Life Insurance 1

Anthony becomes an agent for Acme Insurance Company. Acme has not filed the notice of appointment with the Commissioner. It must do so within how many days? 10 31 30 15

15

Under the standard bring-back rule, assets transferred out of a decedent's estate will be valued in the estate if the transfer occurred within how many years before death? 5 years 3 years 7 years 4 years

3 years

The Commissioner may issue a learner's permit authorizing a person to act as an adjuster for up to how many days? 45 60 30 90

90

All of the following are automatically deemed to represent an insurable interest EXCEPT: Sue (the applicant) and her husband ABC Corp. (the applicant) and its key executive Frank (the applicant) and his elderly neighbor Karen (the disabled applicant, age 28), and her father who cares for her.

Frank (the applicant) and his elderly neighbor

Which of the following best describes insurable interest? It refers to the maximum amount of insurance that may be purchased on the insured person or property. It describes the basic relationship between the insurance company and the policyowner. It refers to the financial relationship between the policyowner and the insured person or property. It refers to the role life insurance can play in protecting policyowners from investment fraud.

It refers to the financial relationship between the policyowner and the insured person or property.

In the actuary's calculation of life insurance premium rates, what affect will a higher interest rate assumption have on the premium rate? Premiums will be lower. Premiums will be higher. The effect cannot be known. It will have no effect.

Premiums will be lower.

If an applicant for an insurance policy submits an application without the first premium, which of the following is correct? The applicant has made an offer to the insurer. The insurer has made an offer to the applicant. The insurer may not make a counteroffer to the applicant. The applicant has invited the insurer to make an offer.

The applicant has invited the insurer to make an offer.

Which one of the following statements about term life insurance is correct? The policy pays a death benefit only if the insured dies during the term. It is intended to cover the insured to age 120. It is permanent insurance. A cash value accumulates in term life policies.

The policy pays a death benefit only if the insured dies during the term.

The tendency of a person diagnosed with a serious illness to try to buy life or health insurance is known as: adverse selection risk avoidance exposure reduction concealment

adverse selection

An insurance producer tells a life insurance applicant that he has the authority to waive the medical exam that is normally required by the insurer with every application. The insurer may be required to accept the application without a medical exam due to the producer's: express authority imputed authority implied authority apparent authority

apparent authority

During the application process, ABC Insurers receives personal and confidential information about Tom, who is applying for a life insurance policy. In which of the following circumstances must ABC Insurers obtain Tom's written authorization before disclosing this information? before disclosing information in response to an administrative order before disclosing information to a consumer reporting agency before disclosing information to law enforcement agencies who are investigating insurance fraud before disclosing information to third parties for telemarketing and sales purposes

before disclosing information to third parties for telemarketing and sales purposes

Which of the following is the actuary's first step in determining the premium charged for a policy? calculate the expected profit calculate the net premium calculate the annual policy dividend calculate the gross premium

calculate the net premium

Which remedy does the Commissioner have if a person has violated the Insurance Information and Privacy Protection Act? cease and desist order fine of up to $20,000 license termination criminal sanctions

cease and desist order

Beatrice is a member of the Supreme Lodge fraternal benefit society. What must Beatrice do before she can sell insurance on its behalf? become a licensed agent with a specialty in fraternal lines insurance obtain a restricted agent's license obtain a surplus lines license comply with the same general licensing requirements that apply to resident agents

comply with the same general licensing requirements that apply to resident agents

Ambiguities in an insurance contract are most often interpreted in favor of the policyowner because insurance contracts are: contracts of adhesion aleatory unilateral conditiona

contracts of adhesion

When meeting with a prospect to discuss life insurance, Agent Tyler makes disparaging comments about the financial stability and reputation of a competitor to dissuade the prospect from purchasing its policies. Which unfair trade practice has Agent Tyler committed? unfair discrimination coercion defamation rebating

defamation

Which of the following is not an unfair claims settlement practice if committed by an insurance company in North Carolina? failing to promptly settle a claim when liability is uncertain failing to promptly acknowledge communications about claims refusing to pay claims without conducting a reasonable investigation attempting to settle a claim based on an application that the producer changed without informing the insured

failing to promptly settle a claim when liability is uncertain

An insurance company that is incorporated in Mississippi is considered what type of insurer in North Carolina? limited domestic alien foreign

foreign

A not-for-profit insurance provider operated by an organization that has a representative form of leadership, operates on a lodge system, and exists solely for the benefit of its members and their beneficiaries is called a: risk retention group fraternal insurance company home service insurance company mutual insurance company

