Life-Only Agent Exam #2

All of the following statements apply to a producer acting as an agent insurance BROKER (as distinguished from an insurance AGENT), EXCEPT:

A broker acts on behalf of the insurer.

Which of the following is a hazard?

A condition that might increase the likelihood of a loss occurring.

Any situation that presents the possibility of a loss is known as:

A loss exposure

Which of the following would be the best client to purchase a variable annuity?

A middle aged divorced housewife with a substantial portfolio, and $60,000 per year income.

Which type of beneficiary designation gives the policyowner the right to change the beneficiary designation without requiring the beneficiary's consent?

A revocable beneficiary designation.

Joe receives a large bonus at work and decides to purchase an annuity with it. His monthly income payments from the annuity will begin the following month. Which of the following has Joe purchased?

A single premium immediate annuity

An annuity in which the underlying investment performance will cause a fluctuation in the value of the benefit is:

A variable annuity

An assignment which transfers all "incidents of ownership" to another part is a(n):

Absolute Assignment

Failure to report background changes within 30 days as required under Section 1729.2 of the California Insurance Code could subject a license or applicant to:

All of the above

Which of the following is required to be included in the writing of an insurance contract?

All of the above

An example of a moral hazard in relation to a life insurance application would be:

An individual has an indifferent attitude about participating in activities that may be damaging to his health.

Subject to the restrictions of the California Insurance Code, any person capable of making a contract may be considered:

An insurer

An insured replaces an existing annuity with a new one and must pay a surrender charge for cancelling the existing annuity. The new policy holds no greater financial benefits to the insured than the existing contract. This is an example of

An unnecessary replacement

There is a financial product that was created to address the risk of a person outliving their life savings. What is this product called?

Annuities

Which of the following is an express authority of an agent in an agency agreement?

Authority to represent the insurer

If the owner of a life insurance policy does not select a settlement option on behalf of the beneficiary, the beneficiary:

Can choose a settlement since it was not chosen by the owner.

As defined by the California Code of Regulations, a person who asserts a right of recovery under an insurance policy is called a:

Claimant

The policy provision which comes into effect when the insured and primary beneficiary die in a simultaneous (common) accident with no evidence as to who died first is:

Common disaster provision

What is the first step in the personal financial planning process?

Define objectives

Non-participating life insurance policies provide all of the following, EXCEPT:

Dividends

The components of determining policy premiums include all of the following EXCEPT:

Dividends

Which of the following is false about dividends paid from life insurance policies?

Dividends are a return of excess premium and are therefore taxable.

The purchase of an insurance policy that may not provide one of the following for the insured. Select the most complete answer:

Elimination of the risk.

Which type of policy pays the face amount if the insured survives to the end of a certain period?

Endowment insurance

When children are covered under a Family Life policy:

Evidence of Insurability is not required if conversion is made to permanent insurance for those children.

In a group insurance policy acts of war and aviation are considered examples of:

Exclusions

All of the following would be considered one of the four major types of loss exposures, EXCEPT:

Financial loss exposure

A beneficiary wants to receive $2,000 per month until the principal and interest are exhausted. Which settlement option should be chosen?

Fixed amount option

Unless the applicant indicates otherwise during the right-to-return period in an individual annuity, the premium for a variable annuity would be invested only in:

Fixed income investments and money market funds.

Choose from the following selections the best description of a premium.

Funds received by an insurer from an insured to realize the benefits of the policy.

With the cost of living rider, the life insurance policyowner:

Gets the automatic increase in the face value if there is an increase in the cost of living index. There is an additional premium for the additional coverage.

Which of the following gives individuals the right to purchase additional life insurance regardless of their insurability?

Guaranteed insurability

All of the following are characteristics of adverse selection EXCEPT:

Insurance companies can not discriminate against applicants who have a higher probability of loss.

Creditors have rights to life insurance policy proceeds when the beneficiary is the:

Insured's estate

The insured cannot borrow against the loan value of the policy without the permission and consent of which of the following?

Irrevocable beneficiary

Which of the following is not a characteristic of life insurance?

It may be based strictly on an oral agreement.

Which of the following products creates an immediate estate?

Life Insurance

Which two insurance products are commonly used to fund buy-sell agreements?

Life insurance and disability insurance.

Who are members of the Medical Information Bureau?

Life insurance companies

The theory of probability is applied to life insurance through the use of:

Mortality tables

When are parties to a contract required to communicate information solely based on personal judgement for a matter in question?

