PA Life practice exam from PSI (1)

Why is relying solely on employer group life insurance generally considered inadequate for most individual's needs? 1. It is financially insufficient to cover end of life expenses. 2. It is meant to cover funeral expenses only. 3. It does not pay off the insured's mortgage. 4. It is based on salary amounts that are too low.

1. It is financially insufficient to cover end of life expenses.

What procedure is used by an insurer to protect itself in the event a dispute arises and the applicant and the agent do not recall the changes that were made in a completed application? 1. The applicant and possibly the agent initial any changes made. 2. The applicant and the agent sign a document that outlines changes made. 3. An arbitration agreement is signed at the time of the signing of the application. 4. All changes must be approved by the underwriter prior to the submission of the application.

1. The applicant and possibly the agent initial any changes made.

The right to change the beneficiary or dispose of the policy or its benefits in any manner one chooses is reserved to the policyowner UNLESS which of the following is true? 1. The policyowner has named an irrevocable beneficiary. 2. The policyowner has named a revocable beneficiary. 3. The policyowner deems the beneficiary unfit. 4. The insurer prohibits changes to beneficiaries.

1. The policyowner has named an irrevocable beneficiary.

How does the per capita rule apply to proceeds from a life insurance policy? 1. The proceeds are divided equally among living primary beneficiaries. 2. The secondary beneficiary receives the proceeds if the primary beneficiary is no longer living. 3. The proceeds go to the policyholder's estate when no beneficiary is living. 4. The proceeds go to the descendants of the primary beneficiaries

1. The proceeds are divided equally among living primary beneficiaries.

Which of the following is TRUE regarding assignment rights for irrevocable beneficiaries? 1. They are MORE likely to receive a loan based on the expectations of the proceeds. 2. They are LESS likely to receive a loan based on the expectations of the proceeds. 3. They can be changed without the beneficiary's consent after a life changing event. 4. They are responsible for premium payment when the policyholder fails to pay.

1. They are MORE likely to receive a loan based on the expectations of the proceeds.

Which of the following lists the three common types of permanent individual life insurance? 1. Variable Life, Whole Life, Universal Life 2. Whole Life, Incidental Life, Term Life 3. Universal Life, AD&D,Term Life 4. Group Life, Whole Life, Variable Life

1. Variable Life, Whole Life, Universal Life

How do warranties differ from representations? 1. a warranty is guaranteed to be true, a representation is believed to be true to the best of one's knowledge. 2. a representation is guaranteed to be true, a waranty is believed to be true to the best of one's knowledge. 3. a warranty is issued by the insurer, a representation is a statement provided by the applicant. 4. an incorrect representation automatically voids a contract, whereas an incorrect waranty must be proven.

1. a warranty is guaranteed to be true, a representation is believed to be true to the best of one's knowledge.

For an individual long-term care policy there is an annual dollar limit for tax deductions that is based on which of the following? 1. age 2. cost of care 3. policy value 4. premium cost

1. age

Which of the following is an example of a premium payment mode? 1. annual premium payment 2. payment by check 3. automatic deduction of premium 4. $200 per policy year

1. annual premium payment

An insured and the beneficiary are both killed in a fatal accident. Which provision presumes the insured survived the beneficiary? 1. common disaster clause 2. irrevocable beneficiary 3. contingent beneficiary 4. endorsement method

1. common disaster clause

Which whole life policy premium type is the most common? 1. continuous premium 2. non-participating 3. limited payment 4. single premium

1. continuous premium

Which of the following term insurance types provides temporary protection that can be changed to some type of permanent protection without evidence of insurability? 1. convertible 2. decreasing 3. level 4. reentry

1. convertible

Which of the following is exempted from the incontestability provision in insurance policies? 1. fraudulent misstatements 2. pre-existing conditions 3. change in health 4. changes in the insurance code

1. fraudulent misstatements

Current assumption whole life policies are sensitive to which of the following? 1. interest rates 2. age of the insured 3. health of the insured 4. current cash value of the policy

1. interest rates

What type of insurance should a company purchase if it wants to insure the life of its CEO? 1. key person insurance 2. BOE insurance 3. group life policy 4. industrial life insurance

1. key person insurance

When the courts look at a contract to determine the intent of the parties which of the following is considered? 1. the entire contract 2. the relevant portions of the contract 3. any material added to the basic contract 4. any words that have ambiguous definitions

1. the entire contract

What is the purpose of Stranger-originated life insurance (STOLI)? 1. the policy is originated primarily or solely for the purpose of resale 2. the policy is written so as to avoid proof of insurable interest 3. it is a method of insuring a person who has been previously declined. 4. it is a fraudulent policy meant for financial gain of someone unknown to the insured.

