Life Insurance Practice Exam

Which of the following determines the cash value of a variable life policy?

The performance of the policy portfolio

The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as

The policy contains sufficient cash value to cover the cost of insurance.

Which of the following is TRUE regarding premium in a 10-year level premium policy?

The premium will remain level for 10 years

With which entity must a corporation register before it will be allowed to operate as an insurance agency?

director

In the event an insurer is found guilty of committing defamation, the insurer may be subject to the maximum penalty of

$10,000

An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?

$10,000, no tax consequence

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

What is the minimum age that a person can obtain a producer's license?

18

The Director may refuse to issue a license if a licensee's aggregate amount of premiums on controlled business exceeded the aggregate amount of premiums on all other insurance business during

2 calendar years immediately preceding the extension date of the license.

Producer licenses are good for what period of time before renewal is required?

2 years

Before each license renewal, an insurance producer must complete at least how many hours of continuing education?

24

A producer whose license is revoked or whose application for a license is denied will be ineligible to reapply for any license for at least

3 years

The policy loans provision states that the insurer must advance to the policyowner a sum up to the policy's cash value after the full amount of premiums have been paid for how long?

3 years

If a viatical settlement provider moves his business the new address must be reported to the Director within

30 days

Illinois law requires that a licensed insurance producer notify the Director, in writing, of any change in their residential address within

30 days

The Director informs a producer that its license has been terminated and immediately receives a request for the charges to be reviewed in court. Within what maximum number of days must the hearing be held?

30 days

In the state of Illinois, a viatical settlement contract must contain an unconditional right to cancel. How long does this right remain in effect?

30 days from the date the contract is executed

A person is in the process of becoming permanently licensed as a producer. A temporary producer's license may be issued for a maximum period of

90 days

Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be

Adjusted to the insured's age at the time of renewal

All of the following would be considered rebating EXCEPT

An agent misrepresents policy benefits to convince a policyowner to replace policies.

To which of the following policies would the state regulation on illustrations NOT apply?

An individual variable life policy

Under which of the following circumstances would an insurer pay accelerated benefits?

An insured is diagnosed with cancer and needs help paying for her medical treatment

Which of the following premium payment modes will incur the lowest payment overall?

Annual mode

Which of the following correctly describes controlled business?

Anytime more than 50% of the total premiums collected by a producer comes from themselves, his or her spouse, employer, or own business

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.

All of the following are requirements of eligibility for Social Security disability income benefits EXCEPT

Being age 65

An insurance contract must contain all of the following to be considered legally binding EXCEPT

Beneficiary's consent

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time.

To legally transact insurance in this state, an insurer must obtain which of the following?

Certificate of Authority

The act of rebating is considered a(n)

Class B Misdemeanor

When both parties to a contract must perform certain duties and follow rules of conduct to make the contract enforceable, the contract is

Conditional. The contract is formed on the basis that certain conditions are met.

According to the entire contract provision, what document must be made part of the insurance policy?

Copy of the original application

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change?

Cost of Living Rider

If an insured surrenders his life insurance policy, which statement is true regarding the cash value of the policy?

It is only taxable if the cash value exceeds the amount paid for premiums.

An insurer creates an advertisement in January of 2015 and keeps a record of its contents on file. Its next regular examination will occur in December of 2018. How long must the insurer keep its advertisements on file?

January 2019

Variable Whole Life insurance is based on what type of premium?

Level fixed

An insured has a life insurance policy that requires him to only pay premiums for a specified number of years until the policy is paid up. What kind of policy is it?

Limited Pay Life

If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used?

Lump sum Upon the death of the insured, or endowment, the contract is designed to pay the proceeds in cash, called a lump sum, unless the recipient chooses an optional mode of settlement.

Which part of an insurance application would contain information regarding the cause of death of the applicant's deceased relatives?

Medical information

After a back injury, an insured is disabled for a year. His insurance policy carries a Disability Income Benefit rider. Which of the following benefits will he receive?

Monthly premium waiver and monthly income

In contrasting stock insurers with mutual insurers, which statement is true?

Stock insurers are owned by the shareholders and issue nonparticipating policies

When term insurance is added to the main policy to enhance the policy or provide added benefit or coverage, it is called a

Term rider

Which of the following, when attached to a permanent life insurance policy, allows the policyowner to customize the policy to provide an additional amount of temporary insurance on the insured, or allows amounts of temporary insurance to cover other family members?

Term rider

Which of the following information will be stated in the consideration clause of a life insurance policy?

The amount of premium payment

When a settlement option is chosen at death, how are the monthly income payments taxed?

The principal portion is generally income tax-free while the interest portion is taxed as ordinary income

Which of the following is not true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities.

What is the purpose of the buyer's guide?

To allow the consumer to compare the costs of different policies

Which of the following is the best reason to purchase life insurance rather than an annuity?

To create an estate

Why should the producer personally deliver the policy when the first premium has already been paid?

