test prep 2

Which of the following is NOT required on an application for a variable life insurance policy? A statement explaining the use of separate accounts in variable insurance A statement that the death benefit may be variable or fixed A statement that cash values may increase or decrease based on the separate account Questions designed to assist the insurer in determining suitability of the insurance

A statement explaining the use of separate accounts in variable insurance There is no requirement that applications for variable life insurance policies contain a statement explaining separate accounts to the applicant.

Which of the following is NOT a punishment for violating the Director's cease and desist order? Suspension or revocation of license A monetary fine Imprisonment Community service

Community service Any person who violates a Cease and Desist order may be subject to a monetary fine and/or imprisonment, and suspension or revocation of license.

Variable Life insurance is based on what kind of premium? Decreasing Graded Level fixed Increasing

Level fixed Variable Life insurance is a level fixed premium investment based product.

Which of the following documents must be provided to the policyowner or applicant during policy replacement? Notice Regarding Replacement Disclosure Authorization Form Buyer's Guide and Policy Summary Policy illustrations

Notice Regarding Replacement During policy replacement, the replacing producer must present to the applicant a Notice Regarding Replacement that is signed by both the applicant and the producer.

What is the maximum penalty for habitual willful noncompliance with the Fair Credit Reporting Act? $100 per violation Revocation of license $2,500 $1,000

$2,500 An individual who willfully violates this Act enough to constitute a general pattern or business practice will be subject to a penalty of up to $2,500.

Which of the following would be the beneficiary in credit life insurance? Borrower Creditor Insured Company

Creditor The creditor is the owner and the beneficiary of the policy.

What is the purpose of the insurability provision in group life policies issued in this state? To automatically renew coverage for a new policy term To require the insurer to provide certificates of insurance to individual insured To guarantee insurability for all eligible applicants To allow the insurer to require proof of insurability from individual insured

To allow the insurer to require proof of insurability from individual insured Under the insurability provision in group life policies, the insurer has the right to require an individual applicant to provide evidence of insurability as a condition for coverage

Which nonforfeiture option provides coverage for the longest period of time? Paid-up option Accumulated at interest Reduced paid-up Extended term

Reduced paid-up The reduced paid-up nonforfeiture option would provide protection until the insured reaches 100, but the face amount is reduced to what the cash would buy.

Which of the following actions is prohibited by the state regulations on producer commissions and compensation? Compensation from surplus lines producers Profit sharing Retrospective commissions Sharing commissions

Retrospective commissions Retrospective commissions are prohibited. All the other mentioned actions are permitted as long as they are within the scope of producers' licenses.

Credit life insurance is usually issued as what type of policies? Annuity Term life Whole life Variable life

Term life Credit life insurance can be issued only as an individual or group term plan.

Which of the following is the closest term to an authorized insurer? Certified Licensed Legal Admitted

Admitted Insurers who meet the state's financial requirements and are approved to transact business in the state are considered authorized or admitted into the state as a legal insurer.

Which of the following premium payment modes will incur the lowest overall payment? Annual Semi-annual Quarterly Monthly

Annual Annual premiums are the only modes of payment that do not result in service fee, so the overall payment will be lower.

A policyowner would like to replace an existing policy with a new one. After having compared the two policies, the insurer has advised the policyowner not to continue the replacement process. What is the insurer's action called?

Conservation Conservation means any attempt by the existing insurer or its producers, or by a broker to dissuade a current policyowner from the replacement of existing life insurance or annuity.

Which of the following authorities may issue a Cease and Desist Order if an insurer is violating the Insurance Code? State Insurance Board MIB Director NAIC

Director Whenever it appears that any person is violating an insurance law of Missouri or any rule or regulation made by the Director, the Director may issue a cease and desist order.

Which of the following is true about the mandatory free look in a Life Insurance policy? It is optional on all life insurance policies. It commences when the policy is delivered. It commences when the application is signed. It applies only to term life insurance policies.

It commences when the policy is delivered. The free look provision is a mandatory provision that allows the insured to examine a policy, and if dissatisfied for any reason, return the policy for a full refund of any premiums paid.

What is required of an insurer should an insured commit suicide prior to one year elapsing under a life insurance policy? Full death benefits will be paid out to the beneficiary. All paid premiums must be returned. Half the paid premiums must be returned. No premiums are to be refunded, but half the death benefits will be given to the beneficiary.

All paid premiums must be returned. Life insurance policies issued in the state of Missouri may exclude or restrict liability of death as a result of suicide if the suicide was committed within 1 year from the date of the policy issue, whether the insured is deemed sane or insane. The insurer is responsible, however, for a prompt refund of paid premiums.

