Arizona Life Only
First-time homebuyers are able to withdraw up to how much from their qualified IRAs without incurring the 10% early withdrawal penalty?
$10,000
A teacher recently retired at age 63 and has a tax sheltered annuity (TSA). Periodic deposits total $120,000 and the value of the contract is now worth $200,000. How much is taxed if the current value is surrendered today?
$200,000
A "premature" distribution from a modified endowment contract (MEC) incurs a penalty tax of
10%
John received a one-time distribution of $50,000 from his modified endowment contract (MEC). Prior to that, the contract's cash value was $150,000, the contract investment amount was $100,000, and the death benefit was $500,000. What percentage of the $50,000 distribution was taxable as ordinary income?
100%
A survivorship life insurance policy usually covers how many lives?
2 lives
Which of these would NOT be a valid reason to add the waiver of premium rider to a life insurance policy?
It allows a policy loan to cover premium payments if the policyowner becomes totally disabled
Which statement regarding the certificate of insurance is accurate?
It indicates evidence of an employee's insurance coverage
How much is normally paid to a policyowner in a life (viatical) settlement?
Less than the death benefit
Laura added a children's rider to her life insurance policy. What type of coverage was added?
Level term
All of these statements correctly describe in aleatory contract EXCEPT
Only one party makes any kind of legally enforceable offer
The law of large numbers enables an insurer to
Predict losses
Switching Life insurance policies without tax consequence is permitted under
Section 1035 rules
How long must a producer maintain customer records for an insurance transaction?
Three years
What would be the disadvantage of naming a trust as beneficiary of a life insurance policy?
Trust administration fees would reduce policy proceeds
Which of the following is NOT considered to be an expense for surviving family members of a deceased wage earner?
Unemployment tax expenses
Which type of life insurance policy allows a policyowner the choice of investments along with flexible premium payments?
Variable universal life Variable universal life involves a guaranteed death benefit plus premium and investment flexibility.
If a producer replaces a client's existing life insurance policy with a new one, which of these actions is advisable?
Wait until the new policy is issued and delivered before surrendering existing policy
When there is a named beneficiary on a life insurance policy, the death benefits
are paid directly to the beneficiary without interference from the insured's creditors
A(n) _________ company is licensed by the Department of Insurance to conduct insurance business in Arizona.
authorized
The refusal of doing business with an individual or business is called a(n)
boycott
A(n) _____ agent is an insurance agent who represents only ONE insurance company.
captive
A(n) _____ insurer restricts the exposures it writes to those of its owners.
captive
If dividend option choices are offered on a whole life insurance policy, the policy MUST
contain a statement that dividends are NOT guaranteed
The courts will normally interpret a policy in favor of the insured when the meaning of the policy is not clear. This is because an insurance policy is a(n)
contract of adhesion
If a life insurance applicant is shown future premiums are to be paid out of non-guaranteed values, the illustration used in the sales presentation MUST
disclose that premium payments may need to be resumed depending on actual results
When using the needs approach for life insurance planning, lump sums may be created for all of the following reasons EXCEPT
employee benefits
Christopher is issued an insurance policy that contains an attached agreement which alters the terms of the policy. This attached agreement is called a(n)
endorsement
Death benefits from a life insurance policy are normally considered to be
exempt from federal income tax
What is an insurance contract that identifies individuals by relationship to a specific organization?
group insurance
After an insurance application has been originated, the producer normally
is the major personal contact to the insured
The death proceeds of a credit life insurance policy are typically paid to the
lender
An insurance policy may be issued with a preferred insurance premium in all of these situations EXCEPT
living in a rural area
In Arizona, the Human Immunodeficiency Virus (HIV) consent form
must disclose who will be receiving a copy of the test results
Which of these is NOT used as selection criteria in the underwriting process of a life insurance application?
national origin
If a producer surrenders their license, how long must they wait to re-apply for the same license?
one year
The authority to change the beneficiary in an individuals annuity lies with the
owner
A life insurance policy's contingent beneficiary is the
person who receives the death benefits if the primary beneficiary dies before the insured
Where is the difference between a standard risk and a substandard risk reflected?
premium charges
An insurance producer must keep usual and customary records that pertain to transactions under the producer's license, at their
principle place of business
A statement MUST be signed by the ________ for any illustrations used in the sale of a life insurance policy.
producer
When a producer submits an application that discloses personal information regarding the applicant, who supplies the privacy notice?
