Practice Life Exam B

58. For an insurance contract, utmost good faith means:

B. Each party relies upon the truthfulness of the other.

34. Who submits a request for life insurance to a company?

C. The applicant

60. Brian purchased a variable life policy and died 25 months after the issue date. It is then discovered that Brian understated his age on the application.What will the insurer do in regard to the payment of the death benefit to the beneficiary?

A. The death benefit will be reduced to reflect the age discrepancy.

44. All of the following statements about a policy grace period are false, except:

B. Grace periods are typically 31 days.

29. The Commissioner can deny an applicant for a license after a hearing:

B. If the applicant has permitted someone in their employment to violate the California Insurance Code.

4. A client has a history of DUIs. To his insurer, they see him as a ________ hazard.

C. Morale

33. Which of the following is considered ordinary insurance?

C. Mortgage redemption

65. Which of the following becomes part of the contract, is guaranteed to be true, and if untrue, may be grounds for rescinding the policy?

C. Warranty

9. All of the following statements about life insurance policy illustrations and the senior market are correct, except:

D. The illustration will note that both guaranteed and non-guaranteed elements will remain unchanged for the years illustrated.

67. Ashley, the policy owner and insured, named Wendell as primary beneficiary and Barbara as contingent beneficiary. Just six (6) weeks prior to Ashley's death, Wendell and Barbara are killed in a common disaster. The insurance proceeds will be received by whom?

B. Ashley's estate

35. All of the following needs to be included on an application for life insurance except:

D. Disability income insurance

70. Which party has the legal authority to name or change the beneficiary?

B. Policyowner

27. In a group life policy with a death benefit of more than $50,000:

B. Premium cost for insurance above $50,000 is taxable as income to the employee.

6. The person who will receive the benefit of an annuity and whose life the payout is based upon when the contract is purchased is the:

B. annuitant

13. Which of the following is not a personal use of life insurance?

C. A client buys insurance to fund a buy-sell agreement.

26. Which of the following is an incorrect statement about a client's privacy rights?

C. A client does not have access to their MIB report as it belongs to the member's life insurers.

42. All of the following statements about assignments are not false, except:

D. Assignments need not be filed with the insurer if notarized and filed in county records.

73. In life insurance, beneficiary succession is the method used to determine who will receive death proceeds. If the primary beneficiary is not living upon the death of the insured who will receive the payment?

D. Contingent beneficiary

64. When an applicant makes a material statement believed to be true to the best of their knowledge, the statement is considered to be a/an

D. Representation.

61. All of the following are true about key person insurance, except:

D. The death benefit is taxable to the business.

45. A client has missed her premium payment on her cash value policy, and the grace period has also lapsed. The policy is still in force because her insurer has been deducting the cost of the premium from her cash value. What provision allows this?

A. Automatic Premium Loan

3. All of the following statements about policy provisions are true, except:

A. Death during the grace period results in a full death benefit being paid.

66. In insurance, the agents have authorization to represent the company. The producers may exercise this relationship through:

A. Express authority, implied authority and apparent authority.

31. What is the minimum number of members required for group life insurance?

B. 10

12. In comparing the purchase of individual life insurance to acquiring group life, which statement is not true?

D. Group insurance has a non-deductible premium while individual insurance has a tax deductible premium to the payor.

74. Situations where the risk is increased by slippery floors, a habit of lying, or reckless drunk driving are best described by which of the following?

B. A hazard

16. Any person to whom the commissioner has issued a seizure order and who refuses to deliver any books, records, or assets of an insurer faces:

B. A misdemeanor punishable by a fine up to $1,000, a year in jail, or both.

43. How many hours of continuing education are required per renewal for a lifeonly agent?

C. 24 hours, 4 of the hours must be in ethics

57. According to the CIC, life-only agents must keep records of their transactions for:

C. 5 years.

38. At what age does Social Security Medicare program Part B start providing benefits?

C. 65

36. A partial payment of proceeds to cover final expenses is paid to someone not designated as a beneficiary but acting in a legal or fiduciary capacity. This is provided in which provision?

D. Facility of Payment

68. Which of the following statements is false in regard to a Life Paid-up at-65 whole life policy?

D. The policy will endow at age 65.

5. Which statement about reinstatement is false?

D. The reinstated policy is incontestable if the first time it was in force it already passed the two year mark.

52. Which of the following cannot be used in a policy illustration if nonguaranteed elements are intended to pay future premiums?

D. Vanishing premiums

1. Which statement is false concerning insurance company regulations?

B. An insurer suffering from an impairment of their minimum required paid-in capital is labeled solvent.

51. A client has purchased an annuity with an annual bonus she received at the end of last year. She has requested annual benefit payments to start at the end of this year. What type of annuity did she purchase?

B. Single Premium Immediate Annuity

71. Term insurance is best described by which of the following?

C. Provides temporary protection, builds no cash value, is less expensive, and may be renewed.

20. Which of the following riders would provide for an insured to increase the face amount of their life insurance policy without proof of insurability?

