life insurance practice test

An insurance agent is planning to give out his business cards to prospective clients to solicit some insurance business. On the business card, the agent's name appears in font size 16, the phone number is in font size 14, and the business address is in font size 10. What font size should be used for the agent's license number? a. 10 b. 12 c. 14 d. 16

10 To assure that the number is not minimized and perhaps missed by a prospective insurance purchaser, the license number must be printed at least as large as the smallest address or telephone number on the same document.

What percentage of a company's employees must take part in a noncontributory group life plan? a. 0% b. 25% c. 75% d. 100%

100% If the employer pays all the premium, all the employees must be covered to avoid adverse selection.

Within how many days of requesting an investigative consumer report must an insurer notify the consumer in writing that the report will be obtained? a. 3 days b. 5 days c. 10 days d. 14 days

3 days Investigative consumer reports cannot be made unless the consumer is advised in writing about the report within 3 days of the date the report was requested.

All insurance policies and annuity contracts delivered to senior citizens in the State of California are subject to a cancellation period of at least a. 20 days b. 30 days c. 45 days d. 60 days

30 days All insurance policies and annuity contracts, other than variable contracts and modified guaranteed contracts, marketed to senior citizens in the State of California are subject to a cancellation period of no fewer than 30 days.

An insurer, by filing a notice of appointment on behalf of an applicant, shall be deemed to have declared that the applicant has had experience or instruction in insurance or that the necessary instruction will be given within a. 30 days after issuance of license. b. 20 days after issuance of license. c. 10 days after issuance of license. d. 60 days after issuance of license.

30 days after issuance of license. An insurer must provide instruction in insurance within 30 days after the filing a notice of appointment.

According to the Entire Contract provision, a policy must contain a. A declarations page with a summary of insureds. b. Buyer's guide to life insurance. c. Listing of the insured's former insurer(s) for incontestability provisions. d. A copy of the original application for insurance.

A copy of the original application for insurance. An insurance contract must contain a copy of the original application.

If an annuitant dies during the accumulation period, what benefit (if any) will be included in the annuitant's estate? a. Full annuity benefit b. No benefits c. Policy loans d. Accumulated cash value

Accumulated cash value If the annuitant died during the accumulation period, the insurer is obligated to return all or a portion of the annuity cash value (values accumulated in the annuity in accordance with contract terms), which will be included in the deceased annuitant's estate.

Which of the following actions would NOT be considered a form of "adverse underwriting decisions" for a policy involving individually underwritten coverage? a. Failure of an agent to apply for coverage that an applicant requests b. An insurer giving an insured a "preferred" rating due to health and lifestyle conditions c. A declination to cover an applicant d. Termination of existing coverage of an insured risk

An insurer gives an insured a "preferred" rating due to health and lifestyle conditions Adverse underwriting decisions result in lower quality coverage, increased premiums, or no coverage granted by the insurer. Preferred rates would benefit the insured through lower premiums and broader risk protections. (CIC 791.02)

What license or licenses are required to sell variable annuities? a. Only a securities license b. No license is required c. Both a life insurance license and a securities license d. Only a life insurance license

Both a life insurance license and a securities license Agents are required to have both a life insurance license and a securities license to sell variable annuities.

A tax-sheltered annuity is a special tax-favored retirement plan available to a. Certain age groups only. b. Certain groups depending on factors such as race, gender, and age. c. Certain groups of employees only. d. Anyone.

Certain groups of employees only. A tax-sheltered annuity is a special tax-favored retirement plan available only to certain groups of employees (nonprofit charitable, educational, religious, and other 501c(3) organizations, including all employees in public education).

Which of the following includes information regarding a person's credit, character, reputation, and habits? a. Agents report b. Consumer report c. Consumer history d. Insurability report

Consumer report Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, and habits collected by a reporting agency from employment records, credit reports, and other public sources.

What is another name for interest-sensitive whole life insurance? a. Current assumption life b. Variable life c. Term life d. Adjustable life

Current assumption life Interest-sensitive whole life, also referred to as current assumption life, is a whole life policy that provides a guaranteed death benefit to age 100.

Which of the following is NOT typically excluded from life policies? a. Death due to plane crash for a fare-paying passenger b. Self-inflicted death c. Death that occurs while a person is committing a felony d. Death due to war or military service

Death due to plane clash for a fare-paying passenger. Generally, policies do not exclude conditions in which an insured is a fare-paying passenger on a commercial airline.

All of the following are considered unfair trade practices in the business of insurance EXCEPT a. Sharing commissions. b. boycott c. rebating d. defamation

Sharing commissions. Sharing commissions is allowed as long as both producers are properly licensed. All other choices are unfair trade practices.

Which rider, when attached to a permanent life insurance policy, provides an amount of insurance on every family member? a. Additional insured rider b. Family term rider c. Spouse rider d. Children's rider

Family term rider A single rider that provides coverage on every family member is called a "family rider".

In determining how material a piece of information is to each party of a contract, the value is not determined by the event itself, but solely by which of the following? a. Truthfulness of such statements being made. b. Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract. c. Interpretation that the seller places on such information in the agreement. d. Amount of information that has been previously disclosed through the inquiry process.

Influence this information would have in forming an estimate of the advantages or the disadvantages of the contract. Materiality is to be determined not by the event, but solely by the influence of the facts upon the party to whom the communication is due, in forming his/her estimate of the disadvantages of the contract.

