CA Life Insurance Exam
A whole life policy that will generate immediate cash value is a a) Single premium policy. b) Continuous premium policy. c) Variable life policy. d) Limited-pay policy.
A
All of the following statements about agents are true EXCEPT a) Exclusive agents work for themselves. b) Producers can be natural persons or corporations. c) Independent agents can be appointed by multiple insurers. d) Managing General Agents are responsible for hiring, training and supervising other agents.
A
All of the following statements are true regarding an Ordinary (Straight) Life policy EXCEPT a) It does not have a guaranteed death benefit. b) It is funded by a level premium. c) It builds cash value. d) If the insured lives to age 100, the policy matures, and the face amount is paid to the insured.
A
An individual has a $200,000 convertible term life insurance policy. If he chooses, he can a) Convert to a whole life policy for the same face amount without proof of insurability. b) Convert to another term policy with a lower face amount without proof of insurability. c) Purchase an individual annuity for any face amount using the 1035 exchange privilege. d) Purchase another term policy and increase his death benefit without proof of insurability.
A
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits? a) A portion of the benefit up to a limit is tax free; the rest is taxable income. b) Principal is tax free, but interest is taxed. c) The entire benefit will be received tax free. d) The entire living benefit is considered taxable income.
A
An insurer must notify the consumer in writing that an investigative consumer report has been requested, within how many days of the initial request? a) 3 days b) 5 days c) 10 days d) 30 days
A
Any person to whom the Commissioner has issued a seizure order and who refuses to deliver any books, records, or assets of an insurer faces the following penalties: a) A misdemeanor punishable by a fine up to $1,000, a year in jail, or both. b) A misdemeanor punishable by a $5,000 fine, if unintentional, or $10,000, if intentional. c) Administrative fines only. d) A felony punishable by a fine up to $1,000, a year in prison, or both.
A
As an insurer's field underwriter, a producer has all of the following responsibilities EXCEPT a) Issuing policies on behalf of the insurer. b) Completing applications. c) Soliciting insurance contracts. d) Collecting premiums.
A
Concerning the Family Protection Policy, all of the following statements are true EXCEPT a) Children, upon reaching the age of majority, are permitted to convert to an individual policy with proof of insurability. b) This type of policy consists of whole life on the base insured and riders on the others. c) Convertible term riders cover both the spouse and all children. d) Additional children born after the policy is issued are covered automatically at no extra cost.
A
Considering the principles of liquidity, how would the policyowner use today's cash values in a life insurance policy? a) Use it for emergency expenses b) Secure a car loan next year c) Make a down payment on a home in 5 years d) Fund a retirement
A
Guaranteeing future dividends is considered to be an unfair or deceptive act known as a) Misrepresentation. b) Twisting. c) False financial statements. d) Rebating.
A
If an insured is injured while committing an illegal act and the insured's health policy contains the Illegal Occupation provision, what percentage of the claim will be paid? a) 0% b) 50% c) 75% d) 100%
A
In a group life policy with a death benefit of more than $50,000 a) Premium cost above $50,000 is taxable as income to the employee. b) Premium cost below $50,000 is taxable as income to the insured. c) Premium cost is tax deferred. d) Premium cost is taxable to the employer.
A
In contrasting stock insurers with mutual insurers, which statement is true? a) Stock insurers are owned by the shareholders and issue nonparticipating policies. b) Stock dividends are tax free while policy dividends are taxable. c) Nonparticipating policies can pay out dividends to the policyholders. d) Mutual insurers are owned by the shareholders and issue participating policies.
A
In the event a notice sent to an insured's email is not received, an insurer must either confirm the insured's email or send a notice by regular mail within a) 5 business days. b) 7 business days. c) 10 business days. d) 30 business days.
A
In the event an annuitant dies during the accumulation period, and there is a beneficiary named in the annuity, annuity benefits would be paid to the a) Named beneficiary. b) Annuitant's estate. c) Next of kin. d) Insurance company.
A
The needs approach to calculating the amount of life insurance needed is based on a) Predicted needs of a family after the premature death of the insured. b) Whether or not the family is in the blackout period. c) Whether or not the insured has dependents. d) The estimate of what would be lost to the family in the event of the premature death of the insured.