A. Guaranteed insurability/future purchase option

15. Under which life settlement option does the insurer retain the death benefitbut pays the beneficiary the earnings on the death benefit?

A. Interest only option

22. In which type of policy does the insurer apply flexible premium to pay for the cost of insurance and expenses and then uses the remaining balance plus interest to build the cash value account?

A. Universal life

69. A policyowner who cannot borrow the equity, change beneficiaries, assign a policy or stop paying premiums without the beneficiary's written consent has designated the beneficiary as a(n):

B. Irrevocable beneficiary.

18. All of the following describe differences between binding receipts and conditional receipts, except:

B. No claim is paid with either receipt until a policy is issued

24. Which of the following is not an acceptable underwriting classification?

C. Declined

14. All of these statements about life insurance settlement options are false, except:

C. Life income with 10 years certain provides at least 120 months of payments.

39. Which of the following statements is not included in the Entire Contract clause?

C. The insurer agrees to provide life insurance protection for the named insured which will be paid to a designated beneficiary when proof of death is received by the insurer.

63. Profit Sharing Plans:

D. Allow for a contribution of a specified proportion of company profits.

75. Which of the following are characteristics of renewable term?

D. Allows the policyowner the opportunity to renew the policy at the end of term, without evidence of insurability. The premium will increase.

40. Which action by an insurer, or its representatives, is not considered an unfair claims violation?

D. An agent advises a claimant to obtain the services of an attorney.

32. Which statement below is least correct regarding the type of insurance that fits best with the applicant's needs?

D. Convertible term can be purchased by applicants who may require a larger death benefit in the future.

59. Which type of insurer requires an attorney-in-fact overseen by an advisory committee of subscribers?

D. Reciprocal insurer

28. To authorize the release of an attending physician's report, the applicant must:

A. Sign a consent form.

53. Premiums paid into a variable annuity purchase which of the following?

B. accumulation units

41. All of the following statements are true about participating and nonparticipating policies, except:

D. Non-participating policies issue dividends to policyowners.

62. Which statement best describes "agreement" as it relates to contracts?

D. One party accepts the exact terms of the other party's offer.

17. The insured dies 6 months after the policy issue date. Upon death of the insured, it is determined that the applicant made a material misstatement on the application. What is the most likely course of action for the insurer?

A. Rescind the policy

25. The provision that protects the proceeds of a life insurance policy from attachment by the beneficiary's creditors after the insured's death is known as the:

A. Spendthrift (Trust) Clause.

23. Which of the following is not a qualified 1035 exchange?

B. A variable annuity exchanged for a variable universal life policy.

30. At age 72, Mrs. Smith is considering applying for Medi-Cal so she can afford her medical bills. Today Agent Charles is visiting her home and wanting to sell her an annuity product. Which of the following is true?

B. Agent Charles cannot allow Mrs. Smith to purchase an annuity if after the purchase, Mrs. Smith wouldn't qualify for Medi-Cal.

2. Which of the following transactions would most likely be declined due to lack of insurable interest?

B. An employee insures their employer in the fear of losing their job

11. Which statement is not true about insurance sales?

B. Brokers represent insurers in negotiating coverage with various insureds.

54. Variable insurance and variable annuity products are regulated by:

B. SEC, FINRA and DOI.

46. Which insurance is known for having a level premium with a fixed rate of return resulting in guaranteed cash value?

B. Whole life

50. An applicant has the right to know that the insurance company will collect certain personal information about their credit, character and reputation. The insurer may gain such information from:

C. A consumer report.

48. For a flexible premium deferred annuity, the time during which the owner makes premium payments and the time before benefit payments begin is known as the:

C. Accumulation period.

19. According to the California DOI, an insurer whose articles of incorporation are registered in Oslo, Norway, is considered:

C. An alien insurer

8. A policy pays the face amount if the insured dies before a specified date, or lives to that specified date. This best describes:

C. An endowment policy

7. The Roth and Traditional IRAs have some similarities. Which of the following is not true?

C. Both are tax deductible to the investor

10. All of the following statements about agents are true, except:

C. Exclusive agents work for themselves.

21. What nonforfeiture option allows a policyowner to use the existing cash value to purchase a policy of the same face amount as the original policy but for a reduced amount of time?

C. Extended term insurance

72. An insurer invests the cash value of a fixed annuity in which of the following assets?

C. General account

47. A forty-five year old investor has been laid off from his job. In order to pay bills he takes a premature distribution from his traditional IRA account. What tax penalties, if any, will he face?

C. He will be required to pay a 10% tax penalty on the amount withdrawn.

37. While collecting underwriting information, certain rules must be followed. Which of the following is incorrect?

C. Post-claims underwriting is a valid and necessary means of determining the insurability of a potential applicant.

56. Which of the following is not excluded from the California Life and Annuity Replacement Law?

C. Purchasing a new policy that will take the place of an existing policy

55. Which of the following is most likely to have a TSA?

C. School district employee

49. An agent who knowingly misrepresents material information for the purpose of inducing a client to lapse, forfeit, change or surrender a life insurance policy or annuity has committed an illegal practice known as:

C. Twisting.