Life Chapter 3
All of the following are true concerning code and ethics except: A - Be truthful and inaccurate when you explain your services. B - Avoid talking bad about your competition. C - Use simple language. D - Review and update files.
A - Be truthful and inaccurate when you explain your services. Rationale - Be accurate about your services.
In order to qualify as a fraternal benefit society, an organization must have: A - Ritualistic work B - A lodge system C - All of the above D - A representative form of government
C - All of the above Rationale - Fraternal's are known for their benevolent and charitable activities, fraternal societies are nonprofit organizations that operate for the benefit of their membership. To retain their tax exempt status, fraternals must have a lodge system that includes ritualistic work and operate under a representative (elected form of government).
An individual who handles premium payments in a trust capacity is considered to be: A - Trustee B - Analyst C - Fiduciary D - Actuary
C - Fiduciary Rationale - When a licensee is handling premium payments they are acting in the capacity of a fiduciary
A managing general agent with a life agent license and a written management agreement with one or more insurers is prohibited from doing which of the following? A - Accept premiums from producers in behalf of the insurer B - Accept and decline risk C - None of these are excluded from the powers and authority given to the managing general agent. D - Appoint, supervise, train and terminate agents on behalf of the insurer
C - None of these are excluded from the powers and authority given to the managing general agent. Rationale - A managing general agent CAN do all of these.
Aiding, assisting, or advertising for a nonadmitted is: A - Illegal unless licensed as a surplus lines broker B - Is a misdemeanor C - These statements are all correct D - Subject to fine of $500.00 plus $100.00 for every month the licensee continues to do so
C - These statements are all correct Rationale - All these statements are true.
A Property and Casualty Agent is required to continue their education by completing: A - a total of 100 hours during the first 4 years of licensing. B - a total of 55 hours during the first 2 years of licensing. C - a total of 24 hours per license term of continuing education courses. D - a total of 25 hours during the first 2 years of licensing.
C - a total of 24 hours per license term of continuing education courses. Rationale - Property and Casualty agents are required to complete 24 hours of continuing education each license term.
All the following are true concerning penalties of unfair trade practices except: A - purpose is to regulate trade practices B - $5000 fine C - commissioner can take action against the agent D - must be intentional
D - must be intentional Rationale - can be unintentional
All the following statements are true except: A - a standard market insurer writes for average or better insureds B - surplus line insurer can write business for nonadmitted companies C - admitted companies can do business in state D - nonadmitted insurers cannot write in California
D - nonadmitted insurers cannot write in California Rationale - unless a surplus lines broker is used
All the following are true concerning the code except: A - the insurance commissioner is elected by voters B - the rules and regulations are open to the public C - the insurance commissioner has the power to institute rules and regulations D - the code is the complete guide to ethical behavior
D - the code is the complete guide to ethical behavior Rationale - It is the guide but not the complete guide.
When the insurer reinsurance a contract they are referred to as the: A - Both of these terms B - Neither of these terms C - The ceding insurer D - Primary insurer
A - Both of these terms Rationale - An insurer that transfers a portion or all of the risk to another insurer is known as the primary or ceding insurer.
Any person to whom the commissioner has issued a seizure order and who refuses to deliver any books, records, or assets of an insurer faces: A - A misdemeanor punishable by a fine up to $1,000, a year in jail, or both. B - Administrative fines only. C - A misdemeanor punishable by a $5,000 fine, if unintentional, or $10,000, if intentional. D - A felony punishable by a fine up to $1,000, a year in prison, or both.
A - A misdemeanor punishable by a fine up to $1,000, a year in jail, or both. Rationale - The fine is up to $1,000 and/or 1 year imprisonment for violation of summary seizure.
All the following are true for continuing education requirements except: A - A property and casualty agent needs 24 hours of continuing education credits each license term. B - A life agent needs 48 hours of continuing education credits for the first and second licensing periods C - New agents selling long-term care need 8 hours of continuing education credits a year for 4 years. D - A life agent needs 3 hours of Ethics training credits each license term.
A - A property and casualty agent needs 24 hours of continuing education credits each license term. Rationale - A life agent would be required to complete 24 hours of CE's per license term.
Conservation applies to: A - All of the above. B - Any insurer with a Certificate of Authority. C - Allows for rehabilitation such as reorganization, consolidation, conversion, merger, or any other action the Commissioner feels is required to return the insurer to financial stability. D - It refers to taking over and managing the affairs of a financially troubled insurer.
A - All of the above. Rationale - All of these refer to Conservation by the Commissioner of an insurer.
The difference between the chronic illness rider and long-term care insurance is: A - Both required the insured to incur long-term care expenses B - Both require the inability to do two activities of daily living or severe cognitive impairment to trigger coverage C - Both require recertification every 12 months while receiving periodic payments D - Both require certification of a chronic illness by a LHCP
A - Both required the insured to incur long-term care expenses Rationale - Benefits from a chronic illness rider are based on the insured's chronic illness condition not LTC expenses. There is no requirement for the insured to incur LTC expense or living or confinement requirements to receive benefits.