A
Under which of the following conditions would life insurance proceeds be taxable by the federal government? a) If there is a transfer for value b) If collaterally assigned to a lender c) If taken as a lump sum d) If paid to the policyowner
A
What are the continuing education requirements for agents who market long-term care insurance policies? a) 8 hours of long-term care specific education included in the regular CE requirements b) 4 hours of long-term care education every year c) 4 hours of long-term care education every 4 years d) 8 hours of long-term care specific education in addition to the regular CE requirements
A
What does the application of contract of adhesion mean? a) Since the insured does not participate in preparing the contract, any ambiguities would be resolved in favor of the insured. b) The holder of the contract has the ultimate power of promise. c) The insurer may go to another for representation. d) It makes sure that the insured does not get more than the value of the loss.
A
What is the minimum number of members required for group life insurance in this state? a) 10 b) 15 c) 25 d) 100
A
When a whole life policy is surrendered for its nonforfeiture value, what is the automatic option? a) Extended term b) Paid up additions c) Cash surrender value d) Reduced paid up
A
When is the company responsible for actions of its agents? a) Whenever the agent is acting within the conditions of the contract b) Whenever the agent is licensed c) Always: the agent's actions are presumed to be those of the company d) Never: agents represent clients, not companies
A
Which of the following best describes pure life annuity? a) It provides the highest monthly benefits. b) It continues payments to the beneficiary when the annuitant dies. c) It is also known as refund life annuity. d) It guarantees to pay out all the proceeds.
A
Which of the following describes the tax advantage of a qualified retirement plan? a) The earnings in the plan accumulate tax deferred. b) Distributions prior to age 59½ are tax deductible. c) Employer contributions are deductible as a business expense when the employee receives benefits. d) Employer contributions are not taxed when paid out to the employee.
A
Which of the following is guaranteed under a variable whole life insurance policy? a) Minimum death benefit b) Interest rates c) Cash value d) Stock performance
A
Which of the following is the best definition of "indemnification"? a) The act of one person who agrees to restore an injured person to the condition he/she enjoyed prior to the loss b) A legal entity which acts on behalf of itself, accepting legal and civil responsibility for the actions it performs and making contracts in its own name c) A contract whereby the two parties involved agree to what things of value will be exchanged by the parties to the contract d) A contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event
A
Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance? a) Insurance application b) Risk analysis c) The law of large numbers d) Agent's Report
A
Which statement is NOT true about insurance sales? a) Brokers represent insurers in negotiating coverage with various insureds. b) Insurance solicitors cannot transact life insurance. c) Agents and brokers must exercise care when using apparent authority during the sales process. d) Mass marketing techniques usually involve selling insurance without the use of an agent.
A
All of the following are consideration in an insurance policy EXCEPT a) The promise to pay covered losses. b) The cash value in the policy. c) The statements on the application. d) The premium paid at the time of application.
B
All of the following are personal uses of life insurance EXCEPT a) Cash accumulation. b) Buy-sell agreement. c) Survivor protection. d) Estate creation.
B
All of the following are true of the Survivorship Life policy EXCEPT a) It can insure more than 2 lives. b) The premium is based on the age of each insured. c) The death benefit is not paid until the last death. d) The premium would be lower than in a joint life policy.
B
All of the following benefits are available under Social Security EXCEPT a) Death benefits. b) Welfare benefits. c) Old-age and retirement benefits. d) Disability benefits.
B
An insured has a life insurance policy in the amount of $250,000 naming his wife as beneficiary. Upon his death, his beneficiary decides not to receive the death benefit for some time. When she finally receives the death benefit check, it's in the amount of $250,530. Is any portion of the proceeds that the beneficiary receives taxable? a) No, the beneficiary is qualified for a "Bereavement Exclusions" if the beneficiary is a spouse. b) Yes, proceeds in excess of face amount are taxable as interest. c) No, proceeds from a life insurance policy are not taxable. d) Yes, proceeds from a life insurance policy are taxable.
B
An insured intentionally did not disclose a material fact on an application for insurance. This would be considered a) Misrepresentation. b) Concealment. c) Coercion. d) Avoidance.
