tx ins exam
what are the steps a producer must complete when replacing an existing policy
1) give applicant a notice regarding replacement 2) obtain a list of all existing life insurance policies to be replaced; 3) give the applicant the original or a copy of written or printed communications used for presentation to the applicant; 4) submit to the replacing insurance company, with the application, a copy of the replacement notice
the commissioner of insurance issues a cease and desist order and immediately receives a request for the charges to be reviewed in a hearing. within how many days must the hearing be held?
10 days
the insured is also the policyowner of a whole life policy. what age must the insured attain in order to receive the policy's face amount?
100
how many days does a viator have to rescind a viatical settlement after receiving the proceeds?
15 days
what is the minimum required number of continuing education credits in ethics every licensing period?
2 hours
according to the limitations of lawsuits provision, how many years does a claimant have to take legal action against the insurer?
2 years
how long is the incontestability period in life insurance policies issued in this state
2 years
how long does an employee have to convert a group policy to an individual policy without evidence of insurability?
31 days
how long is the grace period in group life policies issued in this state?
31 days
the number of credits required to obtain a fully insured status to receive social security benefits is
40
which of the following retirement plans is a special tax-favored plan for nonprofit, charitable, educational or religious groups?
403(b) tax sheltered annuity (TSA)
agents whose license has been revoked will not be able to recieve another license in Texas for at least
5 years
at what age can a participant receive distributions from a qualified plan without incurring a 10% penalty
59 1/2
qualified plan
A retirement plan that meets the IRS guidelines for receiving favorable tax treatment.
the medical information bureau is
A source of medical information to alert insurers to adverse medical history
What is annually renewable term insurance?
Annually renewable term (ART) is the purest form of term insurance in which the death benefit remains level; the policy may be guaranteed renewable each year without proof of insurability, but the premium increases annually according to the attained age.
Underwriting is the process of
Determining the insurance company's risk regarding a proposed insured
NAIC
National Association of Insurance Commissioners, an organization composed of insurance commissioners from all 50 states, the District of Columbia and the 4 U.S territories, formed to resolve insurance regulatory issues.
Which dividend option increases the death benefit?
Paid-up additions increase the death benefit of the original policy by whatever amount the dividend will buy.
An annually renewable term policy
Renews each year with an increased premium
what does insurance solicitation mean
Solicitation of insurance means an attempt to persuade a person to buy an insurance policy, and it can be done verbally or in writing.
commissioner
The head of the state department of insurance.
Who has all of the rights in an annuity contract?
The owner of the annuity has all of the rights such as naming the beneficiary and surrendering the annuity.
what constitutes the entire contract?
The policy and a copy of the application, along with any riders or amendments, form the entire contract.
Which authorities regulate variable life policies?
Variable life insurance products are dually regulated by the State and Federal Government: the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and the State Department of Insurance.
insurance policy
a contract between a policyowner (and/or insured) and an insurance company which agrees to pay the insured or the beneficiary for loss caused by specific events
statute
a formal written law enacted by legislature; insurance statutes can be found in the state Insurance Code
Agent/Producer
a legal representative of an insurance company; the classification of producer usually includes agents and brokers; agents are the agents of the insurer
Reciprocity
a mutual interchange of rights and privileges
which of the persons is required to hold a producer license?
a nonresident agent who negotiates insurance contracts
Applicant or proposed insured
a person applying for insurance
minor
a person under legal age
beneficiary
a person who receives the benefits of an insurance policy
activities of daily living (ADLs)
a person's essential activities that include bathing, dressing, eating, transferring, toileting, continence
Gross Income
a person's income before taxes or other deductions
cash value
a policy's savings element or living benefit
indemnity
a principle of reimbursement on which insurance is based; in the event of loss, an insurer reimburses the insureds or beneficiaries for the loss
suitability
a requirement to determine if an insurance product is appropriate for a customer
Which rider allows the early payment of a portion of the death benefit to the insured?
accelerated death benefit rider
Which riders increase the amount of the death benefit?
accident death rider pays double or triple the amount of face value, cost of living rider automatically increases the amount of insurance based on an inflation index, return of premium pays back all the premiums in addition to the death benefit and some others
which of the following is NOT a nonforfeiture option of a whole life policy?
accumulate at interest
If a misstatement of age is discovered during the processing of a life insurance claim, what will the insurance company do?
