Life-Only Agent Exam #3

Within the scope of insurance contracts, what is "consideration?"

A monthly payment is made by the insured.

A schedule illustrating the probabilities of death each year for life insurance is called:

A mortality table

Which distribution form an annuity would be subject to a penalty tax?

A single payment made to a taxpayer who is age 55.

A basic life insurance policy illustration must include all of the following EXCEPT > A statement that the contract is a life insurance policy. > The impact that riders may have on the policy values. > A definition of key terms used in the illustration. > A statement that actual results will be as illustrated.

A statement that actual results will be as illustrated.

Which policy is a savings instrument designed to first accumulate funds and then systematically liquidate those funds?

Deferred annuity

A policyowner has the right to change all of the following EXCEPT the > Beneficiary > Payment mode. > Dividend schedule > Dividend option

Dividend schedule

What rider doubles the face amount of the policy?

Double Indemnity Rider

The doctrine of "utmost good faith" applies to the business of transacting insurance. Which of the following is an example of its application? > Answers to application questions are provided to the best of one's knowledge. > Any unclear or ambiguous statement in a contract of insurance is decided in favor of the insured. > Each party to a contract must give valuable consideration. > Each party is entitled to rely upon the representations of the other party.

Each party is entitled to rely upon the representations of the other party.

From the descriptions below, identify which one is a term policy. > The policy contains a provision that provides non-forfeiture options. The owner pays premiums for 25 years after which payments are no longer required yet coverage is still in force. > Each year the premium increases as the insured grows older. After several years the coverage and premiums end simultaneously. Cash value is not created. > The policy states premiums are to be paid every year. At the end of 15 years the cash value represents about 25% of the total face amount > The premium increases after 5 years then remains the same until it is paid up at age 65.

Each year the premium increases as the insured grows older. After several years the coverage and premiums end simultaneously. Cash value is not created.

What type of annuity has a minimum fixed interest rate and can also achieve stock-market-like gains?

Equity indexed annuity

If an applicant has been convicted of a misdemeanor and that misdemeanor conviction is later expunged pursuant to California Penal Code section 1203.4, which of the following is true? > Misdemeanors are required to be reported for 10 years from the date of conviction. > The California Department of Insurance only requires an applicant to disclose felony convictions. > Since the misdemeanor conviction was expunged, the applicant does not need to disclose the conviction on the application for an insurance license. > Even though the misdemeanor conviction was expunged, the applicant must still disclose the conviction on the application for an insurance license.

Even though the misdemeanor conviction was expunged, the applicant must still disclose the conviction on the application for an insurance license.

Life insurance settlement options include all of the following, EXCEPT:

Extended term option

Common life insurance policy riders include all of the following EXCEPT > guaranteed insurability > accidental death > extended term > waiver of premium

Extended term.

Which of the following is not one of the common personal uses for life insurance? > Creating emergency funds to avoid the need to liquidate assets. > Funding a by-sell agreement Creation of an immediate estate. > Helping to fund a person's retirement.

Funding a buy-sell agreement

Exclusive agents:

Generally represent only one insurer.

Which one of the following is true regarding an irrevocable beneficiary? > If the irrevocable beneficiary permits, the policy owner may borrow from the cash value. > A policy owner may remover an irrevocable beneficiary whenever she wishes. > An irrevocable beneficiary may borrow from the cash value without the permission of the policy owner. > None of the above.

If the irrevocable beneficiary permits, the policy owner may borrow from the cash value.

What information can a party to a contract of insurance be allowed NOT to communicate according to California law?

Information which the other party already knows.

A person whose life is covered by a life policy is the:

Insured

From the choices below select the best description of a speculative risk? > Insuring against a situation that offers no possibility of gain. > The purchase of an insurance policy to protect from gambling losses. > Insuring someone over the age of 90. > Involving the possibility of a gain in addition to the uncertainty of loss.

Involving the possibility of a gain in addition to the uncertainty of loss.