B
At what point would an automatic premium loan be generated? a) Upon the surrender of the policy b) Following the grace period c) Upon the insured's death d) Once the policy is delivered
B
If a life insurance company uses HIV testing as a part of its underwriting, when must an applicant be notified of the procedure? a) Prior notice is not required b) Prior to performance of the test c) Prior to ordering a physical examination d) Prior to solicitation of the policy
B
If an individual willfully violates provisions of the Fair Credit Reporting Act, what is the maximum civil penalty? a) $1,000 b) $2,500 c) $5,000 d) $10,000
B
If the policy summary for a life insurance policy is not given when the application is taken, when must the policy summary be given to the policyowner? a) When the policy is issued b) When the policy is delivered c) Within 15 days of the application date d) Within 30 days of policy issue
B
In the Social Security blackout period, the surviving spouse will not receive benefits until the age of a) 59 1/2. b) 60. c) 65. d) 70 1/2
B
Joe, Larry, and Curly own a small business. They have made a legal arrangement which states that if one of them dies or becomes disabled, the other two will be able to buy the partner's shares. Which term best describes this arrangement? a) Buy-up Distribution b) Business Continuation c) Shares Distribution d) Business Partner Disability Provision
B
Joe, age 63, was disabled and can no longer work. He meets the Social Security definition of total disability. How many work credits must Joe have accumulated to have the status of fully insured? a) 20 b) 40 c) 10 d) 6
B
Key person insurance can provide protection for all of the following economic losses to a business EXCEPT a) Fund the cost of training a current employee to perform the duties of a deceased employee. b) Pay the death benefit to the estate of the insured. c) Provide deferred compensation retirement benefit if the insured key person survives to retirement. d) Fund the expense of finding a suitable replacement following the death of an employee.
B
Life settlement contracts are put into effect by which of the following? a) A nonforfeiture provision b) An absolute assignment c) The settlement options listed in the policy d) A collateral assignment All rights of ownership have been totally and permanently assigned, transferred or given to the life settlement provider. It has been an absolute assignment.
B
The insured dies 6 months after the policy issue date. Upon death of the insured, it is determined that the insured made a material misstatement on the application. What is the most likely course of action for the insurer? a) No course of action allowed since the policy has already been issued b) Rescind the policy c) An administrative hearing by the Department of Insurance d) A hearing by a court of law to determine the appropriate actions The contestability period is still in force so the policy can be rescinded by the company for material misrepresentation on the application.
B
What is the maximum loan amount a policyowner may withdrawal from a variable universal life insurance policy? a) An amount equal to the first year of premium payments b) An amount not exceeding the cash value c) An amount up to the face amount of the policy d) Nothing; loans are not allowed under variable universal life
B
Which of the following is NOT a characteristic of variable insurance and annuities? a) Cash value is adjusted for inflation. b) Benefits are determined solely based on the policy premium. c) Cash value accumulates based on the performance of stocks. d) Benefits are not guaranteed.
B
Which of the following is NOT a type of a hazard? a) Morale b) Exposure c) Physical d) Moral
B
Which of the following is NOT true regarding a deferred annuity? a) The annuity grows tax deferred. b) Income payments begin within 1 year from the date of purchase. c) It is used to accumulate funds for retirement. d) It can be purchased with a single lump sum.
B
Which of the following is consideration on the part of an insurer? a) Underwriting b) Paying a claim c) Decreasing premium amounts d) Paying the premium
B
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy? a) Premiums are taxable to the employee. b) Premiums are not tax deductible as a business expense. c) Premiums are tax deductible by the key employee. d) Premiums are tax deductible as a business expense.
B
Which of the following is true regarding pure life annuity settlement option? a) It guarantees income for a specified period of time. b) It provides the highest monthly benefit. c) It guarantees that all the proceeds will be paid out. d) The beneficiary will receive a refund of the principal.
B
Which of the following policies can be described as a flexible premium adjustable life policy? a) Credit Life b) Universal Life c) Whole Life d) Term Life
B
Which statement best describes agreement as it relates to insurance contracts? a) Each party must offer something of value. b) One party accepts the exact terms of the other party's offer. c) The intent of the contract must be legally acceptable to both parties. d) All parties must be capable of entering into a contract.
B
A life insurance policy qualifies as a Modified Endowment Contract (MEC) if the amount of premium paid exceeds the amount that would have provided paid-up insurance in how many years? a) 3 years b) 5 years c) 7 years d) The life of the policy
C
According to the Common Disaster clause, if the insured and primary beneficiary are killed in the same accident and it cannot be determined who died first, which of the following will be assumed? a) The estate of the primary beneficiary and the contingent beneficiary split benefits equally. b) The insured died before the primary beneficiary. c) The primary beneficiary died before the insured. d) The deaths occurred at the same time.
C
All of the following are advantages of a qualified retirement plan EXCEPT a) The contribution is not taxable to the employee when made. b) The funds grow tax deferred. c) The income at retirement is tax free. d) The contribution is deductible to the employer.
C
All of the following are reasons an insurer or an insured would have the right to rescind a policy EXCEPT a) When concealment is unintentional. b) An intentional omission in determining if a warranty is false. c) The amount of paid claims exceeds the premiums paid. d) The violation of a material warranty.