adjust the death benefit based on the premiums that were paid
An insured in a group policy has misstated his age on the insurance application. As a result, the insurer will most likely
adjust the premium
which type of policy allows the insured to change the amount of the death benefit the amount of premium or the type of coverage as their needs change?
adjustable life
in an individual life insurance policy when must the nonforfeiture benefits begin?
after 3 policy years
over several years, a policyowner paid $10,000 in premiums for his insurance policy. when he suffered a loss, the insurance company paid out $50,000 in benefits. what characteristic of an insurance contract does this describe?
aleatory
what is the difference between absolute and collateral assignment
an absolute assignment permanently transfers all rights of ownership to another person; a collateral assignment is a transfer of partial rights
which of the following is considered a field underwriter?
an agent
inducement
an offer that attempts to influence the other party
nonprofit organization
an organization that uses its surplus to fulfill its purpose instead of distributing the surplus to its owners or members
Whose life expectancy is taken into consideration in an annuity?
annuitant
How do annuities differ from life insurance policies?
annuities liquidate an estate (life insurance creates an estate). annuities pay income to the annuitant while he or she is till living; life insurance pays the death benefit
which of the following would be the main source of underwriting information used by the company in the risk selection process?
application
When must insurable interest exist in life insurance?
application date
all of the following persons who do not have an employer-sponsored retirement plan would be eligible to set up contributions to a traditional IRA EXCEPT
arlene age 72 a nurse
the legal transfer of all or part of a policyowner's rights title or interest is called a (n)
assignment
which of the following terms refers to the transfer of some or all of the ownership rights of a life insurance policy from one individual to another?
assignment
which of the following is NOT an example of a company's location of incorporation?
authorized
all of the following are nonforfeiture options in life insurance policies EXCEPT
automatic premium loans
if a life policy does not pass the 7 day test, that policy
becomes a modified endowment contract
Nonforfeiture Values
benefits in a life insurance policy that the policyowner cannot lose even if the policy is surrendered or lapses
Betty is the only beneficiary named on her husband Bob's policy which has a Common Disaster provision. They are in a car wreck, and Bob dies instantly. Betty lives for 29 days. Who will receive the death benefit?
bob's estate
in credit life insurance who is responsible for paying the policy premium?
borrower
which of the following statements is true of both the fixed period and fixed amount settlement options?
both guarantee that the principal and interest will be fully paid out
What settlement options are available in life insurance policies?
cash payment (lump sum), life income, interest only, fixed period installments, and fixed amount installments
What are the 3 nonforfeiture options in life insurance policies?
cash surrender value reduced paid up insurance or extended term option
which of the following features of the indexed whole life policy is not fixed
cash value growth
the 10% early withdrawal penalty from an IRA can be waived for
catastrophic medical expenses
what do employees receive under a group contract?
certificate of insurance
the receipt given to a life insurance applicant when the application is completed and the initial premium is received is called a(n)
conditional receipt
moral turpitude
conduct that is contrary to community standards of justice, honesty or good morals
representations are statements made by the applicant that are
considered true to the best of the applicant's knowledge
which of the following includes information regarding a person's credit, character, reputation, and habits?
consumer report
the most common type of whole life insurance where premiums are payable over the whole life of the insured to age 100 is called
continuous premium (straight) life
Variable Life Insurance
contracts in which the cash values accumulate based upon a specific portfolio of stocks without guarantees of performance
Fixed Life Insurance
contracts that offer guaranteed minimum or fixed benefits
Pretax contribution
contribution made before federal and/or state taxes are deducted from earnings
Liquidation of an estate
converting a person's net worth into a cash flow
a key person insurance policy benefit will pay for which of the following?
cost of training a replacement
life insurance
coverage on human lives
which of the following is the beneficiary in credit life insurance?
creditor
When the insured purchased a new home, he wanted to purchase a life insurance policy that would protect his family against losing it should he die before the mortgage was paid. Which of the following policies is best suitable for that need?
decreasing term
credit life insurance is usually written as what type of policy?
decreasing term
an individual inherited a large sum of money at age 40 and wanted to use it to provide a guaranteed income after his retirement at age 60. which of the following types of annuities would best meet this need?
deferred
which of the following is NOT a standard exclusion in life insurance policies?
disability
in group life policies individual certificates are given to
each insured person
surrender
early termination of a policy by the policyowner
the policy and copy of the application along with any riders and amendments is called the
entire contract
which provisions of a life insurance policy states that the application is part of the contract?
entire contract
how often must producers renew their licenses?