The free look period for life insurance is:

10 - 30 days

The California Insurance Code contains very specific regulations regarding the ability of a senior citizen to return a life insurance policy or annuity. The regulation: 1. Applies to group plans and individually issued policies equally. 2. Allows a senior citizen a minimum of 30 days to return a life or annuity contract to the insurer. they are entitled to a full refund if premium. 3. Specifies a senior citizen as an individual who is at least 65 years of age as of the purchase date.

2 only

Group insurance law stipulates that an incontestability period be provided to the applicant. The time period is:

2 years

An agent gets his license in 2017. he will need to complete ______hours of continuing education for each 2-year license term.

24

A 10-year certain annuity with an installment refund is purchased. The annuitant dies after receiving monthly payments for 5 years. How many remaining payments will the insurer make?

60 payments

In order to deal with the financial consequences of the death of a senior sales manager, a corporation could purchase:

Key person insurance.

How would a "pure" risk best be described?

Losing some pay from work because of an injury.

What would a person be guilty of who refuses to submit books and records to the Commissioner?

Misdemeanor

Which component of a life insurance premium is based on the insured's age and gender?

Mortality

What uses the law of averages to determine life rates?

Mortality table

In determining the rates to charge for life insurance premiums, a company will use:

Mortality, interest, expenses

When may a representation be withdrawn?

Only before the insurance is in effect.

In life insurance, the only measure of liability is the amount:

Payable as provided in the policy.

Choose the correct statement about a cost of living rider. the policy owner: > Pays an additional premium for the extra protection the ruder provides and will see the face amount of the contract increase according to the increase of the index. > Is only charged a flat fee to have the rider attached. > Could experience a decrease in amount of the policy if the CPI decreases. > All of the above.

Pays an additional premium for the extra protection the ruder provides and will see the face amount of the contract increase according to the increase of the index.

Choose the best beneficiary designation for the following case: The children are to receive equal shares of the benefit. If any of the children die before the insured does, the insured wishes the remaining children to receive the deceased child's share equally divided among them.

Per Capita

In life insurance, the loss of a key employee is considered a:

Personnel loss

Which type of loss is a business exposed to death, retirement, resignation or disability of a key employee?

Personnel loss exposure

Which risk classification carries the lowest premium?

Preferred

Unless it is merely a statement of an expectation or a belief, a representation as to the future is considered which of the following?

Promise

Any transaction that involves purchasing a life insurance policy and terminating an existing policy is known as:

Replacement

The principle of indemnification is best described as:

Restoring an individual to a condition they enjoyed in the past, thus making them whole.

An employee has just received a huge bonus check. She uses the bonus money to buy an annuity that will immediately begin paying $400 a month to her. This is called a

Single-premium immediate annuity.

The direct response distribution of insurance utilizes all of the following to promote the sale of insurance EXCEPT > Television commercials > Telephone call from an agent > brochures mailed to prospective clients > Internet advertising

Telephone call from an agent

A person invests $10,000 in a single premium annuity and another $10,000 in a certificate of deposit (CD). Both pay 10% interest annually. The person is in a 31% income tax bracket. For 40 years, this person does not touch his annuity and reinvests all income from the CD at 10%. Which of the following statements is true? > The CD would be worth several hundred thousand more because of tax deferral. > They would be worth approximately the same amount after the payment of deferred income taxes. > The CD would be worth several hundred thousand more because there is no commission paid on a CD. > The annuity would be worth several hundred thousand more because of the tax deferral of the earnings.

The annuity would be worth several hundred thousand more because of the tax deferral of the earnings.

Which party has rights in a life insurance policy only after the death of the insured?

The beneficiary

Insurance companies have an obligation to pay death benefits to:

The beneficiary upon the death of the insured.

A child born or adopted after a family policy is issued has what effect on the policy?

The child will have term insurance coverage under the same contract.

What is used to determine the amount of an annuity distribution that is exempt from taxation?

The exclusion ratio.

All of the following statements regarding variable life insurance are true, EXCEPT: > The policyholder can choose, based on company options, where the cash value is invested. > The insurance company assumes the investment risk. > It can be structured as either whole life or a universal policy. > It is subject to state insurance regulations and federal securities regulations.

The insurance company assumes the investment risk.