producer
The Genetic Information Nondiscrimination Act of 2008 bars all of the following, EXCEPT:
prohibits the use of genetic information in health insurance, unless the applicant signs a waiver
During an annuity's liquidation phase, the annuitant normally
receives benefit payments at regular intervals
What happens to the death benefit of a life insurance policy if the insured elects a partial payment from the accelerated (living) benefit provision?
reduced
A group-owned insurance company that is formed to assume and spread the liability risks of its members is known as a
risk retention group
Dividends from a stock insurance company are normally sent to
shareholders
The Arizona Life and Disability Insurance Guaranty Fund protects an insured in the event of
the insurer's insolvency
A material change in a modified endowment contract (MEC) results in
the seven pay test, adjusted for cash value, applies again
Purchasing insurance is an example of risk
transference
After an annuity has been in force for _____ year(s), it becomes incontestable.
2 years
A licensee whose name or address changes must notify the Commissioner within
30 days
Every producer licensed in Arizona must notify the Director within how many days of any change of residential, business or e-mail address?
30 days
Which type of life insurance policy is best suited for paying off the outstanding balance of a 30-year mortgage in the event of the insured's death?
30-year decreasing term
Greg had recently been terminated from his job that covered him for group life insurance. How long does he have to convert his coverage to an individual policy?
31 days
A policyowner decides to surrender the cash value of a whole life insurance policy. The insurer has up to ____ month(s) to delay this payment.
6
How long can an insurer legally defer paying the cash value of a surrendered life insurance policy?
6 months
How long do most states allow an insurance company to delay the payment of a cash surrender under the Delayed Payment provision?
6 months
Telemarketing calls may ONLY be received between the hours of
8:00 am to 9:00 pm
Which of the following actions is considered to be an unfair trade practice?
A producer who sells insurance to an individual by means of threat
Which statement regarding a single premium life insurance policy is NOT correct?
Additional premiums may be required under certain conditions
The highest mortality rate belongs to which group?
Age 70 males
Which of these individuals may NOT obtain a temporary producer license?
An employee of a retired licensed producer
When a large sum of money is used to structure monthly payments, which product is typically used?
An immediate annuity
Which statement is INCORRECT concerning a tax-sheltered annuity (TSA)
Annual investment gains are included in participant's gross income
During the liquidation phase of an annuity contract, to whom are the income benefits normally payable to?
Annuitant
An applicant submits a life insurance application where an investigative consumer report is used in the underwriting process. Which of these statements is true?
Applicant has a right to receive a copy of the report
Which of these statements regarding insurance is false?
As the number of insured units increases, the number of losses decreases
Which of the following actions would be considered a felony in the State or Arizona?
Attempting to defraud an insurer
Which of these is true regarding the exchange of consideration among parties involved in an insurance contract?
Can be unequal
Which statement regarding the waiver of premium rider is accurate?
Cash payment is not directly provided to the policyowner
Which of the following is NOT a condition that must be met for an accidental death benefit to be paid?
Cause of death must be from a job-related injury
Which would be described as a beneficiary designation by class?
Children of the insured
Which of the following can be used to avoid the mandatory withholding tax on qualified plan distributions?
Conduit IRA
Which report contains information regarding an individual's general reputation and credit standing?
Consumer report
The policy provision that permits an employee to change from a group plan to an individual plan is called the
Conversion provision
How long does one premium payment cover in a single premium whole life policy?
Full life of the policy
Mike applied for life insurance and was issued a conditional receipt. He is later found to be insurable and is issued a policy. When does his coverage become effective?
Date of issuance of the conditional receipt
In what way is a life insurance policy affected by an accelerated benefit payment?
Decreases the death benefit
Which of the following is generally a form of group credit life insurance?
Decreasing term insurance
Which of the following is NOT guaranteed in a whole life policy?
Dividend scale
An employer has a group life coverage for his employees. How would an employee in poor health be treated in this situation?
Eligible for the same type of coverage as the other employees
Which statement best defines what a Policy Title means on an insurance policy?
Every policy must have a title on the face and on the back of the policy, briefly describing the policy
Which statement concerning an adjustable life insurance policy is FALSE?
Evidence of insurability is required when there is a change in premium
Which life insurance policy option allows the policyowner to have coverage equal to the net death benefit of the lapsed policy?
Extended term nonforfeiture option
When an applicant applies for a large amount of life insurance coverage, which of the following would likely NOT be an underwriting requirement?
Eye examination
Which statement concerning a decreasing term life policy is accurate?
Face amount decreases over the policy period
A consumer who has been recently denied insurance, credit, or employment based on an unfavorable consumer report MUST be advised as such. Which of the following does this statute originate from?