No insurance policy form can be issued, delivered, or used in this state unless it has been Developed by the Director. Filed with and approved by the Guaranty Association. Approved by the Department of Insurance. Reviewed by the Department and approved by the Governor.

Approved by the Department of Insurance. Prior to the use of any policy or contract form, rider, or endorsement, insurers must submit the forms and all changes to the Department of Insurance and have the forms approved by the Director.

If an individual producer's license expires and the producer doesn't want to pass a written exam, the license must be reinstated within what time period from the renewal date? 9 months 12 months 3 months 6 months

12 months An individual insurance producer who allows his or her license to expire may, within 12 months from the due date of the renewal fee, reinstate the same license without passing a written exam.

The validity of coverage under a life insurance policy may not be contested, except for nonpayment of premium, after the policy has been in force for at least how many years? 1 year 2 years 5 years 7 years

2 years The incontestability clause prevents an insurer from denying a claim due to statements in the application after the policy has been in force for 2 years, even if there has been a material misstatement of facts or concealment of a material fact.

All of the following are requirements to obtain an insurance producer license in Missouri EXCEPT Be at least 18 years of age. Be of good moral character. Pass a written examination on the line(s) of insurance for which a license is sought. Attend an approved prelicensing course.

Attend an approved prelicensing course. Prelicensing education is not a licensing requirement in Missouri.

G is a commercial airline pilot who also flies his own twin piper aircraft for recreational purposes. What type of provision in a life insurance policy prevents his life from being covered under the policy should he die in a recreational plane crash? Recreational Disaster Clause Aviation Exclusion Cause Recreational Exclusion Clause Aviation Disaster Clause

Aviation Exclusion Cause This provision stipulates that life insurance policies must include a notice of any war or aviation exclusions. The notice must be prominently displayed on the face of the policy and clearly name and explain the exclusions.

All of the following statements are correct regarding Credit Life Insurance EXCEPT Benefits are paid to the borrower's beneficiary. The amount of insurance permissible is limited per borrower. Premiums are usually paid by the borrower. Benefits are paid to the creditor.

Benefits are paid to the borrower's beneficiary. In Credit Life Insurance, the creditor is the beneficiary for the amount of benefit equal to the outstanding balance of the loan.

Contracts that are prepared by one party and submitted to the other party on a take-it-or-leave-it basis are classified as Binding contracts. Contracts of adhesion. Unilateral contracts. Aleatory contracts.

Contracts of adhesion. Insurance policies are written by the insurer and submitted to the insured on a take- it-or-leave-it basis. The insured does not have any input into the contract, but simply adheres to the contract.

Which of the following is NOT an example of insurable interest? Business partners in each other Employer in employee Child in parent Debtor in creditor

Debtor in creditor The three recognized areas in which insurable interest exists are as follows: a policyowner insuring his or her own life, the life of a family member (relative or spouse), or the life of a business partner, key employee, or someone who has a financial obligation to them. A debtor does not have an insurable interest in the creditor.

Which of the following authorities is required to conduct a financial examination of the state's insurers? Guaranty Association Director NAIC State insurance board

Director The Director must examine the finances of every insurer every five years, as part of the examination of the insurer's conduct.

R has a life insurance policy that specifically excludes his death from being covered should it occur in an act of war. Where must this be spelled out in the policy? In the excluded provisions section On the convertible coverage page On the face of the policy In the binder of the policy under exclusions

On the face of the policy This provision stipulates that life insurance policies must include a notice of any war or aviation exclusions. The notice must be prominently displayed on the face of the policy and clearly name and explain the exclusions.

Methods used to pay the death benefits to a beneficiary upon the insured's death are called Beneficiary provisions. Death benefit options. Settlement options. Designation options.

Settlement options. Settlement options are methods used to pay death benefits to a beneficiary upon the insured's death.

Nonforfeiture values guarantee which of the following for the policyowner? That the policy premiums will never increase That the cash value will not be lost That the dividends will be paid annually That the death benefit will be paid in a lump sum

That the cash value will not be lost Because permanent life insurance policies have cash values, there are certain guarantees built into the policy that cannot be forfeited by the policyowner. Nonforfeiture values give the insured the right to the cash value even if the policy lapses or is surrendered.

Which of the following describes the duties of an insurance producer? Procuring insurance from an unauthorized insurer Soliciting or negotiating insurance contracts on behalf of clients Providing advice or counsel regarding insurance policies for a fee Soliciting, negotiating or delivering insurance policies

Soliciting, negotiating or delivering insurance policies An insurance producer is a person required to be licensed pursuant to the laws of this state to sell, solicit or negotiate insurance.