The CIC (CA Insurance Code) requires property insurance policies specify all of the following, EXCEPT: > A description of the insured property > Insured's risks or perils > The policy period > The insured's address

The insured's address

Regarding life insurance coverage for a company, the one responsible for obtaining the coverage, maintaining the policy, and paying the premium is:

The master policyholder.

A variable annuity applicant requests that the premium be immediately invested in a stock portfolio. The policy is returned to the insurer within the cancellation period. What is the applicant entitled to receive?

The policy account value on the date the policy was received by the insurer.

All of the following statements about survivorship life insurance are true, EXCEPT: > The policy face amounts are usually more than $ 1,000,000. > It offers premiums that are quite low compared to what is charged on separate policies. > The policy face amount is paid out only upon the death of the first insured to die. > It is particularly well suited to meet the needs of estate taxes.

The policy face amount is paid out only upon the death of the first insured to die.

Loss retention is an effective risk management technique when all of the following conditions exist, EXCEPT: > The insured chooses to assume the losses involved. > The probability of loss is unknown. > The losses are highly predictable. > The worst possible loss is not serious.

The probability of loss is unknown.

What doe stew statement "life insurance creates an immediate estate mean?

The total death benefits is paid whenever the insured dies.

Which of the following is incorrect regarding life insurance benefit settlements? > They must be decided at the time of application. > If not chosen by the policyowner, the death benefit goes directly to his estate. > If not decided by the policyowner, the beneficiary can decide on a settlement option. > They can be changed anytime during the life of the policy.

They must be decided at the time of application.

What is the purpose of "key person" insurance?

To cover decreased business earnings due to the death of a key employee.

An insured bought a $150,000 non-participating whole life policy many years ago. She is 100 years old today. She has never borrowed from the policy, and has made all premium payments when do. The policy cash value is:

$150,000

How much employer provided group term life insurance is exempt from income taxation?

$50,000

A participating life insurance policy is defined as a contract that

Allows the policyowner to receive a share of surplus in the form of policy dividends.

A type of contract, which is considered a savings instrument used for accumulating investment funds for the purpose of eventually receiving those through a systematic program of withdrawal is a/an:

An annuity

How is the insurance Commissioner selected?

An election by the people.

In insurance terms a representation can be considered:

An implied warranty.

Collateral assignments on life policies are most often used for:

Bank loans

Any attempt by an existing insurer or their agent to dissuade a policy owner from replacing an existing life insurance or annuity contact is known as:

Conservation

Which of the following is considered ordinary life insurance?

Continuous premium whole life

As defined by the California insurance code, "insurance" is a:

Contract

A worker dies while he is credited with six quarters of the last 13-quarter period. What status does the worker have under social security?

Currently insured

The face amount of a mortgage redemption life insurance policy

Decreases to match the principal amount owed under a mortgage loan.

All of the following statements about the election of a life insurance policy's settlement options are true, EXCEPT: > When no settlement option is chosen, the proceeds are automatically paid to the policy owners estate. > The election is made by the policy owner at the time the application is submitted. > The policy owner may change the settlement option after it has been chosen. > The election may be made by the beneficiary if no settlement option is in force at the time of death of the insured.

When no settlement option is chosen, the proceeds are automatically paid to the policy owners estate.

What factor determines the difference between deferred and immediate annuities?

When the annuity payments begin. (Deferred annuities have longer accumulation periods.)

Which of the following best defines risk?

Uncertainty of financial loss.

97. The policyowner, age 50, has been paying the premiums on his whole life policy for fifteen years. He needs the equivalent of one-third of his policy's cash value for two years. He wants to continue to have the same amount of life insurance protection and he can afford to continue to pay the policy's premium. Which of the following would appear to be his BEST course of action?

Use the policy loan provision to borrow money from the policy, but keep making the premium payments to keep the policy in force.

A product provides annuity benefits that may vary according to any separate account or accounts maintained by the insurer. This describes:

Variable annuity

Which of the following contracts provides benefits that fluctuate automatically with investment results?

Variable life insurance

In order to receive the principal sum benefit for death from a disability policy, the death must occur:

Within a specified number of days after injury.