LIFE PRODUCER EXAM (MI)

All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT

Dividends from a mutual insurer

in which of the following situations is it legal to limit coverage based on marital status?

It is never legal to limit coverage based on marital status

to sell variable life insurance policies, an agent must receive all of the following EXCEPT

SEC registration

Which of the following policies would be classified as a traditional level premium contract?

Straight Life

In a group the life insurance policy, the employer may select at all of the following EXCEPT

The beneficiary

Which is NOT required of an applicant for an insurance in Michigan?

Two letters of recommendation attesting to trustworthiness, reliability, and good reputation

The Waiver of Cost of Insurance rider is found in what type of insurance?

Universal Life

An agent and an applicant for a life insurance policy fill out and sign the application. However, the applicant does not wish to give the agent the initial premium, and no conditional receipt is issued. When will coverage begin?

When the agent delivers the policy, collects the initial premium, and the applicant completes an acceptable Statement of Good Health

In the state, a temporary license may be issued for any of the following reasons EXCEPT

a producer's retirement

what documentation grants express authority to an agent?

agent's contact with the principal

an employee quits his job and converts his group policy to an individual policy, the premium for the individual policy will be based on his

attained age

What is the maximum fine for submitting a false or fraudulent claim to the insurer? a)$500 b)$1,000 c)$1,500 d)$2,000

b) 1,000 If convicted for a false claim, an insured, agent, collector, physician or any other person could be fined up to $1,000.

What does "liquidity" refer to in a life insurance policy? a)The insured receives payments each month in retirement. b)Cash values can be borrowed at any time. c)The death benefit replaces the assets that would have accumulated if the insured had not died. d)The policyowner receives dividend checks each year.

b) Cash values can be borrowed at any time. Liquidity in life insurance refers to availability of cash to the insured through cash values.

All of the following are true regarding rebates EXCEPT a)Dividends are not considered to be rebates. b)Rebates are allowed if it's in the best interest of the client. c)Rebates are only allowed if specifically stated in the policy. d)Rebating can be anything of economic value, given as an inducement to buy.

b) Rebates are allowed if it's in the best interest of the client. A rebate is an illegal act which involves returning something of value to the client as an inducement to buy, such as the commission. Rebates are only allowed if specifically stated in the policy. Insurance dividends are not considered rebates as the IRS considers it as a return of overpaid premium.

Annuities can be used to fund which of the following? a)Estate creation b)Retirement plans c)Variable life insurance d)Group life insurance

b) Retirement plans Since annuities are a popular means to provide retirement income, they are often used to fund qualified retirement plans.

To sell variable life insurance policies, an agent must receive all of the following EXCEPT a)A life insurance license. b)SEC registration. c)FINRA registration .d)A securities license.

b) The owner will receive the surrender value of the annuity. If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed according to the nonforfeiture provision.

What happens if a deferred annuity is surrendered before the annuitization period? a)Deferred annuities cannot be surrendered prior to the annuitization period. b)The owner will receive the surrender value of the annuity. c)The owner will only receive a refund of premium. d)The insurer can only apply the surrender value toward another annuity.

b) The owner will receive the surrender value of the annuity. If a deferred annuity is surrendered prior to annuitization, the surrender value of the annuity is guaranteed according to the nonforfeiture provision.

Which is generally true regarding insureds who have been classified as preferred risks? a)They keep a higher percentage of any interest earned on their policies. b)Their premiums are lower. c)They can borrow higher amounts off of their policies. d)They can decide when to pay their monthly premiums.

b) Their premiums are lower. The preferred risk classification indicates that an insured is in excellent physical condition and employs healthy lifestyles and habits. These individuals qualify for lower premiums than those in the other categories.

Annuities can be used to fund which of the following? A) estate creation B) Retirement plans C) Variable Life Variable D) Group Life Insurance

b) retirement plans

graded-premium whole life policy premiums are typically lower initially, but gradually increase for a period of 5 to 10 years. After the period of increase the premiums will

be level thereafter

producers are permitted to share or split commissions, providing that

both are properly licensed for the line of insurance

If an insured changes his payment plan from monthly to annually, what happens to the total premium? a)Doubles b)Increases c)Decreases d)Stays the same

c) Decreases Because the insurer would have the entire premium to invest for a full year, they would reduce the premium amount.