Which of the following statements is TRUE concerning the Accidental Death Rider? a. This rider is only available to insureds over the age of 65. b. It is only available in group insurance. c. It will pay double or triple the face amount. d. It is also known as a triple indemnity rider.

It will pay double or triple the face amount. The Accidental Death Rider pays 2 or 3 times the face amount if death is the result of an accident as defined in the policy and occurs within 90 days of such an accident.

When calculating the amount a policyowner may borrow from a variable life policy, what must be subtracted from the policy's cash value? a. Mortality costs b. The cash surrender amount c. Outstanding loans and interest d. The face amount

Outstanding loans and interest To calculate the loan value an insured may take out of the variable life insurance policy, any unpaid loans and interest must be subtracted from the policy's cash value.

When may a representation be withdrawn? a. with the first 2 years of the policy b. Prior to the issuance of the policy c. at any time d. after the policy is issued

Prior to the issuance of the policy Once the policy is issued, representations cannot be withdrawn.

What is an injured party entitled to receive if an intentional concealment is discovered? a. $1,000 for any compensatory damages b. Rescission of the policy c. Nothing. Only intentional concealment is punishable. d. No less than $500 and no more than $5,000 for compensatory damages

Rescission of the policy An injured party is entitled to rescind the policy regardless of whether the concealment was intentional or unintentional.

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? a. Length of income period b. Amount of interest c. Size of each installment d. Predetermined length of time stated in the contract

Size of each installment The size of each installment determines the length of time that benefits are received under the Fixed Amount settlement option. It logically follows that larger installments translate into shorter benefit periods.

Your client is planning to retire. She has accumulated $100,000 in a retirement annuity, and now wants to select the benefit option that will pay the largest monthly amount for as long as she lives. As her agent, you should recommend a. Installment refund. b. Joint and survivor. c. Straight life. d. Life income with period certain.

Straight life. With the straight life option, the annuity payments cease at death. However, because there are no other guarantees that might incur additional charges, this option provides the highest monthly benefits for an individual annuitant.

Which of the following would provide an underwriter with information concerning an applicant's health history? a. A medical examination b. The agent's report c. The inspection report d. The Medical Information Bureau

The Medical Information Bureau An agent's report and inspection report provide personal information. Medical exams provide information on current health. Only the MIB will provide information about an applicant's medical history.

An employer offers group life insurance to its employees for the amount of $10,000. Which of the following is true? a. The value of insurance will be deducted from the employees' compensation. b. The cost of coverage paid by the employer is taxed to the employees. c. The cost of coverage paid by the employer is tax deductible by the employees. d. The cost of coverage is a deductible expense by the employer.

The cost of coverage is a deductible expense by the employer. The cost of coverage paid by the employer in excess of $50,000 is taxed to the employee.

An insured wants to transfer his personal insurance policy to a friend. Under what conditions would this be possible? a. It is impossible to transfer a policy. b. The insured would have to surrender his policy to the insurer, and his friend could then ask to buy it. c. The insured can transfer the policy to his friend and then notify the insurer of the change. d. The insured will need a written consent of the insurer.

The insured will need a written consent of the insurer. A personal insurance contract is written between an insurance company and an individual, and the company has a right to decide with whom it will and will not do business. An insured can transfer an insurance contract to another person, but he or she must first obtain the written consent of the insurer.

The owner of a life insurance policy wishes to name two beneficiaries for the policy proceeds. What will the soliciting insurance producer say? a. The policyowner can specify the way proceeds are split in the policy. b. The way proceeds are split between beneficiaries is decided by which type of policy is chosen. c. Life insurance policies may have only one beneficiary. d. The proceeds will be split evenly between the two beneficiaries.

The policyowner can specify the way proceeds are split in the policy. The owner of a life insurance policy may name any individual as a beneficiary for the policy proceeds. The owner may name more than one individual, in which case the individual beneficiaries will split the benefit by the percentage specified in the policy.

All of the following are true about variable products EXCEPT a. Policyowners bear the investment risk. b. The premiums are invested in the insurer's general account. c. The minimum death benefit is guaranteed. d. The cash value is not guaranteed.

The premiums are invested in the insurer's general account. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.

What is the purpose of a suicide provision within a life insurance policy? a. To limit the insurer's liability after the 2 year waiting period b. To deter the policyowner from committing suicide c. To protect the policyowner d. To protect the insurer from persons who purchase life insurance with the intention of committing suicide

To protect the insurer from persons who purchase life insurance with the intention of committing suicide The suicide provision protects the company from those individuals who purchase life insurance with the intention of committing suicide. If the insured commits suicide after the 2 year period, the policy will pay the death proceeds to the designated beneficiary the same as if the insured had died of natural causes.

Under what circumstances would a life insurance contract qualify as a "standard policy?" a. Under no circumstances b. When it meets the guidelines established by the Commissioner, as described in the Model Policy Article of the California Insurance Code c. When it conforms to the NAIC Model Illustration requirements d. When it contains ALL of the essential elements of an insurance contract, as described in the Model Policy Article of the California Insurance Code

Under no circumstances The California Insurance Code prohibits the creation of a "standard" Life insurance policy.

An insured who signs a fraudulent claim form may be guilty of a. Misdemeanor. b. Misrepresentation. c. Rebating. d. Perjury.

perjury If an insured signs a fraudulent claim form, the insured may be found guilty of perjury.