Texas Life Insurance Part 2

#73. If an agent has completed 35 hours of continuing education in one renewal period, how many CE hours will the agent have to complete in the next renewal period? a) 11 b) 24 c) 35 d) 0

b) 24

#64. An agent's license will terminate within how many days from the due date of obligatory fees and continuing education requirements? a) 180 b) 90 c) 60 d) 30

b) 90

#57. What is the waiting period on a Waiver of Premium rider in life insurance policies? a) 30 days b) 3 months c) 5 months d) 6 months

d) 6 months

#28. An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his a) Experience Rating. b) Group rate. c) Insurer's scheduled rate. d) Attained age.

d) Attained age

#62. Which of the following types of insurance policies is most commonly used in credit life insurance? a) Increasing term b) Whole life c) Equity indexed life d) Decreasing term

d) Decreasing term

#32. What provision in an insurance policy extends coverage beyond the premium due date? a) Free look b) Automatic premium loan c) Waiver of premium d) Grace period

d) Grace period

#12. If a settlement option is not chosen by the policyowner or the beneficiary, which option will be used? a) Life income b) Fixed period c) Fixed amount d) Lump sum

d) Lump sum

#19. All of the following are personal uses of life insurance EXCEPT a) Buy-sell agreement. b) Survivor protection. c) Estate creation. d) Cash accumulation.

a) Buy-sell agreement.

#4. Which is TRUE about the cash surrender nonforfeiture option? a) Funds exceeding the premium paid are taxable as ordinary income. b) After the cash surrender, the insured is covered for a grace period of 1 month. c) The policy remains active for some time after the policyholder opts for cash surrender. d) The policyholder receives the original cash value of the policy.

a) Funds exceeding the premium paid are taxable as ordinary income.

#39. Which of the following is another term for the accumulation period of an annuity? a) Pay-in period b) Premium period c) Liquidation period d) Annuity period

a) Pay-in period

#30. Which of the following will be included in a policy summary? a) Premium amounts and surrender values b) Copies of illustrations and application c) Comparisons with similar policies d) Primary and secondary beneficiary designations

a) Premium amounts and surrender values

#85. If a person is compensated for a testimonial in an advertisement, which of the following statements should be included in the advertisement? a) Commissioned advertisement b) Paid endorsement c) Insurer is not responsible for the contents of the testimonial d) The author is the employee of the insurer

b) Paid endorsement

#7. Which two terms are associated directly with the way an annuity is funded? a) Renewable or convertible b) Single payment or periodic payments c) Increasing or decreasing d) Immediate or deferred

b) Single payment or periodic payments

#77. An individual covered under a group life insurance policy may convert the policy to any of the following EXCEPT a) Life paid up at age 65. b) Whole Life. c) 15-year level term. d) 20-pay life.

c) 15-year level term.

#29. Regarding the free-look provision, the insurance company a) Cannot charge a premium after 10 days. b) Must issue a free policy for 30/31 days. c) Must issue a free policy for 10 days. d) Must allow the policyowner to return the policy for a full refund.

d) Must allow the policyowner to return the policy for a full refund.

#79. Any inducement offered to the insured in the sale of an insurance policy that is not specified in the policy is an unlawful practice known as a) Twisting. b) False advertising. c) Coercion. d) Rebating.

d) Rebating.

#88. A temporary license holder can receive a commission from a sale made to all of the following EXCEPT a) The license holder's spouse's best friend. b) An accountant at a rival insurance company. c) The license holder's family doctor. d) The license holder's sister-in-law.

d) The license holder's sister-in-law.

#66. Upon the submission of a death claim under a life insurance policy, when must the insurer pay the policy benefit? a) Immediately after receiving written proof of loss b) On the next anniversary of the policy c) Within 30 days d) Within 2 months

d) Within 2 months

#80. No one whose license has been revoked can receive another license in Texas for a) 5 years. b) 6 months. c) 1 year. d) 2 years.

a) 5 years.

