PA Life Insurance Exam Review

Guaranteed and Current

A Universal Life insurance policy has two types of interest rates that are called:

yes but not unfairly

Are insurance company underwriters allowed to discriminate?

a. predicted needs of the family after the insured's death

Based on Human Life Value Approach, which of the following is NOT used to calculate an individual's life value? a. predicted needs of the family after the insured's death b. insured's current and future income c. insured's annual expenses. d. Effect of inflation on income over time

Not subject to income taxation by the Federal Government

Death benefits payable to a beneficiary under a life insurance policy are generally

10 days

How long is the right to examine period for new individual annuities issued in this state?

From trustee to trustee

In a direct rollover, how is the money transferred from one plan to the new one?

c. The annuitant will receive the higher of either the guaranteed minimum rate or the current rate

In a fixed annuity, which of the following is true regarding the guaranteed interest rate on the investment? a. The annuitant will receive the lower of either the guaranteed minimum rate or current rate. b. the annuitant will only receive the guaranteed minimum specified in the contract c. the annuitant will receive the higher of either the guaranteed minimum rate or current rate d. the annuitant will always receive the current interest rate.

b. The insured's age at death

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: a. face amount of the policy b. the insured's age at death c. the beneficiary's life expectancy d. projected interest rates

Agent's contract with the principal

What documentation grants express authority to an agent?

$5,000

What is the civil penalty for the first violation of the Pennsylvania Insurance Fraud Prevention Act?

18

What is the minimum age for obtaining an insurance producer's license in this state?

6 months

What is the waited period for the waiver of premium rider in life insurance policies?

When the application is signed and a check is given to the agent

When is the earliest a policy may go into effect?

a. specified

All of the following are beneficiary designations EXCEPT: a. specified b. tertiary c. contingent d. primary

24 Hours will be applied to the current reporting period, and 24 can be applied to the period immediately following

A producer has successfully completed 52 hours of continuing education. How many hours can the producer apply to her current reporting period, and how many hours can she carry toward the next reporting period?

cash option

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

b. Retirement plan

Annuities can be used to fund which of the following? a. estate creation b. retirement plans c. variable life insurance d. group life insurance

Interest

During partial withdrawal from a universal life policy, which portion will be taxed?

d. Reciprocal

Which of the following insurance options would be considered a risk-sharing arrangement? a. stock b. mutual c. surplus lines d. reciprocal

a. size of each installment

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? a. size of each installment b. predetermined length of time stated in the contract c. length of income period d. amount of interest

a. substandard risk

Which of the following types of risk will result in the highest premium? a. substandard b. standard c. preferred d. all risks pay equal premiums

$300

At the time of initial licensing, what fee must a viatical settlement provider pay?

Guaranteed insurability rider

If a life policy allows the policyowner to make periodic additions to the face amount at standard rates, without proving insurability, the policy includes a

c. If a consumer does not sign and return the notice of disclosure within 30 days

Under which of the following circumstances can financial institutions share insurance coverage information with third parties, for the purpose of soliciting the purchase of insurance? a. Under no circumstances b. if a consumer decides to opt out c. if a consumer does not sign and return the notice of disclosure within 30 days d. whenever it is requested by the commissioner

Cash values can be borrowed at any time

What does "liquidity" refer to in a life insurance policy?

c. the insured's contingent beneficiary

When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident and it was impossible to determine who died first. Which of the following would receive the death benefit? a. the insured's estate b. the primary beneficiary's estate c. the insured's contingent beneficiary d. the insurance company

It is reduced to the amount of what the cash value would buy as a single premium

When a reduced paid-up nonforfeiture option is chosen, what happens to the face amount of the policy?

