Practice Exam: Exam Mode

Extended Term vs Reduced Paid-Up

-Extended term is the AUTOMATIC nonforfeiture option: same ace amount, shorter term of coverage -Policy cash value is used by the insurer as a single premium to purchase a completely paid-up permanent policy that has a reduced face amount from that of the former policy. The new reduced policy bulds its own cash value and will remain in force until death or maturity

Interdeterminate Premium Whole Life

-Premium rate that may vary from year to year -Specify 2 premium rates: Guaranteed and nonguaranteed -After 2-3 yrs, the insurer establishes a new rate which could be increased, kept the same, or lowered based on the company's expected mortality, expense and investments BUT the premium can never be higher than the guaranteed max.

Graded premium whole life

-Similar to modified life, in that premiums start out relatively low and then level off at a point in the future. -They typically start with a premium that is approx. 50% or lower than the premium of a straight life policy -The premium gradually increases each year for a period of normally 5-10 years, and then remains level thereafter

What types of premiums does universal life offer?

1. Target 2. Minimum

An agent has completed a total of 30 hours of continuing education (CE) during a licensee renewal period. How many of the hours may the agents apply toward during the next CE compliance period?

6 hours

Material misrepresentation

A statement, that if discovered, would alter the underwriting decision of the insurance company If misrepresentations are intentional, they are considered fraud

What do Modified Life and Straight Life policies have in common?

Accumulation of cash value

Insurance policies are not drawn up through negotiations, and an insured has little to say about its provisions. What contract characteristic does this describe?

Adhesion A contract of adhesion is prepared only by the insurer. The insured's only option is to accept or reject the policy as written

Warranty

An absolutely true statement

Class H Felony

Any person who assists or conspires with another person to knowingly defraud or deceive an insurer

When must insurable interest exist?

At the time of application

Because an insurance policy is a legal contract, it must conform to the state law governing contracts which require all of the following elements EXCEPT

Conditions -Conditions are part of the policy structure -Consideration is an essential part of a contract

What is interest sensitive whole life also known as?

Current Assumption

What is another term for interest-sensitive whole life insurance?

Current Assumption Life

In which of the following methods of changing a beneficiary does the policyowner send the contract to the home office of the insurer for approval and change?

Endorsement method

All of the following are dividend options EXCEPT

Fixed-period installments

How long must an insurer or it's agent keep a complaint record?

For at least 5 years to have a list of all of the written complaints

Life insurance death proceeds are what?

Generally not taxed as income

Which of the following is an eligibility requirement for all Social Security Disability Income benefits?

Have attained fully insured status Although social security offers many benefits, such as retirement, survivors, and Medicare, only those who have trained full insured status are eligible for Disability Income benefits. Contributing to Social Security for 40 quarters (10 years) attains fully insured status

The Commissioner has the power to examine and investigate the affairs of every insurance institution or agent doing business in North Caroline to determine which of the following?

If the insurer remains solvent and conducts business in compliance with state laws and regulations

A return of premium term life policy is written as what type of coverage?

Increasing

What are the two components of a universal policy?

Insurance and cash account

Concealmet

Legal term for the intentional withholding of information of a material fact that is crucial in making a decision. -Withholding of information by the applicant that will result in an imprecise underwriting decision May void a policy

A policy will pay the death benefit if the insured dies during the 20-year premium and nothing if death occurs after the 20 year period. What type of policy is this?

Level term

NAIC

National Association of Insurance Commissioners -Formed to resolve insurance regulatory issues

An agent is completing an insurance application or a client. The agent is required to provide the client with a "notice of information practices" at all of the following times EXCEPT

No notice is ever required at the initial completion of the application

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

Unilateral contract

Only one of the parties in the contract is legally bound to do anything The insured makes no legally binding promises, but an insurer is legally bound to pay losses covered by a policy in force

In term policies, what happens to the premium throughout the term of the policy?

Premium always remains level

Indemnity (AKA reimbursement)

Provision in an insurance policy stating that in the event of loss, an insured or a beneficiary is permitted to collect only to the extent of the financial loss, and is not allowed to gain financially because of the existence of an insurance contract -It means that insureds cannot recover more than their loss

Which nonforfeiture option provides coverage for the longest period of time?

Reduced paid-up

Representations

Statements believed to be true to the best of one's knowledge, but are not guaranteed to be true

Impersonation (AKA false pretense)

The act of assuming the name and/or identity of another person for the purpose of committing a fraud Impersonation is illegal

If the Commissioner of Insurance is unable to complete their term, what happens?

The governor appoints a replacement

What will an equity indexed annuity be credited with at the end of the contract term?

The greater of the guaranteed minimum value or the current (indexed) value -The current interest rate that is actually credited is often tired to a familiar index, like the Standard and Poor's 500

An insured has submitted a fraudulent claim on a heath insurance policy 1 year after the policy issue. The insurer paid the claim, but a year later they discover that the claim was fraudulent. The insured was convicted of a felony. Witch of the following statements is true regarding the payment of the claim?

The insured may be ordered to pay restitution (i.e.,) payback what was paid out based on a fradulent claim

Under which of the following circumstances would a pretext interview be permissible?

The insurer suspects criminal activity and fraud

All of the following are true statements regarding the accumulation of interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy

The Commissioner is empowered to examine the records of any person transacting insurance in the State as an agency, an agent, or broker of record. If the Commissioner does examine a person, the expense of that examination will be paid by who?

The person examined

Who must have insurable interest?

The policyowner must have insurable interest in the life of the insured

Which of the following is TRUE about an indeterminate premium whole life policy?

The premium can be raised up to a guaranteed maximum rate

All of the following would be eligible to establish a Keogh retirement plan EXCEPT

The president and employee of a family corporation (Keogh plans are for self-employed individuals and their employees)

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive

Which of the following is NOT true regarding Equity Indexed Annuities?

They earn lower interest rates than fixed annuities

Misrepresentations

Untrue statements on the application that can void a contract

When is the earliest a policy may go into effect?

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