Life ex

Fred purchased a $100,000 policy naming his wife, Wilma, as primary beneficiary, and his only child, Pebbles, to receive any proceeds if Wilma dies before Fred, or if she dies after Fred but before receiving all the policy proceeds. Fred elected the interest settlement option for Wilma, with the right of withdrawal after 5 years. No settlement option was stipulated for Pebbles. Fred dies on May 6th, 1991 Wilma's vintage automobile gasps its last breath on July 4th, 1996, and Wilma decides $15,000 will be adequate to purchase a newer model. Wilma: A Should seek other financing arrangements B May withdraw the $15,000, or more if she desires C Cannot withdraw any part of the proceeds D May access only up to the $15,000 from the proceeds

B **Since the 5-year period of non-withdrawal has ended, withdrawals can now be made from the proceeds held by the insurer.

The premium charged for new policies obtained by exercising the Guaranteed Insurability Rider is based upon the: A Original policy issue age of the policyowner B Attained age of the insured C Original policy issue age of the insured D Attained age of the policyowner

B

This rider allows for the insured to obtain additional insurance in between the specified ages including marriage and the birth or adoption of a child, when the need for insurance coverage may increase without having to prove insurability. It is called the ________ rider: A Additional Insurance Protection B Guaranteed Insurability C Family D Waiver of Insurability

B

When an insurer accounts for the interest and mortality factors, then adds additional charges to meet all costs of a contract, it derives __________. A The net premium B The gross premium C The dividends D The policy reserves

B

Which of the following policies allow for a partial withdrawal or partial surrender? A Variable Whole Life B Universal Life C Current Assumption Life D Traditional Whole Life

B

Ted owns a $50,000 Whole Life Policy. At age 47, he decides to stop paying premiums on his policy when it has $15,000 of cash value and exercise the Extended Term Option. Ted's term benefit will be: A $65,000 B $50,000 C $15,000 D $35,000

B

01:14:14 If the policyowner can withdraw funds from an annuity without surrender charges in the event interest crediting rates fall by more than a specific amount, this is referred to as a(n) ____________ provision. A Bailout B Free look C Refund D Cancellation

A

A beneficiary receives ample income each month from the interest earned while the insurance company retains the principal. This is referred to as which of the following? A Capital Conservation B Conservative Earnings C Capital Gains D Net Capital

A

An agent holds a license and sells insurance for several companies, but is not appointed with company XYZ. If the agent writes a policy for XYZ, which of the following would apply? A If issued by the company, the company would be fined up to 3 times the premium received B XYZ must issue the policy C The agent will guarantee the policy D If issued by the company, the company would be fined up to 3 times the commission earned

A

The 31 days in which the employee may change his/her group policy to an individual policy upon termination and without evidence of insurability, is known as: A Ownership Rights Provision B The Conversion Period C The Contestable Period D Change of Policy Provision

B

An insured purchased an ordinary life policy 15 years ago, and at that time listed her husband as the only beneficiary. Her husband died 2 years ago but she never changed the beneficiary. She dies, leaving one surviving adult child. Who receives the death benefit? A The insured's estate B The probate court C The insured's trust D The state treasury

A

First-to-die and last-to-die life insurance policies have in common all of the following, except: A They both continue in force after one of the named insureds dies B Generally they cover the lives of two people, typically husband and wife C They are both issued by an insurance company D They both require premiums to be paid on time

A

J has an event that could be subject to a claim. This event occurs on April 1 of this year. How long does J have to bring legal action against the insurer? A April 1 of next year B October 1 of this year C June 1 of this year D July 1 of this year

A

Jason has a Whole Life insurance policy with a face amount of $100,000, an annual premium of $1,000, and a cash value of $10,000. If he wants to borrow money from the insurer, what is the maximum he can obtain? A $10,000 B $90,000 C The sum of the premiums paid up to that point in time D $100,000

A

The _________ settlement industry has increased awareness of STOLI/IOLI. A Life B Financial C Viatical D Mortality

A

To help protect against experiencing immediate claims, group plans have a(n) _______ period set up by the group sponsor. A Probationary B Open enrollment C Conversion D Elimination

A

What is required to add a nonfamily member to a life insurance policy under a term rider? A Insurable interest B The nonfamily members commitment to pay the premium for the rider C The insured must be under the age of 40 D Permission of the producer

A

Which of the following establishes a cost basis in an annuity? A After-tax contributions B Tax deferred gains C Tax deferred interest D Pre-tax contributions

A

Which of the following identifies the parties to the contract and the perils it covers and the circumstances under which the insurer will pay a life insurance policy claim? A Insuring Clause B Entire Contract Clause C Consideration Clause D Exclusions Provision

A

Which of the following types of life insurance is the most common out of all life coverage in force in the United States? A Ordinary B Group C Industrial D Variable

