NC Life
If the Commissioner denies an initial application for an agent, how long does the applicant have to request a review after receiving notification of the denial?
- 30 days If the Commissioner finds that the applicant has not fully met the requirements for licensing, the Commissioner shall refuse to issue the license and shall notify in writing the applicant and the appointing insurer, if any, of the denial, stating the grounds for the denial. In order for the applicant to be entitled to a review of the Commissioner's action to determine the reasonableness of the action, the applicant must make a written demand upon the Commissioner for a review no later than 30 days after service of the notification upon the applicant.
When transacting business in this state an insurer formed under the laws of another country is known as a/an
- Alien insurer. Alien insurer is defined as an insurer formed under the laws of another country.
when an insurance producer conducts business under any name other than the proucer's legal name, he or she must:
notify the commissioner before using the assumed name
Which of the following is the basic source of information used by the company in the risk selection process?
-Application The application is the basic source of information an insurer uses in the risk selection process.
If the commissioner denies an initial application for an agent, how long does the application have to request a review after receiving notification of the denial
30 days
What does "level" refer to in level term insurance?
Face Amount
Variable Life Insurance is based on what kind of premium?
Level fixed.
What is true regarding an indeterminate premium whole life policy?
The premium can be raised up to a guaranteed maximum rate
Forcing a client to buy insurance from a particular lender as a condition of granting a loan is defined as
coercion
Which of the following is true about the premium on the children's rider in a life insurance policy?
- It remains the same no matter how many children are added to the policy. The premium does not change on the inclusion of additional children; it is based on an average number of children.
What is the purpose of establishing the target premium for a universal life policy?
- To keep the policy in force The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
What are the two components of a universal policy?
Insurance and cash account.
An agent represents the
Insurer
failure to notify the commissioner of changes to a licensee's address within 10 business days may result in an administrative fee of
$50
What is the maximum face amount on an industrial life policy?
- $1,000 Industrial life insurance is a form of life insurance where premiums are payable monthly or more frequently. The face amount of an industrial insurance policy may not exceed $1,000.
The automatic premium loan provision is activated at the end of the
- Grace period. Provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force.
What is the benefit of choosing extended term as a nonforfeiture option?
- It has the highest amount of insurance protection. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy. The duration of the new term coverage lasts for as long a period as the amount of cash value will purchase.
All of the following are true about variable products EXCEPT
- The premiums are invested in the insurer's general account. Insurers selling variable products invest their customer's monies in a separate account, which is very similar to a mutual fund. Since there is no guaranteed rate of return, customers must bear the investment risk.
If a life insurance policy increases significantly in face amount (death benefit) when the insured reaches a specified age, what type of policy is this?
Jumping juvenile policy
During replacement of life insurance, a replacing insurer must do which of the following?
Obtain a list of all life insurance policies that will be replaced
when would a 20-pay whole life policy endow?
when the insured reaches age 100
When an agent changes email address, the Department of Insurance must be notified within
- 10 days North Carolina agents have 10 business days to notify the Department of a change in residential or email address.
Which nonforfeiture option provides coverage for the longest period of time?
- Reduced paid-up The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.
An insured committeed suicide one year after his life insurance policy was issued. The insurer will
refund the premiums paid. If the insured commits suicide within 2 years following the policy effective date, the insurer's liability is limited to a refund of premium.
If a licensee fails to notify the Commissioner of insurer insolvency, if known or suspected, and to provide a statement of relevant facts, which of the following is TRUE?
- The Commissioner may suspend or revoke the person's license. It is the duty of any licensed person, or employee or representative of an insurance company to notify the Commissioner of any violations of the General Statutes of the Insurance Code, or insurer insolvency. The Commissioner may suspend, revoke, or refuse to renew the license of any licensee who willfully fails to comply with this section of the Insurance Code.
What is true regarding an indeterminate premium whole life policy?
The premium can be raised up to a guaranteed maximum rate.
In NC, statutes, rules and regulations that govern insurance companies, insurance transcations and insurance agents are known as the
insurance code
Insurance companies are required to provide proof of loss forms to the claimant within how many days after receipt of notice of loss?
