Life insurance

Which entity has the authority to grant a temporary insurance agent's license?

Commissioner of Insurance The Commissioner of Insurance can issue a temporary life insurance agent's license for 180 days.

Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPT

Conditions Conditions are part of the policy structure. Consideration is an essential part of a contract.

If a notice of a claim is submitted to an insurer, and the insurer suspects arson is involved, how long does the insurer have to accept or reject the claim?

30 days An insurer must either accept or reject a claim within 15 days of receiving a notice of a claim and all requested statements, forms, and other items. This period is extended to 30 days if the insurer suspects the loss results from arson.

If a policyowner surrenders his life insurance policy that has been in force for 5 years within 60 days after the premium due date, what will the insurer be required to pay?

A cash surrender value A life insurance policy must ensure that upon surrender of the policy no later than 60 days after the due date of a premium payment, the company will pay a cash surrender value (instead of a paid-up nonforfeiture benefit) if the premiums have been paid for at least 3 full years for ordinary life insurance policies, or 5 years for industrial life insurance.

Which of the following is another term for an authorized insurer?

Admitted Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.

All of the following statements are correct regarding credit life insurance EXCEPT

Benefits are paid to the borrower's beneficiary. In credit life insurance, the creditor is the beneficiary for the amount of benefit equal to the outstanding balance of the loan.

Which of the following is NOT true regarding an annuity certain?

Benefits stop at the annuitant's death. Annuities Certain are short-term annuities which limit the amount paid to a certain fixed period or until a certain fixed amount is liquidated. There are no life contingencies.

When an individual obtains an insurance license for the primary purpose of writing insurance on themselves, or for members of their immediate family, or business, this is called

Controlled business. When producers sell policies on themselves, their family, or business associates, this is called "controlled business." In this state, at least 25% of a licensee's total volume of premiums in a calendar year must be from business other than controlled business.

Which of the following is NOT an example of a valid insurable interest?

Debtor in the life of the creditor The three recognized areas in which insurable interest exists are as follows: a policyowner insuring their own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to the policyowner. A debtor does not have an insurable interest in the creditor.

Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?

Defamation Defamation is making statements that are false as to the financial condition of any insurer and which are calculated to injure any person engaged in the business of insurance.

An insurance company has published a brochure that inaccurately portrays the advantages of a particular insurance policy. What is this an example of?

False advertising False advertising is the illegal practice of advertising or circulating materials that are untrue, deceptive, or misleading.

Circulating deceptive sales material to the public is what type of unfair trade practice?

False advertising Insurers are prohibited from advertising or circulating any materials that are untrue, deceptive, or misleading. That practice is considered false advertising.

When possible, what should insurers strive to eliminate from illustrations?

Footnotes and caveats Insurers will, as often as possible, eliminate the use of footnotes and caveats and define terms used in the illustration in language that would be understood by a typical person within the segment of the public to which the illustration is directed.

Which of the following entities is not an insurer but an organization formed to provide insurance benefits for members of an affiliated lodge or religious organization?

Fraternal benefit society Fraternal insurers operate on the basis of a lodge or charitable organization, but they may also sell formal insurance plans for the benefit of their members. Reciprocal insurers are also associations that provide insurance for their members, but they are formed only for the purpose of providing insurance.

Two attorneys operate their practice as a partnership. They want to start a program through their practice that will provide retirement benefits for themselves and three employees. They would likely choose

HR-10 (Keogh Plan). HR-10 (Keogh Plans) are plans specifically for self-employed and their employees.

Which of the following policy components contains the company's promise to pay?

Insuring clause The insuring clause contains the company's promise to pay.

An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an

Interest-sensitive Whole Life. Because the cash values are generated by investments, interest rates will affect the amount of the cash value.

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 The Disability Income Benefit rider waives the policy premiums, just like the Waiver of Premium rider. Unlike the Waiver of Premium rider, it also allows the insured to receive a weekly or monthly income during the disability period.

Which of the following documents must be provided to the policyowner or applicant during policy replacement?

Notice Regarding Replacement During policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.

Which of the following is NOT true about a joint and survivor annuity benefit option?

Payments stop after the first death among the annuitants. A joint and survivor annuity will pay until the last annuitant has died; however, the surviving annuitant may receive reduced payments.

Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?

Premiums are not tax deductible as a business expense. The business cannot take a tax deduction for the expense of the premium. However, if the key employee dies, the benefits paid to the business are usually received tax free.

The regulations regarding replacement apply to which of the following?

Renewable term Replacement rules apply to all life insurance policies except group life policies, group annuities, credit life or nonconvertible term which will expire in 5 years or less and cannot be renewed. Purchasing additional coverage under the GIR is not a replacement of coverage, simply an addition of coverage.

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 Term riders may be used to customize a permanent life insurance policy to meet the needs of the policyowner.

Which of the following is NOT a licensing requirement for a corporation in the state of Texas?

The business must be able to pay up to $50,000 in the event that it is proven to be negligent. All of the above criteria are true, with the exception of the amount of money a business can afford to lose, in the event that it is proven to be negligent. A business only needs to be able to pay $25,000.

Which of the following is INCORRECT concerning a noncontributory group plan?

The employees receive individual policies. The employer receives a master policy, and employees receive a certificate of insurance.

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT

The policy is owned by the company. The policy is owned by the employee.

All of the following statements apply to temporary licenses EXCEPT

They allow licensees to sell new policies. Temporary licenses may be granted for up to 180 days without a written examination. Applicants must complete at least 40 hours of training within 30 days of applying for the license. A temporary license may only be used to service existing policies, not to solicit, negotiate or replace new policies.

How are contributions to a tax-sheltered annuity treated with regards to taxation?

They are not included as income for the employee, but are taxable upon distribution. Funds contributed are excluded from the employee's current taxable income, but are taxable upon withdrawal.