Which one of the following is not a principal part of the Gramm-Leach-Bliley Act? A - Do not call provisions B - Safeguard rule C - Pretexting provisions D - Financial privacy rule
A - Do not call provisions Rationale - The GLB Act includes provisions to protect consumers personal financial information held by financial institutions. There are three principal parts to the privacy requirements: the Financial Privacy Rule, Safeguards Rule and pretexting provisions.
Which is false concerning the accelerated death benefit for chronic illness rider? A - It requires an A&H license to sell B - It may not be marketed in any manner as long-term care coverage C - Only permanent conditions will qualify for claim as the condition must be likely to last the rest of the insured's life to qualify for the benefit. D - No special continuing education requirement to sell this product
A - It requires an A&H license to sell Rationale - The accelerated death benefit for chronic illness rider requires a life agent license to sell.
A licensed producer who appoints and supervises other producers, earns a commission override on the business of those producers and has overall responsibility for producers in a given territory is considered a(n): A - Managing general agent B - Domestic producer Incorrect AnswerAmerican agency system Incorrect AnswerSurplus lines producer
A - Managing general agent Rationale - Managing General Agents (MGA) are licensees that have a written agreement with one or more insurers to manage the sale of their products in a given territory. Managing General Agents for test purposes can do anything an insurer can do. They can even negotiate reinsurance on behalf of an insurer.
Which of the following would require a Certificate of Registration to act as an Administrator in connect with collection of premiums and settling claims for life, health, or annuity coverages? A - None of the above. B - A creditor on behalf of its debtors C - A Life Agent D - A union
A - None of the above. Rationale - None of these would require a Certificate of Administration to act as an administrator.
An analyst may not receive any fee not based upon a written agreement signed by the party to be charged. This agreement must include all the following, except: A - Statement of services to be performed to which no fee will be charged B - Amount of the fees C - A statement that information and services concerning insurance policies may be obtained from the insurer without cost D - Statement that the analyst has both a Life and A&H license and receives commissions for the sale of products.
A - Statement of services to be performed to which no fee will be charged Rationale - The agreement must outline the services to be performed for which a fee is to be charged and the amount of the fee.
A surplus lines broker is required to obtain every applicants signature on a statement that provides all of the following information Except: A - The policy was denied by insurers licensed by the State of California B - The insurer does not participate in any of the CA insurance guarantee funds C - Guarantee funds will not pay for claims if the insurer becomes insolvent D - The policy is being issued by an insurer who is not licensed by the State of California
A - The policy was denied by insurers licensed by the State of California Rationale - The statement that must be signed is actually a warning disclosure that is in 16 pointe bold type print that includes a statement that the policy is being issued through a nonadmitted insurer, not that they were denied by a licensed (admitted) insurer of California.
All the following are examples of a pretext interview except: A - gathering information for underwriting B - refuses to identify themselves C - misrepresents the purpose of the interview D - pretends to be someone they are not
A - gathering information for underwriting Rationale - Legal
All the following are fiduciary duties except: A - making sure your accounting is done proper in the same account, so you know what is your money and what is the company's money B - giving insureds a receipt when payments are made C - making deposits in a timely manner D - taking insured payments
A - making sure your accounting is done proper in the same account, so you know what is your money and what is the company's money Rationale - Never mix your money with company money.
All the following are true except: A - marketing division handles selling products and the expenses of the company B - actuarial handles what to charge for the premiums C - claims division handles claims D - underwriting division handles the selection of risks
A - marketing division handles selling products and the expenses of the company Rationale - The actuaries must also account for the ordinary expenses of doing business.
All the following are true concerning ethics with senior citizens except: A - must give an additional 30 days more for a free look period than people who are not senior citizens B - use simple language C - no pretext interviews D - do not oversell
A - must give an additional 30 days more for a free look period than people who are not senior citizens Rationale - 30 total days not in addition to the normal 10 days.
All the following are true concerning conservation of a company except: A - workers comp claims are paid first B - $100,000 is the most that a guaranteed company will pay for a life claim C - all companies report their financial reports to commissioner every year D - commissioner has the right to take over a company if financial reports are negative
B - $100,000 is the most that a guaranteed company will pay for a life claim Rationale - in life insurance, perhaps not even that much, by limiting exposure to no more than $250,000 in death benefits.
Life only agents selling annuities are required to complete an ____________ course before submitting their first application. A - None of the above B - 8 hour C - 12 hour D - 4 hour
B - 8 hour Rationale - Though all require a training course before submitting the first application, only Life Agents can sell annuities and are required to complete an 8 hour annuities course.
All of the following are not considered an administrator except: A - An employer acting on behalf of their employees B - Contracted by an insurance company. C - Life agent D - Life company
B - Contracted by an insurance company. Rationale - A written agreement with the insurer listing their responsibilities and compensation arrangements with the insurer.
