License Exam Questions

Where are premiums from fixed annuities invested?

A general account A fixed annuity is characterized by a general account into which the purchase payments (premiums) are invested

A married couple purchase a life insurance policy on their newborn baby. They are concerned about what would happen to the policy if either one of them were unable to continue making the premium payments due to death or disability. Which policy rider should their agent recommend?

Payoff benefit Pay or rider provides protection to the insured minors. If the life insurance is for a child and the parent paying the premium dies or becomes disabled, the insurance company will waive the premium until the child reaches a predetermined age, such as 18 or 21.

Who would be allowed catch-up contributions?

Individuals age 50 or older Individuals who are age 50 or older are entitled to make additional catch-up contributions.

When the owner of a participating whole life policy uses the dividend to provide more life insurance coverage, which of the following dividend options is being used?

Paid-up additions The paid-up addition dividend option is used to purchase more paid-up insurance each year, thereby increasing the death benefit.

Variable insurance as variable annuities are regulated by?

SEC, FINRA and Departments of Insurance Variable products are governed at the national level by the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA), and at the state level by the Department of Insurance.

Which of the following is a permissible reason for an insurance company to contest payment of a claim based on statements in the application?

The application contains material misstatements An insurance company may contest payment of a claim on the basis of a material misstatement if facts or concealment of a material fact no lager than 2 years after the policy became effective

Which method of dealing with risk is applied when insurance is purchased?

Transfer Transfer is the basic principal of insurance under which the risk of financial loss is assigned to another party. Insurance is the most common method of transferring risk from an individual or group to an insurance company.

Which of the following statements is TRUE regarding an Agent's Report during policy application process?

It provides the agent's personal observations concerning the proposed insured. The Agent's Report provides the agent's personal observations concerning the proposed insured. The Agent's Report does not become a part of the entire contact, although it is a part of the application process.

If an individual willfully violates provisions of the Fair Credit Reporting Act, what is the maximum civil penalty?

$2,500 The penalty for willfully violating the Fair Credit Reporting Act cannot exceed $2,500

An annuity has accumulated the cash value of $70,000 of which $30,000 is from premium payments. The annuitant first during accumulation phase. The beneficiary will receive..?

$70,000 If the annuitant's death occurs during the accumulation period, the beneficiary will receive the amount of premiums paid into the plan or the cash value, whichever is greater. In this case, the beneficiary will receive $70,000

Which of the following would be TRUE of both the fixed-period and fixed-amount settlement options?

Both guarantee the principal and interest will be fully paid out *Neither the fixed-period nor fixed-amount settlement options guarantee income for the life of the beneficiary; however, they both guarantee that the entire principle and interest will be fully paid out

In a life insurance application, all of the following signatures will be required EXCEPT?

The home office underwriter The agent and the insured most both sign the application. If the applicant is other than the insured then the applicant must sign. The home office underwriter does not sign the application.

If an insured dies, and it is discover that the insured misstated his/her age or gender, the life insurance company will..?

Adjust the death benefit to what the premium would hav repurchased at the actual age or gender. If the applicant has misstated his or her age or gender on the application, the insurer, in the event of a claim, is allowed under this provision to adjust the benefits to an amount that the premium at the correct age or gender would have otherwise purchased.

An annuity would normally be purchased by an individual who wants to...?

Provide income for retirement The main purpose of annuity is to liquidate an estate and provide income for retirement. Life insurance creates an estate and provides a death benefit to the beneficiaries.

With Adjustable Life, the owner can change all of the following EXCEPT?

The Insured The mortality charge is determined by the actuary in the home office. The owner of the policy has not control over this mortality.

Which of the following statements describes one of the reasons individuals purchase life insurance?

It creates an immediate estate Life insurance death proceeds can create an estate when the insured dies.

When comparing a Joint Life Policy to two individual life policies of the same amount on the same insureds, which condition is true?

Joint Life has a lower premium than the total two individual polices. Since Joint life pays one death benefit (at the first death) it's premium is less than the total of two individual policies.

All the following statements are true regarding an ordinary (Straight) Life Policy EXCEPT?

