insurance test questions
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an Certified insurer. Self-insurer. Authorized insurer. Local insurer.
Authorized insurer.
If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a Nonforfeiture option. Guaranteed insurability rider. Paid-up additions option. Cost of living provision.
Guaranteed insurability rider.
An Adjustable Life policyowner can change which of the following policy features? The coverage period The mortality expense The investment account The insured
The coverage period
The Waiver of Cost of Insurance rider is found in what type of insurance? Juvenile Life Universal Life Whole Life Joint and Survivor
Universal Life
A producer was found guilty of a 3rd violation of the Insurance Code. What would be the monetary penalty he will have to pay? $25,000 $5,000 $10,000 $15,000
$10,000
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer? $8,000, no tax consequence $8,000, tax on growth only $10,000, tax on growth only $10,000, no tax consequence
$10,000, no tax consequence
What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? $100 per violation Revocation of license $2,500 $1,000
$2,500
If a credit life policy lapses for nonpayment before the debt is satisfied, within how many days must the creditor either refund the premium paid or apply it against the debt? 3 10 30 60
60
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 An executive annuity plan. Subject to government standards. Illegal. A nonqualified annuity plan.
A nonqualified annuity plan.
Which of the following would be considered an unfair claims settlement practice? Requesting the insured to submit a signed proof of loss statement, after the insured has already verbally advised the insurer of the claim Requesting the insured swear under oath concerning the facts of the claim Delaying the settlement of a claim for 30 days in order for the insured to conduct an investigation Advising the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered
Advising the insured that if the claim goes to arbitration, the insured would probably receive less than what is currently being offered
An insurer that holds a Certificate of Authority in the state in which it transacts business is considered a/an Local insurer. Certified insurer. Self-insurer. Authorized insurer.
Authorized insurer.
An insured receives an annual life insurance dividend check. What term best describes this arrangement? Reduction of Premium Annual Dividend Provision Accumulation at Interest Cash option
Cash option
A tax-sheltered annuity is a special tax-favored retirement plan available to Certain groups depending on factors such as race, gender, and age. Certain groups of employees only. Anyone. Certain age groups only.
Certain groups of employees only.
The type of policy that can be changed from one that does not accumulate cash value to the one that does is a Convertible Term Policy. Renewable Term Policy. Decreasing Term Policy. Whole Life Policy.
Convertible Term Policy.
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 Insuring clause. Misstatement of Age clause. Incontestability clause. Reinstatement clause.
Incontestability clause.
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 Reinstatement clause. Insuring clause. Misstatement of Age clause. Incontestability clause.
Incontestability clause.
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an Endowment. Nonqualified annuity. Modified endowment contract. Accelerated benefit policy.
Modified endowment contract.
The dividend option in which the policyowner uses dividends to purchase a term policy for one year is referred to as the One-year term option. Paid-up option. Accelerated endowment. Paid-up additions.
One-year term option.
Which of the following will be included in a policy summary? Copies of illustrations and application Comparisons with similar policies Primary and secondary beneficiary designations Premium amounts and surrender values
Premium amounts and surrender values
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? Accidental death and dismemberment rider Guaranteed insurability rider Change of insured rider Term rider
Term rider
Which of the following describes the tax advantage of a qualified retirement plan? The earnings in the plan accumulate tax deferred. Distributions prior to age 59½ are tax deductible. Employer contributions are deductible as a business expense when the employee receives benefits. Employer contributions are not taxed when paid out to the employee.
The earnings in the plan accumulate tax deferred.
What is the advantage of reinstating a policy instead of applying for a new one? The face amount can be increased. The cash values have gained interest while the policy was lapsed. The original age is used for premium determination. Proof of insurability is not required.
The original age is used for premium determination.
All of the following are true of key person insurance EXCEPT There is no limitation on the number of key employee plans in force at any one time. The employer is the owner, payor and beneficiary of the policy. The key employee is the insured. The plan is funded by permanent insurance only.
The plan is funded by permanent insurance only.
Solicitation rules would apply to which of the following types of coverage? Whole Life Deferred Annuity Variable Life Group Life
Whole Life
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later than Prior to filling out an application for insurance. With the policy. Upon issuance of the policy. Within 30 days after the first premium payment was collected.
With the policy.