Cease and Desist order

When the commissioner suspects that a person is violating an insurance law or other regulation, what can be issued that would order the person to stop committing the act of violation?

d. funds exceeding the premium paid are taxable as ordinary income

Which is TRUE about the cash surrender nonforfeiture option? a. after the cash surrender, the insured is covered for a grace period of one month b. the policy remains active for some time after the policyholder opts for cash surrender c. the policyholder receives the original cash value of the policy d. funds exceeding the premium paid are taxable as ordinary income

a. Commissioner

Which of the following authorities is authorized to issue a temporary insurance producer's license? a. commissioner b. NAIC c. Federal Insurance Licensing Association d. State insurance Board

b. Failure to promptly settle a claim when liability has been clearly established

Which of the following is an example of an unfair claims settlement practice? a. using arbitration when the insured and insurer cannot reach agreement b. failure to promptly settle a claim when liability has been clearly established c. denying coverage after a reasonable investigation has been conducted d. making claims payments which clearly indicate under which coverage payment has been made

Monthly

Which of the following premium modes would result in the highest annual cost for an insurance policy? a. monthly b. quarterly c. semi-annual d. annual

c. Variable annuity

Which of the following products requires a securities license? a. equity indexed annuity b. deferred annuity c. variable annuity d. fixed annuity

b. bail out

Which of the following provisions in annuity contracts allow the owner to surrender the annuity if interest rates drop to a specified level? a. annuitization b. bail out c. surrender d. nonforfeiture

b. Buy-sell agreements are normally funded with a life insurance policy *buy-sell agreements are contracts that establish what will be done with a business in the event that an owner dies. They are normally funded with a life insurance policy.

Which of the following statements concerning buy-sell agreements is true? a. buy-sell agreements pay in the event of a medical emergency b. buy-sell agreements are normally funded with a life insurance policy c. premiums paid are deductible as a business expense d. benefits received are considered income taxable

the same face amount as in the whole life policy

Under an extended term nonforfeiture option, the policy cash value is converted to

Separate Account

Underlying assets for variable annuity contracts must be maintained in what type of account?

Extended Term

Which nonforfeiture option has the highest amount of insurance protection?

c. It is level term insurance

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

to purchase a smaller amount of the same type of insurance as the original policy

the paid-up addition option uses the dividend....

c. both the principal and interest will be liquidated over a selected period of time

Which of the following best describes fixed-period settlement option? a. the death benefit must be paid out in a lump sum within a certain time period b. income is guaranteed for the life of the beneficiary c. both the principal and interest will be liquidated over a selected period of time d. only the principal amount will be paid out within a specified period of time

b. size of each installment

Which of the following determines the length of time that benefits will be received under the Fixed Amount settlement option? a. amount of interest b. size of installment c. predetermined length of time stated in the contract d. length of income period

d. issue policies

Which of the following does a producer NOT have the authority to do? a. deliver policies b. solicit insurance contracts c. negotiate contracts of insurance d. issue policies

a. the loss must be catastrophic

Which of the following is NOT a characteristic of an insurable risk? a. the loss must be catastrophic b. the loss must be due to chance c. the loss must be measurable d. the loss exposure must be large

Depreciation period

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income?

Concealment

An applicant knowingly fails to communicate information that would help an underwriter make a sound decision regarding coverage. This is an example of:

Decreases

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

Face amount

Which policy component decreases in decreasing term insurance?

Entire Contract

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 __________

Waiver of premium

The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called

Joint life *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

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?

Life insurance and securities

What are the licensing requirements for someone who sells variable universal life insurance?

d. Payor Benefit Rider *only pays the premium if the payor is disabled or dies

Which of the following riders would NOT cause the death benefit to increase? a. Guaranteed Insurability rider b. Cost of Living rider c. Accidental Death rider d. Payor benefit Rider

c. Controlled business

Which of the following would NOT be considered an unfair and deceptive practice? a. defamation b. misrepresentation c. controlled business d. rebating

A portion of the benefit up to a limit is tax free; the rest is taxable income.

An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?

Modified endowment contract

If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a:

d. having employees complete continuing education courses every 2 years

All of the following are licensing requirements for a business entity EXCEPT: a. demonstrating general fitness, competence, and reliability b. maintaining on staff at least 1 licensed person in good standing c. applying for a license in the same lines of authority as held by licensed designees d. having all employees complete continuing education courses once every 2 years

Rebating

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?

When an insurer's underwriter approves coverage

In forming an insurance contract, when does acceptance usually occur?

Handling insurer funds in a trust capacity

In insurance transactions, fiduciary responsibility means:

reciprocity

A producer licensed in another state wants to become a producer in PA. The other state gives the same privileges to PA producers wanting to be licensed in that state as it does its own agents. PA, therefore, extends the privileges of its agents to the prospective agent of the other state. What is this called?

a presentation of nonguaranteed elements of a policy

The term "illustration" in a life insurance policy refers to:

A group needing low cost life insurance.