fraternal insurance company

If the Alpha-Omega Corporation wants to provide cost-effective life insurance for all its full-time employees, it will most likely buy which of the following? business life insurance individual term life insurance group term life insurance whole life insurance

group term life insurance

Though not specifically cited in the producer's contract, the producer is expected to telephone prospects on the insurer's behalf to arrange sales appointments. This is an example of what kind of producer authority? perceived authority apparent authority implied authority express authority

implied authority

What is the mathematical concept of probability that helps insurers estimate the statistical likelihood of mortality or morbidity losses at any given age? law of large numbers underwriting principle actuarial principle law of probability

law of large numbers

From an insurance risk perspective, an applicant engaging in adverse selection is demonstrating which type of hazard? morale hazard moral hazard physical hazard legal hazards

morale hazard

When collecting personal financial or health information, an insurance company is required to do all of the following EXCEPT provide individuals with copies of documents disclosed to other parties. provide methods for individuals to prevent disclosure of the information. notify individuals about the company's privacy practices. describe conditions under which the company may disclose the information to other parties.

provide individuals with copies of documents disclosed to other parties.

The primary reason for using third-party ownership in personal life insurance for estate planning purposes is to: reduce the tax rate used in calculating the estate tax convert the life insurance proceeds from an estate taxable asset to an income taxable asset remove the life insurance proceeds from the insured's estate and thus reduce the value of the taxable estate transfer the estate tax liability from the owner to the beneficiary

remove the life insurance proceeds from the insured's estate and thus reduce the value of the taxable estate

Statements made on a life insurance application are considered: unconditional promises warranties representations conditional promises

representations

In order to be grounds for the insurer to void a contract, an applicant's statements on an insurance application must involve: excessive details a broken warranty the deliberate withholding of material facts an incorrect statement

the deliberate withholding of material facts

All of the following are insurable risks EXCEPT: the risk of becoming ill and requiring hospitalization the risk of premature death the risk of one's home value decreasing due to a drop in market prices the risk of incurring dementia requiring long-term medical care

the risk of one's home value decreasing due to a drop in market prices

Jack's beneficiaries were unable to collect the $250,000 in proceeds under his life insurance policy because of the insurer's insolvency. What amount will his beneficiaries typically be able to collect if the policy is covered by the Life and Health Insurance Guaranty Association? $100,000 $250,000 $300,000 $200,000

$250,000

Which of the following is an example of an unauthorized insurance company in Illinois? Company A, an Illinois-based company that holds a certificate of authority in Illinois and 32 other states Company C, a Florida-based company that does not hold a certificate of authority Illinois but whose products are approved by the Illinois insurance department Company D, a Canadian company that holds a certificate of authority in Illinois Company B, an Iowa-based company that does not hold a certificate of authority in Illinois and sells products that are not approved by the Illinois insurance department

Company B, an Iowa-based company that does not hold a certificate of authority in Illinois and sells products that are not approved by the Illinois insurance department

In life insurance, for how long must insurable interest exist? If no insurable interest exists when a policyowner buys a life insurance policy, the contract may still be enforced. It must exist when a claim is submitted. It must continue for the life of the policy. Insurable interest must exist only at the time the applicant enters into a life insurance contract.

Insurable interest must exist only at the time the applicant enters into a life insurance contract.

Zelda, a producer selling health insurance, assures a prospective applicant that the insurance company she represents is backed by the protections of the North Carolina Life and Health Insurance Guaranty Association. Which of the following statements is correct regarding this kind of assurance? It is highly regulated by the Insurance Department. It is required when selling to Medicare-eligible individuals. It is prohibited at all times. It is recommended when selling health insurance.

It is prohibited at all times.

Linda is an administrative assistant at ABC Insurance Company and is also studying to become a producer. She routinely accepts premiums and makes cold calls soliciting insurance on behalf of her boss, a licensed producer. Which statement is correct? Linda's actions are lawful, if her boss acts as her sponsor. Linda must be licensed in order to accept premiums and solicit insurance. Linda's actions are lawful because she is in the process of becoming a producer. Linda's actions are lawful, provided ABC Insurance Company has given its consent.

Linda must be licensed in order to accept premiums and solicit insurance.

Emil, an agent licensed in North Carolina, moves to a new home on April 30. He is required to notify the North Carolina Department of Insurance by what date? May 30 May 7 October 31 May 10

May 10

All of the following statements regarding the career agency distribution system are correct EXCEPT: It uses agents who primarily if not exclusively represent one insurer. Personal producing general agents (PPGAs) are commonly hired to manage career agencies. There are two types, the general agency system and the managerial system. The managerial form of career agency system uses company employees as the agency managers.