All the following are true concerning termination of license except: A - license is terminated at the time a partnership or organization is dissolved if licensee is the organization B - licensee can give up their license with a 90 day notice C - license is terminated at the death of licensee D - a change in the partners of a partnership
B - licensee can give up their license with a 90 day notice Rationale - A licensee can send a notice of resignation and return his/her license to the Commissioner and give up his/her insurance license at any time.
All the following are true concerning altering disability income polices applications except: A - only by insurer with written consent B - never C - never by an agent D - only by insured
B - never Rationale - Alterations cannot be made to any written application for any disability policy by any person other than the applicant unless written consent is given.
If someone has a Life Agent Combo and a Property/Casualty license, then how many CE hours would be required in the current license term? A - 30 hours B - 50 hours C - 25 hours D - 24 hours
D - 24 hours Rationale - Since this person has a Life and P/C license then they would be required to complete 24 hours per license term.
What entity has been actively involved in helping insurance remain under the jurisdiction of state government by bringing uniformity through model laws for the insurance industry? A - NCCI B - National Association of Insurance Agents C - Professional Agents Association D - NAIC
D - NAIC Rationale - The National Association of Insurance Commissioners develops model laws, standards, and guidelines for the insurance industry to protect the interest of policyowners and preserve state regulation.
How many hours of continuing education are required per renewal for a life-only agent? A - 24 hours, 3 of the hours must be in ethics B - 24 hours, 2 of the hours must be in ethics C - 20 hours, 3 of the hours must be in ethics D - 20 hours, 2 of the hours must be in ethics
Rationale - Life only Agents, A&H only Agents, and Life and A&H Agents must complete 24 hours of CE of which must include 3 hours of Ethics. Previously 4 hours of ethics were required.
The accelerated death benefit for chronic illness rider must disclose all of the following except: A - You Selected This AnswerThe policy or certificate is a Medicare supplement B - The policy or certificate does not provide long-term care insurance subject to California LTC insurance law. C - Benefits paid under the chronic illness rider are treated for federal income tax purposes as accelerated life insurance death benefits under IRC 101(g). D - The policy or certificate is not a California Partnership for LTC policy program.
A - You Selected This AnswerThe policy or certificate is a Medicare supplement Rationale - The chronic illness rider is not a Medicare supplement (policy or certificate).
Which statement is false concerning interpretation of policy provisions? A - There are three branches of government that control insurance. B - Executive branch is headed by the insurance commissioner which enacts the laws. C - Judicial makes rulings on the meaning of policies. D - Legislative branch enacts the laws and control the conduct of insurance business in California
B - Executive branch is headed by the insurance commissioner which enacts the laws. Rationale - The executive branch does not enact the laws but interprets them.
The purpose of insurance regulation is to protect the public by all of the following except: A - Make sure rates are adequate, reasonable and equitable. B - Interpreting policy provisions C - None of these statements are false D - Prevent fraud and insurer insolvency
B - Interpreting policy provisions Rationale - Interpretation of policy provision is not a primary objective of insurance regulation.
__________ company is an unincorporated company that consists of subscribers managed by an attorney. . A - Mutual Insurance B - Reciprocal Insurance C - Stock Insurance D - Governmental Exchange
B - Reciprocal Insurance Rationale - A reciprocal company is an unincorporated company that consists of subscribers managed by an attorney. Participants in this pool are called subscribers or members and they share profits and losses in the same proportion as the amount of insurance purchased from the exchange by the members
Which of the following statements is true? A - A life only or A&H only require 20 hours of CE, including 3 hours of Ethics to be completed prior to license renewal. B - You Selected This AnswerA person with either a Life only or A&H only, or both a Life and A&H license must complete 24 hours of CE, which includes 3 hours of Ethics prior to license renewal. C - A Life Settlement Broker license requires 15 hours of CE prior to renewal. D - A person that has both a Life and A&H licenses must complete 24 hours of CE for each, which includes 3 hours of Ethics, prior to license renewal.
B - You Selected This AnswerA person with either a Life only or A&H only, or both a Life and A&H license must complete 24 hours of CE, which includes 3 hours of Ethics prior to license renewal. Rationale - The number of hours required apply to the individual who holds the license not to each license. Regardless of the number of licenses held the agent is required to complete 24 hours of CE, which includes 3 hours of Ethics, prior to license renewal. Life Settlement Broker license does not have a CE requirement once the person has qualified for the license.
"Paid in capital" applies to all companies except: A - alien mutual B - foreign mutual C - domestic stock D - domestic mutual
B - foreign mutual Rationale - "Paid-in capital" or "capital paid-in" means: In the case of all other insurers except a foreign mutual insurer.
When a company, an organization or a group of affiliated organizations form a subsidiary for the purpose of having the subsidiary provide all or part of the insurance for the parent company or companies, this subsidiary is known as a: A - Joint stock insurer B - Lloyds of London C - An exchange D - A captive insurer
D - A captive insurer Rationale - This is the definition of a captive insurer.