C
An insurer that operates for one or more social, educational, charitable, benevolent, or religious purposes for the benefit of its members is known as a a) Reciprocal insurer. b) Stock insurer. c) Fraternal insurer. d) Mutual insurer.
C
How are contributions to a tax-sheltered annuity treated with regards to taxation? a) They are taxed as income for the employee. b) They are taxed as income for the employee, but are tax free upon withdrawal. c) They are not included as income for the employee, but are taxable upon distribution. d) They are never taxed.
C
How will life insurance proceeds that are paid as a lump sum received by the beneficiary? a) Taxed as investment income b) As tax-deductible income c) Free of federal income taxation d) Taxed as ordinary income
C
If an insured purchases an insurance policy with a large deductible, what risk management technique is the insured exercising? a) Avoidance b) Sharing c) Retention d) Transfer only
C
J is receiving fixed amount benefit payments from his late wife's insurance policy. He was told that if he dies before all of the benefits are paid, the remaining amount will go to the contingent beneficiary. Which settlement option did J choose? a) Interest Only b) Joint and Survivor c) Fixed Amount d) Fixed Period
C
Policies written on a third-party ownership basis are usually written to cover which of the following? a) Insured's estate b) Policyowner's estate c) Policyowner's minor children or business associates d) Policyowners who are not insureds Most policies involving third-party ownership are written in business situations or for minors in which the parent owns the policy.
C
The Guaranteed Insurability Rider allows the owner to purchase additional amounts of life insurance without proof of insurability at all of the following EXCEPT a) Birth of a child. b) Marriage. c) Purchase of a new home. d) Approximately every 3 years between the ages of 25 and 40.
C
The entire contract includes all of the following EXCEPT a) A copy of the application. b) Any riders or amendments. c) A buyer's guide. d) The life insurance policy.
C
Wagering on a sporting event is an example of what type of risk? a) Simple b) Pure c) Speculative d) Calculative
C
When an insurer tries to discourage a policyholder from replacing an existing policy, this is called a) Retention effort. b) Adverse selection. c) Conservation effort. d) Negotiating.
C
Where are premiums from fixed annuities invested? a) A hedge fund b) A separate account c) A general account d) A variable annuity
C
Which of the following best describes life annuity with period certain option? a) The maximum guarantee period is 10 years. b) The benefit payments cease with the death of the annuitant. c) It guarantees benefit payments for life of the annuitant and for a specified period for the beneficiary. d) It provides the highest monthly benefit for an individual annuitant.
C
Which of the following indicates the person upon whose life the annuity income amount is determined? a) Owner b) Insured c) Annuitant d) Beneficiary
C
Which of the following is NOT a component of an insurance policy premium? a) Insurer expenses b) Investment return c) Number of beneficiaries d) Mortality cost
C
Which of the following is true regarding a joint life annuity? a) The payments go to a beneficiary upon the last death. b) The payments go to the surviving annuitant after the first death. c) The payments stop at the first death. d) The payments stop at the last death.
C
Without obtaining dual licensing, life-only agents may transact all of the following types of insurance EXCEPT a) Accidental death. b) Endowments. c) 24-hour care coverage. d) Disability income.
C
Your client wants to provide a retirement income for his elderly parents in case something happens to him. He wants to make sure that both beneficiaries are guaranteed an income for life. Which settlement option should this policyowner select? a) Fixed-period installments b) Life income c) Joint and Survivor d) Fixed-amount installments
C
A policyowner who is also the insured wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. The policyowner should have her husband named as the a) Secondary beneficiary. b) Contingent beneficiary. c) Irrevocable beneficiary. d) Revocable beneficiary.
D
According to the life insurance replacement regulations, which of the following would be an example of policy replacement? a) A term policy expires, and the insured buys another term life policy. b) Term insurance is changed to a Whole Life policy. c) A lapsed policy is reinstated within a specific timeframe. d) A policy is reissued with a reduction in cash value.
D
All of the following are true regarding the waiver of cost of insurance rider EXCEPT a) The rider waives insurance costs in the event the insured becomes disabled. b) The rider is only applicable to universal life policies. c) The rider cannot waive the cost of premiums that accumulate cash value. d) The rider expires when the insured reaches age 60.
D
All of the following statements about indexed whole life insurance are correct EXCEPT a) The premium is fixed. b) There is a guaranteed minimum interest rate. c) The cash value depends on the performance of the equity index. d) The policy face amount remains level throughout the life of the policy.