A

Which of the following would not be a situation in which the annuity premium dollars would qualify for an income tax deduction for the premium payor? A A married couple purchasing a flexible premium non-qualified deferred annuity to supplement their future retirement income B An employee purchasing a flexible premium deferred variable annuity within a traditional 401(k) plan through payroll deduction C A school teacher purchasing a periodic premium tax sheltered annuity (TSA) through payroll deduction D An employed individual purchasing a traditional IRA flexible premium deferred annuity each year from discretionary dollars

A

K has a $10,000 traditional whole life policy with a loan outstanding of $1,000 and a 5% interest charge. At the end of the first year of the loan, K did not pay the loan interest. What is the result of K's inaction? A K's new loan balance is $1,050 B K's new loan balance is $950 C K's loan balance remains at $1,000 D K's new loan balance is $10,500

A *The cash value is used as collateral against the loan. Interest will be charged annually, and if unpaid, will be added to the balance of the unpaid loan. $1,000 x 5% = $1,050.

Which of the following may an insurer purchase for its separate account? A Neither answer is correct B Both answers are correct C Securities of a subsidiary of the insurer D More than 10% of the total issued and outstanding voting securities of any single issuer

A -Separate accounts for variable annuities may not acquire: 1) Any securities of the insurer's subsidiary. 2) Over 10% of the total voting securities of any other issuer. This would be considered a conflict of interest and would provide companies an unfair advantage.

An insured owns a $50,000 permanent life policy that she purchased 4 years ago that has a disability waiver of premium. The insured becomes disabled and pays premiums during the waiting period until the waiver begins. Once the waiver begins, what happens to the premiums she paid during the waiting period? A It is held in escrow until the disability is over then refunded B The insurer refunds it C It is added to the policy's cash values D It is kept by the insurer as part of the cost of providing the benefit

B

ERISA is a ________ law. A Municipal B Federal C International D State

B

The McCarran-Ferguson Act of 1945: A Established the Interstate Commerce Commission as the primary regulator of insurance B Gave states the authority to regulate insurance C Established the Federal Insurance Office D Reinforced violations of the Sherman Antitrust Act

B

The maximum liability of the Life and Disability Insurance Guaranty Association for all benefits, including cash values, for any one life is: A $250,000 B $300,000 C $100,000 D There is no limit

B

Each of the following are characteristics of a Current Assumption Whole Life insurance policy, except: A If interest rates increase premiums can be reduced or cash values can increase at a faster rate B The death benefit is not guaranteed C The insurance company can change the premium D The insurance company can change the interest rate credited to the policy

B

If a beneficiary has the choice and is interested in capital conservation, then which of the following settlement options should be chosen? A Life Only B Interest Only C Period Certain D Fixed Amount

B

If a client owns an equity-indexed product, what happens if the market falls in value by a large amount? A The policy's values are reduced in proportion to the loss B The policy's values can never be impaired due to negative index performance C The policy's losses must first be made up before any future interest can be credited D The policy's values are reduced on a dollar-for-dollar basis

B

If you have a map to find the exact location of a treasure, what type of risk would this be? A Assumed risk B Speculative risk C Possible risk D Pure risk

B

Group Life Insurance is usually written as: A Decreasing Term B Increasing Term C Annual Renewable Term D Contributory Term

c

Joe has a policy with a face amount of $50,000 and a policy loan of $2,000. He is also a week late on his $500 premium payment. Joe decides he can no longer make monthly payments, so he chooses the extended term nonforfeiture option. What is the face value on the new policy? A $50,000 less the $2,000 loan balance B $50,000 C $50,000 less the $500 premium and the $2,000 loan balance D $50,000 minus the $500 premium

B

Once a policy has lapsed, the insured usually can reinstate the policy, provided proof of insurability is shown, if: A Past due premiums plus interest have been repaid and less than 1 year has elapsed B All back premiums due plus interest have been repaid and less than 3 years have elapsed C The insured is under the age of 65 D Past due premiums have been paid within 5 years

B

A life annuity with period certain pays the annuitant: A A specified fixed dollar amount in a selected mode of payment until liquidated B For a specified minimum number of years, or the rest of his or her life, whichever is longer C For a certain period of time as specified and pays a beneficiary the same amount in regular installments for life D A fixed dollar amount in regular installments, but only for the remainder of the annuitants life expectancy

B

A minor aged ______ years or older may contract for insurance on his or her own life. A 14 B 15 C 12 D 10

B

Albert owns a life insurance policy insuring his son David. He wants a Settlement Option that, if David were to die, would provide guaranteed payments to Albert and his wife until both of them die. Albert's producer should recommend: A Life Income Period Certain B Life Income Joint and Survivor C Joint Life D Fixed Amount