Never

All of the following are contained in a mortality table EXCEPT:

Number living at the end of designated year.

Insurance negatively affects society in all of the following ways EXCEPT:

Paid claims do not actually replace the damages as a whole..

John pays the premium for a $200,000 life insurance policy and is issued a binding receipt. John dies in an accident the next day. In the course of underwriting, the company determines John was not insurable by their guidelines at the time the binding receipt was issued. What must the insurer do?

Pay the claim in full.

Which of the following statements about life insurance policy loans is correct?

Policy loans may be repaid at any time while the policy is in force.

Individual life insurance policies sold to seniors in the State of California must include a prominently placed statement that divulges all of the following information EXCEPT:

Proof of surrender must be notarized at the agent's principal office.

When premium payments on a whole life insurance policy are being waived because the person whose life is insured is totally disabled, the actual effect on the policy's cash value will be to:

Provide for the continued increase in the cash value during the period of disability.

The prices of insurance for each exposure unit is called the:

Rate

How would a "peril" best be defined?

Reason for the loss

Which type of insurance guarantees the right to renew the policy each year, regardless of health, but at an increased premium?

Renewable term

According to the California Insurance Code, which of the following MUST be specified in an insurance contract?

Risks insured against

What is the performance of an Equity index annuity based on?

S&P 500

Select the type of annuity payment option that has the least amount of risk for the insurer, and therefore, pays the highest amount of income to the insured over time.

Straight/pure life

Which retirement plan was designed for employees of public school systems?

TSA

An individual with a low income and high insurance needs should buy:

Term insurance

There are four basic classes of life insurance. All of the selections listed below are regarded as ordinary insurance, EXCEPT:

Term life insurance policy

The MINIMUM number of employees for group life insurance in California is:

2

A person has paid $50,000 into a fixed annuity over 20 years. When he decides to begin income payments the insurer calculates that he will receive $4,000 per year for life, which means that he will receive a total of $100,000. In the first 10 years of payments how much is taxable each year?

$2,000

If the Commissioner issues a Notice of Seizure for documents and the individual fails to send those documents what is the penalty?

1 year in jail and/or $1,000 fine.

What is the penalty tax imposed on amounts received from a modified endowment contract?

10%

Choose the payments from an insurance policy which are not subject to federal income taxes:

The death benefit paid to a beneficiary in a lump sum.

What is the limit of liability in a term life insurance policy?

The face amount of the policy.

When does an individual have an insurable interest in the life of another person?

The individual depends on the other person for financial support.

From the choices below, select the answer that best reflects the concept of indemnification.

The insured can not get back any more than the loss they have experienced.

The mathematical rule that says that as the number of individual but similar exposure units increases the easier it is to predict losses is which of the following?

The law of large numbers

Which of the following is not a factor in determining the premium for a life insurance contract?

The number of new policy owners expected in the next anniversary year

In the life insurance planning process, the "blackout period" is:

The period of time when a surviving spouse does not receive any Social Security benefits.

The Free Look provision of life insurance issued in California states that certain conditions exist in order for a policy to be delivered to the policyowner properly. Which of the following is not correct in determining good delivery?

The policy was hand delivered personally, no receipt of delivery needed.

Which statement best describes how the Return of Premium (ROP) rider works on a term life policy?

The policyowner will receive all or a portion of the premiums paid in over the life of the policy if the insured is still living at the end of the policy's term.

Assume two people apply for life insurance with exactly the same monthly premiums. One individual buys a whole life policy, and the other, a 10-year renewable term plan. Both are standard risks with no difference in their age or health rating. Select the statement from below which is false.

The whole life policy will pay a higher amount to the beneficiary should the insured die within the first 10 years.

A type of life insurance policy called a first-to-die policy is very helpful in business situations whereby a partner can purchase the interest of a deceased partner at death. This policy can also be used by a husband and wife naming each other as beneficiaries. Select the incorrect statement about first-to-die plans from below.

They pay a reduced amount upon the death of the last surviving insured.

All of the following are reasons for an individual to purchase personal life insurance, EXCEPT:

To cover a buy/sell agreement.

The purpose of laws regarding the replacement of life and annuity contracts includes all of the following, EXCEPT:

Tp protect the interests of life insurers and their agent.

Which type of insurance coverage has both a savings element and a flexible premium option?

Universal life

An automatic premium loan, found only in cash value policies:

Will pay a premium that is due by using the policy's cash value.