Fair Credit Reporting Act
Which of the following contracts offer deferred taxation, flexible payments, a guaranteed interest rate, and death benefits equal to the cash value?
Flexible premium fixed annuity
Rick owns a variable universal life policy and chooses a variable death benefit option. What will typically happen to the death benefit as a result of this selection?
Fluctuate with changes in the cash account
An annuity contract may be returned for a full refund during the
Free-look period
What is another name for a Keogh plan?
HR 10 plan
When is it acceptable to charge or receive a fee or service charge in addition to the premium in connection with the transaction of insurance?
If the amount of the fee or service charge is reasonably related to the cost of the service
The Medical Information Bureau consists of members from which group?
Insurance companies
Which of these is NOT relevant when determining the amount of personal life insurance need it?
Local unemployment rates
Tim is confined to a nursing home but doesn't have a terminal illness. Which life insurance rider is designed to help pay for this type of expense?
Long-term care benefit rider
According to the Federal Fraud and False Statements Act, which of these is considered to be an intentional violation?
Making false entries in a company's books
John bought a deferred annuity on Mary. John amends the contract years later to name Tom as the recipient of the proceeds if Mary dies. Who is the annuitant for this contract?
Mary
Which of the following may be considered an act of misrepresentation?
Misleading or failing to adequately disclose the title and true nature of a policy offered to a client
Life insurance premiums are computed on what three factors?
Mortality, interest, expenses
Which statement best describes a single premium whole life policy?
Paid-up policy that offers lifetime protection
Straight whole life insurance can be accurately described in all of these statements EXCEPT
Policy protection normally expires at age 65
How is the insured protected if a payor benefit rider is attached to the life insurance policy?
Premium payments are waived in the event the premium payor dies or becomes disabled
When must a producer provide disclosure about information practices to an applicant?
Prior to or at the time of signing the application
Which of the following would NOT be a reason for purchasing life insurance on a child's life?
Provides benefits for the child if the parents die
A life insurance policy's waiver of premium rider has the ability to
Relieve the insured of premium payments following an initial waiting period after the insured becomes totally disabled
T is covered by an Accidental Death and Dismemberment (AD&D) policy that has an irrevocable beneficiary. What action will the insurance company take if T requests a change of beneficiary?
Request of the change will be refused
Which of these factors does NOT influence an individual's need for life insurance?
Self-maintenance expenses
Which of these situations would NOT potentially involve a prison sentence under Federal law?
Selling insurance with a nonresident license
XYZ Corp gives money to an employee to purchase a life insurance policy and allows the employee to select the beneficiary. What kind of plan is this?
Split-dollar
Which of the following entities does NOT establish regulations for variable insurance products?
State Attorney General
What happens to the cash value of a market value adjusted annuity if it's surrendered prior to the end of the stated guarantee period?
Subjected to market value adjustment
How are monthly life annuity benefit payments treated under a tax sheltered annuity (TSA)?
Taxed as ordinary income in the year received
K is an agent who takes an application for individual life insurance and accepts a check from the client. He submits the application and check to the insurance company, however the check was never signed by the applicant. If the application is approved, when will coverage be effective?
The date the agent delivered the policy, collected the initial premium, and obtained a good health statement from the insured
Peter, age 50, surrenders his modified endowment contract (MEC). How is the gain treated in terms of federal income taxes?
The gain is treated as taxable income and a penalty tax is imposed on the gain
Rick recently died and left behind an individual IRA account in his name. His widow was forwarded the balance of the IRA. The transfer of Rick's IRA account balance to his surviving spouse qualifies for
The marital deduction
Which of the following statements about the installments for a fixed period settlement option in life insurance policies is NOT true?
The periodic payment amount is determined by the beneficiary's age
Taxable income may be the result from all of these modified endowment contract (MEC) transactions EXCEPT for
The policy is surrendered for less than what was paid into it
What is considered the collateral on a life insurance policy loan?
The policy's cash value
Which of these must be disclosed in a universal life policy?
The policy's surrender charges
An agent gives a conditional receipt to a client for an insurance policy after collecting the initial premium. When will the policy become effective?
When the conditions of the receipt are met
At what point are death proceeds paid in a joint life insurance policy?
When the first insured dies
An annuitant is paid $495 per month until the contract value is exhausted at some undetermined date in the future. Which type of annuity payout option is this?
a fixed amount
A life insurance policy provision that has the ability to reduce the death benefit is called the
accelerated (living) benefit
The absolute assignment of a life insurance policy results in
all incidents of ownership transferred to the assignee
The owner's cost basis for a non-qualified deferred annuity is typically the same as the
annuity's cash value