B

An insured owning an Adjustable Life Policy enjoys a policy that has characteristics of both ______ and _______. A Level and Increasing Term B Permanent and Term C Decreasing and Level Term D Increasing and Decreasing Term

B

One of the greatest advantages of convertible and renewable term policies is that: A They provide living benefits B The insured is not required to show proof of insurability in order to renew or convert C They always renew or convert at the insured's original issue age D The insured is guaranteed the right to renew or convert at any age with no increase in premium

B

A producer may have his or her license revoked or suspended for all of the following reasons, except: A Forging another's name on an insurance document B Providing incorrect, misleading, incomplete information to the Commissioner C Failing to pay a traffic ticket on time D Failure to pay state income tax

C

A type of coverage with a small face amount, typically purchased to pay the burial expenses of the insured, is called a(n) _________ plan: A Interment B Annuity C Pre-need D Family

C

All of the following are true of a substandard risk, except: A The coverage could be reduced for a period of time B The insured may have a flat additional premium added to their base premium C The premium would be discounted D The insured may be rated as older than their actual age

C

An individual can make changes to their group life insurance plan at any time for any one of the following reasons, except: A Change in employment status such as going to or from part-time to full-time B Getting married C Changing health insurance carriers and deductibles D Adding an eligible dependent

C

If an employee does not enroll during open enrollment and they still want coverage, what happens? A They must provide proof of insurability B They cannot obtain as much coverage as those who enrolled during the open enrollment C The forms of insurance are more limited when they do apply for coverage D They pay more in premiums than those who enrolled during the open enrollment

C

Premiums for a variable universal life policy: A Are fixed and must be paid at the specified intervals B Are fixed but may vary in payment schedule C Can vary in amount as well as payment schedule D Are determined by using the AIR method of rate calculation

C

To be able to start operations, a mutual company must have all of the following, except: A A minimum number of applications for insurance B The advanced premium payment for each application C A minimum number of stockholders D A minimum surplus as specified by the state

C

Under Alabama law, you cannot pay any valuable consideration to a person if they are not licensed as a producer. If a producer violates this provision, they are subject to a fine of up to: A 3 times the premium paid B $1,000 C 3 times the commission paid D $10,000

C

When an insurer wishes to implement changes to a group life policy, whom must it notify? A Management only B Each participant individually C The group sponsor D The beneficiaries

C

Which Term Life insurance policy would have the highest initial premium, all else being equal? A 5-year Term B 1-year Term C 20-year Term D 10-year Term

C

Which of the following Annuities can it be said that it has 'upside potential, but no downside risk' when it comes to the stock market overall? A Market Value Adjustment B Fixed C Indexed D Variable

C

Which of the following annuities does not have a traditional accumulation phase? A Flexible premium deferred B Single premium deferred C Single premium immediate D Periodic premium deferred

C

Which of the following is a true characteristic of a Variable Universal Life policy? A The policy has a fixed premium schedule B The insurer bears all risks in accumulating cash value C As long as there is sufficient cash value to cover policy expenses when due, the insured is not required to pay the planned premium D The policy requires only a life license to sell

C

All of the following are true regarding disclosures at the point of sale and issues relating to AIDS, except: A Insurers must avoid unfair discrimination between those in the same underwriting class for the risks of AIDS B Insurers must require the maintenance of strict confidentiality of personal information obtained through testing C Much like illegal drugs and nicotine the applicant does not have to provide consent prior to insurer's testing for HIV D Insurance companies may refuse to issue a policy to individuals based on positive HIV test results

C **Insurers must require informed consent before testing for HIV.

Which of the following term life insurance policies cannot be renewed? A Re-entry B Level C Decreasing D Increasing

C *dECREASING FOLLOWS THE DEBT REPAYMENT SCHEDLE AND INCE PAID OFF POLICY ENDS

All of the following life insurance policies have a cash value that increases based on interest being credited to the cash value, except: A Universal Life B Current Assumption Whole Life C Variable Universal Life D Equity-Indexed Whole Life

C Variable Universal Life's cash values grow based on the performance of the separate accounts chosen by the policyowner, while the other three policies have interest credited to the cash values by the insurer.