Which of the following best describes annually renewable term insurance? a)Neither the premium nor the death benefit is affected by the insured's age. b)It provides an annually increasing death benefit. c)It is level term insurance. d)It requires proof of insurability at each renewal.

c)It is level term insurance. Annually renewable term is a form of level term insurance that offers the most insurance at the lowest cost.

All of the following are duties and responsibilities of producer at the time of application EXCEPT

change any incorrect statement on the application by personally initialing next to the corrected statement.

The type of insurance sold to a debtor and designed to pay the amount due on a loan if the debtor dies before the loan is repaid is called

credit life

Annually renewable term policies provide a level death benefit for a premium that a)Decreases annually. b)Remains level. c)Fluctuates. d)Increases annually.

d) Increases annually. Annually renewable term policies provide a level death benefit for a premium that increases each year with the age of the insured.

Which of the following is NOT true regarding a Certificate of Authority? a)It may be necessary for transacting business in a specific state. b)It is equivalent to an insurance license. c)It is issued by the state department of insurance. d)It is issued to group insurance participants.

d) It is issued to group insurance participants. Before insurers may transact business in a specific state, they must apply for a license or Certificate of Authority from the state department of insurance and meet any financial (capital and surplus) requirements set down by the state.

Which rule would apply if an agent knows an applicant is going to cash in an old policy and use the funds to purchase new insurance? a)Reinstatement rule b)Conversion rule c)Disclosure rule d)Replacement rule

d) Replacement rule Anytime a new policy is issued that replaces or modifies existing insurance, a replacement form must be submitted to the ceding company.

Life insurance death proceeds are a)Taxable to the extent that they exceed 7.5% of the beneficiary's adjusted gross income. b)Taxed as a capital gain. c)Taxed as ordinary income. d)Generally not taxed as income.

d)Generally not taxed as income. Life insurance death benefits are generally not taxed as income.

if an insured changes his payment plan from monthly to annually, what happens to the total premium?

decreases

Which of the following types of insurance polices is most commonly used in credit life insurance?

decreasing term

Life insurance death proceeds are

generally not taxed as income

The Commission may waive relicensing requirements or examinations for someone who has been a licensed insurance producer

in the preceding 12 months

annually renewable term polices provide a level death benefit for a premium that

increased annually

which statement regarding insurable risks is NOT correct?

insured cannot be randomly selected

An insured buys a 5-year level premium term policy with a face amount of 10,000. The policy also contains renewability and convertibility options. When the insured renews the policy in 5 years, what will happen the premium?

it will increase because the insured will be 5 years older than when the policy was originally purchased

what is a definition of a unilateral contract?

one-sided: only one party makes an enforceable promise.

Most agents try to collect the initial premium for submission with application. When an agent collects the initial premium from the a applicant, the agent should issue the applicant

premium receipt

A couple owns a life insurance policy with a Children's Term rider. Their daughter is reaching the maximum age of dependent coverage, so she will have to convert to permanent insurance in the near future. Which of the following will she need to provide for proof of insurability.

proof of insurability is not required.

A policy owner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policy owner should have her husband named as the

revocable beneficiary

If an immediate annuity is purchased with the face amount at death or with the cash value at surrender, this would be considered a

settlement option

the interest earned on policy dividends is

taxable

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

the contingent beneficiary

If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant

with the policy

are insurance company underwrites allowed to discriminate?

yes, but not unfairly

how much is agent's appointment fee?

$5

if a statement of policy information is not furnished to the applicant at the time of application, how soon must the form be delivered to the applicant?

15 days

Which of the following provisions would not be allowed as a part of a life insurance policy issued in Michigan?

A provision that allows the effective date of the policy to be backdated up to 8 months in order to effect a lower premium rate for the insured.

Which of the following applicants could insured charge a higher rate of premium and not violate regulations regarding unfair discrimination?

An applicant who is a smoker