Personal producing general agents (PPGAs) are commonly hired to manage career agencies.

Abby lives in Maryland, where she is licensed as an insurance agent. She wants to apply for a nonresident license in North Carolina. Which of the following conditions must she satisfy? She must move to North Carolina. She must show her license to be in good standing in Maryland. She must be sponsored by an agent licensed in North Carolina. She must surrender her Maryland license.

She must show her license to be in good standing in Maryland.

With respect to third-party ownership of life insurance in the personal insurance market, all the following statements are true EXCEPT: Policy ownership can be transferred to anyone without there having to be an insurable interest between that person and the insured. Third-party ownership is common in estate planning. The insured has the right to name the beneficiary. Third-party ownership is the basis of stranger-oriented life insurance (STOLI).

The insured has the right to name the beneficiary.

All the following statements regarding stranger-owned life insurance (STOLI) are correct EXCEPT: STOLI is an arrangement in which investors convince an individual to purchase a life insurance policy on himself which is transferred to the investor in exchange for a sum of money. STOLI and investor-owned life insurance (IOLI) are the same thing. The insured retains the right to designate the policy's beneficiary. STOLI is financed through premium loans during the first several years, until it is transferred from the insured to the investors.

The insured retains the right to designate the policy's beneficiary.

All the following statements about the net premium for a traditional life insurance policy are correct EXCEPT: The net premium reflects two of the three premium factors: mortality and interest. The net single premium for a traditional life insurance policy is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment. The net premium is the insurer's estimated cost to provide the policy benefits without accounting for the insurer's expenses. Calculating the net single premium is the first step in calculating the gross premium charged to the policyowner.

The net single premium for a traditional life insurance policy is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment.

Alice wants to spread her life insurance premiums over the year, rather than pay a single annual premium. She asks her agent what that would mean in terms of the sum of premiums paid. Which of the following is the correct response? Whichever mode of premium she chooses, the sum of premiums over the course of the year is the same. The sum of premiums will be lower than if she paid a single annual premium. The sum of premiums will be higher than if she paid a single annual premium. The sum of premiums may be higher or lower than the single annual premium, depending on whether the annual premium is paid at the start or end of the policy year.

The sum of premiums will be higher than if she paid a single annual premium.

All of the following statements about participating policies are correct EXCEPT: Though not required to do so, insurers may guarantee their participating policy dividends. They are generally issued only by mutual insurance companies. Participating life policies pay the policyowner a policy dividend out of its divisible surplus. They may also be called par policies.

Though not required to do so, insurers may guarantee their participating policy dividends.

Best Insurance Company is incorporated in Canada and just applied for a license to transact insurance in North Carolina. Which type of insurer is Best Insurance Company considered in North Carolina? alien limited foreign domestic

alien

The Royale Insurance Company, domiciled in Toronto, Canada, transacts business legally in New York. In New York, Royale is classified as a(n): domestic insurance company alien insurance company unauthorized insurance company foreign insurance company

alien insurance company

Statewide Insurers wants to obtain an investigative consumer report about an applicant because of questions it has regarding the individual's credit history. What must Statewide do before it can obtain a report? require the applicant to sign an affidavit attesting to the truth of the statements in the report notify the applicant that he has the right to prepare his own report obtain the applicant's signed consent before obtaining the report notify the applicant that he has the right to be interviewed in connection with the report

notify the applicant that he has the right to be interviewed in connection with the report

In addition to the fiduciary responsibility they have with all customer premiums and assets, producers are expected to do all the following EXCEPT: avoid all forms of rebating seek opportunities to replace existing policies with newer products make sure all product recommendations are suitable for the customer disclose all pertinent information concerning a proposed policy

seek opportunities to replace existing policies with newer products

In its fiduciary responsibility to its principal, a producer is required to do all the following EXCEPT: fully account for premiums and submit them to the insurer on a timely basis carry out authorized activities with reasonable care solicit business that is certain to be profitable to the insurer fully disclose to the insurer all pertinent information that affects the placement of an insurance policy

solicit business that is certain to be profitable to the insurer

Which of the following is not a reason for license suspension or revocation? knowingly accepting insurance from an unlicensed individual having a producer license revoked in another state soliciting relatives and friends for insurance failing to pay state income tax

soliciting relatives and friends for insurance

Alex owns a "home service" life insurance policy, which means he most likely pays his premiums in which of the following ways? weekly or monthly, often personally to the agent who comes to Alex's home quarterly by checking account debit with a single premium payment annually by personal check

weekly or monthly, often personally to the agent who comes to Alex's home