An insurance plan owned by an employer, creditor or association, providing coverage for the employees, debtors, or members, refers to which of the following? A Individual Life Insurance B Industrial Life Insurance C Group Life Insurance D Ordinary Life Insurance

C Group Life Insurance

The process of analyzing risk exposures and designing programs to handle them is known as: A Adverse Selection B Insurable Risks C Risk Management D Loss Exposure

C Risk Management

The minimum capital required to form and organize a new domestic stock life insurance company in Alabama is: A $500,000 B $50,000 C $1,000,000 D $2,000,000

c

All of the following regarding convertible term life insurance is true, except: A Conversion can be based on either the attained or original issue age of the insured B The new premium will be higher on the conversion policy compared to the original policy C Conversion is without evidence of insurability D The conversion can take place at any time

D

All of the following would be considered replacement in life insurance and subject to replacement guidelines, except: A A policy amended with reduced benefits to purchase a new policy B A policy that will be lapsed or surrendered in order to purchase a new policy C A policy that has been converted to reduced paid up or extended term insurance to purchase a new policy D A term policy converted to whole life insurance

D

Controlled business may be defined as insurance sold: A To anyone willing to buy B To existing clients only C To individuals needing an increased amount of term insurance D To the producer, the producer's family and friends, and the producer's business associates

D

Linda wants her husband to be the beneficiary of her life policy but also wants to retain all rights of ownership. Which of the following types of beneficiary designations should she use? A Contingent beneficiary B Irrevocable beneficiary C Tertiary beneficiary D Revocable beneficiary

D

The type of policy that can be changed from one that does not accumulate cash values to one that does is a: A Universal life policy B Permanent policy C Variable life policy D Convertible term policy

D

Under the provisions of the fixed period settlement option, the: A Principal amount remains unchanged for a fixed period B Interest only is paid, the principal remains unchanged C Principal amount is invested in the stock market for a fixed period D Principal amount generally decreases to zero

D

Unless an exception applies, a tax penalty is assessed for withdrawals from annuities of tax-deferred earnings prior to age ______. A 65 B 62 C 55 D 59 1/2

D

What is the main purpose of backdating a policy? A To provide the agent with more up-front commissions B To gather more premium from the customer C To build more equity in the policy D To save age

D

What is the name of the rider that requires that the premium payor become totally and permanently disabled before it will pay a claim? A Juvenile Waiver B Minor age waiver of premium C Jumping Waiver D Payor Benefit (Waiver of Payor's Premium)

D

When an applicant completes the insurance application in its entirety and provides the producer with a premium check, what in effect has taken place? A The applicant is accepting the producer's offer of coverage B The applicant has given the producer the authority to negotiate the terms of the contract with the insurer C The producer is making an offer of insurance to the applicant D The applicant is making an offer to the insurer

D

When the annuitant dies during the accumulation phase of the annuity, the beneficiary receiving the death benefit: A Pays income tax on any gains using the deceased's income tax bracket B Pays no income tax on any portion of the proceeds C Pays taxes based on the estate tax rate of the deceased D Pays income tax on any gains at his or her own income tax rate

D

Which insurance company department determines the probability of loss and sets the premium rates? A Sales B Claims C Underwriting D Actuarial

D

Which of the following Whole Life insurance policies has the highest annual premium payment per $1,000 of coverage for a 35-year-old, all other factors being equal? A Ordinary Straight Whole Life B 30-Pay Ordinary Whole Life C Limited Pay Ordinary Whole Life to age 85 D 20-Pay Ordinary Whole Life

D

Which of the following correctly describes the effect of the Common Disaster Clause? A If the insured and primary beneficiary are killed in an auto accident in which both were in the car at the time of the crash, an autopsy will be required in order to determine which passenger died first B If an insured and contingent beneficiary both die in a train wreck, it is presumed that the insured died first in order to protect the primary beneficiary's right to claim the death benefit C If the primary and contingent beneficiary die when the boat they were sailing in sinks, it is presumed that the primary beneficiary outlived the contingent beneficiary for claims paying purposes D If an insured and primary beneficiary both are killed when the bus they are riding in goes over a cliff and if it cannot be determined who died first, the insured or primary beneficiary, the insured will be presumed to have survived the primary beneficiary so the contingent beneficiary will be able to receive the death proceeds

D

Which of the following is FALSE regarding Settlement Options? A Settlement Options are used when the owner wants to convert a lump sum death benefit to an income stream for the beneficiary B If the policyowner has chosen an option prior to death, the beneficiary cannot change it at time of claim C A policyowner may change a previously chosen settlement option before the insured dies D Both principal and interest received as a result of a settlement option are taxed as ordinary income to the beneficiary, as received

D

Alma, age 35, earns $50,000 a year and expects to retire when she is 65. What is Alma's human life value? A $5 million B $500,000 C $100,000 D $1.5 million

D *Human life value can be established by multiplying earnings ($50,000) by the number of working years (30). $50,000 x 30 years = $1,500,000.

Which of the following best describes the return of premium rider? A An increasing term benefit that matches the cash value accumulation B A level term rider in the amount of 20 annual premiums C An increasing term benefit that matches the cumulative premiums paid D A benefit similar to waiver of premium, but is free of charge

c

A grandparent purchases a life insurance policy on their granddaughter. This is an example of _________. A Wealth Transfer B Key Person Insurance C Third-Party Ownership D Two-Party Ownership

c