Which of the following types of insurance would be written by a limited lines agent? Variable life insurance Surplus lines insurance Term life insurance Credit insurance
Credit insurance
A rider attached to a life insurance policy that provides coverage on the insured's family members is called the Other-insured rider. Change of insured rider. Juvenile rider. Payor rider.
Other-insured rider.
A producer received a group master policy and certificates for delivery to the insured. Within how many days must the policy and certificates be delivered? 10 calendar days 5 business days 5 calendar days 10 business days
10 calendar days
If an insurer cancels an agency contract, it must notify the Commissioner in writing within how many days? 10 15 20 30
15
The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? 1 year 2 years 5 years 7 years
2 years
Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? 3 days 5 days 10 days 14 days
3 days
Licensees must file with the Department a branch office registration form within how many days before business is first conducted there? 10 15 20 30
30
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits? Principal is tax free, but interest is taxed. The entire benefit will be received tax free. The entire living benefit is considered taxable income. A portion of the benefit up to a limit is tax free; the rest is taxable income.
A portion of the benefit up to a limit is tax free; the rest is taxable income.
Who can make a fully deductible contribution to a traditional IRA? A person whose contributions are funded by a return on investment An individual not covered by an employer-sponsored plan who has earned income Anybody; all IRA contributions are fully deductible regardless of income level Someone making contributions to an educational IRA
An individual not covered by an employer-sponsored plan who has earned income
The death protection component of Universal Life Insurance is always Decreasing Term Annually Renewable Term Whole Life Adjustable Life
Annually Renewable Term
Which of the following best describes fixed-period settlement option? Only the principal amount will be paid out within a specified period of time. The death benefit must be paid out in a lump sum within a certain time period. Income is guaranteed for the life of the beneficiary. Both the principal and interest will be liquidated over a selected period of time.
Both the principal and interest will be liquidated over a selected period of time
Which of the following is TRUE about credit life insurance? Debtor is the annuitant. Creditor is the insured. Debtor is the policy beneficiary. Creditor is the policyowner.
Creditor is the policyowner.
Which of the following is NOT an example of insurable interest? Employer in employee Child in parent Debtor in creditor Business partners in each other
Debtor in creditor
Which of the following types of insurance policies is most commonly used in credit life insurance? Increasing term Whole life Equity indexed life Decreasing term
Decreasing term
Which nonforfeiture option has the highest amount of insurance protection? Decreasing Term Reduced Paid-up Extended Term Conversion
Extended Term
Circulating deceptive sales material to the public is what type of Unfair Trade Practice? Coercion Misrepresentation False advertising Defamation
False advertising
Circulating deceptive sales material to the public is what type of Unfair Trade Practice? Defamation Coercion Misrepresentation False advertising
False advertising
Misrepresenting an insurance policy as a share of stock is an example of which of the following? Churning Rebating Twisting False advertising
False advertising
What type of insurance would be used for a Return of Premium rider? Decreasing Term Annually Renewable Term Increasing Term Level Term
Increasing Term
In which of the following situations is it legal to limit coverage based on marital status? Divorce within the last six months of applying for insurance It is never legal to limit coverage based on marital status. Excessive number of divorces, as defined by the Insurance Code Legal separation during the application process
It is never legal to limit coverage based on marital status.
Variable Whole Life insurance is based on what type of premium? Graded Level fixed Increasing Flexible
Level fixed
Traditional IRA contributions are tax deductible based on which of the following? Owner's age IRA limit Owner's income How long the plan has been in force
Owner's income
An employer has sponsored a qualified retirement plan for its employees where the employer will contribute money whenever a profit is realized. What is this called? HR 10 plan Profit sharing plan 401(k) plan Tax-sheltered account plan
Profit sharing plan
All of the following are true regarding rebates EXCEPT Rebates are only allowed if specifically stated in the policy. Rebating can be anything of economic value, given as an inducement to buy. Dividends are not considered to be rebates. Rebates are allowed if it's in the best interest of the client.
Rebates are allowed if it's in the best interest of the client.
In New Jersey, the public is protected by a notice of discontinuance when a policy is discontinued for nonpayment of premiums. When a policy is discontinued, all of the following are required EXCEPT A reminder of the date of discontinuance. Ceasing to collect premium payments from group participants unless the group policyholder remains fully responsible for the benefits. Refund of premiums.
Refund of premiums.
The Federal Fair Credit Reporting Act Regulates consumer reports. Protects customer privacy. Regulates telemarketing. Prevents money laundering.
