Tennessee Life Insurance FINAL
Which of the following is INCORRECT regarding a $100,000 20-year level term policy?
At the end of 20 years, the policy's cash value will equal $100,000.
All of the following are true regarding the guaranteed insurability rider EXCEPT
This rider is available to all insureds with no additional premium.
What is the purpose of a fixed-period settlement option?
To provide a guaranteed income for a certain amount of time
All of the following are dividend options EXCEPT
fixed period installments
At the time the insured purchased her life insurance policy, she added a rider that will allow her to purchase additional insurance in the future without having to prove insurability. This rider is called
guaranteed insurability
All of the following are true regarding the guaranteed insurability rider EXCEPT:
this rider is available to all insureds with no additional premium
What is the name of the insured who enters into a viatical settlement?
viator
Which of the following types of insurance policies would perform the function of cash accumulation?
whole life-Life insurance is unique from other types of insurance in that it could perform the function of cash accumulation. Cash values are available in whole life policies.
An employee quits her job where she has a balance of $10,000 in her qualified plan. If she decides to do a direct transfer from her plan to a Traditional IRA, how much will be transferred from one plan administrator to another and what is the tax consequence of a direct transfer?
$10000, no tax consequence-During an IRA direct transfer (or direct rollover), the full amount gets reinvested from one plan to the other.
In forming an insurance contract, when does acceptance usually occur?
When an insurer's underwriter approves coverage-In insurance, the offer is usually made by the applicant in the form of the application. Acceptance takes place when an insurer's underwriter approves the application and issues a policy.
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it is
a modified endowment contract
Under the Fair Credit Reporting Act, if the consumer challenges the correctness of the information contained in his/her report, the reporting agency must
respond to the consumers complaint
The insurer discovered that one of the applicants for life insurance missed a couple of questions on the application. What should the insurer do with the application?
return to the applicant for completion
The Ownership provision entitles the policyowner to do all of the following EXCEPT
set premium rates
Which of the following types of risk will result in the highest premium?
substandard risk
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as
survivor protection
The protocol for replacement does not apply to which of the following situations?
the existing and replacing insurer are the same & the transaction involves credit life insurance
Which of the following is NOT true of life settlements?
the seller must be terminally ill
What is the purpose of establishing the target premium for a universal life policy?
to keep the policy in force-The target premium is a recommended amount that should be paid on a policy in order to cover the cost of insurance protection and to keep the policy in force throughout its lifetime.
If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered
unfair trade practice
policy allows withdrawals and partial surrenders?
universal life
An insured under a life insurance policy has been diagnosed with a terminal illness and has 6 months to live. The insured knows that his financial state will worsen even more with the upcoming medical expenses. What option could the insured utilize?
viatical settlement
The rider in a whole life policy that allows the company to forgo collecting the premium if the insured is disabled is called
waiver of premium
When would a 20-pay whole life policy endow?
when the insured reaches age 100-A limited-pay whole life policy, just like straight life, endows for the face amount if the insured lives to age 100. The premium is, however, completely paid off in 20 years.
Any person acting as an insurance producer without a valid license may be fined up to
$1000 for each violation
How many credit hours of excess continuing education are producers allowed to carry over to the next renewal cycle?
12 hours
Which of the following named beneficiaries would NOT be able to receive the death benefit directly from the insurer in the event of the insureds' death?
A minor son of the insured
Which of the following are NOT fundable by annuities?
death benefits
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT
insured's age at death
Which of the following statements regarding HIV testing for insurance purposes is NOT true?
insurers are barred from requesting HIV testing
Which provision of a life insurance policy states the insurer's duty to pay benefits upon the death of the insured, and to whom the benefits will be paid?
insuring clause
SIMPLE Plans require all of the following EXCEPT
at least 1000 employees
Variable Life insurance is based on what kind of premium?
level fixed
The insured undder a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?
$100000
If an insured receives accelerated death benefits, what is the least amount of the original death benefit that the beneficiary would receive after the insured's death?
0%
What percentage of a company's employees must take part in a noncontributory group life plan?
100%-If the employer pays all of the premium, all employees must be covered to avoid adverse selection.
