Life insurance
If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually?
$3,000
4. An insured had a $10,000 term life policy. The annual premium of $200 was due on February 1; however, the insured failed to pay the premium. He died on February 28. How much would the beneficiary receive from the policy
$9,800
26. What documentation grants express authority to an agent
)Agent's contract with the principal
#7. Which of the following is true regarding a single life settlement option
)It provides income the beneficiary cannot outlive.
An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?
)When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health
Continuing education requirements must be met every
2 years.
#34. Insurers must keep files of all advertisements used in Louisiana for how many years?
4
30. Insurers must keep files of all advertisements used in Louisiana for how many years?
4
55. Insurers must keep files of all advertisements used in Louisiana for how many years?
4
The Commissioner is elected to a term that lasts for how many years
4
29. In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?
5
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term
50,000d)The face amount will be determined by the insurer. The face of the term policy would be the same as the face amount provided under the whole life policy
31. What is the waiting period on a Waiver of Premium rider in life insurance policies?
6 months
What is a material misrepresentation
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
What is a material misrepresentation?
A statement by the applicant that, upon discovery, would affect the underwriting decision of the insurance company
: Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?
Adhesion
If a person purchases a Flexible Premium Deferred Annuity, when is the soonest that income payouts will begin?
After 1 year,The Flexible Premium Deferred Annuity (FPDA) is purchased with multiple payments. The benefit payments begin sometime after one year from the date of purchase.
#13. 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 be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?
Any form of life insurance
32. Which of the following types of agent authority is also called "perceived authority"?
Apparent
All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPT
At distribution, all amounts received by the employee are tax free.
The accelerated benefits provision will provide for an early payment of the death benefit when the insured
Becomes terminally ill.
#16. Which of the following is TRUE about a class designation?
Beneficiaries are not identified by name.
Which of the following is TRUE about a class designation?
Beneficiaries are not identified by name.
All of the following statements are correct regarding credit life insurance EXCEPT
Benefits are paid to the borrower's beneficiary.
60. All of the following are personal uses of life insurance EXCEPT
Buy-sell agreement.
#3. When a policyowner designates a group of individuals as the beneficiary of a life insurance death benefit without specifically naming the individuals, this is called
Class designation, A designation such as the child of the insured, or all children of the insured, or all current members of a group, is called a "class designation." The individuals need not be specifically named, since each who meet the qualifications of being included in the class will share in the benefit.
#35. Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as
Coercion
A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?
Collateral assignment
A producer who fails to segregate premium monies from his own personal funds is guilty of
Commingling
17. An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of
Concealment
32. An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
Consideration
29. Which of the following is NOT fundable by annuities?
Death benefits
Which of the following is NOT fundable by annuities?
Death benefits
Which of the following is true regarding taxation of dividends in participating policies?
Dividends are not taxable. Dividends are not considered to be income for tax purposes, since they are the return of unused premiums. The interest earned on the dividends, however, is subject to taxation as ordinary income.
#39. Which of the following best describes an insurance company that has been formed under the laws of this state?
Domestic
Which of the following best describes an insurance company that has been formed under the laws of this state?
Domestic
#27. All of the following statements are true regarding tax-qualified annuities EXCEPT
Employer contributions are not tax deductible.
#38. The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the
Entire contract.
The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the
Entire contract.
: The authority granted to an agent through the agent's contract is referred to as
Express authority.
Which policy component decreases in decreasing term insurance?
Face amount
Circulating deceptive sales material to the public is what type of Unfair Trade Practice?
False advertising
When doing business in this state, an insurance company that is formed under the laws of another state is known as which type of insurer?
Foreign
20. A Universal Life insurance policy has two types of interest rates that are called
Guaranteed and Current.
4. An individual purchased a life insurance policy on his life naming his wife as primary beneficiary, and their daughter as contingent beneficiary. Under what circumstances could the daughter collect the death benefit?
If the primary beneficiary predeceases the insured
#8. An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act?
Illegal under any circumstances
#15. Which authority is NOT stated in an agent's contract but is required for the agent to conduct business
Implied
52. The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the
Incontestability clause.
33. Which insurance principle states that if a policy allows for greater compensation than the financial loss incurred, the insured may only receive benefits for the amount lost?
Indemnity
Which of the following is true regarding the spendthrift clause in life insurance policies?
It can protect the policy proceeds from creditors of the beneficiary.
What is the purpose of a conditional receipt?
It is intended to provide coverage on a date prior to the policy issue
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy
It is reduced to the amount of what the cash value would buy as a single premium.
Which of the following statements about the reinstatement provision is true
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
If a contract provides a set amount of income for two or more persons with the income stopping upon the first death of the insured, it is called a
Joint life annuity.
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?
Jumping juvenile policy
If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?
Lump sum
#5. If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/an
Modified endowment contract.
#42. Which of the following is NOT true regarding policy loans?
Money borrowed from the cash value is taxable.
Which of the following premium modes would result in the highest annual cost for an insurance policy?