every 2 years
each of the following is a typical characteristic of group life insurance EXCEPT
evidence of insurability is usually required
in a contract consideration refers to
exchange of something of value by both parties
the federal law that permits an applicant for insurance to question the validity and source of any credit information is called
fair credit reporting act
the use of words or symbols that are similar to which of the following entities is prohibited in life insurance advertisement
federal government
Securities
financial instruments that may trade for value (for example, stocks, bonds, options)
a spouse receives $5000 a month until the principal and interest on her husband's life insurance policy have been paid out. which settlement option did this beneficiary choose?
fixed amount
a life settlement option that pays out the death benefit incrementally in a specified amount until all of the proceeds are exhausted is called
fixed amount installments
coercion
forceful act or threat aimed to influence a person to act against his or her will
a producer delivers a policy to an insured but nine days later the insured returns the
free look
the premium payment mode can be best described as the
frequency with which the policy premium will paid
What provision in a life insurance policy extends coverage beyond the premium due date?
grace period
which of the following features allows an insurance policy to remain in force for a specific number of days beyond the premium due date?
grace period provision
Which rider would allow additional insurance at specified dates or events, without evidence of insurability?
guaranteed insurability
what happens to the benefit if the annuitant dies during the accumulation period?
if the annuitant dies before annuitization (or payout period), his/her beneficiary will receive the amount paid into the plan or the cash value, whichever is greater
which of the following would be considered a disadvantage of term insurance?
if the insured dies after the end of the term, there is no death benefit to the beneficiary
Which nonforfeiture option is automatically selected if the policy owner has not made a selection?
if the policyowner has neglected to select one of these nonforfeiture options, the insurer will automatically implement the extended term option in the event of termination of the original policy.
under what circumstances will the contingent beneficiary receive the death benefit?
if the primary beneficiary dies before the insured
what happens to an unpaid policy loan at insured's death
if there are outstanding loans at the time of the insured's death, the amount will be considered a debt to the policy and the death benefit will be reduced by the amount of indebtedness
how soon can payments begin in a deferred annuity
in a deferred annuity, income payments begin sometime after one year from the date of purchase
Policy maturity
in life policies, the time when the face value is paid out
With personal life insurance, the lump-sum death is received by the beneficiary
income tax free
the life insurance policy provision that prohibits an insurance company from denying a death claim after the policy has been in force for a specified period of time is the
incontestability
which of the following provisions prevents an insurer from denying a claim due to statements made on a life insurance application after the policy has been in force for a period of time?
incontestability
a 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
an annuity in which investment growth is dependent on the performance of an index such as the standard and poor's 500 is called a (n)
indexed annuity
how does inflation affect the purchasing power of a fixed annuity
inflation can erode the purchasing power of income payments
If the agent feels that there could be misrepresentation on the part of the applicant for insurance, what must the agent do?
inform the insurance company
to prevent individuals from profiting from a loss insurance companies must be certain that
insurable interest exists
an employee quits his job and converts his group insurance to an individual policy. on which of the following will the premium for the individual policy be based?
insured's attained age
all the following may have an insurable interest in the insured EXCEPT
insured's best friend
home office
insurer's headquarters, principal place of business
adverse selection
insuring of risks that are more prone to losses than the average risk
which of the following reports would contain information concerning a person's character reputation or habits collected through interviews with the person's associates or friends?
investigative consumer report
a beneficiary who has a vested interest in the proceeds of a life insurance policy is the
irrevocable beneficiary
What is the free-look period, and when does it begin?
it allows the policyowner a specified number of days after policy delivery to look over the policy and if dissatisfied for any reason return it for a full refund of premiums. the free look period begins when the policyowner receives the policy not when the insurer issues it
all of the following are true regarding the guaranteed insurability rider EXCEPT
it is available automatically, for no extra premium
which of the following is NOT a requirement of a qualified plan?
it must be temporary
what is the purpose of the automatic premium loan provision
it prevents the unintentional lapse of a policy due to nonpayment of the premium
what are the characteristics of term life insurance
it provides temporary, pure death protection, with no cash value
which of the following is true about the free look period in a life insurance policy?
it starts when the policy is delivered
which settlement option guarantees an income for two or more recipients for as long as they live
joint and survivor
a whole life product that covers two lives and provides for payment of the death benefit on the death of the first insured is called
joint life
when the business is the owner, premium payor, and beneficiary of a life insurance policy, this is an example of a(n)
key person policy
an illustration used in the sale of a life insurance policy must include a label stating
life insurance illustration
which of the following is an example of a limited pay life policy
life paid up at age 65
What type of permanent insurance allows the policyowner to pay for a policy in a specified period of time, and the policyowner does not have to make any more premium payments for the life of the policy?
