MA Producer Life Insurance Exam Prep

All of the following statements are true about applying for a nonresident producer's license in Massachusetts EXCEPT: The home state must grant licenses to Massachusetts residents on a reciprocal basis. An applicant's license must be in good standing in the home state. An applicant must establish residency in Massachusetts. An applicant must pay a fee.

An applicant must establish residency in Massachusetts.

Federal law requires that businesses fairly and accurately report consumer information through which of the following? CAN-SPAM Act Telemarketing Sales Rule Fraud and False Statements section Fair Credit Reporting Act

Fair Credit Reporting Act

Which of the following pieces of legislation controls the manner in which businesses treat consumer information when it is used for insurance purposes? Fair Credit Reporting Act Consumer Privacy Act Fraud and False Statements section Interstate Commerce Clause

Fair Credit Reporting Act

To qualify for an insurance producer's license in Massachusetts, a person must have all of the following EXCEPT: licensing fee college degree good moral character 18 years of age

college degree

An applicant for a $500,000 whole life insurance policy pays the initial premium along with his application. In this case, what has the applicant done? made a counteroffer to the insurer accepted a counteroffer from the insurer made an offer to the insurer accepted an offer from the insurer

made an offer to the insurer

Which of the following do variable life insurance premiums generally include to cover the cost of managing the investment element of the contract? premium surcharge maintenance fee quarterly administrative fee compensation fee

maintenance fee

How often must the Commissioner examine the affairs and transactions of every authorized insurer? once every two years once every five years once every three years annually

once every five years

Buying life or health insurance is an example of which risk management technique? risk transfer risk retention risk reduction risk avoidance

risk transfer

Why would a large manufacturer choose to self-insure rather than buy an insurance policy from an insurance company? to avoid having to comply with state insurance laws dealing with employee benefits so they can pick and choose which losses they cover to shelter company cash from federal taxation to save insurance premiums by paying relatively minor losses out of company funds

to save insurance premiums by paying relatively minor losses out of company funds

Acme Insurance and Apogee Insurance agree to offer different premium rates for persons of equal risk within a particular class. They also agree to limit benefits paid to insureds within this class if the insureds live in certain counties of Massachusetts. What are Acme and Apogee engaging in? acceptable marketing and underwriting practices insurance fraud false advertising unfair and prohibited business practices

unfair and prohibited business practices

Which of the following is directly responsible for regulating the insurance industry in Massachusetts? Commissioner of Insurance state legislature Attorney General Governor

Commissioner of Insurance

All of the following are automatically deemed to represent an insurable interest EXCEPT: ABC Corp. (the applicant) and its key executive Karen (the disabled applicant, age 28), and her father who cares for her. Sue (the applicant) and her husband Frank (the applicant) and his elderly neighbor

Frank (the applicant) and his elderly neighbor

Which of the following statements about representations and warranties is most correct? Promises made by the insurer in the insurance contract are deemed representations. A statement made on the application which is true to the applicant's best knowledge is deemed a misrepresentation if it is later discovered to be inaccurate. Statements made by the applicant on the application are deemed warranties. Insurers can rescind (cancel) an insurance contract if a misrepresentation is discovered on the application during the contestability period.

Insurers can rescind (cancel) an insurance contract if a misrepresentation is discovered on the application during the contestability period.

All of the following statements regarding the career agency distribution system are correct EXCEPT: There are two types, the general agency system and the managerial system. The managerial form of career agency system uses company employees as the agency managers. Personal producing general agents (PPGAs) are commonly hired to manage career agencies. It uses agents who primarily if not exclusively represent one insurer.

Personal producing general agents (PPGAs) are commonly hired to manage career agencies.

Harry and Connie each want to buy life insurance that will provide a guaranteed death benefit whenever they die, will generate a guaranteed cash value they can access while living, and even return excess premiums to them. Which of the following would best fit this couple's needs? term life insurance variable life insurance participating whole life insurance group life insurance

participating whole life insurance

Which of the following contract characteristics is unique to insurance contracts but NOT all contracts? legal purpose competent parties consideration unilateral

unilateral

Which of the following is NOT a power granted to the Massachusetts Commissioner of Insurance? investigating suspected violations of the insurance code enforcing insurance laws issuing regulations to administer the insurance code writing insurance laws

writing insurance laws

All the following uses for life insurance in a business represent a valid insurable interest, EXCEPT: Life insurance purchased by business partners to provide funds that can be used to buy out the business interest of the one who dies. Life insurance used to provide funds in the event an insured key employee or partner dies. Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies. Life insurance bought by businesses to cover the lives of their key employees or owners.

Life insurance purchased on an important customer to make up for the financial losses that might occur when that customer dies.