To help the insured understand all aspects of the contract

What type of life insurance is most commonly used for group plans?

annually renewable term

All of the following are regulated areas of the insurance industry EXCEPT

commissions

In a case where the primary beneficiary predeceases the insured, in the event of the insured's death, the death benefit proceeds will be paid to

contingent beneficiary

How often is a resident insurance producer required to pay license fees?

every 2 years

Under which installments option does the annuitant select the amount of each payment, and the insurer determines how long they will pay benefits?

fixed amount

All of the following are business uses of life insurance EXCEPT

funding against general company financial loss

An insured bought an insurance policy that requires him to pay $150 in premiums on the 15th of each month. He then takes an extended vacation and forgets to pay the premium. Ten days later, his policy is still in effect and has not lapsed. Which policy provision allowed for this?

grace period

Life income joint and survivor settlement option guarantees

income for 2 or more recipients until they die

An insured has a life insurance policy from a participating company and receives quarterly dividends. He has instructed the company to apply the policy dividends to increase the death benefit. The dividend option that the insured has chosen is called

Paid-up additions

If an actuary would like to sell life insurance policies, what licensure is needed?

Producer's license for life insurance

What is the purpose of establishing the target premium for a universal life policy?

To keep the policy in force

Which employees of an insurance company are responsible for the final risk selection?

Underwriters

Each year a license viatical settlement provider must file with the Director a(n)

annual statement

Which of the following persons is required to hold a producer license?

A person who negotiates insurance contracts

The term "illustration" in a life insurance policy refers to

A presentation of non guaranteed elements of a policy

Which of the following terms can be used by producers to identify themselves at the beginning of sales presentations?

Insurance producer

As a field underwriter, a producer is responsible for all of the following tasks EXCEPT

Issue the policy that is requested

Which of the following is called a "second-to-die" policy?

survivorship life

Which of the following types of insurance products would be appropriate for an individual with a low income and high insurance needs?

term insurance

Which of the following is NOT an example of a business use of Life Insurance?

workers compensation

All of the following are true of an annuity owner EXCEPT

The owner must be the party to receive benefits.

If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT

Erase the incorrect answer and record the correct answer.

When an insurer begins underwriting procedures for an applicant, what will be the main source for its underwriting information?

Application The application contains most of the information used for underwriting purposes. This is why its completeness and accuracy are so crucial.

What characteristic makes whole life permanent protection?

Coverage until death or age 100

The term "fixed" in a fixed annuity refers to all of the following EXCEPT

Death Benefit

All of the following are prohibited practices EXCEPT

Denying a claim after an investigation

A proposed policy form includes accelerated benefits. Before the policy can be legally used, it must be approved by which of the following?

Department of Insurance

According to the Fair Credit Reporting Act, all of the following would be considered negative information about a consumer EXCEPT

Disputes regarding consumer report information

Items stipulated in the contract that the insurer will not provide coverage for are found in the

Exclusions clause

The requirement that producers must account for all insurance funds collected, and without the expressed consent of the insurance company are not permitted to commingle those funds with their own funds, is known as

Fiduciary responsibility

If taken as a lump sum, life insurance proceeds to beneficiaries are passed

Free of federal income taxation.

What required provision protects against unintentional lapse of the policy?

Grace Period usually 30-31 days

Fiduciary responsibilities apply in which of the following situations?

Handling client premiums

In which of the following cases will the insured be able to receive the full face amount from a whole life policy?

If the insured lives to age 100

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

The reduction of premium option uses the dividend to reduce

Next year's premium

An individual buys a flexible premium deferred life annuity with 20 year period certain. What would his beneficiary receive if he died 5 years after beginning the annuity phase?

Payments for 15 years

The Gramm-Leach-Bliley Act was passed to?

Protect private customer information filed with a financial institution.

Which of the following best details the underwriting process for life insurance?

Selection, classification, and rating of risks

All of the following are general duties of the Director EXCEPT

Set premium rates

The Ownership provision entitles the policyowner to do all of the following EXCEPT

Set premium rates

An individual receives a lump-sum inheritance. He'd like to use the money to create a lifetime income since he'll be retiring soon. He purchases an annuity and wishes to receive payments beginning in 2 months. What did he buy?

Single premium deferred annuity

An agent uses an insurer's illustration. He obtains proper approval and does not change the illustration in any way. The illustration involves projected amounts, and the agent stipulates that the amount would not be guaranteed. Which of the following is true?

The agent must stipulate that the illustration is not part of the contract.

The president of a company is starting an annuity and decides that his corporation will be the annuitant. Which of the following statements is true?

The annuitant must be a natural person.

If a life insurance policy has an irrevocable beneficiary designation,

The beneficiary can only be changed with written permission of the beneficiary

All of the following are true about Group Life insurance EXCEPT

The employer is the beneficiary

All of the following are true of group life insurance EXCEPT

The insureds each own their own contract

An applicant receives a temporary insurance producer license. After 80 days, the owner of the insurance company decides to sell the business. Which of the following is TRUE?

The license will automatically terminate.

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

When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered

discrimination

How often does a viatical settlement provider's license expire?

every year