- 15 When any company under any insurance policy requires a written proof of loss after notice of the loss has been given by the insured or beneficiary, the company must furnish a blank form within 15 days.
Social Security was created to protect against all of the following EXCEPT
- Bad investment choices. Social Security is a Federal program enacted in 1935, that is designed to provide protection, for eligible workers and their dependents, against financial loss due to death, disability, superannuation (retirement income), and sickness in old age.
An insurance institution or agent that discloses information in violation of the information privacy and disclosure statutes of North Carolina will be liable for
- Damages sustained by the individual to whom the information relates. An insurance institution, agent, or insurance-support organization that discloses information in violation shall be liable for damages sustained by the individual to whom the information relates. No individual, however, shall be entitled to a monetary award that exceeds the actual damages sustained by the individual as a result of a violation. Next
Which of the following are NOT fundable by annuities?
- Death benefits Annuities are most commonly used to fund a person's retirement, but they can technically be used to accumulate cash for any reason. Annuities can also be used to liquidate an estate. Annuities do not provide death benefits; those are provided by life insurance.
The provision which states that both the policy and a copy of the application form the contract between the policyowner and the insurer is called the
- Entire contract. The policy, together with the attached application, constitutes the entire contract. This provision limits the use of evidence other than the contract and the attached application in a test of the contract's validity. This is a mandatory provision in life insurance.
When an insurance agency published an advertising brochure, it emphasized the company's financial stability and sound business practices. In reality, its financial health is terrible, and the company will soon have to file for bankruptcy. Which of the following terms best describes the advertisement?
- False financial statement False financial statements are made when insurance companies attempt to hide their financial troubles from the public and government officials.
Term policies are available as level, increasing and decreasing? Which policy component fluctuates depending on the policy type?
Death benefit
All statements of the insured in any application for a policy of insurance are deemeed
Representations
nonforfeiture values guarantee which of the following for the policyowner?
The the cash value will not be lost.
In an adjustable life policy all of the followng can be changed by the policy owner except
the type of investment
The Commissioner must examine every domestic insurer at least once every
- 5 years. The Commissioner has the power to examine and investigate the affairs of every insurer or agent doing business in this state in order to determine whether the insurance institution or agent has been engaged in a conduct in violation of the General Statutes. The examination must be conducted at least once every 5 years.
What is the waiting period on a Waiver of Premium rider in life insurance policies?
- 6 months Most insurers impose a 6-month waiting period from the time of disability until the first premium is waived.
Which of the following best describes the concept that the insured pays a small amount of premium for a large amount of risk on the part of the insurance company?
- Aleatory An insurance contract is an aleatory contract in that it requires a relatively small amount of premium for a large risk.
Any agent, broker or limited representative who acts for a person other than himself negotiating a contract of insurance, for the purpose of receiving the premium, is deemed to be
- An agent of the company Any agent, broker or limited representative who acts for a person other than himself negotiating a contract of insurance, for the purpose of receiving the premium, is deemed to be the company's agent. Any agent, broker or limited representative knowingly procuring by fraudulent representations payment, or the obligation for the payment, of a premium of insurance, may be found guilty of a Class 1 misdemeanor.
All other factors being equal, the least expensive first-year premium payment is found in
- Annually Renewable Term. Annually renewable term is the purest form of term insurance. The death benefit remains level, but the premium increases each year with the insured's attained age. In decreasing policies, while the face amount decreases, the premium remains constant throughout the life of the contracts. In level term and increasing term policies, the premium also remains level for the term of the policy. Therefore, in the other types of level policies, the first-year premium would not be different from any other year.
A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision?
- Automatic premium loan This provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.
Which of the following features of the Indexed Whole Life policy is NOT fixed?
- Cash value growth Under the Indexed Whole Life policy, the premium is fixed, and the death benefit is guaranteed. Cash value is dependent upon the performance of the equity index although a minimum cash value is guaranteed.
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. Credit life is most often sold by lenders and is term insurance written with a face amount and term that is matched to the amount and length of the loan period. Credit insurance is a special type of coverage written to insure the life of the debtor and pay off the balance of a loan in the event of the death of the debtor.