Which of the following actions would NOT subject a producer to license probation, suspension, revocation, or nonrenewal? failure to meet sales goals falsifying financial records disobeying a cease and desist order incompetency

failure to meet sales goals

In a third-party life insurance contract, the parties to the contract are the: the insurance company, the owner, and the beneficiary the owner, the insured, and the insurance company the owner, the insured, and the beneficiary the insured, the beneficiary, and the insurance company

the owner, the insured, and the insurance company

Sandy and Cindy are healthy, are 45 years old, and have similar life expectancies. Though they are insured by the same company, Sandy's life insurance premiums are considerably lower than Cindy's. What may this indicate a case of? twisting false advertising misrepresentation unfair discrimination

unfair discrimination

Which of the following is not within the powers of the Commissioner of Insurance? writing insurance laws examining insurers investigating insurance producers issuing insurance regulations

writing insurance laws

After the first 36-month period following licensure, a producer is required to complete how many hours of continuing education per license renewal period? 45 hours 24 hours 36 hours 12 hours

45 hours

Which of the following is an example of an unauthorized insurance company in Illinois? Company C, a Florida-based company that does not hold a certificate of authority Illinois but whose products are approved by the Illinois insurance department Company D, a Canadian company that holds a certificate of authority in Illinois Company B, an Iowa-based company that does not hold a certificate of authority in Illinois and sells products that are not approved by the Illinois insurance department Company A, an Illinois-based company that holds a certificate of authority in Illinois and 32 other states

Company B, an Iowa-based company that does not hold a certificate of authority in Illinois and sells products that are not approved by the Illinois insurance department

Which of the following best describes insurable interest? It refers to the financial relationship between the policyowner and the insured person or property. It refers to the maximum amount of insurance that may be purchased on the insured person or property. It refers to the role life insurance can play in protecting policyowners from investment fraud. It describes the basic relationship between the insurance company and the policyowner.

It refers to the financial relationship between the policyowner and the insured person or property.

As a risk management technique, which of the following best illustrates risk transfer? Sheila refuses to drink alcoholic beverages if she expects to drive a car afterward. John refuses to buy life insurance because he figures he has enough money in his savings to pay for his burial when he dies. Robert purchases life insurance because he figures doing so is far less expensive than trying to save all the money his survivors would need upon his death. Carol eats a healthy diet and exercises regularly, hoping that doing so will keep her healthy.

Robert purchases life insurance because he figures doing so is far less expensive than trying to save all the money his survivors would need upon his death.

In Massachusetts, which of the following persons is NOT required to have an insurance producer's license? Richard, who only sells variable annuities Mickey, who negotiates insurance contracts Sven, who administers employee benefits for his employer Maureen, who sells life insurance

Sven, who administers employee benefits for his employer

Life insurance has been purchased by ABC Company on the lives of two partners, Hugh and Danny, and three key employees Eileen, Vern, and June. Which of the following would apply if Hugh and June were to leave the business? The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there. The company would have to drop its coverage for both Hugh and June within 30 days of their departures. The company could keep the life insurance it has on Hugh, since he is a principal of the company, but would have to drop June's coverage, because she is not. The company can only retain its coverage on June because she is not a principal of the company.

The company could keep the life insurance it has on both Hugh and June, even though both are no longer employed there.

With respect to third-party ownership of life insurance in the personal insurance market, all the following statements are true EXCEPT: The insured has the right to name the beneficiary. Policy ownership can be transferred to anyone without there having to be an insurable interest between that person and the insured. Third-party ownership is the basis of stranger-oriented life insurance (STOLI). Third-party ownership is common in estate planning.

The insured has the right to name the beneficiary.

All the following statements regarding stranger-owned life insurance (STOLI) are correct EXCEPT: STOLI is an arrangement in which investors convince an individual to purchase a life insurance policy on himself which is transferred to the investor in exchange for a sum of money. The insured retains the right to designate the policy's beneficiary. STOLI is financed through premium loans during the first several years, until it is transferred from the insured to the investors. STOLI and investor-owned life insurance (IOLI) are the same thing.

The insured retains the right to designate the policy's beneficiary.

When may an insurer cancel either whole life or term life insurance? The insurer may cancel either type of policy without reason at any time. The insurer may not cancel either type of life insurance policy under any circumstances. The insurer may cancel either type of policy only if the insured becomes uninsurable. The insurer may cancel both types of policies if the policyowner does not pay the premiums.

The insurer may cancel both types of policies if the policyowner does not pay the premiums.

To be considered insurable, a risk (and the potential loss it represents) must meet which one of the following requirements? The loss must be definable as to time, cause, and location. The loss must be certain to occur. The loss must be catastrophic. The loss cannot be measurable.

The loss must be definable as to time, cause, and location.

All the following statements about the net premium for a traditional life insurance policy are correct EXCEPT: Calculating the net single premium is the first step in calculating the gross premium charged to the policyowner. The net premium is the insurer's estimated cost to provide the policy benefits without accounting for the insurer's expenses. The net premium reflects two of the three premium factors: mortality and interest. The net single premium for a traditional life insurance policy is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment.

The net single premium for a traditional life insurance policy is the amount actually charged to the policyowner who wants to purchase the policy with a single premium payment.

