Life and Health Review Exams

J and K are married and have several children. J is the primary beneficiary on K's Accidental Death and Dismemberment (AD&D) policy and K's sibling L is the contingent beneficiary. J, K, and L are involved in a train accident and K and L are killed instantly. The Accidental Death benefits will be paid to?

"J only"

A terminated employee who was covered under a group life policy for $15,000 of Term Life insurance may convert to a?

$15,000 Whole Life policy

A person may first become eligible for disability benefits under Social Security after having been disabled for?

5 months

Which of the following statements is CORRECT when the owner of an ordinary life policy chooses a premium payment mode that is more frequent than an annual payment?

A higher gross premium will be paid than if paid on an annual basis

Which of the following parts of a life policy is guaranteed to be CORRECT?

A warranty

Insurance companies may use all of the following sources to obtain underwriting information about an applicant EXCEPT?

Actuarial rating bureaus

Which of the following would be a certificate holder under a trustee group life policy?

An employee

A policyowner may change a revocable beneficiary at which of the following times?

At any time

Which of the following provisions would keep a Whole Life policy in force if a required premium payment is not made and sufficient cash value exists from which the premium can be paid?

Automatic Policy Loan The Automatic Policy Loan provision will keep a Whole Life policy in force if a required premium payment is not made and there is sufficient cash value.

What is the tax advantage of key-person life insurance?

Death proceeds are nontaxable

All of the following are systems that support the sale of insurance through agents and brokers EXCEPT?

Fraternal Benefit Society System. All of these are actual insurance agency systems except for Fraternal Benefit Society Systems

N is beneficiary of G's life insurance policy. N and G are both killed instantly in an accident and it cannot be determined who died first. Under the Uniform Simultaneous Death Act, proceeds from the insurance policy would be paid to?

G's contingent beneficiary.

What type of agent may represent a number of insurance companies under separate contractual agreements

Independent agent Independent agents may represent a number of insurance companies under separate contractual agreements

A retirement plan that may be established by an employee, regardless of any other retirement plan is called a(n)?

Individual Retirement Account (IRA)

Which of the following clauses of an insurance contract states that a specified amount of money will be paid to a designated person on the death of an insured?

Insuring Agreement The insuring clause or provision sets forth the company's basic promise to pay benefits upon the insured's death.

Which life insurance arrangement is used to circumvent state insurable interest statutes?

Investor-Originated Life Insurance Investor-originated life insurance (or IOLI), sometimes called stranger-originated life insurance (or STOLI) is used to circumvent state insurable interest statutes. This is done when an investor (or stranger) persuades an individual to take out life insurance specifically for the purpose of selling the policy to the investor. The investor compensates the insured and makes the premiums, then collects the death benefit when the insured dies.

B is the owner and insured in a Single Premium Universal Life Insurance contract. B wants to name a charitable entity as beneficiary and make the change permanent. Which is the best type of designation to assure B's wishes?

Irrevocable

Which of the following statements is CORRECT about a Straight(pure) Life annuity option for a single life?

It pays for the life of the annuitant

An example of a Limited-Pay Life policy is?

Life Paid-Up at Age 65

"At age 50, out of 100,000 born the same year, 87,623 will still be alive. Of these, 729 will die this year." The preceding information is used to determine premium rates and is found in which of the following types of tables?

Mortality

Who is considered the owner of a mutual insurance company?

Policyholders Policyholders are considered owners of a mutual insurance company

Which of the following statements is CORRECT about the premium payment schedule for a Whole Life Policy?

Premiums are payable throughout the insured's lifetime, and coverage continues until the insured's death With whole life insurance, premiums are payable throughout the insured's lifetime, and coverage continues until the insured's death.

Which of the following statements is correct when comparing participating policies with non-participating policies?

Premiums for participating policies are usually higher than for non-participating policies Premiums for participating policies are usually higher than for non-participating policies because dividends are involved with participating policies

Under Social Security, which of the following determines the full amount of retirement benefits for an eligible person?

Primary Insurance Amount (PIA)

An insured lapsed a life insurance policy one year ago and now wants to reestablish this coverage. The policy can be placed in force under the?

Reinstatement provision In cases where a policyowner wishes to reinstate a lapsed policy, the reinstatement provision allows the policyowner to do so with some limitations.

Which forms of payment can be used to purchase an annuity?

Single payment or a series of payments

The Old Age and Survivors Disability Health Insurance (OASDHI) system is COMMONLY referred to as?

Social Security

Which of the following statements about the Suicide clause is CORRECT with regard to an Individual Life Policy?

