Simulated Life Exam
What is the default nonforfeiture option?
extended term
Which of the following statements best describes the general tax treatment of life insurance pre- and post-death distributions?
most distributions from a life insurance policy at the insured's death are income tax-free, but pre-death distributions may be subject to income taxation if the withdrawal exceeds premiums paid
Which of the following statements regarding the paid-up additions life insurance policy dividend option is NOT correct?
the paid-up additions dividend option is only available to insureds that remain insurable
All the following elements of an adjustable life policy are adjustable EXCEPT:
the policy loan rate
How much may the commissioner fine an insurer for each violation of a cease and desist order?
$10,000
What is the penalty per violation for producers that commit an unfair method of competition or an unfair trade practice?
$3,000 (max aggregate penalty of $30,000)
For good cause, the commissioner can grant licensees an extension of how many months to complete their continuing education requirements?
1 year
To be licensed to sell both life and accident/health insurance in CO, an applicant must complete:
100 hours of pre-licensing education
An individual life insurance policy mist become contestable no later than how long after its effective date?
2 years
A producer has how many days to file a written response to the commissioner after he has been terminated by his appointing insurer?
30 days
When a life insurance policy is being replaced, the replacing insurer must give the policyholder the right to return the policy for a full refund. The insurer is required to give the policyholder this right for at least:
30 days
A group life insurance policyholder must be given how long a grace period for premium payment?
31 days
The commissioner must examine every insurer doing business in CO at least once every:
5 years
If a group life insurance plan is contributory, what minimum % of eligible employees must participate?
75%
For a beneficiary to receive accidental death benefits, death of the insured generally must occur within how many days following the accident?
90 days
Which of the following would be subject to replacement regulations?
A new policy that cause an existing life insurance policy to be surrendered
What is the definition of a fiduciary?
A person in a position of trust and confidence who handles the affairs and funds of others
An alien insurance company is incorporated in:
a country other than the US
An insurer that is domiciled in Ohio and does business in Alabama is considered to be:
a foreign insurer
Steve is diagnosed with inoperable cancer and learns that he has only a few months to live. He wants to take an extended vacation with his wife and needs some immediate funds. He has held a whole life insurance policy for many years. Which of the following options would be the BEST source of funds, if Steve wants a lump sum payment?
accelerated benefit rider
Which is NOT a life insurance policy provision?
cancellation
A license is the legal property of:
state of Colorado
Beth is secondary beneficiary of a life policy, receiving monthly income benefits under an installment refund option. Her mother, the primary beneficiary, received a total of $4,200 in benefits before she died. The original proceeds totaled $22,000. Assuming Beth lives long enough, she will be paid monthly benefits until she has received a total of:
$17,800 ($22,000 - $4,200)
How many hours of the total # of continuing education hours must be in approved courses in the lines of insurance for which the producer is licensed?
18 hours
Which of the following $50,000 limited-pay life policies will have the highest premium for an applicant who is age 30?
20-pay life policy -limited pay life policies have shorter premium-paying premiums -shorter period, higher premium
An employer may require an employee to be at least what age to be eligible to participate in a Keogh plan?
21
Suppose a producer holds two licenses, one to transact life insurance and another for accident/health insurance. How many hours of continuing education must this producer complete within 24 months following the renewal date of the earliest license?
24 hours
How much of the pre-licensing coursework in CO must be devoted to industry ethics?
3 hours of every 50-hour course
Larry owns a deferred annuity for which his wife Karen is the designated annuitant and his son Chris is the designated beneficiary. If Larry were to die before the contract is annuitized, to whom would the contract's death benefit be payable?
Chris
Abner's age was misstated in his application for a $50,000 life policy. What will the company do when it discovers the error?
It will adjust either the premium rate or the amount of protection
"Juan owns a 5-year $50,000 term life insurance policy, and Maria owns a $50,000 whole life insurance policy. Which of the following statements is CORRECT?
Juan's policy, but not Maria's may have an option to convert
Max and Leah recently became grandparents. Max, age 71, is employed as an architect and earns an annual salary of $55,000. He has never set up an IRA, but he is thinking about it, now that he has grandchildren. His spouse, Leah, is covered by her company's corporate retirement plan. She has told him that he can contribute to her plan so that they can retire sooner. Which of the following statements is TRUE?
Max cannot contribute to Leah's company retirement plan (only employees and employers can make contributions)
Paul, age 62, is applying for a universal life insurance policy and wants to arrange the beneficiary designation in such a way as to use the proceeds to provide lifetime income to his wife, Marsha. Which of the following settlement options is best suited for this purpose?
Paul, as the owner, can pick life income as the settlement option his spouse must take when he dies. This option will give Marsha a monthly income she cannot outlive
Jessica saw an advertisement in the local newspaper for a new type of health insurance policy offered by Protective Insurers, Inc. She noticed that Protective Insurers was also selling these policies through vending machines. Protective Insurers would be considered what type of insurer?
a direct response writer
Which of the following statements regarding 1035 exchanges is NOT correct?
a life insurance policy that is a modified endowment contract may be exchanged for a new life insurance policy and, provided that premiums are paid for at least 7 years thereafter, no longer be considered an MEC
An insurer of an insurer is known as:
a resinsurer
At a certain point in time, an employee will have a nonforfeitable right to the money contributed to a pension plan by the employer. This right is known as:
a vested interest
"Tina's grandparents purchased a $250,000 universal life insurance with the intent to permanently transfer ownership to her when she turned 21. What is that transfer of rights known as?
