Life Insurance Exam Test Questions

Which of the following is the closet term to an "authorized" insurer? A. Admitted B. Certified C. Legal D. Licensed

A. Admitted

Who makes up the Medical Information Bureau? A. Physicians and paramedics B. Insurers C. Hospitals D. Former insured

B. Insurers

A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as A. Survivor protection B. Juvenile protection provision C. Life Planning D. Survivorship insurance

A. Survivor Protection

A deferred annuity is surrendered prior to annuitzation. Which of the following best describes the nonforfeiture value of the annuity? A. The surrender value will not be more than 80% of the cash value in the annuity after the time of surrender B. The surrender value should be equal to 100% of the premium paid, minus any prior withdraws and surrender charges C. A deferred annuity cannot be surrendered prior to annuitization. The owner must wait until the annuitization period begins to receive any payments. D. The surrender value will be based on current interest rates

B. The surrender value should be equal to 100% of the premium paid, minus any prior withdraws and surrender charges

An insured stops making payments on a loan taken from his cash value policy. What will most likely happen? A. The insurer will not permit the policyowner to take out any more loans B. The policy will be reduced to an extended term option C. The insurer will increase the interest rate on the loan and charge a penalty D. The policy will terminate when the loan amount with interest equals or exceeds the cash value

D. The policy will terminate when the loan amount with interest equals or exceeds the cash value

A universal life insurance policy has two types of interest rate that are called A. Guranteed and current B. Minimum and target C. Fixed and variable D. Option A and B

A. Guranteed and current

Which of the following statements is true concerning the Accidental Death Rider? A. It will pay double or triple the face amount B. Also known as the triple indemnity rider C. It is only available in group insurance D. The rider is only available to insureds over the age of 65

A. It will pay double or triple the face amount

A prospective deferred annuity owner is concerned about what would happen if he surrendered the annuity before the annuitization period. The agent most likely explained which of the following? A. Nonforfeiture option guarantees that the owner will receive a surrender value of the contract B. It is not possible to surrender an annuity before the annuitzation period C. The insurance company will apply the money to another annuity or a life insurance policy, but the money cannot be returned. D. The owner will receive some of the money back, which will depend on the surrender value established by the insurer at the time the contract is terminated

A. Nonforfeiture option guarantees that the owner will receive a surrender value of the contract If a deffered annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed due to the non forfeiture provision

Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds? A. Vacation travel expenses B. Travel expenses for family members to come to the funeral C. Day care D. Debt cancelation

A. Vacation travel expenses

An annuitant dies before the effective date of a purchased annuity. Assuming that the annuitant's wife is the beneficiary , what will occur? A. The interest will continue to accumulate tax deferred B. Interest will become immediately taxable C. Premiums will increase D. Premiums will decrease

A.The interest will continue to accumulate tax deferred If contract holder dies before annuity date contracts interest is taxable. If the beneficiary is a spouse then the interest is tax deferred

An insolvent insurer is one who is unable to pay its obligations when they are due or has fewer assets than liabilities for a period of A. 6 years B. 3 years C. 2 years D. 4 years

B. 3

Which of the following are generally not considered when underwriting group insurance? A. Nature of Group B. Groups medical history C. Groups past claim experience D. Size of group

B.Groups medical history

When contributions to an immediate annuity are made with before-tax dollars, which of the following is true of the distributions? A. There are no distributions B. Distributions are nontaxable C. Distributions are taxable D. Distributions can't begin prior to age 70 1/2

C. Distributions are taxable

Which of the following documents must be provided to the policyowner or applicant during policy replacement? A. Policy illustrations B. Buyer's Guide and Policy Summary C. Notice Regarding Replacement D. Disclosure Authorization Form

C. Notice Regarding Replacement During policy replacement, the replacing producer must present to the aplicant a notice regarding replacement thats signed by the applicant and producer

The superintendent may examine books and records of all authorization insurers in Ohio. Who is responsible for paying for the exam? A. The NAIC B. The Department of Insurance C. The Insurer D. The Superintendent

C. The Insurer

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment? A. The annuitant will only receive the guaranteed minimum specified in the contract B. The annuitant will receive the lower of either the guaranteed minimum rate or current rate C. The annuitant will receive the higher of either the guaranteed minimum rate or current rate D. The annuitant will always receive the current interest rate