An insurance institution or agent that discloses information in violation of the information privacy and disclosure statutes of North Carolina will be liable for
- Damages sustained by the individual to whom the information relates. An insurance institution, agent, or insurance-support organization that discloses information in violation shall be liable for damages sustained by the individual to whom the information relates. No individual, however, shall be entitled to a monetary award that exceeds the actual damages sustained by the individual as a result of a violation
What does "level" refer to in level term insurance?
- Face amount Level term policies maintain level death benefit (or face amount) throughout the term of the policy. In level term insurance, the premium also remains consistent over the years, unlike the premiums of many policies, which increase as the policyholder ages.
Under a 20-pay whole life policy, in order for the policy to pay the death benefit to a beneficiary, the premiums must be paid
- For 20 years or until death, whichever occurs first. Under a 20-pay life policy, all of the premiums necessary to cause the policy to endow at the insured's age 100 are paid during the first 20 years; however, if the insured dies before all of the planned premiums are paid, the beneficiary will receive the face amount as a death benefit.
A Return of Premium term life policy is written as what type of term coverage?
- Increasing Return of premium (ROP) life insurance is an increasing term insurance policy that pays an additional death benefit to the beneficiary equal to the amount of the premiums paid.
In North Carolina, statutes, rules, and regulations that govern insurance companies, insurance transactions, and insurance agents are known as the
- Insurance Code. In North Carolina, the legislature has made and implemented state statutes which, collectively, are known as the Insurance Code.
What is the purpose of a conditional receipt?
- It is intended to provide coverage on a date prior to the policy issue. Coverage commences on the date of the application or the date of a medical examination, whichever is later, on the condition that the applicant is determined to be insurable at the rate applied for.
Twin brothers are starting a new business. They know it will take several years to build the business to the point that they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?
- Joint Life A Joint Life policy covering two lives would be the least expensive because the premiums are based on an average age, and it would pay a death benefit only at the first death.
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?
- Life income with period certain The life income with period certain option guarantees payments for the life of the recipient and also specifies a guaranteed period of continued payments. If the recipient should die during this period, the payments would continue to a designated beneficiary for the remainder of the period.
What type of whole life insurance policy has premiums that are adjusted so that during the first years of the policy, the premiums are lower than those of a straight whole life policy, and in subsequent years the premiums are higher than those of a straight whole life policy?
- Modified life Modified life policies were developed to attract young professionals who have a large financial investment in their education and training, but starting their professional careers, they have limited resources to buy insurance. Modified life is a permanent policy, but in the early years, the premiums are similar to that of a term policy; in later years, the premiums are increased to build cash values and cause the policy to endow.
Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured?
- Option B Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.
Which of the following riders would NOT cause the Death Benefit to increase?
- Payor Benefit Rider Payor Benefit Rider does not increase the Death Benefit; it only pays the premium if the payor is disabled or dies. With Guaranteed Insurability Rider, the policyowner can increase DB at specified ages or events, i.e. marriage or birth of a child; Cost of Living Rider increases DB to keep pace with inflation; in Accidental Death Rider, if the insured dies from an accident, DB is a multiple of the Face Amount.
A private investigator has been hired by an insurance company to obtain a character report on an insurance applicant. The investigator contacts the applicant and requests an interview stating that he is conducting a research for a publication. The applicant permits the interview and unknowingly gives information that will be used in the underwriting decision. Which of the following does this scenario describe?
- Pretext interview A pretext interview is where a person, in an attempt to obtain information about a natural person, pretends to be someone he is not or pretends to represent a person he is not in fact representing.
An agent offers his client free tickets to a sporting event in exchange for the purchase of an insurance policy. The agent is guilty of
- Rebating. When producers give or promise anything of value that is not specified in the policy, they are guilty of rebating.
To sell variable life insurance policies, an agent must receive all of the following EXCEPT
- SEC registration. Agents selling variable life products must be registered with FINRA, have a securities license, and must be licensed within the state to sell life insurance. SEC registration is for securities, not agents.
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT
- The insured's age at death. The insured's age at death will not be considered, but the longer the life expectancy of the recipient, the lower the payments will be.