an absolute assignment
When appropriate, the CO commissioner of insurance reports a violation of insurance to:
an appropriate district attorney
Which of the following policyholders may request that the Commissioner examine an insurer because they fear the insurer is unsound or insolvent?
at least 5 policyholders who have at least $100,000 insurance in force and who have specified their concerns in writing
The commissioner gives approval to an insurer to do business in CO in a certificate of:
authority
Why do most states ban STOLI transactions?
because the investor, who is names as the beneficiary, does not have an insurable interest in the insured
All of the following insurance practices are illegal in CO EXCEPT:
comparing policies
Which of the following riders provides for changes in the benefit payable based on changes in the CPI?
cost-of-living adjustment rider
Madison, who is 27, is interested in purchasing a car from the local dealership. What kind of insurance might be included when she finances her car?
credit life insurance
All of the following are examples of unfair claims settlement practices EXCEPT:
denying a claim after a thorough investigation indicates the loss is not covered under the policy
All of the following are violations of CO insurance law EXCEPT:
informing a new policyholder that their new policy, if inadvertently lapsed for nonpayment of premium, could be reinstated upon reapplication
Which of the following statements regarding a conditional receipt is CORRECT?
it is given only if the initial premium has been submitted with the signed application
George and Virginia have n annuity that will provide benefits for George's life and then continue to provide the same amount of benefits to Virginia as his survivor. What type of annuity did George set up?
joint life and survivorship annuity
In order to be valid, a group life insurance policy:
must cover at least 3 people on the date of issue
Alaina, age 39, is married and has a small son. She is employed as a sales manager by R.J Links, a sole proprietorship that owes much of its success to Alaina's efforts. She recently borrowed $50,000 from her brother-in-law, Pete, to finance a vacation home. Which of the following individuals does NOT have an insurable interest in Alaina's life?
one of her customers
Ben is considering the purchase of a $75,000 whole life policy. Which of the following options would tend to lower his premiums?
paying premiums annually as opposed to monthly
All of the following are examples of liquid assets EXCEPT:
real estate
If a producer offers to refund part of a prospect's premium in exchange for the purchase of an insurance policy, the producer is committing the illegal act of:
rebating
Who is required to keep copies of the notice regarding replacement of life insurance, the applicant's statement, and any other notifications concerning replacement for at least 5 years?
replacing insurer
All of the following insurance practices are illegal in CO EXCEPT:
replacing one life insurance policy for another
Upon the insured's death, which of the following policies will pay the face amount of the policy plus a sum equal to all or a portion of the premiums paid?
return-of-premium policy
The advantages of qualified retirement plans to employers include all of the following EXCEPT:
rewarding a few employees rather than many
An insurance company that pays dividends from a source other than profits is:
subject to a maximum fine of $1000
Which of the following is NOT required in order to reinstate a lapsed permanent life policy?
submit an application for reinstatement within 4 years of the lapse
Under an executive bonus plan, the amount of premiums paid is:
taxable income for the employee
If there are changes to an insurance application due to a error in information, who must initial the corrections?
the applicant
Which of the following factors is NOT used to calculate each payment with the fixed period option?
the chosen payment amount
Michelle, age 31, just purchased a $50,000 variable life insurance policy. With regard to her policy, which of the following statements is NOT correct?
the death benefit of $50,000 is not guaranteed
Which of the following statements about immediate annuities is NOT correct?
the income flow must be fixed rather than variable (can be one or the other)
Under what condition may an insurer refuse benefits to the beneficiary of an insured who committed suicide?
the insured committed suicide within the 1st year of the policy's effective date
Norma and Luis are considering the purchase of an annuity for retirement. Which payout option would be the least suitable for them?
the joint life annuity option
A license is deemed to be used for controlled business if during any 12 month period:
the licensee's total premiums on controlled business exceeded the total premiums on all other businesses
Which of the following statements regarding a disability income rider is NOT correct?
the only way to provide disability benefits in a life insurance policy is through a disability income rider
The payor benefit typically waives premiums on a juvenile policy if:
the person who pays the premium dies or becomes disables before the insured child reaches a certain age
Which of the following phrases best describes a life insurance policy under the entire contract clause?
the policy, any amendments or riders, and a copy of the signed application
Which of the following situations constitutes an insurable interest?
the policyowner must expect to suffer a loss when the insured dies or becomes disabled
"Willa purchases a 5-year $50,000 level term policy with an option to renew. Which of the following statements about the policy's renewability is CORRECT?
the premium for the renewal period will be higher than the initial period
Life insurance proceeds are included in the gross estate if:
the proceeds are payable to the insured's estate or the insured had any incidence of ownership in the policy at the time of death or transferred ownership within 3 years of death
An applicant determined by underwriting to be declined would be:
uninsurable at any price
Patrick owns an adjustable life policy. Which of the following statements is CORRECT?
upon showing evidence of insurability, Patrick can increase the face amount of his policy
Arnold buys a $25,000 participating whole life policy. He has a definite need for more life insurance but believes he cannot afford it. Which of the following dividend options would help to solve this problem automatically?
using dividends to buy paid-up additions
All of the following statements about debtor group life insurance are correct EXCEPT:
when the insured dies, the policy proceeds are awarded to the insured's estate
Suppose a producer helps a client set up an estate plan, which is not part of the producer's usual service. The producer can charge a fee for this service under all of the following circumstances EXCEPT:
when the producer always planned to sell insurance to the client
All the following are duties of the commissioner EXCEPT:
writing insurance laws