Insurance Test

Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die? a)Joint Life b)Decreasing Term c)Whole Life d)Ordinary Life

a)Joint Life A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.

What are the penalties for the first, second, and any subsequent violation of the New Jersey Fraud Prevention Act, respectively? a)$25,000; $50,000; $100,000 b)$5,000; $10,000; $15,000 c)$1,000; $5,000; $10,000 d)$10,000; $15,000; $20,000

b)$5,000; $10,000; $15,000 The penalty for a violation of the Act is no more than $5,000 for the first violation, $10,000 for the second violation, and $15,000 for each subsequent violation.

The insurer must maintain copies of Notice Regarding Replacement and the comparative information form, policy summary, and all sales materials until the next regular examination by the Department of Banking and Insurance or for at least a)5 years. b)8 years. c)10 years. d)3 years.

a)5 years. The insurer must maintain copies of Notice Regarding Replacement and the comparative information form, policy summary, and all sales materials for at least 5 years or until the next regular examination by the Department of Banking and Insurance.

An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do? a)Pay a reduced death benefit b)Pay the full death benefit c)Pay nothing; there was a misrepresentation on the application d)Pay the full death benefit and refund excess premium

a)Pay a reduced 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. However, it does not apply to statements relating to age, sex and identity.

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT a)The policyholder has the right to withdraw the accumulations at any time. b)The interest is not taxable since it remains inside the insurance policy. c)The annual dividend is retained by the company. d)The interest is credited at a rate specified by the policy.

b)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.

If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE? a)The insurer may deny coverage later, because of the information missing on the application. b)The policy will be interpreted as if the insurer waived its right to have an answer on the application. c)The policy will be interpreted as if the insured did not have an answer to the question. d)The policy will be void.

b)The policy will be interpreted as if the insurer waived its right to have an answer on the application. Any unanswered questions need to be answered before the policy is issued. If a policy is issued with questions left unanswered, the contract will be interpreted as if the insurer waived its right to have an answer for the question, and will not be able to deny coverage later because of unanswered questions.

Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members? a)Guaranteed insurability rider b)Change of insured rider c)Term rider d)Accidental death and dismemberment rider

c)Term rider Term riders may be used to customize a permanent life insurance policy to meet the needs of the policyowner.

A producer's appointment lasts for how long? a)2 years b)3 years c)5 years d)Until it is terminated

d) Until it is terminated While the producer is licensed, any agency appointment continues in effect until termination.

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term? a)The insured must provide evidence of insurability to renew the policy. b)The insured may only convert the policy to another term policy. c)The insured may renew the policy for another 10 years at the same premium rate. d)The insured may renew the policy for another 10 years, but at a higher premium rate.

d)The insured may renew the policy for another 10 years, but at a higher premium rate. Policies that are guaranteed renewable and convertible may be renewed, without evidence of insurability, for another like term, or may be converted to permanent insurance, without evidence of insurability.