#54. An insured pays a $100 premium every month for his insurance coverage, yet the insurer promises to pay $10,000 for a covered loss. What characteristic of an insurance contract does this describe? a) Aleatory b) Good health c) Adhesion d) Conditional

a) Aleatory

#75. When transacting business in this state an insurer formed under the laws of another country is known as a/an a) Alien insurer. b) Domestic insurer. c) Foreign insurer. d) Admitted insurer.

a) Alien insurer.

#86. In Texas, how is the Commissioner of Insurance placed in office? a) Appointed by the Governor for a term of 2 years b) Appointed by the Governor for a term of 4 years c) Appointed by the Senate for a term of 2 years d) By election, at the same election when other state officials are chosen.

a) Appointed by the Governor for a term of 2 years

#72. The initial amount of credit life insurance may NOT exceed a) The amount to be repaid under the contract. b) An amount set by statute and adjusted regularly for inflation. c) The borrower's monthly income. d) The borrower's annual income.

a) The amount to be repaid under the contract.

#6. If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant a) With the policy. b) Upon issuance of the policy. c) Within 30 days after the first premium payment was collected. d) Prior to filling out an application for insurance.

a) With the policy.

#41. Under which of the following circumstances would an insurer pay accelerated benefits? a) A couple wants to build a house and would like to make a larger down payment. b) An insured is diagnosed with cancer and needs help paying for her medical treatment. c) A couple is nearing retirement and needs a steady stream of income. d) An insured is looking for a way to put her daughter through college.

b) An insured is diagnosed with cancer and needs help paying for her medical treatment.

#16. In an annuity, the accumulated money is converted into a stream of income during which time period? a) Conversion period b) Annuitization period c) Payment period d) Amortization period

b) Annuitization period

#31. In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT a) Applicant's present occupation. b) Applicant's past income. c) Applicant's past medical history. d) Applicant's present physical condition.

b) Applicant's past income

#22. When the policyowner specifies a dollar amount in which installments are to be paid, he/she has chosen which settlement option? a) Extended term b) Fixed amount c) Fixed period d) Life income period certain

b) Fixed amount

#94. Which of the following would NOT be considered rebating? a) Collecting a lower premium than what's specified in a policy as a token of client appreciation b) Giving a client a $25 pen with the insurer's logo during the insurance application process c) Sending a $50 gift certificate to the insured's employee after the insurance has been effected as a thank you for the referral d) Sharing commission with the insured

b) Giving a client a $25 pen with the insurer's logo during the insurance application process

#20. An individual is purchasing a permanent life insurance policy with a face value of $25,000. While this is all the insurance that he can afford at this time, he wants to be sure that additional coverage will be available in the future. Which of the following options should be included in the policy? a) Nonforfeiture options b) Guaranteed insurability option c) Dividend options d) Guaranteed renewable option

b) Guaranteed insurability option

#45. When Y applied for insurance and paid the initial premium on August 14, he was issued a conditional receipt. During the underwriting process, the insurance company found no reason to reject the risk or classify it other than as standard. Y was killed in an automobile accident on August 22, before the policy was issued. In this case, the insurance company will a) Keep the premium and reject the risk on the basis that the applicant died before the policy could be issued. b) Issue the policy anyway and pay the face value to the beneficiary. c) Negotiate a reduced settlement with the beneficiary due to the unusual circumstances involved. d) Return the premium to Y's estate, since it has no obligation to pay the death claim.

b) Issue the policy anyway and pay the face value to the beneficiary.

#63. On a participating insurance policy issued by a mutual insurance company, dividends paid to policyholders are a) Guaranteed. b) Not taxable since the IRS treats them as a return of a portion of the premium paid. c) Paid at a fixed rate every year. d) Taxable as ordinary income.

b) Not taxable since the IRS treats them as a return of a portion of the premium paid

#83. All of the following are unfair claims settlement practices EXCEPT a) Failing to acknowledge pertinent communication pertaining to a claim. b) Suggesting negotiations in settling the claim. c) Refusing to pay claims without conducting a reasonable investigation. d) Failing to adopt and implement reasonable standards for settling claims.

b) Suggesting negotiations in settling the claim.