Monthly
29. Death benefits payable to a beneficiary under a life insurance policy are generally
Not subject to income taxation by the Federal Governmen
#21. Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
Payor Benefit
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
Payor Benefit
14: All of the following are examples of risk retention EXCEPT
Premiums
1: Pertaining to insurance, what is the definition of a fiduciary responsibility?
Promptly forwarding premiums to the insurance company
#11. Pertaining to insurance, what is the definition of a fiduciary responsibility?
Promptly forwarding premiums to the insurance company Fiduciary refers to a position of trust. When an agent is handling the premiums that belong to an insurance company, they are acting in a fiduciary capacity.
44. A situation in which a person can only lose or have no change represents
Pure risk. Pure risk refers to situations that can only result in a loss or no change. Pure risk is the only type insurance companies are willing to accept.
Which of the following statements about a suicide clause in a life insurance policy is TRUE?
Suicide is excluded for a specific period of years and covered thereafter
44. All of the following would be different between qualified and nonqualified retirement plans EXCEPT
Taxation on accumulation
Which of the following may NOT be included in an insurance company's advertisement?
That its policies are covered by a state Guaranty Associatio
All of the following entities regulate variable life policies EXCEPT
The Guaranty Association.
#28. A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true
The amount of the distribution is reduced by the amount of a 20% withholding tax
All of the following statements about equity index annuities are correct EXCEPT
The annuitant receives a fixed amount of return.
#32. Which of the following is TRUE regarding the insurance amount in a credit life policy?
The creditor can only insure the debtor for the amount owed
An insured is dissatisfied with her insurance policy and wants to negotiate certain provisions of the contract. What entity would her producer represent?
The insurer
40. Which of the following is NOT a characteristic of an insurable risk?
The loss must be catastrophic.
All of the following are true regarding a decreasing term policy EXCEPT
The payable premium amount steadily declines throughout the duration of the contract.d)The death benefit is $0 at the end of the policy term. Premiums remain level with a decreasing term policy; only the face amount decreases.
#40. In terms of parties to a contract, which of the following does NOT describe a competent party?
The person must have at least completed secondary education
How must a replacing producer respond to an applicant wishing to replace existing life insurance?
The producer must provide the applicant with a Notice Regarding Replacement.
All of the following are characteristics of a group life insurance plan EXCEPT
There is a requirement to prove insurability on the part of the participants
All of the following are requirements for life insurance illustrations EXCEPT
They must be part of the contract.
#38. All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium. The guaranteed insurability rider may be structured to allow for specific additional amounts of insurance to be purchased at specific ages, dates and events without proving insurability; however, the coverage is purchased at the insured's attained age and the maximum allowable purchase is specified in the base policy. This rider usually expires at the insured's age 40.
3. What is the purpose of the buyer's guide?
To allow the consumer to compare the costs of different policies The buyer's guide provides generic information about life insurance policies and allows the consumer to compare the costs of different policies. The policy summary provides specific information about the issued policy, as well as the insurer's information.
5: Which of the following is NOT a goal of risk retention?
To minimize the insured's level of liability in the event of loss
#10. In insurance policies, the insured is not legally bound to any particular action in the insurance contract, but the insurer is legally obligated to pay losses covered by the policy. What contract element does this describe?
Unilateral ,In a unilateral contract, the insured is not legally bound to do anything. The insurer, however, must pay losses covered by the policy.
Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount?
Universal life
#39. How long will the beneficiary receive payments under the single life settlement option?
Until the beneficiary's death
In a survivorship life policy, when does the insurer pay the death benefit?
Upon the last death
Which of the following types of policies allows for a flexible premium and a variable investment component?
Variable universal life insurance
. The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called
Waiver of premium.
13: Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract
Warranty
When would a 20-pay whole life policy endow
When the insured reaches age 100
#18. Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
Withdrawals are not taxable.
36. Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?
Withdrawals are not taxable.
#17. A producer's license has been revoked for a violation of the Insurance Code. When can the producer apply for a new license
Within 1 year of the revocation If a producer license has been revoked, the producer may file another license application within 1 year from the effective date of revocation, or within 5 years from the date of final court order if judicial review of revocation is sought.
When transacting business in this state an insurer formed under the laws of another country is known as a/an
a)Alien insurer.
Which of the following features of the Indexed Whole Life policy is NOT fixed?
a)Cash value growth
42. Which of the following is TRUE regarding the annuity period?
a)It may last for the lifetime of the annuitant
#36. Which of the following is TRUE regarding the annuity period?
a)It may last for the lifetime of the annuitant.
Which of the following statements about the reinstatement provision is true?
a)It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
#18. All of the following are characteristics of a group life insurance plan EXCEPT
a)There is a requirement to prove insurability on the part of the participants.
#28. Which of the following would least likely be considered a legitimate need that would be paid by insurance proceeds?
a)Vacation travel expenses
What is the main purpose of the Seven-pay Test?
b)It determines if the insurance policy is a MEC.
#28. Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated benefici
b)Life income with period certain
#24. The type of term insurance that provides increasing death benefits as the insured ages is called
c)Increasing term.