C. The annuitant will receive the higher of either the guaranteed minimum rate or current rate

In which of the following situations is it legal to limit coverage based on martial status? A. Excessive number of divorces, as defined by the insurance code B. Divorce within the last 6 months of applying for the insurance C. Legal seperation during the application process D. It is never legal to limit coverage based on martial status

D. It is never legal to limit coverage based on martial status

All of the following are rewuirements for life insurance illustrations except A. They may only be used as approved B. They must identify nonguranteed values C. They must differentiate between guaranteed and projected amounts D. They must be part of the contract

D. They must be part of the contract

Which of the following is NOT a goal of risk retention? A. To reduce expenses and improve cash flow B. To fund losses that cannot be insured C. To increase control of claim reserving and claims settlements D. To minimize the insured's level of liability in the event of a loss

D. To minimize the insured's level of liability in the event of a loss

Which of the following is true for both equity indexed annuities and fixed annuities? A. They invest on a conservative basis B. Both tied to a equity index C. Both are considered to be more risky than variable annuities D. They have a guaranteed minimum interest rate

D.They have a guaranteed minimum interest rate

All of the following statements are true regarding installments for a fixed amount except A. The annuitant may select how big the payments will be B. Value of the account and future earnings will determine the time period for the benefits C. The payments will stop when the annuitant dies D. The option pays specific amount until the funds are exhausted

C. The payments will stop when the annuitant dies

Under the Fair Credit Reporting Act, if the consumer challenges the correctness of the information in his/her report, the reporting agency must A. Respond to the consumers complaint B. Send an actual certified copy of the entire report to the consumer C. Change the report D. Defend the report if the agency feels it is accurate

A. Respond to the consumers complaint

An insured purchases a policy in 2008 and died in 2013. The insurance company discovers at that time that the insured concealed information during the application process. What can they do? A. Pay the death benefit B. Pay a decreased death benefit C. Refuse to pay the death benefit because of the fraud D. Sue for the right to not pay the death benefit

A.Pay the death benefit Under the incontestability clause, once the policy has been in place for at least 2 years then you can not deny any claims

An employee quits her job where she has a balance of $10,000 in her qualified plan. The balance was paid out directly to the employee in order for her to move the funds to a new account. If she decides to rollover her plan to a Traditional IRA, how much will she receive from the plan administrator and how long does she have to complete the tax free rollover? A. $8,000, 30 days B. $8,000, 60 days C. $10,000, 30 days D. $10,000, 60 days

B. $8,000, 60 days IRA rollovers must be completed within 60 days from the time the money is taken out for the first plan. If the distribution from the first plan is paid directly to the participant, 20% of the distribution must be withheld by the payor.

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but their children when they reach a certain age. Which settlement option should the policyowner choose? A. Life income with period certain B. Interest only option C. Joint and survivor D. Fixed amount option

B. Interest only option

For the reported losses of an insured group to become more likely to equal the statistical probability of loss for that particular class, the insured group must become A. Older B. Larger C. Smaller D. More Active

B. Larger

Which of the following riders would not cause the Death benefit to increase? A. Guaranteed Insurability Rider B. Payor Benefit Rider C. Cost of Living Rider D. Accidental Death Rider

B. Payor Benefit Rider

Which of the following statements about a suicide clause in a life insurance policy is true? A. Suicide is excluded as long as the policy is in force B. Suicide is excluded for a specific period of years and covered thereafter C. Suicide is covered for a specific period of years and excluded thereafter D. Suicide is covered as long as the policy is in force

B. Suicide is excluded for a specific period of years and covered thereafter

What are the personal uses of life insurance? A. Insured protection, estate creation and cash accumulation B. Survivor protection, estate creation and conservation, cash accumulation and liquidity C. Cash accumulation, estate depletion and liquidity D. Beneficiary protection, liquidity, estate creation, and cash accumulation

B. Survivor protection, estate creation and conservation, cash accumulation and liquidity

If an agent fails to obtain an applicant's signature on the application, the agent must A. Return the application to the applicant for a signature B. Send the application to the insurer with a note explaining the absence of signature C. Sign the application for the applicant D. Sign the application, stating it was the agent

A. Return the application to the applicant for a signature

Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company? A. Subrogation B. Aleatory C. Adhesion D. Warranty

B. Aleatory

All of the following information about a customer must be used in determining annuity sutability except A. Financial experience B. Beneficiary's age C. Annual income D. Tax status

B. Beneficiary's age

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? A. The death benefit cannot be decreased B. Death benefit can be increased with proof of insurability C. The death benefit can be increased only when the policy has developed a cash value D. The death benefit will be increased only by exchanging the existing policy for a new one