limited payment
Policy endowment
maturity date
the MIB is a nonprofit trade association that maintains
medical information on applicants for life and health insurance
which of the following is NOT true regarding policy loans?
money borrowed from the cash value is taxable
what is the requirement for a number of employees in a SIMPLE plan?
no more than 100
exempt
not subject to a duty or obligation
a life insurance death benefit paid in a lump sum to a beneficiary is
not subject to any taxes
generally, the premium paid for personal life insurance is
not tax deductible
all of the following would be considered an insurance transaction EXCEPT
obtaining an insurance license
An insured submits the full premium along with a completed application, and the policy is issued 10 days later. When does the coverage begin?
on the date of the application
What are the death benefit options in universal life policies?
option A is the level death benefit option and option B is the increasing death benefit option
When a death claim is submitted, the insurer discovered that the insured understated her age on the application for a life policy. What will the insurer take?
pay a reduced death benefit based on the insured's actual age
the insured died four months after a $100,000 life insurance policy was issued and delivered. at the time of the claim the company noticed the original application was missing some key information. what will the company do?
pay the death claim because the insurer waived the right to obtain the missing information
lump sum
payment of the entire benefit in one sum
commission
payment to the agent by the insurance company for placing insurance, usually a percentage of the policy premium
what are the characteristics of whole life insurance
permanent protection to the insured's age 100, with living benefits such as cash value, policy loans, and nonforfeiture options
Insured
person covered by the insurance policy; may or may not be the policy owner
If no receipt is issued at the time of application, a statement of good health is usually required at the time of
policy delivery
lapse
policy termination due to nonpayment of premium
which of the following is true regarding a joint life policy?
premium is based on the average age of the insureds
What does the payor benefit rider protect?
premium payments for a juvenile policy
a current assumption or interest sensitive whole life policy has
premiums that may vary according to interest rate fluctuations
LIFO (last in, first out)
principle applied to asset management in life insurance products, under which it is assumed that the funds paid into the policy last will be paid out first
FIFO (first in, first out)
principle under which it is assumed that the funds paid into the policy first will be paid out first
an annuity is considered fixed when it does all of the following EXCEPT
provides the annuitant with either the guaranteed or current interest rate, whichever is less
what are some of the group characteristics important for underwriting
purpose, size, turnover and financial strength of the group
the insured usually pays $1,200 annually for her life insurance premium, this year she has accumulated $175 in dividends and applied that to her next premium reducing it to $1,025. what dividend option has the insured chosen?
reduced paid up
what are the minimum required nonforfeiture options in life insurance policies issued in this state
reduced paid up, extended term, and shortened benefit period
what qualifications must an individual obtain prior to selling variable life insurance products
registration with FINRA, a securities license, and a state issued license to sell life insurance
With a traditional whole life policy, the death benefit
remains constant over time
to reinstate the full death benefit of a life policy that has been kept in force by the automatic premium loan provision the policyowner must
repay the loan plus interest
Statements in the application for insurance that are believed to be true to the best of the applicant's knowledge are called
representations
restitution
restoration to the original condition or repayment
which of the following are social security benefits?
retirement, disability, and survivors
if an agent falls to obtain an applicant's signature on the insurance application, the agent must
return the application to the applicant for signature
what is the main responsibility of a company's underwriting unit?
risk selection and classification
Earned Income
salary, wages ,or commissions; but not income from investments, unemployment benefits, and similar sources of income
what should a producer do if information on an application for insurance is missing or needs to be corrected?
set up an appointment with the applicant to either complete a new application or correct the error and have the applicant initial the change
the commissioner of insurance is responsible for all of the following actions EXCEPT
setting premium rates
which type of life insurance policy generates immediate cash value?
single premium
What are the 2 premium payment options in annuities?
single premium and periodic premiums
an annuity that is purchased with a lump sum payment and begins income payments within one year is a
single premium immediate annuity
consideration
something of value that each party gives to the other (binding force in any contract)
What is the risk classification for those who are insurable, but have a higher than average risk?
substandard
the advantage of qualified plans to employers is
tax deductible contributions
variable universal life insurance offers a policyowner which of the following features?