Regulates consumer reports
Which of the following riders is often used in business life insurance policies when the policyowner needs to change the insured under the policy? Guaranteed insurability rider Payor benefit rider Substitute insured rider Term rider
Substitute insured rider
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? Guaranteed insurability rider Change of insured rider Term rider Accidental death and dismemberment rider
Term rider
Who bears all of the investment risk in a fixed annuity? The insurance company The owner The beneficiary The annuitant
The insurance company
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT The policyholder has the right to withdraw the accumulations at any time. The interest is not taxable since it remains inside the insurance policy. The annual dividend is retained by the company. The interest is credited at a rate specified by the policy.
The interest is not taxable since it remains inside the insurance policy.
How must a replacing producer respond to an applicant wishing to replace existing life insurance? The producer must request the permission of the existing insurer. The producer has no specific duties. The producer must provide the applicant with a Notice Regarding Replacement. The producer must collect the existing policies and turn them over to the replacing insurer.
The producer must provide the applicant with a Notice Regarding Replacement.
How are contributions to a tax-sheltered annuity treated with regards to taxation? They are taxed as income for the employee. They are taxed as income for the employee, but are tax free upon withdrawal. They are not included as income for the employee, but are taxable upon distribution. They are never taxed.
They are not included as income for the employee, but are taxable upon distribution.
What is the purpose of settlement options? They provide the beneficiary with the income he/she cannot outlive. They determine how death proceeds will be paid. They are guarantees built into the policy. They guarantee a return of excess premiums.
They determine how death proceeds will be paid.
All of the following are requirements for life insurance illustrations EXCEPT They must differentiate between guaranteed and projected amounts. They must be part of the contract. They may only be used as approved. They must identify nonguaranteed values.
They must be part of the contract.
What is the purpose of the buyer's guide? To provide the name and address of the agent/producer issuing the policy To list all policy riders To provide information about the issued policy To allow the consumer to compare the costs of different policies
To allow the consumer to compare the costs of different policies
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called Guaranteed insurability. Waiver of cost of insurance. Payor benefit. Waiver of premium.
Waiver of premium.
Which of the following is correct regarding credit life insurance? It insures the life of a creditor. It has a maximum term of 20 years. It insures the life of a debtor. It is purchased on an installment basis.
it insures the life of the debtor
Which of the following is NOT considered a misrepresentation as it pertains to unfair trade practices? Exaggerating the benefits provided in the policy Stating that the competitors will arbitrarily increase their premiums each year Making comparisons between different policies Stating that the insurance policy is a share of stock
Making comparisons between different policies
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? Amount of interest Size of each installment Predetermined length of time stated in the contract Length of income period
Size of each installment
All of the following entities regulate variable life policies EXCEPT The Guaranty Association. Federal government. The SEC. The Insurance Department.
The Guaranty Association.
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT? The insured would not need to prove insurability for a conversion policy. The insured may convert coverage to an individual policy within 31 days. The premium for individual coverage will be based upon the insured's attained age. The insured may choose to convert to term or permanent individual coverage.
The insured may choose to convert to term or permanent individual coverage.
An insured replaces his current policy with one offered by another insurer. If he finds that he is unsatisfied with the new policy, within what period of time can he return it and receive a full refund? This is not possible with replacement policies unless a mistake was made by either of the insurers. 30 days 60 days 90 days
30 days
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an Interest-sensitive Whole Life. Credit Life. Annual Renewable Term. Adjustable Life.
Interest-sensitive Whole Life.
Which of the following best describes a misrepresentation? Making a deceptive or untrue statement about a person engaged in the insurance business Making a maliciously critical statement that is intended to injure another person Discriminating among individuals of the same insuring class Issuing sales material with exaggerated statements about policy benefits
Issuing sales material with exaggerated statements about policy benefits
Which of the following best describes the MIB? It is a rating organization for health insurance. It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance. It is a government agency that collects medical information on the insured from the insurance companies. It is a member organization that protects insured against insolvent insurers.
It is a nonprofit organization that maintains underwriting information on applicants for life and health insurance
Which of the following is NOT true regarding a Certificate of Authority? It may be necessary for transacting business in a specific state. It is equivalent to an insurance license. It is issued by the state department of insurance. It is issued to group insurance participants.
It is issued to group insurance participants.