The death protection component of Universal Life Insurance is always Increasing Term Annually Renewable Term Whole Life Adjustable Life

Annually Renewable Term A universal policy has two components: an insurance component and a cash account. The insurance component (or the death protection) of a universal life policy is always annual renewable term insurance.

Which of the following reports will provide the underwriter with the information about an insurance applicant's credit? Inspection report Agent's report Any federal report Consumer report

Consumer report Consumer reports include written and/or oral information regarding a consumer's credit, character, reputation, or habits collected by a reporting agency from employment records, credit reports, and other public sources.

Which of the following is TRUE about credit life insurance? Debtor is the annuitant. Creditor is the insured. Debtor is the policy beneficiary. Creditor is the policyowner.

Creditor is the policyowner. In credit life insurance, the creditor is the policyowner and the beneficiary; the debtor is the insured.

When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used to Pay back all premiums owed plus interest. Receive payments for a fixed amount. Purchase a single premium policy for a reduced face amount. Purchase a term rider to attach to the policy.

Purchase a single premium policy for a reduced face amount. When a whole life policy lapses or is surrendered prior to maturity, the cash value can be 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.

Under SIMPLE plans, participating employees may defer up to a specified amount each year, and the employer then makes a matching contribution up to an amount equal to what percent of the employee's annual wages? 10 3 5 7

3 Under SIMPLE plans, participating employees may defer up to a specified amount each year, and the employer can then contribute up to an amount equal to 3% of the employees' annual compensation. Contributions and earnings are both tax-deferred until funds are withdrawn.

Albert Jones, CPCU, has prepared an insurance course and obtained approval for the course for 6 hours of continuing education credits. Al presented this course to various agent groups during the continuing education term on four different occasions. How many continuing education credit hours may Al claim for his own license renewal? 0 6 12 24

6 An individual teaching an approved course qualifies for the same number of credit hours as those attending and completing the course; however, the individual may receive credit on one time in a continuing education term requirement for the same course.

The minimum number of credits required for partially insured status for Social Security disability benefits is 4 credits. 6 credits. 10 credits. 40 credits.

6 credits. To be considered partially insured, an individual must have earned 6 credits during the last 13-quarter period.

Which of the following factors determines the amount of each installment paid in a Life Income Option arrangement? Projected life insurance and health insurance Recipient's life expectancy and amount of principal Projected income Recipient's health and death benefits

Recipient's life expectancy and amount of principal The recipient's life expectancy and the amount of principal determine the amount of each installment paid in the Life Income Option arrangement.

Variable life insurance policies, as well as any riders, endorsements and other documents attached to them, must be approved by The Director The Guaranty Association The NAIC The State

The Director Variable life insurance policies and their attached documents must be filed and approved by the Director before use.

How often must an insurer who delivers variable life insurance policies in Missouri determine any changes in variable death benefits? Quarterly Annually Biannually Biennially

Annually Changes in variable death benefits must be determined at least annually.

A producer has submitted a new application to his insurer; however, 30 days later there was still no coverage available for the applicant. What must the producer do? Submit a complaint to the Department of Insurance Submit a request for coverage to the insurer Inform the applicant in writing Nothing: producer has no further obligations once the application is submitted to the insurer.

Inform the applicant in writing Producers must ensure that each applicant for new policy receives coverage as soon as reasonably possible. If the insurer does not provide coverage within 30 days of the application, the producer must inform the prospective insured of this fact in writing.

All other factors being equal, what would the premium be like in a survivorship life policy as compared to the premium in a joint life policy? Lower Higher As high Half the amount

Lower Survivorship Life is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age. The major difference is that survivorship life pays on the last death rather than upon the first death. Since the death benefit is not paid until the last death, the joint life expectancy in a sense is extended, resulting in a lower premium than that which is typically charged for joint life.

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 Projected interest rates. Face amount of the policy. The insured's age at death. The beneficiary's life expectancy.

The insured's age at death. The insured's age at death will not be considered, but the longer the life expectancy of the recipient, the lower the payments will be.

All of the following are true regarding a decreasing term policy EXCEPT The contract pays only in the event of death during the term and there is no cash value. The face amount steadily declines throughout the duration of the contract. The payable premium amount steadily declines throughout the duration of the contract. The death benefit is $0 at the end of the policy term.

The payable premium amount steadily declines throughout the duration of the contract. Premiums remain level with a decreasing term policy; only the face amount decreases.