D
An agent has completed 30 hours of continuing education by the end of a license period instead of the required 24 hours. What will happen to the 6 hours in excess? a) They will be credited toward the agent's commissions. b) The outcome will depend upon whether it is the agent's first license period or not. c) They will be lost. d) They will be carried over into the next licensing period.
D
An agent selling variable annuities must be registered with a) Department of Insurance. b) The Guaranty Association. c) SEC. d) FINRA.
D
An applicant buys a nonqualified annuity, but dies before the starting date. For which of the following beneficiaries would the interest accumulated in the annuity NOT be taxable? a) Charitable organization b) Dependents c) Annuitant d) Spouse
D
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) Good health b) Adhesion c) Conditional d) Aleatory
D
If an insurance company issues a policy even though some questions on the application were unanswered, when can the insurer get the answers to those questions? a) Within 3 months of issuing the policy b) Within 30 days of issuing the policy c) At any time within the incontestable period d) Never; the insurer has waived its right to those answers by issuing the policy
D
If the annuitant dies before the annuity start date, which of the following is true? a) The interest will not be tax deferred. b) The interest is tax free if the beneficiary is a spouse. c) The interest is nontaxable. d) The interest is taxable.
D
In a deferred annuity, the difference between the accumulation value and the surrender value is the a) Mortality charge. b) Interest credit. c) Front end load. d) Surrender charge.
D
Life insurance creates an immediate estate. Which of the following best explains this statement? The policy has cash values and nonforfeiture values. b) The policy generates immediate cash value. c) The death benefit will always be paid to the estate of the insured. d) The face value of the policy is payable to the beneficiary upon the death of the insured.
D
Partners in a business want to make sure that if one of them were to pass away, their surviving family will receive a fair value for their portion in the business. What life insurance arrangement would be most suited for transitioning the business? a) Deferred Compensation Plan b) Executive Bonus Plan c) Split Dollar Plan d) Buy-Sell Agreement
D
Restoring an insured financially after a claim is known as a) Adhesion. b) Restoration. c) Reasonable expectations. d) Indemnity.
D
The provision that sets forth the basic agreement between the insurer and the insured and states the insurer's promise to pay the death benefit upon the insured's death is called the a) Payment of claims. b) Declarations. c) Consideration. d) Insuring clause.
D
What effect will the long-term care (LTC) rider have on the death benefit of a life insurance policy if LTC benefits were paid to the insured? a) Increase the death benefit by the amount paid into LTC b) Not affect the amount payable to the beneficiary c) Eliminate the death benefit d) Reduce the death benefit
D
What is the maximum penalty for releasing personal nonpublic information of multiple consumers without their consent? a) $2,500 b) $4,800 c) $160,000 d) $500,000
D
What is the purpose of the surrender charge in a deferred annuity? a) To punish the annuitant for breach of contract b) To prevent the over funding of the annuity c) To provide additional revenue for the insurance company d) To compensate the company for loss of investment value
D
What type of insurer uses a formal sharing agreement? a) Stock insurers b) Mutual insurers c) Fraternal Benefit Societies d) Reciprocal insurers
D
When may a representation be withdrawn by the applicant? a) Only after the insurance is in effect b) At any time as long as all parties agree c) It can never be withdrawn once submitted d) Only before the insurance is in effect
D
Which of the following best describes what the annuity period is? a) The period of time from the accumulation period to the annuitization period b) The period of time during which money is accumulated in an annuity c) The period of time from the effective date of the contract to the date of its termination d) The period of time during which accumulated money is converted into income payments
D
Which of the following is NOT a standard exclusion in life insurance policies? a) Hazardous occupation b) War and military service c) Aviation d) Disability
D
Which of the following is a correct statement about annuities? a) Variable annuities provide minimum guaranteed rate of interest. b) Variable annuities place the funds into the company's general account. c) Fixed annuities have the annuitant assume the risks of investment. d) Fixed annuities do not provide protection against inflation.
D
Which of the following is an example of liquidity in a life insurance contract? a) The death benefit paid to the beneficiary b) The flexible premium c) The money in a savings account d) The cash value available to the policyowner
D
Which of the following statements concerning the Medical Information Bureau is correct? a) The Medical Information Bureau report must be attached to each life insurance policy issued. b) All applicants for life insurance receive a copy of the findings of the life insurance medical examination. c) Information contained in the Medical Information Bureau report is available to all physicians. d) The Medical Information Bureau assists underwriters in evaluating and classifying risks.
D