Suicide may be excluded up to a year from date of issue of coverage while sane or insane In Missouri, suicide may be excluded up to a year from date of issue of coverage while sane or insane.

Which of the following types of insurance policies would provide the greatest amount of protection for a temporary period?

Term

Which type of coverage when selected will allow an applicant to have excess life insurance coverage?

Term Rider Term riders allow an applicant to have excess life insurance coverage.

If an insurance company obtains an inspection report on a prospective insured, it must inform the prospect that it is permitted to do so under which of the following federal laws?

The Fair Credit Reporting Act

Changes made on an insurance application should be signed or initialed by which of the following parties?

The applicant

L purchased a life insurance contract on July 16, 2004. L became severely depressed and on November 1, 2004 took his own life. Which of the following statements best describes how the insurance company settled the claim with L's beneficiaries?

The claim was denied under the Suicide clause of the policy The claim was denied because the insured committed suicide within two years of policy issue under the Suicide clause.

A company wants to purchase a Key Employee Life policy. Which of the following statements is INCORRECT?

The employee names the beneficiary

An applicant for life insurance must be informed of their rights under the Fair Credit Reporting Act at which of the following times?

When the producer completes the insured's application An applicant for life insurance must be informed of their rights when the producer completes the insured's application

Which of the following policies guarantees to pay the face value either to the beneficiary when the insured dies or to the insured when age 100 is attained?

Whole Life

All of the following provisions are required in a group life policy EXCEPT?

an Accidental Death and Dismemberment provision

The feature of a life insurance policy stating that the policy will not cover certain risks is called?

an exclusion Exclusions are features of a life insurance policy stating that the policy will not cover certain risks.

A beneficiary who must consent to a change in the beneficiary designation in a life insurance policy is referred to as?

an irrevocable beneficiary

An insured under a group contract will receive a?

certificate

The Pension Protection Act of 2006 is designed to?

encourage employees to increase contributions to their employer-sponsored retirement plans

Adjustable Life insurance is designed to meet an insured's need for?

flexible premiums As financial needs and objectives change, the policyowner can make adjustments to the premium and/or face amount.

An underwriter would use consumer reports to determine an applicant's?

likelihood of making premium payments

If an initial premium is not collected when a life insurance application is written, the insurance becomes effective?

on delivery of the policy to the insured and payment of the initial premium to the producer

Amounts of money that together with future premiums, interest, and survivorship benefits will fulfill an insurance company's obligations to pay future claims is known as?

reserves

All of the following persons must sign an application for life insurance EXCEPT the?

revocable beneficiary

FICA tax is applied to an employee's income up to a certain income amount. This amount is called?

taxable wage base

A policyowner decides to use dividends from a life insurance policy to purchase paid-up additions. The policyowner asks an agent to explain how the amount of the paid-up addition that is purchased each year will be determined. The agent's explanation includes all of the following facts EXCEPT

the age of the beneficiary

Under a Limited-Pay Life policy, the death benefit coverage usually continues?

to age 100 Even though the premium payments are limited to a certain period, the insurance protection extends until the insured's death, or to age 100.

One requirement for writing a Single Premium annuity is to?

make a lump-sum payment

Dividends from a stock company are paid to stockholders, whereas in a mutual company dividends are?

paid to the policyowners By issuing participating policies that pay policy dividends, mutual insurers allow their policyowners to share in any company earnings.

If an insured has an outstanding policy loan with interest due at the time of death, the insurer will recover the monies by deducting the amount from the?

policy proceeds If not repaid by the time the insured dies, the loan balance and any interest accrued are deducted from the policy proceeds at the time of claim.

The governing body of a mutual insurance company is elected by the?

policyholders The governing body of a mutual insurance company is elected by the policyholders.

An insured purchased a $20,000 Whole Life policy with Accidental Death and Dismemberment (AD&D). Three years later, the insured purposely took an overdose of sleeping pills which resulted in the insured's death. The insurance company will pay a MAXIMUM of?

$20,000 The suicide occurred outside the Suicide clause period (normally 1-2 years), thus the face amount will be paid

Which of the following items binds the insurer to coverage as of the date of the application or medical examination, whichever is later, provided that the proposed insured is determined to be an acceptable risk?

A binding receipt

Which of the following policy sections enables a policyowner to exchange one insurance policy for a policy of a different kind?

Conversion privilege The conversion privilege enables a policyowner to exchange one insurance policy for a policy of a different kind.

Which of the following statements describes the income tax treatment of policyowner dividends?

Only interest on accumulations is taxed If the dividends exceed the total premium payments for the insurance policy, the excess dividends are considered taxable income.

A distribution received from an employer sponsored retirement plan or from an IRA is eligible for a tax-free rollover if it is reinvested in an IRA within how many days after the distribution?

