's contract but is required for the agent to conduct business?
Implied
Life income joint and survivor settlement option guarantees
Income for 2 or more recipients until they die
What type of insurance would be used for Return of Premium rider?
Increasing term
What type of report provides information about the applicant's hobbies, habits, and financial status?
Inspection report
In the agent/insurer relationship, who is considered the principal?
Insurer
What 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?
Insuring clause
Which of the following is NOT true regarding a Certificate of Authority
It is issued to group insurance participants
In modified life policies, what happens to the premium?
It is level at the beginning and increases after the first few years
How does insurance distribute the financial consequences of individual losses?
It transfers the risk to all persons insured
Concerning juvenile Life Insurance, which of the following statements is INCORRECT?
Juvenile life is classified as any life insurance purchased by a minor
Insuring clause, at the beginning of policy,
List parties, premium, length of coverage, and amount of death benefit
An applicant conceals relevant health information on the application. The applicant represents what type of hazard?
Moral
A rider attached to a life insurance policy that provides coverage on the insured's family members is called
Other-insured rider.
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 a lower renewal premium by proving insurability
which of the following riders would NOT cause the Death Benefit to increase?
Payor benefit rider
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?
Premiums are not tax deductible as a business expense
Which of the following statements is an accurate comparison between private and government insurers?
Private insurers may be authorized to transact insurance by state insurance departments
All of the following are marketing arrangements used by insurers EXCEPT
Reinsurance system. protects against catastrophic issues
What are the personal uses of life insurance
Survivor protection, estate creation and conservation, cash accumulation, and liquidity
Which of the following is true regarding a market value adjusted annuity?
The owner is guaranteed a fixed interest rate for a specific period of time.
Under an extended tern nonforfeiture option, the policy cash value is converted to
The same face amount as in the whole life policy
Which of the following is Not true of settlements?
The seller must be terminally ill
Which of the following is TRUE about nonforfeiture values?
They are required by state law to be included in the policy
Which of the following is true about nonforfeiture values?
They are required by state law to be included in the policy.
Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child where the parent is the policy owner?
Third-party ownership. For business situations or for minors in which parents owns the policy
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
Twisting
Which of the following policies can be described as a flexible premium adjustable life policy?
Universal Life
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCPET
Upon conversion, the death benefit of the permanent policy will be reduced by 50%
Which of the following types of insurance is investment based, has a level fixed premium, and a non guaranteed cash value?
Variable whole life
The provision that sets forth the basic agreement between the insurer and the insured and stated the insurer's promise to pay the death benefit upon the insured's death is called the
insuring clause
A policyowner no longer needs a life insurance policy and agrees to sell it to a third party for more than its cash value. this type of transaction is called a/an
life settlement
All of the following are examples of risk retention EXCEPT
premiums. planned assumption of risk
What is the penalty for the IRA distributions that are below the required minimum for the year?
50
Which of the following is the required number of participants in a contributory group plan?
75%
When the insurer stipulates the time period of payment of claims, how soon must the insurer pay a death benefit claim after receiving the proof of death?
2 months
For a producer to meet state continuing education requirements, how many CE hours must be completed on the topic of ethics?
3
Licensees must make a report of any action taken against them in another jurisdiction or by another government agency in Alabama within how many days of the final disposition of the matter?
30
When replacement is involved, how long must existing insurers maintain records of replacement notifications?
5 years
When risks with higher probability of loss are seeking insurance more often than other risks, this is known as what?
Adverse selection
Which of the following is true regarding the spendthrift clause in life insurance policies?
It can protect the policy proceeds from creditors of the beneficiary
Which of the following riders provide for the payment of part of the policy death benefit if the insured is diagnosed with a terminal illness that will result in a death within 2 years?
Living Needs rider
What is the other term for the cash payment settlement option?
Lump sum
In a single employer group plan, what is the name of the policy issued to the employer?
Master contract
The life Insurance solicitation regulation was promulgated to do the following:
Provide adequate information to consumers regarding relative cost of insurance products
Which of the following would help prevent a universal life policy from lapsing?
Target premium.
Which of the following entities was created to protect insureds against an insurer's insolvency?
The Life and Disability Insurance Guaranty Association
A business is the owner and beneficiary of the key-person life policy. When the business collects the policy benefit, how is it taxed?
The benefit is received tax free
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding the change?
The death benefit can be increased by providing evidence of insurability
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT
The interest is not taxable since it remains inside the insurance policy.
All of the following statements concerning the use of life insurance as an Executive Bonus are correct except
The policy is owned by the company.
An individual applies for a life policy. Two years ago he suffered a head injury from a accident, so he cannot remember parts of his past, but is otherwise competent.He has also been hospitalized for drug abuse, but does not remember this when applying for insurance. The insurer issues the policy and learns of his history one year later. What will probably happen?
The policy will not be affected
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
The waiver of cost of insurance rider is found in what type of insurance?
Universal life
Which of the following insurance products are covered under solicitation regulations of the insurance code?
Whole life
An adjustable life policy can assume the for of either
term or permanent life