As a condition for renewal of their licenses, how many hours of continuing education are required for all resident and nonresident insurance producers?
24
Unless revoked or suspended, how long does a producer's license remain in effect in Tennessee?
24 months
producer must report to consumer that an investigative consumer report will be obtained within how many days?
3 days
Upon receipt of notice of appointment, the Commissioner must verify the insurance producer is eligible for appointment within how many days?
30 days-The Commissioner must verify eligibility within 30 days.
Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?
Amount paid with the accelerated benefit, plus the earnings lost by the insurance company in interest income from the accelerated benefit
Under which of the following circumstances would an insurer pay accelerated benefits?
An insured is diagnosed with cancer and needs help paying for her medical treatment.
When a life insurance policy is cancelled and the insured has selected the extended term nonforfeiture option, the cash value will be used to purchase term insurance that has a face amount
Equal to the original policy for as long a period of time that the cash values will purchase.
If a change needs to be made to the application for insurance, the agent may do all of the following EXCEPT
Erase the incorrect answer and record the correct answer.-An agent should not use white-out, erase or obliterate any answers given to a question on an application. It could prevent an insurer from contesting the application, should it be necessary.
All of the following are business uses of life insurance EXCEPT
Funding against general company financial loss.-Both life and health insurance can be used for a variety of purposes in a business setting, including the funding of business continuation agreements, compensating executives, and protecting the firm against financial loss resulting from the death or disability of key employees.
All of the following entities regulate variable life policies EXCEPT
Guaranty Association
Which of the following statements about the reinstatement provision is true?
It requires the policyowner to pay all overdue premiums with interest before the policy is reinstated.
What is a definition of a unilateral contract?
One-sided; only one party makes an enforceable promise
Which is the appropriate action by the insurer if a prospective insured submitted an incomplete application?
Return the application to the applicant for completion
Which is NOT true about beneficiary designations?
The beneficiary must have insurable interest in the insured.-A beneficiary is the person or interest to whom the policy proceeds will be paid upon the death of the insured. Beneficiaries do not have to have an insurable interest in the policyholder.
Which of the following describes the tax advantage of a qualified retirement plan?
The earnings in the plan accumulate tax deferred.
An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?
The insured may renew the policy for another 10 years, but at a higher premium rate.
Which of the following determines the cash value of a variable life policy?
The performance of the policy portfolio
All of the following are characteristics of a Universal Life policy EXCEPT
The planned premium pays for mortality charges and expenses and any excess is returned to the policyowner.
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as
The policy contains sufficient cash value to cover the cost of insurance.
The policyowner of a Universal Life policy may skip paying the premium and the policy will not lapse as long as
The policy contains sufficient cash value to cover the cost of insurance.-In Universal Life Insurance, the policyowner may skip a premium payment without lapsing the policy as long as the policy contains sufficient cash value at the time to cover the cost of insurance for that premium period.
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?
The policy will be interpreted as if the insurer waived its right to have an answer on the application.
A temporary insurance License may be issued without examination in all of the following instances EXCEPT
To an applicant who fails to pass an insurance producer's examination.
The paid-up addition option uses the dividend
To purchase a smaller amount of the same type of insurance as the original policy.
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT
Upon conversion, the death benefit of the permanent policy will be reduced by 50%.
All of the following are TRUE regarding the convertibility option under a term life insurance policy EXCEPT
Upon conversion, the death benefit of the permanent policy will be reduced by 50%.-Convertible term insurance is convertible without proof of insurability up to the full term death benefit. However, upon conversion, the premium for the permanent policy will be based on the insured's attained age.
If the insured pays $100 premium for every month with insurance coterage yet the insurer promises to pay $10,000 for the cover losses what characteristics of an insurance contract is as described
aleatory
Which of the following information will be stated in the consideration clause of a life insurance policy?
amount of premium payment
Which of the following information will be stated in the consideration clause of a life insurance policy?
amount of premium payment-The consideration clause states that the value offered by the insured is the premium and statements made in the application, so it will include the information about the amount and frequency of premium payments.