Which of the following best describes annually renewable term insurance? Neither the premium nor the death benefit is affected by the insured's age. It provides an annually increasing death benefit. It is level term insurance. It requires proof of insurability at each renewal.
It is level term insurance.
An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called One-year term purchase. Accumulation at interest. Reduction of premiums. Paid-up additions.
Paid-up additions.
Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early? Dividend Accumulation option Paid-up option Accumulation at Interest Paid-up additions
Paid-up option
Which nonforfeiture option provides coverage for the longest period of time? Paid-up option Accumulated at interest Reduced paid-up Extended term
Reduced paid-up
If an insured under a variable life insurance policy dies, how will the insurer respond to outstanding policy loans? The policy is withheld until payments are met. The loan amount is charged to the beneficiaries. The loans are waived. The loan amounts are deducted from the death benefit.
The loan amounts are deducted from the death benefit.
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? As of the policy delivery date As of the first of the month after the policy issue As of the policy issue date As of the application date
As of the application date
Applicants for surplus lines authority must fulfill all of the following requirements EXCEPT Hold a property and casualty license. Pass an insurance licensing exam. Hold a bond as a condition for licensure. Be a New Jersey resident.
Hold a bond as a condition for licensure.
Which of the following is NOT true regarding a nonqualified retirement plan? Earnings grow tax deferred. It needs IRS approval. Contributions are not currently tax deductible. It can discriminate in benefits and selecting participants.
It needs IRS approval.
Which of the following settlement options in life insurance is known as straight life? Life with period certain Fixed amount Life income Single life
Life income
The Ownership provision entitles the policyowner to do all of the following EXCEPT Assign the policy. Designate a beneficiary. Set premium rates. Receive a policy loan.
Set premium rates.
If the issuance of a license is denied and a hearing is requested, which entity will be making determination whether or not the license should be issued? The NAIC The state courts The Office of Administrative Law The Department of Insurance
The Department of Insurance
Which is true about a spouse term rider? Coverage is allowed for an unlimited time. The rider is decreasing term insurance. Coverage is allowed up to age 75. The rider is usually level term insurance.
The rider is usually level term insurance.
In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT The length of coverage. The premium. The amount of insurance. The type of investment.
The type of investment.
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? Guaranteed insurability rider Change of insured rider Term rider Accidental death and dismemberment rider
term rider
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 cost of insurance. Payor benefit. Waiver of premium. Guaranteed insurability.
waiver of premium
Which of the following best describes fixed-period settlement option? The death benefit must be paid out in a lump sum within a certain time period. Income is guaranteed for the life of the beneficiary. Both the principal and interest will be liquidated over a selected period of time. Only the principal amount will be paid out within a specified period of time.
Both the principal and interest will be liquidated over a selected period of time
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy? It is increased when extra premiums are paid. It decreases over the term of the policy. It remains the same as the original policy, regardless of any differences in value. It is reduced to the amount of what the cash value would buy as a single premium.
It is reduced to the amount of what the cash value would buy as a single premium.
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary? Single life Fixed-amount Life income with period certain Joint and survivor
Life income with period certain
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer report Must be advised that a copy of the report is available to anyone who requests it. May sue the reporting agency in order to get inaccurate data corrected. Must be informed of the source of the report. Are entitled to obtain a copy of the report from the party who ordered it.
Must be informed of the source of the report.
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? Pay nothing; there was a misrepresentation on the application Pay the full death benefit and refund excess premium Pay a reduced death benefit Pay the full death benefit
Pay a reduced death benefit
Upon policy delivery, the producer may be required to obtain any of the following EXCEPT Delivery receipt. Signed waiver of premium. Statement of good health. Payment of premium.
Signed waiver of premium
Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? Size of each installment Predetermined length of time stated in the contract Length of income period Amount of interest
Size of each installment
Which of the following policies would be classified as a traditional level premium contract? Universal Life Variable Universal Life Straight Life Adjustable Life
Straight Life
Which of the following information will be stated in the consideration clause of a life insurance policy? The time period allowed for the payment of premium The conditions for insurability The amount of premium payment The parties to the contract
The amount of premium payment
All of the following statements concerning an employer sponsored nonqualified retirement plan are true EXCEPT The plan is not approved for favorable tax treatment by the IRS. The employer can receive a current tax deduction for any contributions made to the plan. The plan is a legal method of accumulating money for retirement needs. The plan can discriminate as to who may participate.
The employer can receive a current tax deduction for any contributions made to the plan