the ability to increase the death benefit
the time period during which an annuitant contributes to an annuity is called
the accumulation period
an annuity has 2 distinct periods. what are they called and what happens during each?
the accumulation period, also known as the pay in period, is the period of time over which the annuitant makes payments (premiums) into an annuity. the annuity period, also referred to as the annuitization period, liquidation period, or pay out period, is the time when money is distributed to the annuitant
who owns a group life contract? what does the insured receive?
the actual policy (master policy/ contract) is issued to the sponsor of the group, which is often an employer. the employees are the insured who are issued certificates of insurance
Face Amount
the amount of benefit stated in the life insurance policy
What is the limit on the amount of credit life insurance on a debtor?
the amount of credit life on a debtor cannot exceed the amount owed to the creditor
Death Benefit
the amount paid upon the death of the insured in a life insurance policy
which of the following individuals would NOT sign an application for life insurance policy?
the beneficiary
if a life insurance policy has an irrevocable beneficiary designation,
the beneficiary can only be changed with written permission of the beneficiary
a universal life contract expires when
the cash value account becomes too small to pay the cost of insurance
endow
the cash value of a whole life policy has reached the contractual face amount
Insurer (principal)
the company who issues an insurance policy
all of the following statements about sources of underwriting are true EXCEPT
the contents of an inspection report cannot be disclosed to the applicant
At age 25, an individual purchased a decreasing term policy. What does that say about the coverage and the premium?
the coverage decreases but the premium stays the same
Who is the owner and who is the beneficiary of a credit life policy?
the creditor is the owner and the beneficiary of the policy
principal
the face value of the policy; the original amount invested before the earnings
a printer has hired an advertising agency to design and edited advertisement brochures for an insurance company. once the brochures are printed, who is responsible for the advertisements and their content?
the insurance company
which statement is INCORRECT concerning policy dividends?
the insurance company may guarantee dividends
attained age
the insured's age at the time the policy is issued or renewed
who is responsible for all written and distributed insurance advertisements
the insurer whose policies are advertised is responsible for all its advertisements, regardless of who wrote, created, presented, or distributed them
Premium
the money paid to the insurance company for the insurance policy
Policyowner
the person entitled to exercise the rights and privileges in the policy
what is the difference between a revocable and irrevocable beneficiary
the policyowner may change a revocable beneficiary at any time. an irrevocable designation, however, has a vested interested in the policy and may not be changed without the beneficiary's written consent
If the cash value exceeds the premiums paid in a whole life policy, what are the tax consequences if the policy is surrendered
the portion that exceeds the premiums paid is taxable
level premium
the premium that does not change throughout the life of a policy
which of the following statements is true regarding a universal life policy?
the premiums can be decreased by the insured
how does continuous premium straight life differ from 20 year limited pay life
the premiums for straight life will be spread over the insured's lifetime thus enabling the insurance company to charge a lower annual premium. when the premium paying period is condensed to 20 years a higher annual premium is required
Vesting
the right of a participant in a retirement plan to retain part or all of the benefits
all of the following apply to the waiver of premium rider EXCEPT
there is no charge for this rider
which of the following insurance arrangements will be appropriate for a business purchasing life insurance on its general manager?
third party ownership
which of the following best describes the purpose of the USA PATRIOT Act with regards to the insurance industry?
to prevent terrorism activities through monitoring of financial transactions
what is the purpose of a grace period
to prevent unintentional policy lapse for nonpayment of premium
what is the main purpose of requiring licenses for persons who transact insurance?
to protect the general public
what is the purpose of the grace period in life insurance policies?
to protect the policyowner against an unintentional lapse of the policy
cease and desist
to stop or discontinue
assignment
transfer of rights of policy ownership
insolvent
unable to meet financial obligations
An insured receives a monthly summary of his life insurance policy. The cash value this month is significantly lower than it was last month. What type of policy is it?
variable
which of the following arrangements allows someone living with a life-threatening condition to sell an existing life insurance policy and use the proceeds before death?
viatical settlement
what is the term for an insured who enters into a viatical settlement?
viator
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
If a producer accepts a completed application without the first premium, when does coverage become effective for the insured?
when the policy is delivered and the first premium is paid
in a renewable term policy the additional premium pays for the right to renew the policy
with the same coverage amount regardless of the insured's health
Rollover
withdrawal of the money from one qualified plan and placing it into another plan
deferred
withheld or postponed until a specified time or event in the future
the renewable provision allows the policyowner to renew the coverage at the expiration date
without evidence of insurability