1. the policy is originated primarily or solely for the purpose of resale

Which of the following occurs immediately after the application is submitted and the initial premium paid? 1. the underwriting process begins 2. the applicant's references are checked 3. the beneficiaries are selected 4. the insurance goes into effect.

1. the underwriting process begins

Which of the following is TRUE of the limited pay whole life policy? 1. Coverage ends when the policy is paid-up. 2. Coverage continues after the policy is paid-up. 3. Premium payments increase as the insured ages. 4. Premium payments are lower than continuous premium whole life.

2. Coverage continues after the policy is paid-up.

Obtaining consumer information reports under false pretenses is prosecutable by which of the following? 1. USA Patriot Act 2. Fair Credit Reporting Act 3. State laws where the applicant resides 4. Securities and Exchange Commission

2. Fair Credit Reporting Act

Which policy provision permits the policyowner to take a specified number of days to examine the contract, and allows for cancellation and a full refund if the policyowner rejects the terms or costs? 1. Exclusions 2. Free look 3. Grace period 4. Insuring Clause

2. Free look

Why is the accidental death benefit referred to as double indemnity? 1. It provides for both the actual death as well as other losses from the accident 2. It provides twice the face value in the policy for death due to accident. 3. The beneficiaries have twice the amount of time to provide proof of loss. 4. The beneficiaries must provide proof of death due to multiple causes.

2. It provides twice the face value in the policy for death due to accident.

Which annuity settlement option provides a stated monthly amount to the annuitant and upon the annuitant?s death the same or a lesser amount paid for the lifetime of the survivor? 1. Joint life option 2. Joint and survivorship option 3. Life annuity certain option 4. Refund life annuity option

2. Joint and survivorship option

Which one of the following is particularly important for an insurance producer to explain to a client upon delivery of a life insurance policy? 1. the effective date 2. any exclusions 3. premium due dates 4. loan interest rates

2. any exclusions

What is the primary advantage for obtaining a reinstatement of a policy rather than obtaining a new one? 1. No proof of insurability is required 2. insured original issue age is used 3. No application is required 4. outstanding loans are cancelled

2. insured original issue age is used

Which of the following refers to how often a premium is paid? 1. level 2. mode 3. net 4. ratio

2. mode

In which of the following must a beneficiary change request be filed in writing to the insurer and is made effective by the insurance company recording the change in its records? 1. designation option 2. recording method 3. endorsement method 4. succession of beneficiaries

2. recording method

In order to AVOID being classified as an MEC, a policy must pass which of the following? 1. five-pay test 2. seven-pay test 3. policy loan test 4. accelerated benefits test

2. seven-pay test

Which of the following is the time limit on certain defenses after which the policy becomes incontestable? 1. 12 months 2. 18 months 3. 2 years 4. 5 years

3. 2 years

Which of the following is common in an increasing term life policy? 1. Insurance protection decreases over time. 2. The premium increases over time. 3. It begins with little or no insurance protection. 4. It is used as mortgage credit insurance.

3. It begins with little or no insurance protection.

All of the following are tax qualified retirement plans EXCEPT 1. Keogh. 2. 401(k). 3. Section 529 plan. 4. SEP.

3. Section 529 plan.

If the insurer wishes to share an applicant's HIV status, the applicant must be given full notice of all of the following EXCEPT 1. insurer's practices with respect to the treatment of this information. 2. the applicant's rights to maintain privacy. 3. an opportunity to refuse the dissemination of the information. 4. the treatment procedures that are covered by the policy.

3. an opportunity to refuse the dissemination of the information.

