Practice Test #2

Representations in insurance contracts qualify as:

Implied warranties

Stranger-originated life insurance policies are in direct oppositions to the principle of:

Insurable interest

A contract which one party undertakes to indemnify another against loss is called?

Insurance

Which of the following is correct regarding credit life insurance?

It insures the life of a debtor

What describes a situation when poor risk are balanced with preferred risk, and average risk are in the middle?

Profitable distribution of exposures

Which type of beneficiary is changeable at any point?

Revocable

Which of the following is true regarding a market value adjusted annuity?

The owner is guaranteed a fixed interest rate for a specific period of time.

All of the following are true regarding a decreasing term policy except?

The payable premium amount steadily declined throughout the duration of the contract

To which of the following products does the replacement regulation apply?

Whole life insurance

Partners in a business enter into a buy sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

Any form of life insurance

And insured neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has an insurer violated?

Consideration

Which of the following is not a legitimate use of annuities by a business?

Creating a tax shelter

Which of the following is true regarding taxation of dividends in participating policies?

Dividends are not taxable

Which is true about the cash surrender nonforfeiture option?

Funds exceeding the premium paid are taxable as ordinary income

What are the consequences of a failure to comply with the Commissioner's office while it is executing a seizure order?

It is a misdemeanor punishable by a fine of $1,000, one-year imprisonment, or both.

Which of the following is true regarding the annuity period?

It may last for the lifetime of the annuitant

Which of the following is called a second to die policy?

Survivorship life

For the purpose of insurance, risk is defined as?

The uncertainty or chance of loss

Which of the following statements best describes the effect The accelerated benefit provision would have on the benefits paid to the beneficiary?

it will decrease the benefits paid

The waiver of cost of insurance rider is found in what type of insurance?

Universal Life

Which of the following insurance arrangements will be appropriate for a parent buying a life insurance policy on a child or the parent is a policy owner?

Third-party ownership

During the free look period, The premium for a variable annuity may be invested in all of the following except?

Value funds

Which of the following is a key distinction between variable whole life and variable universal life products?

Variable whole life has a guaranteed death benefit

Which of the following methods of calculating the amount of life insurance needed takes into account the insured's wages, years until retirement, and inflation?

Human life value approach (HLVA)

All of the following are requirements for life insurance illustrations except?

They must be part of the contract