All of the following could own group life insurance EXCEPT a. a group needing low cost life insurance b. a group sponsored by an employer c. an alumni group d. a debtor group

Replacement Rule

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?

c. national origin

All of the following are factors that an underwriter could use to select and classify risk EXCEPT a. occupation b. avocation c. national origin d. morals

d. the payable premium amount steadily declines throughout the duration of the contract *premiums remain level with a decreasing term policy; only face amount decreases

All of the following are true regarding a decreasing term policy EXCEPT: a. the death benefit is $0 at the end of the policy term b. the contract pays only in the event of death during the term and there is no cash value c. the face amount steadily declines throughout the duration of the contract d. the payable premium amount steadily declines throughout the duration of the contract

b. 24 hours each licensing period

Which of the following is true regarding Continuing Education required for those holding a Pennsylvania producer license? a. varies from insurer to insurer b. 24 hours each licensing period c. 12 hours each annual period d. continuing education is optional

Promptly forwarding premiums to the insurance company

Pertaining to insurance, what is the definition of a fiduciary repsonsibility?

d. the cost of coverage is based on the ratio of men and women in the group

Which of the following statements about group life is correct? a. the premiums are higher than in an individual policy because there is no medical exam b. the group sponsor receives a Certificate of Insurance c. the policy can be converted to an individual term insurance policy d. the cost of coverage is based on the ratio of men and women in the group

c. The payments will stop when the annuitant dies

All of the following statements are true regarding installments for a fixed amount EXCEPT: a. this option pays a specific amount until the funds are exhausted b. the annuitant may select how big the payments will be c. the payments will stop when the annuitant dies d. value of the account and future earnings will determine the time period for the benefits

b. the charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days

Which of the following is true regarding a waiver of a surrender charge on an annuity contract? a. the surrender charge waiver only applies to immediate annuity b. the charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days c. the charge can only be waived if the annuitant needs the funds for medical expenses d. the surrender charge will be applied to all premature surrenders

d. Fair Credit Reporting Act

Which of the following protects consumers against the circulation of inaccurate or obsolete personal or financial information? a. unfair trade practices law b. the guaranty Association c. Consumer Privacy Act d. Fair Credit Reporting Act

b. It is a life contingency option.

All of the following statements are true regarding installments for a fixed period annuity settlement option EXCEPT: a. The insurer determines the amount for each payment b. It is a life contingency option. c. It will pay the benefit only for a designated period of time. d. the payments are not guaranteed for life.

Policy Summary

What describes the specific information about a policy?

a. it is the viatical settlement provider's responsibility to inform the policyowner's insurance company that the policy has been viaticated. *must be done within 20 days

A policyowner decides to sell his life insurance policy to a viatical settlement company.Which of the following is true? a. it is the viatical settlement provider's responsibility to inform the policyowner's insurance company that the policy has been viaticated. b. the insurance department must notify the policyowner's insurer that the policy has been viaticated c. it is the policy owner's sole responsibility to inform his insurance company that the policy has been viaticated d. only the insurance company or a licensed broker may seek the viatical settlement contract

To keep the policy in force

What is the purpose of establishing the target premium for a universal life policy?

c. the policy is owned by the company (it is actually owned by the employee)

All of the following statements concerning the use of life insurance as an Executive Bonus are correct EXCEPT: a. the employer pays a bonus to a selected employee to fund the policy b. it is considered a nonqualified employee benefit c. the policy is owned by the company d. any time of insurance policy may be used

c. the insured has 15 calendar days from the effective date of contract to rescind it

An insured has entered into a viatical settlement but decides that he would like to back out of the contract. Which of the following is true? a. this is possible at any time, but the longer the insured waits, the more of a penalty he will have to pay. b. once a contract has been signed, it cannot be rescinded c. the insured has 15 calendar days from the effective date of the contract to rescind it d. the insured has 30 days from the effective date of the contract to rescind it.

b. illegal

An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice? a. defamation b. illegal c. a legal advertising strategy d. unfair discrimintation

c. the annuitant cannot be the same person as the annuity owner

Which of the following is NOT true regarding the annuitant? a. the annuitant receives the annuity benefits b. the annuitant must be a natural person c. the annuitant cannot be the same person as the annuity owner d. the annuitant's life expectancy is taken into consideration for the annuity

b. to create an estate

Which of the following is the best reason to purchase life insurance rather than annuities? a. to liquidate a sum of money over a lifetime b. to create an estate c. to liquidate a sum of money over a period of years d. to create regular income payments