All of the following are common exclusions from loss found in disability income policies EXCEPT for that incurred while 1. serving in the military 2. living overseas 3. commiting a misdemeanor 4. piloting a personal aircraft

3. commiting a misdemeanor

In a level term life policy, which ALWAYS remains constant? 1. premium 2. beneficiary 3. death benefit 4. maximum age of the insured

3. death benefit

Which part of an insurance contract contains the promise to pay losses covered by the policy in exchange for the insured's premium and compliance with policy terms? 1. conditions 2. policy title page 3. insuring clause 4. definitions

3. insuring clause

Which of the following is characteristic of a nonqualified plan? 1. defined vesting schedule 2. plan established by the employer 3. plan does not meet federal guidelines for tax benefits 4. employer contributions are deductible business expenses

3. plan does not meet federal guidelines for tax benefits

All of the following are ownership rights EXCEPT 1. changing the beneficiary of the policy 2. borrowing funds against cash value 3. switching the policy from one insured to another 4. assigning all of the rights of the policy to another person

3. switching the policy from one insured to another

Group AD&D policies may be deducted by whom and under which deduction category? 1. the employee under business expenses 2. the employee under medical expenses 3. the employer under business expenses 4. the employer under workers' compensation deduction

3. the employer under business expenses

All of the following are required signatures on a life insurance application EXCEPT 1. the agent. 2. the applicant. 3. the minor in a juvenile policy. 4. the proposed insured.

3. the minor in a juvenile policy.

Which of the following is TRUE of an equity-indexed annuity? 1. It is a variable annuity. 2. It may decrease in value. 3. It requires a securities license to sell. 4. It has a guaranteed minimum interest rate.

4. It has a guaranteed minimum interest rate.

All life insurance and health insurance contracts contain all of the following EXCEPT 1. Policy face 2. Insuring clause 3. Conditions 4. Representations

4. Representations

Which of the following is TRUE for a flexible premium annuity? 1. The actual amount of the annuity benefit is determined in advance. 2. A single set amount premium is paid by the annuitant on an annual basis. 3. The company promises to pay the annuitant an amount each period beginning after a single lump sum payment. 4. The purchaser has the option to vary the amount of each premium payment falling between a minimum and maximum amount.

4. The purchaser has the option to vary the amount of each premium payment falling between a minimum and maximum amount.

Under the misstatement of age provision, what happens if it is determined at death that the insured's age or gender was misstated on a life insurance policy application? 1. the application is considered fraudulent and no benefits are paid. 2. the proceeds of the policy must be determined by a probate court proceeding 3. if the death is two years after originally policy purchase, complete benefits are paid 4. benefits are adjusted to an amount that the premium would have purchased at the correct age or gender

4. benefits are adjusted to an amount that the premium would have purchased at the correct age or gende

The group conversion option is allowed for all of the following EXCEPT 1. termination of the master policy. 2. loss of group coverage due to termination of employment. 3. upon the loss of eligibility on the part of a class of insureds. 4. during the annual benefits enrollment period.

4. during the annual benefits enrollment period.

Which is a common approach to addressing the problems inherent in naming a minor as a beneficiary to a life insurance policy? 1. using class designations 2. using contingent beneficiaries 3. naming the estate as the beneficiary 4. establishing a trust to administer proceeds

4. establishing a trust to administer proceeds

All of the following are classifications of risk EXCEPT 1. substandard. 2. preferred. 3. declined. 4. non-nicotine.

4. non-nicotine.

All of the following are features of the spendthrift clause EXCEPT 1. proceeds are paid in some other way than a single lump sum. 2. proceeds are protected by the insurer from the beneficiary's creditors. 3. transfer of proceeds to creditors is prohibited. 4. the beneficiary may encumber the proceeds.

4. the beneficiary may encumber the proceeds.

All of the following are TRUE regarding incomplete applications EXCEPT 1. the underwriting department will return the application to the agent. 2. the applicant will have to wait additional time before coverage begins. 3. there will be a delay in the underwriting process. 4. the incomplete application can be accepted with the missing information added later.

4. the incomplete application can be accepted with the missing information added later.

Which type of annuity attempts to offset inflation by providing a benefit linked to an underlying investment account? 1. deferred 2. fixed 3. immediate 4. variable

4. variable

Which policy type is backed by equity investments and allows the policyholder to adjust the death benefit? 1. term life 2. variable life 3. regular whole life 4. variable universal life

4. variable universal life