60

The policy provision that prevents an insurance company from altering its agreement with a policyowner by referring to documents or other items not contained in the policy is called the?

Entire Contract provision The entire contract provision, found at the beginning of the policy, states that the policy document, the application (which is attached to the policy), and any attached riders constitute the entire contract. Nothing may be "incorporated by reference," meaning that the policy cannot refer to any outside documents as being part of the contract.

Which of the following statements is CORRECT about a Variable insurance contract?

It does not guarantee a return on investment accounts In contrast, variable insurance products do not guarantee contract cash values, and it is the policyowner who assumes the investment risk. Variable life insurance contracts do not make any promises as to either interest rates or minimum cash values.

Which of the following plans may be used by a sole proprietor only if the employees of the business are included?

Keogh (Unincorporated) Pension Plan

What is the purpose of insurance?

To replace the uncertainty of risk with guarantees The purpose of insurance is to replace the uncertainty of risk with guarantees.

The applicant's signature is required on a life insurance application for which of the following reasons?

To represent that the statements on the application are true to the best of the applicant's knowledge

Which of the following policies is designed to provide flexible premiums and an adjustable death benefit?

Universal Life Universal Life is designed to provide flexible premiums and an adjustable death benefit.

An immediate annuity contract provides for?

liquidation of a principal sum

Which of the following features of a group Term Life policy enables an individual to leave the group and continue his or her insurance without providing evidence of insurability?

Conversion privilege The conversion privilege allows an individual to leave the group term plan and continue his or her insurance without providing evidence of insurability.

Which of the following statements about a five-year old Whole Life policy is CORRECT?

If a policyowner stops paying premiums, the policyowner may elect a Nonforfeiture option Nonforfeiture options allow a policyowner to stop paying premiums and not forfeit any of the equity in the policy.

Three individuals form a partnership with equal shares valued at $300,000. If they were persuaded to use an "entity" buy-sell plan funded with life insurance, how many policies and for what amounts would be purchased?

Three policies for $100,000 each

An agent is required to register with the National Association of Securities Dealers (NASD) in order to sell which of the following policies?

Variable Life Because of the transfer of investment risk from the insurer to the policyowner, variable insurance products are considered securities contracts as well as insurance contracts.

A life insurance company that shares its suplus earnings with its insureds is known as?

a participating company Participating insurance companies share its surplus earnings with its insureds

Disability, as defined for Social Security purposes, describes an employee who is unable to engage in?

any occupation

All of the following business arrangements can use "insured buy-sell agreements" to assure the orderly continuation of a business EXCEPT?

government entities

When an insured must obtain the beneficiary's consent to change the beneficiary of a life insurance policy, the original designation is said to be?

irrevocable

If the only difference in life insurance premiums for men and women is based on the fact that women are expected to live longer, then the premium for women's life insurance should be?

lower

To comply with ERISA minimum participation standards, qualified retirement plans must allow the enrollment of all employees?

over age 21 with one year service

Which of the following items may be used to include coverage for children under their parent's insurance policy?

A Term rider Family plan policies usually cover the family head with permanent insurance and the coverage on the spouse and children is term insurance in the form of a rider.

Which of the following sections of a life insurance contract states that the application is part of the contract?

Entire Contract provision The Entire Contract provision, found at the beginning of the policy, states that the policy document, the application (which is attached to the policy), and any attached riders constitute the entire contract.

The authority behind the requirements that an applicant for an Accident and Health policy MUST be notified of an investigation concerning the applicant's character, general reputation and mode of living is known as the?

Fair Credit Reporting Act The Fair Credit Reporting Act is a Federal law requiring an individual to be informed if that individual is being investigated by an inspection company

A producer who discovers that answers to a series of questions on a life insurance application were omitted should take which of the following actions?

Schedule another appointment with the applicant to complete the unanswered questions

In a life insurance policy, the Consideration clause states that the policyowner's consideration consists of completing the application and?

paying the initial premium The Consideration clause states that the policyowner's consideration consists of a completed application and the first initial premium

All of the following factors are used in the needs approach for determining the amount of required life insurance EXCEPT?

the percentage of future income

A Life annuity offers protection against the risk of?

living longer than anticipated

A 40 year old insured who buys a Single Premium Whole Life Policy and lives to age 85 will have paid a total out-of-pocket cost that is?

less than the premiums paid for a Straight Life policy The advantage offered by a single premium policy is that the policyowner will pay less for the policy than if the premiums were stretched over several years

An Adjustable Life policyowner may take all of the following actions without providing proof of insurability EXCEPT?

increase the face amount