Which of the following most accurately describes the basic function of a life insurance policy's net premium? The net premium is the amount an individual actually pays to provide all the benefits promised in the policy regardless of premium mode. The net single premium is the amount required to cover the policy's promised benefits, without accounting for the insurer's policy-related expenses. The net premium is the amount actually charged to the policyowner. The net premium represents the insurer's mortality charge.

The net single premium is the amount required to cover the policy's promised benefits, without accounting for the insurer's policy-related expenses.

Alice wants to spread her life insurance premiums over the year, rather than pay a single annual premium. She asks her agent what that would mean in terms of the sum of premiums paid. Which of the following is the correct response? Whichever mode of premium she chooses, the sum of premiums over the course of the year is the same. The sum of premiums will be lower than if she paid a single annual premium. The sum of premiums may be higher or lower than the single annual premium, depending on whether the annual premium is paid at the start or end of the policy year. The sum of premiums will be higher than if she paid a single annual premium.

The sum of premiums will be higher than if she paid a single annual premium

All of the following statements about key person life insurance are correct, EXCEPT: Key person, or key employee, life insurance is an example of third-party ownership. Upon the insured employee's death, the employee's surviving family receives the policy's death benefit. Life insurance used as key person life is normally owned by the business rather than the insured. The business applies for, owns, and is the beneficiary of the policy covering the life of a key employee.

Upon the insured employee's death, the employee's surviving family receives the policy's death benefit.

All of the following statements about fixed whole life insurance cash values are correct EXCEPT: Cash values grow over the life of the policy and are calculated to equal the policy's face amount at the insured's age 120 (age 95 in the case of universal life insurance). Withdrawing or borrowing from the cash value will have no impact of the policy's death benefit. As long as premiums are paid, the insurance stays in force, the cash values grow, and the policy is guaranteed to pay its specified death benefit. The policyowner owns the cash value in the policy and can access it.

Withdrawing or borrowing from the cash value will have no impact of the policy's death benefit.

All the following types of insurance involve a personal contract EXCEPT: a medical expense insurance policy an automobile policy a life insurance policy a disability income insurance policy

a life insurance policy

Lucy is applying for an individual health insurance policy and discloses that she is diabetic, which is considered which of the following? a morale hazard a moral hazard a critical hazard a physical hazard

a physical hazard

An insurance producer tells a life insurance applicant that he has the authority to waive the medical exam that is normally required by the insurer with every application. The insurer may be required to accept the application without a medical exam due to the producer's: express authority imputed authority implied authority apparent authority

apparent authority

What must an insurance company do to make a producer its agent? appoint the producer as its agent employ the producer accept an insurance application submitted by the producer issue a certificate of authority to the producerWhat must an insurance company do to make a producer its agent? appoint the producer as its agent employ the producer accept an insurance application submitted by the producer issue a certificate of authority to the producer

appoint the producer as its agent

Which of the following is NOT a prohibited marketing practice? rebating premiums discrimination among risks fixing premium rates among insurers coercion

discrimination among risks

The contract between the producer and insurer, setting forth certain acts and duties the producer is specifically authorized to perform, describes the producer's: implied authority apparent authority express authority agency authority

express authority

Nick's producer's license lapsed eight months ago when he failed to pay the renewal fee and fulfill continuing education (CE) requirements. What must he do to reinstate the license? reapply for the license and pay the reinstatement fee fulfill CE requirements and pay the renewal fee fulfill CE requirements and pay fees for renewal and reinstatement reapply for the license and pass the license exam again

fulfill CE requirements and pay fees for renewal and reinstatement

Though not specifically cited in the producer's contract, the producer is expected to telephone prospects on the insurer's behalf to arrange sales appointments. This is an example of what kind of producer authority? implied authority apparent authority perceived authority express authority

implied authority

A producer who disobeys a Commissioner's order to cease and desist from an illegal activity is not subject to which of the following? fine imprisonment license revocation license suspension

imprisonment

The purpose for the Policy Summary, which must be given to every insurance applicant before an application is signed, is to: provide buyers with details of the specific insurance contract they are considering for purchase explain the step-by-step process involved in purchasing the recommended product explain the general features, benefits, and conditions of the type of insurance being considered disclose all the hidden costs associated with the policy being applied for

provide buyers with details of the specific insurance contract they are considering for purchase

Which of the following is clearly not a rebate? giving an insurance prospect a gift for considering a policy accepting a gift in exchange for buying insurance reducing premiums due to an insurer's favorable claims experience returning a portion of the premium on a new policy

reducing premiums due to an insurer's favorable claims experience

The federal Risk Retention Act of 1986 contains guidelines for which of the following entities? risk retention groups Fraternal insurance companies reinsurance companies surplus lines insurance companies

risk retention groups

Sylvia's insurer guarantees a fixed death benefit for the policy she owns. Based on this, which one of the following benefits is also most likely guaranteed with this policy? policy dividends her ability to borrow an interest-free loan from the cash value payment of premiums on Sylvia's behalf in the event of emergencies the policy's cash value

the policy's cash value