It does not have a guaranteed death benefit Straight life (also called Ordinary Life it Continuous Premium Whole Life) changes a level annual premium for the lifetime of the insured and provides a level, guaranteed death benefit. If the insured lives to age 100, the policy endows (matures) and the Dave amount is paid to the insured at that time. During the insured's lifetime the straight life policy builds cash value. The insurer guarantees the cash value and rate benefit under a straight life policy.

What is purpose of a buy-sell agreement?

To allow the business buyout in case of the owner's death

Under what circumstances will the contingent beneficiary receive the death benefit?

If the primary beneficiary dies before the insured The only way the contingent beneficiary will revive the death benefit is if the primary beneficiary dies before the insured.

Which provision may be added to a permanent life policy, at no cost, that insures that the policy will not lapse so long as there is cash value?

Automatic Premium Loan Option With the automatic premium loan option, if the premium is not paid out and the policy reaches the end of the grace period, the insurance company is directed to borrow the premium from the cash value as a loan to prevent the lapse.

An insured and his spouse recently had a child. Which of the following riders would allow the couple to insure the child for a limited period of time at a specified amount.

Children's term rider The children's term rider allows children to be added to coverage for a limited period of time for a specified amount.

Which of the following is NOT a standard exclusion in life insurance policies?

Disability Exclusions are policy provisions, which exclude certain types of risks. Aviation, hazardous occupation, and military services are most common exclusions. Disability is not a common exclusion.

An applicant may challenge information discovered as a result of an investigative consumer report under which of the following Acts?

Fair Credit Reporting Act The federal Fair Credit Reporting Act regulates consumer investigative reports that are ordered in connection with applications for credit, insurance or employment. If an insurer takes adverse action against an applicant based upon incorrect information received in a credit report, the Act contains procedures for the applicant to follow in order to get it corrected, without the need to file a lawsuit.

A whole life policy that will generate immediate cash value is a..?

Single Premium Policy A whole life policy that will generate immediate cash value is a single premium policy.

A loss resulting from which of the following would qualify for the accidental death rider coverage?

An automobile accident Deaths that result from a health condition or disability, or self-inflicted injuries, or from war, as a result of certain hobbies or avocations such as flying, are usually not cover under the accidental death rider.

Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life. Which settlement option should this policy owner select?

Joint and survivor Under the Joint and Survivor settlement option, payments will continue until the death of the last beneficiary

What is the difference between a straight life policy and a 20-pay whole life policy?

Premium payment period A limited-pay whole life policy, just life straight life, endows for the face amount of the insured lives to age 100. The premium is, however, completely paid off in 20 years.

Dividend received on participating life insurance policies are..?

Not taxable because they are a return of unused premium. Diviner's on participating life insurance policies are not income taxable because they are a return of under premiums.

Who is the annuity owner?

The person who purchases the annuity The owner of an annuity is the person who purchases the contract, but does not have to be the one who receives the benefits.

J is receiving fixed amount benefit payments from his late wife's insurance policy. He was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did J choose?

Fixed amount The fixed-amount option pays a fixed, specified amount in installments until the proceeds (principal and interest) are exhausted. The recipient selects a specified dollar amount to be paid until it is gone. If the beneficiary dies before the proceeds are exhausted, installments will continue to be paid to a contingent beneficiary until all proceeds have been paid out.

In a noncontributory group policy...

100% of eligible employees must participate In a noncontributory plan, the employer pays all of the premium, so they must cover all eligible employees

Which of the following is true of the taxation of cash values in a business life insurance policy?

Cash values grow tax deferred The cash value of a business owner life insurance policy or an employer provided policy accumulated on a tax-differed basis and is taxed in the same manner as an individually owned policy.

Which of the following is a provision found in life insurance policies?

Reinstatement Reinstatement is the only policy provision; the rest are policy riders.

Which of the following will NOT be included in the buyer'a guide?

Specific information about the policy A buyer's guide provides generic information about life insurance policies and explains how a buyer should go about choosing the amount and type of insurance to buy, and saving money by comparing the cost of similar policies. The policy summary provides specific information about the chosen policy, as well as the agent's name and address.