#24. Which nonforfeiture option provides coverage for the longest period of time?
c)Reduced paid-up
All of the following statements are true regarding installments for a fixed amount EXCEPT
c)The payments will stop when the annuitant dies.
#6. Which is generally true regarding insureds who have been classified as preferred risks?
c)Their premiums are lower.
. Which is generally true regarding insureds who have been classified as preferred risks?
c)Their premiums are lower.
#42. According to the Entire Contract provision, a policy must contain
d)A copy of the original application for insurance. An insurance contract must contain a copy of the original application.
Which of the following statements is NOT true concerning insurable interest as it applies to life insurance?
d)A debtor has an insurable interest in the life of a lender.
#2. In an annuity, the accumulated money is converted into a stream of income during which time period?
d)Annuitization period The "annuitization period" (annuity period) is the time during which accumulated money is converted into an income stream.
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this
d)Reduction of premium
All advertisements are the responsibility of the
insurer
#2. An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen to the premium?
)It will increase because the insured will be 5 years older than when the policy was originally purchased.
22. Equity indexed annuities
)Seek higher returns.
#27. If a policy has an automatic premium loan provision, what happens if the insured dies before the loan is paid back?
)The balance of the loan will be taken out of the death benefit.
All of the following are true of key person insurance EXCEPT
)The plan is funded by permanent insurance only.
#19. If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered
An unfair trade practice.
#14. The LEAST expensive first-year premium is found in which of the following policies?
Annually Renewable Term
#28. The death protection component of Universal Life Insurance is always
Annually Renewable Term
#4. Representations are written or oral statements made by the applicant that are
Considered true to the best of the applicant's knowledge
15: Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as
Contracts of adhesion.
#39. If an insured changes his payment plan from monthly to annually, what happens to the total premium?
Decreases
#33. J applied for a life insurance policy on January 10. The policy was issued on January 31. J's agent was vacationing at the time the policy was issued, so J did not receive the policy until February 18. J decides that he does not want the policy. When would J need to return the policy to the insurer in order to receive a full refund of premium paid?
February 28th, or 10 days after the time the policy is delivered
#16. If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?
Fixed period
A Return of Premium term life policy is written as what type of term coverage?
Increasing
#16. What type of insurance would be used for a Return of Premium rider
Increasing Term
20. An underwriter may obtain information on an applicant's hobbies, financial status, and habits by ordering a(n)
Inspection report.
35. What type of annuity guarantees to pay an income to the annuitant each year as long as he lives, and upon death, the annuity will refund the remaining payments to a beneficiary?
Installment refund annuity
37. What type of annuity guarantees to pay an income to the annuitant each year as long as he lives, and upon death, the annuity will refund the remaining payments to a beneficiary?
Installment refund annuity
13. The Medical Information Bureau (MIB) was created to protect
Insurance companies from adverse selection by high risk persons.
54. The Medical Information Bureau (MIB) was created to protect
Insurance companies from adverse selection by high risk persons.
Which of the following statements regarding HIV testing for life insurance purposes is NOT true?
Insurers are barred from requesting HIV testing.
35. A fixed annuity contract provides for
Level benefit payment.
A fixed annuity contract provides for
Level benefit payment.
Not subject to income taxation by the Federal Governmen
Level benefit payment.
What is a definition of a unilateral contract?
One-sided: only one party makes an enforceable promis
#8. Which of the following is NOT correct regarding false statements by a person engaged in the business of insurance?
Only written statements can be considered fraud
43. A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will
Pay the policy proceeds only if it would have issued the policy.
59. Which nonforfeiture option provides coverage for the longest period of time
Reduced paid-up
#5. Which nonforfeiture option provides coverage for the longest period of time?
Reduced paid-up,The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy
26. Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe?
Reduction
An insured committed suicide one year after his life insurance policy was issued. The insurer will
Refund the premiums paid.
10. An insured will be allowed to reactivate her lapsed life insurance policy if action is taken within a certain period of time, and proof of insurability is provided. Which policy provision allows this?
Reinstatement provision
Which of the following statements concerning a Simplified Employee Pension plan (SEP) is INCORRECT?
SEPs are suitable for large companies.
Equity indexed annuities
Seek higher returns.
51. The human resources director of an insurance company loves the policy she has with the company. She's personable, and the company wants to use her in a new advertisement. Which of the following statements pertaining to this scenario is true?
She can appear in the advertisement under the condition that her connection to the company is disclosed.
37. An insurance policy that only requires a payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called
Single premium whole life.
A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true?
The amount of the distribution is reduced by the amount of a 20% withholding tax.
#27. Which of the following is the best reason to purchase life insurance rather than annuities?
To create an estate
What is the purpose of establishing the target premium for a universal life policy?
To keep the policy in force
#23. After a hearing, if the Commissioner finds that a licensee is using Unfair Methods of Competition, the Commissioner may issue a Cease and Desist order against that person and levy a fine of how much?
Up to $1,000 for each violation.
39. An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date?
d)The date of medical exam
An employee is insured under her employer's group life plan. If she terminates her group coverage, which of the following statements is INCORRECT?
d)The insured may choose to convert to term or permanent individual coverage.