All other factors being equal, the least expensive first-year premium payment is found in
annually renewable term
An insurer wants to begin underwriting procedures for an applicant. What source will it consult for the majority of its underwriting information?
application
An insurance producer may not act as an agent for an insurer unless he/she has become which of the following?
appointed
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?
automatic premium loan-Automatic premium loan provision is not required, but is commonly added to contracts with a cash value at no additional charge. This is a special type of loan that prevents the unintentional lapse of a policy due to nonpayment of the premium.
A Limited Insurance Representative is an individual, other than an insurance producer, who may solicit or negotiate contracts for certain types of insurance which includes all of the following EXCEPT
automobile physical damage insurance-A Property Insurance license is required to write automobile physical damage coverage.
Assuming that a policy does not contain an unconditional refund provision of at least 10 days, when must a Buyer's Guide and policy summary be provided?
before accepting the initial premium
Assuming that a policy does not contain an unconditional refund provision of at least 10 days, when must a Buyer's Guide and policy summary be provided?
before accepting the initial premium-The insurer must provide, to all prospective purchasers, a Buyer's Guide and a Policy Summary prior to accepting the applicant's initial premium. This is not required if the policy contains an unconditional refund provision of at least 10 days, or if the Policy Summary contains an unconditional refund offer. Under these circumstances, the Buyer's Guide and Policy Summary can be delivered with the policy or prior to delivery of the policy.
A man decided to purchase a $100,000 Annually Renewable Term Life policy to provide additional protection until his children finished college. He discovered that his policy
required a premium increase each renewal
An insured receives an annual life insurance dividend check. What term best describes this arrangement?
cash option
What does "liquidity" refer to in a life insurance policy?
cash values can be borrowed at any time
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
conditional
The proposed insured makes the premium payment on a new insurance policy. If the insured should die, the insurer will pay the death benefit to the beneficiary if the policy is approved. This is an example of what kind of contract?
conditional-A conditional contract requires both the insurer and policyowner to meet certain conditions before the contract can be executed, unlike other types of policies which put the burden of condition on either the insurer or the policyowner.
An insurer neglects to pay a legitimate claim that is covered under the terms of the policy. Which of the following insurance principles has the insurer violated?
consideration
If a producer continues to violate the Insurance Code, a new civil penalty will be assessed every
day
Which of the following terms describes making false statements about the financial condition of any insurer that are intended to injure any person engaged in the business of insurance?
defamation
All of the following could be considered rebates if offered to an insured in the sale of insurance EXCEPT
dividends from a mutual insurer-Dividends paid to policyholders of a mutual insurer are not considered to be a rebate because the policy specifies that they might be paid.
Who is the owner and who is the beneficiary on a Key Person Life Insurance Policy?
employer
An insurer devises an intimidation strategy in order to corner a large portion of the insurance market. Which of the following best describes this practice?
illegal
An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act?
illegal under any circumstance
The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the
incontestability clause
When would a misrepresentation on the insurance application be considered fraud?
intentional and material
Which settlement option allows the insurer to retain the face amount but pay some income based on gain on the proceeds to the beneficiary at regular intervals?
interest only
An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in the policy at issue time. The policy is a/an
interest-sensitive whole life
Which of the following activities is NOT performed by an insurance producer?
issuing the policy-Any activity that falls within the definition of transacting insurance requires that the person be licensed as an insurance producer. Insurance policies are issued by insurers and not producers.
A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?
joint life policy
variable life insurance is based on what kind of premium
level fixed
Which two terms are associated directly with the premium?
level or flexible
Which life insurance settlement option guarantees payments for the lifetime of the recipient, but also specifies a guaranteed period, during which, if the original recipient dies, the payments will continue to a designated beneficiary?
life income with period certain
What is the term for how frequent a policy owner is required to pay the policy premium
mode
Which of the following is another term for the accumulation period of an annuity?
pay-in period
Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?
payor benefit
Who is a third-party owner?
policyowner is not the insured-Third-party owner is a legal term used to identify an individual or entity that is not an insured under the contract, but that has a legally enforceable right under it.
Which of the following will be included in a policy summary?
premium amounts and surrender values