The act of trying to discourage a policyholder from dropping his/her existing policy is called Conservation effort. Dissuasive effort. Baiting. Bargaining.

Conservation effort. The act of trying to discourage a policyholder from dropping his/her existing policy is called "conservation effort".

An insured has a life insurance policy with graded death benefits. In the first year of the policy, the death benefit is less than 50% of the face amount on the policy. What amount must the policy contain in accidental death benefits during the graded death benefit period? The same amount as the general death benefits There is no requirement Full face amount of the policy Half the face amount of the policy

Full face amount of the policy Life insurance policies with graded death benefits must provide accidental death benefits in an amount of at least the face amount of the policy during the graded death benefit period (this requirement only applies to policies that provide less than 50% of the face amount as a first-year death benefit).

Which of the following provisions in universal life policies stipulates that a written notice of the termination of coverage must be sent to the policyowner? Illustrations Periodic disclosure Grace period and lapse Policy guarantees

Grace period and lapse Grace period and lapse provisions requires that a written notice of the termination of coverage must be sent to the policyowner at least 30 days prior to the termination. After policy lapse, a grace period of at least 30 days must be provided.

Which of the following is NOT true regarding the annuitant? The annuitant's life expectancy is taken into consideration for the annuity. The annuitant receives the annuity benefits. The annuitant must be a natural person. The annuitant cannot be the same person as the annuity owner.

The annuitant cannot be the same person as the annuity owner. While they don't have to be, the annuitant and annuity owner are often the same person. The annuitant is the person who receives benefits or payments from the annuity and for whom the annuity is written. Since the annuitant's life expectancy is taken into consideration, the annuitant must be a natural person.

The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose? Fixed amount option Interest only option Life income with period certain Joint and survivor

Interest only option With the interest-only option, the insurance company retains the policy proceeds and pays interest on the proceeds to the recipient (beneficiary) at regular intervals.

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. Credit Life. Annual Renewable Term. Adjustable Life.

Interest-sensitive Whole Life. Because the cash values are generated by investments, interest rates will affect the amount of the cash value.

A 60-year-old participant in a 401(k) plan takes a distribution and rolls it over to an IRA within 60 days. Which of the following is true? The amount distributed is subject to ordinary income tax. The amount of the distribution is reduced by the amount of a 20% withholding tax. No taxes are due since the plan participant is over age 59 1/2. There is a 10% early withdrawal penalty.

The amount of the distribution is reduced by the amount of a 20% withholding tax. Distributions from 401(k) plans are taxable as ordinary income in the year of the distribution. However, if the distribution is rolled over to a Traditional IRA, taxes are deferred until the required minimum IRA distributions begin (which is generally no later than age 70 1/2). Since this client actually took a distribution (instead of making a trustee-to-trustee roll over), the distribution is subject to 20% withholding tax.

What is the time limit to contest life insurance policies in Missouri? 3 years 5 years 1 year 2 years

2 years The validity of the policy may not be contested, unless it's for nonpayment of premium or fraudulent misstatements by the applicant, after the policy has been in force for 2 years.

What is the maximum policy loan interest rate in Missouri? 15% 5% 8% 10%

8% According to state regulations, the maximum policy loan interest rates may not exceed 8% per year.

Which of the following would be considered false advertising? Implying that the agent is the insurer Stating the differences in benefits between Whole Life Insurance and Term Life Insurance Stating that a policy has limitations and exclusions Failing to include premiums in sales materials

Implying that the agent is the insurer A person or entity cannot use a name that deceptively suggests it is an insurer. Premiums do not have to be included in sales materials because they will vary depending on the insured's age and health. Most policies have limitations and exclusions, and there is a difference between whole life and term. It is not illegal to note this for applicants.

When does credit life insurance coverage take effect? The date the policy is delivered 30 days after the first payment is received The date the application is completed The date the debtor becomes obligated to the creditor

The date the debtor becomes obligated to the creditor The term of credit life insurance takes effect on the date the debtor becomes obligated to the creditor. If the insurer requires evidence of insurability, and that evidence is provided 30 days after the date the debtor becomes obligated to the creditor, the term of the insurance begins on the date the company determines the evidence of insurability to be satisfactory.

The policyowner of an adjustable life policy wants to increase the death benefit. Which of the following statements is correct regarding this change? The death benefit can be increased only by exchanging the existing policy for a new one. The death benefit can be increased by providing evidence of insurability. The death benefit cannot be increased. The death benefit can be increased only when the policy has developed a cash value.

The death benefit can be increased by providing evidence of insurability. The policyowner (insured) would need to prove insurability for the amount of the increase.