#61. Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? a) Representation b) Warranty c) Concealment d) Indemnity

b) Warranty

#26. The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective? a) As of the first of the month after the policy issue b) As of the policy issue date c) As of the application date d) As of the policy delivery date

c) As of the application date

#55. When must insurable interest exist in a life insurance policy? a) When there is a change of the beneficiary b) At the time of loss c) At the time of application d) At the time of policy delivery

c) At the time of application

#38. A policyowner fails to pay the premium due on his whole life policy after the grace period passes, but the policy remains in force. This is due to what provision? a) Incontestability period b) Assignment c) Automatic premium loan d) Waiver of premium

c) Automatic premium loan

#84. When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered a) Controlled business. b) Adverse selection. c) Discrimination. d) Twisting.

c) Discrimination.

#17. 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? a) Beneficiary clause b) Consideration clause c) Insuring clause d) Entire contract clause

c) Insuring clause

#60. Which of the following is an example of a limited-pay life policy? a) Level Term Life b) Straight Life c) Life Paid-up at Age 65 d) Renewable Term to Age 70

c) Life Paid-up at Age 65

#50. Which Universal Life option has a gradually increasing cash value and a level death benefit? a) Term insurance b) Option B c) Option A d) Juvenile life

c) Option A

#27. An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use? a) Reduction of premium b) Accumulation at interest c) Paid-up option d) One-year term

c) Paid-up option

#43. What is the advantage of reinstating a policy instead of applying for a new one? a) The face amount can be increased b) The cash values have gained interest while the policy was lapsed c) The original age is used for premium determination d) Proof of insurability is not required

c) The original age is used for premium determination

#93. After filing a claim, an insured tells the insurer that there is more than one insurance policy in force. That insurer sets aside the claim until it hears what the other company will pay. The insurer's action will be classified as a) Coordinated. b) Proactive. c) Unfair. d) Prudent.

c) Unfair.

#40. The main difference between immediate and deferred annuities is a) The number of insureds. b) The amount of each payment. c) When the income payments begin. d) How the annuity is purchased.

c) When the income payments begin

#70. The Insurance Commissioner may examine the affairs of any insurer as often as necessary, but not less frequently than once every a) Year. b) 2 years. c) 3 years. d) 5 years.

d) 5 years

#67. An insurer publishes intimidating brochures that portray the insurer's competition as financially and professionally unstable. Which of the following best describes this act? a) Legal, provided that the information can be verified b) Illegal until endorsed by the Guaranty Association c) Legal, provided that the other insurers are paid royalties for the usage of their names d) Illegal under any circumstances

d) Illegal under any circumstances

#24. The Medical Information Bureau (MIB) was created to protect a) Insurance departments from lawsuits by policyowners. b) Insureds from unreasonable underwriting requirements by the insurance companies. c) Medical examiners that perform insurance physical examinations. d) Insurance companies from adverse selection by high risk persons.

d) Insurance companies from adverse selection by high risk persons.

#48. 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 a) Credit Life. b) Annual Renewable Term. c) Adjustable Life. d) Interest-sensitive Whole Life.

d) Interest-sensitive Whole Life

#42. Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client? a) Interest-sensitive whole life b) Life annuity with period certain c) Increasing term d) Limited pay whole life

d) Limited pay whole life

#47. All of the following are true about variable products EXCEPT a) The minimum death benefit is guaranteed. b) The cash value is not guaranteed. c) Policyowners bear the investment risk. d) The premiums are invested in the insurer's general account.

d) The premiums are invested in the insurer's general account.

#58. An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? a) The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time. b) The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies. c) One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies. d) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

d) The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.

#10. What is the purpose of the buyer's guide? a) To provide the name and address of the agent/producer issuing the policy b) To list all policy riders c) To provide information about the issued policy d) To allow the consumer to compare the costs of different policies

d) To allow the consumer to compare the costs of different policies

#9. Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE? a) Distributions before age 59 1/2 incur a 10% penalty on policy gains. b) Policy loans are taxable distributions. c) Accumulations are tax deferred. d) Withdrawals are not taxable.

d) Withdrawals are not taxable.