A group of 15 skydivers met at a seminar and began talking about life insurance during a break. Because it was expensive to get individual life insurance, they decided to band together to form a small group so that they could qualify for group life insurance. After they applied for group life insurance, they were rejected. Why?
- The purpose of the group was to purchase life insurance. In order to qualify for small group life insurance, a group must be formed for a purpose other than attaining life insurance.
Which of the following is NOT true regarding Equity Indexed Annuities?
- They earn lower interest rates than fixed annuities. Equity Indexed Annuities invest on an aggressive basis in order to yield higher returns. Like a fixed annuity, Equity Indexed Annuities have guaranteed minimum interest rates. The insurance company often keeps a predetermined percentage of the return and pays the rest to the annuity owner. Equity Indexed Annuities are less risky than variable annuities and earn higher interest rates than fixed annuities.
Which of the following Life Insurance policies would be considered interest sensitive?
- Universal life As well as being a flexible premium policy, universal life is also an interest-sensitive policy. The insurer credits the cash value in the policy with a current (nonguaranteed) interest rate and backs the cash value with a contract (lower guaranteed) rate of interest.
Which of the following terms is used to describe a person, other than a viator, that enters into or effectuates a viatical settlement contract?
- Viatical settlement provider "Viatical settlement provider" means a person, other than a viator, that enters into or effectuates (makes effective) a viatical settlement contract.
When would a 20-pay whole life policy endow?
- When the insured reaches age 100 A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.
A legally acceptable attempt by an existing insurer to dissuade a current policyowner from the replacement of existing life insurance is called
- conservation conservation means any attempt by the existing insurer or its producers, or a broker to dissuade a current policy owner from the replacement of existing life insurance or annuity.
The automatic premium loan provision is activated at the end of the
-Grace period. Provided there is sufficient cash value in the policy, this provision triggers a loan at the end of the grace period to keep a policy in force.
All of the following are TRUE statements regarding the accumulation at interest option EXCEPT
-The interest is not taxable since it remains inside the insurance policy. The interest credited under this option is TAXABLE, whether or not the policyowner receives it.
Agents who persuade insureds to cancel a policy in favor of another one when it might not be in the insured's best interest are guilty of
-Twisting. Twisting is a misrepresentation that persuades an insured or a policyowner, to his or her detriment, to cancel, lapse, or switch policies.
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?
-Universal Life - Option A Universal Life Option A (Level Death Benefit option) policy must maintain a specified "corridor" or gap between the cash value and the death benefit, as required by the IRS. If this corridor is not maintained, the policy is no longer defined as life insurance for tax purposes, and consequently loses most of the tax advantages that have been associated with life insurance.
After appointing an agent, how long does an insurer have to file with the Commissioner the form detailing the agent's name, address, and other needed information?
- 30 days Insurers have 30 days to file, in a form prescribed by the Commissioner, the names, addresses, and other information required by the Commissioner for its newly appointed agents.
How long is a free-look period for replacement policies?
- 30 days The replacing insurer must provide to the policyowner notice of the right to return the policy or contract within 30 days of the delivery of the contract and receive an unconditional full refund of all premiums.
The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this?
- Reduction of premium The Reduction of Premium option allows the policyholder to apply policy dividends toward the next year's premium. The dividend is subtracted from the premium amount, yielding the new premium due for the next year.
The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change?
- The death benefit can be increased by providing evidence of insurability. The policyowner (insured) would need to prove insurability for the amount of the increase.
Under an extended term nonforfeiture option, the policy cash value is converted to
- The same face amount as in the whole life policy. Under this option the insurer uses the policy cash value to convert to term insurance for the same face amount as the former permanent policy.
In an Adjustable Life policy all of the following can be changed by the policy owner EXCEPT
- The type of investment. Typically, the owner of an adjustable life policy has the following privileges: increasing or decreasing the premium, changing the premium-paying period, increasing or decreasing the face amount of coverage, or changing the period of protection.
The two type of assignments are
absolute & collateral absolute assigns the entire policy. collateral assigns a part or all of the benefits.