Fines of up to $1000 for each act *only fines up to $500 for each act

Violation of unfair discrimination law may result in all of the following penalties EXCEPT: a. refusal to renew licenses b. imprisonment c. fines of up to $1000 for each act d. suspended licenses

Dec. 31 of the year that contains the fifth anniversary of the owner's death

When must an IRA be completely distributed when a beneficiary is not named?

d. option a * under option A, the death benefit remains level while the cash value gradually increases. The death benefit will increase at a later date in order to maintain a gap between the cash value and the death benefit before the policy matures

Which Universal Life option has a gradually increasing cash value and a level death benefit? a. juvenile life b. term insurance c. option B d. option A

a. A licensee is barred from charging a fee in addition to a commission to a person for the sale, solicitation or negotiation of a contract of insurance for commercial business.

Which of the following statements is INCORRECT? a. a. A licensee is barred from charging a fee in addition to a commission to a person for the sale, solicitation or negotiation of a contract of insurance for commercial business. b. no insurance producer may charge a fee for the completion of an application for a contract of insurance c. the fee charged by the licensee must be disclosed in advance in writing to the person and must be reasonable in relationship to the services provided. d. a licensee may charge a fee in addition to a commission to a person for the sale, solicitation, or negotiation of a contract of insurance for commercial business

d. Its premium steadily decreases over time in response to its growing cash value *straight life policies charge a level annual premium throughout the insured's lifetime and provide a level, guaranteed death benefit

Which statement is NOT true regarding a Straight Life policy? a. the face value of the policy is paid to the insured at age 100 b. it usually develops cash value by the end of the third policy year c. it has the lowest annual premium of the three types of Whole Life policies d. its premium steadily decreases over time in response to its growing cash value

The death benefit can be increased by providing evidence of insurability.

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? a. the death benefit can be increased by providing evidence of insurability b. the death benefit cannot be increased c. the death benefit can be increased only when the policy has developed a cash value d. the death benefit can be increased only by exchanging the existing policy for a new one

b. SEC registration

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

Making derogatory oral statements about another insurer's financial condition

What best describes the unfair trade practice of defamation?

It is intended to provide coverage on a date prior to the policy issue

What is the purpose of a conditional receipt?

Income tax on distributions and no penalty

What is the tax consequence of amounts received from a Traditional IRA after the money was left in the tax-deferred account by the beneficiary?

for 31 days

When an employee terminates coverage under a group insurance policy, coverage continues in force for....

d. suicide is excluded for a specific period of years and covered thereafter

Which of the following statements about a suicide clause in a life insurance policy is TRUE? a. suicide is covered for a specific period of years and excluded thereafter b. suicide is covered as long as the policy is in force c. suicide is excluded as long as the policy is in force d. suicide is excluded for a specific period of years and covered thereafter

d. it requires the policyowner to pay all overdue premiums with interest before the policy is reinstated

Which of the following statements about the reinstatement provision is true? a. it permits reinstatement within 10 years after a policy has lapsed b. it provides for reinstatement of a policy regardless of the insured's health c. it guarantees the reinstatement of a policy that has been surrendered for cash d. it requires the policy owner to pay all overdue premiums with interest before the policy is reinstated

c. Withdrawals are not taxable

Which of the following statements regarding the taxation of modified endowment contracts is FALSE? a. policy loans are taxable distributions b. accumulations are tax deferred c. withdrawals are not taxable d. distributions before age 59 1/2 incur a 10% penalty on policy gains

c. Universal Life

Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium amount? a. variable life b. adjustable life c. universal life d. flexible life

The purpose of the group was to purchase life insurance.

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, they were rejected. Why?

b. forwarding premiums to the insurer *fiduciary refers to a position of trust. When an agent is handling the premiums that belong to an insurance company, they are acting in a fiduciary capacity

Which of the following is an example of an agent's fiduciary responsibilities? a. offering additional coverage to a client b. forwarding premiums to the insurer c. helping clients to file claims d. performing a review of clients' coverage