B. Death benefit can be increased with proof of insurability

An insured receives a monthly summary for his life insurance policy. He notices that the cash value of his policy is significantly lower this month then it was last month. What type of policy does the insured have? A. Variable B. Term C. Securities D. Stock

A.Variable

Who can make a fully deductible contribution to a traditional IRA? A. A person who contributions are funded by a return on investment B. An individual not covered by an employer-sponsored plan who has earned income C. Anybody: all IRA contributions are fully deductible regardless of income level D. Someone making contributions to an educational IRA

B.An individual not covered by an employer-sponsored plan who has earned income

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner? A. Reduced paid-up B. Cash surrender C. Paid-up options D. Extended term

B.Cash surrender Once the cash surrender value is paid the contract is over

Which of the following is true regarding the insurance amount in a credit life insurance policy? A. Creditor may insure the debtor for an unlimited amount of coverage B. Creditor can only insure the debtor for the amount owed C. The amount of coverage can be greater than the amount owed D. Allowable amount of coverage is determined by the State Insurance Commissioner

B.Creditor can only insure the debtor for the amount owed

Are insurance company underwriters allowed to discriminate? A. No, higher risks pay higher premiums B. Yes, but not unfairly C. No, discrimination is an unfair practice D. Yes, but only for gender

B.Yes, but not unfairly

A policyowner cancels his life policy but instructs the insurance company to transfer the cash value of his policy to an annuity. The nontaxable transaction is called A. Rollover B. Premature Distribution C. 1035 Exchange D. Qualified Distribution

C. 1035 Exchange

Which of the following is true regarding taxation of dividends in participating policies? A. Dividends are considered income for tax purposes B. Dividends are taxable in some life insurance policies and nontaxable in others C. Dividends are nontaxable D. Dividends are taxable only after a certain amount is accumulated annually

C. Dividends are nontaxable

Which of the following is true regarding a waiver of a surrender charge on an annuity contract? A. Surrender charge can only be waived if the annuitant needs the funds for medical expenses B. The surrender charge waiver only applies to immediate annuity C. The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days D. The charge can only be waived if the annuitant needs the funds for medical expenses

C. The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days Annuitant contracts provide for a waiver of surrender charges if the annuitant is confined to a long-term care facility for at lest 30 days

A life insurance policy does not have a war clause. If the insured is killed during a time of war, what will the beneficiary receive from the policy? A. Policy's cash value B. Refund of premiums C. Full death benefit D. Nothing, since the insured was killed as a result of a war

C.Full death benefit If a life insurance does not have the War or Military Clause then the benefits are paid to the beneficiary as if the insured dies of any other cause

Insurance is the transfer of A. Risk B. Peril C. Hazard D. Loss

D.Loss

Because of financial obligations, John felt that he needed more insurance than the insurer was willing to issue. John's insurance procedure told him that he could maximize the death benefit without increasing the face amount by the use of a(n): A. Return of Premium B. Automatic premium loan C. Waiver of premium rider D. Payor Rider

A.Return of Premium With the ROP rider attached, upon the insured's death, the benefit paid will be the face amount plus an amount equal to all the premiums

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would financially be able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement? A. Term Insurance only B. Any form of life insurance C. Universal Life insurance D. Permanent insurance only

B. Any form of life insurance

Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premium must be paid A. For 20 years B. Until the policyowners age 65 C. Until the policyowners age 100, when the policy matures D. For 20 years or until death, whichever occurs first

D. For 20 years or until death, whichever occurs first

Upon the submission of a death claim under a life insurance policy, when should the insurer pay the policy benefit? A. Within 2 years pf the date of loss B. On the next anniversary of the policy C. After the estate of the insured has been settled D. Immediately after receiving written proof of loss

D. Immediately after receiving written proof of loss

Which of the following has the authority to issue a cease and desist order? A. Federal Insurance Regulation Board B. Department of Insurance C. State police D. Superintendent

D. Superintendent

An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority? A. Express B. Assumed C. Implied D. Apparent

D.Apparent Agent who accepts a premium after the due date appears to the client to have authority to prevent the lapse but in fact he does not

Julie pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. Julie has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? A. Reduction of premium option B. Cash option C. Dividend-to-premium option D. Accumulation at interest

A. Reduction of premium option ROPO allows policyowner to apply policy dividends towards the next years premium.