Colorado Life Insurance Final Exam

A 41 year old lawyer who wants a policy to pay his mortgage if he dies (decreasing term life generally is used as mortgage insurance)

A decreasing term life policy would be the most appropriate for:

12-month period

A license is considered to be used for controlled business if the total amount of premiums on controlled business would exceed the total amount of premiums on all other insurance business during any:

30 days

A producer or business entity shall report to the Commissioner any administrative action taken against the producer within:

First

After what policy year of any life insurance policy, can suicide of the policyowner not be used as defense against the payment of benefits?

Cash surrender

Alex's life policy lapsed, which Nonforfeiture option would the insurer send him the value of the policy?

15 days

All life insurance policies have a free look period of how many days?

Fiduciary

All money received by a licensee is received in what type of capacity?

Statement identifying preprinted sales materials

All of the following must be listed in the notice regarding replacement, EXCEPT:

Other agents

An agent has a fiduciary responsibility to all the following, EXCEPT:

Rebating

An agent offering to waive the prospective client's first life insurance premium is engaging in which of the following unfair practices?

Explain the issue and collect an additional premium.

An insurance applicant submits an application with a premium. After underwriting, the insurer sends back the policy, rated, with an impairment rider. What should the producer tell the applicant at delivery?

The signature of the insured (unless not an adult), and the agent.

An insurance application is not complete unless it has:

A person who solicits, negotiates, effects, procures, delivers, renews, or continues policies of insurance in Colorado

An insurance producer includes which of the following people?

The state

An insurance producer's license is at all times the property of:

In life insurance, insurable interest must be present at the time of:

Application

59 1/2

At what age would a qualified retirement plan distribution be premature?

Flexible premium deferred annuity

Becky is a 31 years old and knows she needs to start a retirement plan. She currently works in a bakery and is worried about how inflation would affect her retirement plan. Which annuity would be a good fit for her needs?

His beneficiary will receive the full death benefit.

Blake died 20 days after his group life insurance coverage was terminated. He did not apply for individual coverage. Which of the following is true?

Death

Colorado requires producers to avoid the use of all the following words, EXCEPT:

Yes, the interest can be paid annually, or added to the loan.

Does a loan on the cash value of a life insurance policy accrue interest, and if so, how is the interest handled?

Dow Jones Industrial Average.

Dylan is looking at buying an equity-indexed life policy; it will likely be tied to:

Reduction of premium

Dylan tells the insurer to keep the dividend and apply it to his next premium. He is using which dividend option?

Delivery

Errors & Omissions are most likely to occur during:

2%

From the date of death to the date of the claim settlement, the annual rate of interest paid on death benefits is what percentage above the federal discount rate?

Renewable term

Gregory recently purchased a one-year term insurance policy. At the end of the year, he can purchase an identical policy without having to show proof of insurability. Why type of policy did he purchase?

Never taxed

How are dividends treated for tax purposes?

30 days

How many days does an insurance producer have to report to the Commissioner any administrative action taken against them as well as any criminal prosecution that occurs in another jurisdiction?

At least 5 years or until the next examination by the Department, whichever is later

How much time must a replacing insurer that uses producers be able to produce copies of the notification regarding replacement?

As often as he deems necessary

How often can the Commissioner conduct a financial examination of a licensed insurer?

The death benefit

If James has an increasing term policy, which of the following must increase?

For 2 years

If a license is revoked, an insurance producer will not be eligible to apply for a new license:

Provide the person with an order of the hearing findings

If after a hearing, the Commissioner finds that an infraction has occurred, he must:

Defamation

If an agent were to publish literature that is false or maliciously critical of another insurer calculated to injure a person engaged in the business of insurance, the agent would be committing:

Pay the death benefit based on the applicant's actual age.

If an applicant states their age is 30 on an application for life insurance, when they were actually 37, what is the insurer likely to do?

Primary

If more than one beneficiary is named, who is the first in line?

Variable annuity

If the cash values of an annuity are invested in securities, it is a:

3 individuals

In Colorado, what is the minimum number of individuals a group life policy will cover?

The application does not include the premium

In a life policy, a statement of good health is needed when:

5th degree or closer

Insurable interest exists only for those related within the:

24 hours

Insurance producers must complete how many hours of continuing education each licensing period?

Both the applicant and the producer

Insurance producers must provide any applicant who has existing policies with a written notice of the replacement regulations which must be signed by:

Variable universal life

Investment risk is completely taken by the policyowner is what type policy?

Risk classification

Jacob, James and Jonathan are triplets, and all applied for the same type of insurance coverage at the same time. For James and Jonathan the rates were the same. Jacob's rate was quite a bit higher. What is the most likely reason for this difference?

Renewability is the insurer's option.

Jamie has a renewable term policy. Which of the following is not an incorrect statement about this type of policy.

Term policy

Jeff has limited financial resources, but finds himself in a position where he needs a good deal of protection. A __________would probably best suit his needs at this time.

The value of nonforfeiture options may decrease.

Jennifer made an additional premium payment on her Adjustable Life policy. Which of the following is not a way that her policy is affected by this payment?

The grace period provision

Kim's policy remained in force for a certain number of days even though she forgot to pay the premium. The provision that allows this is called:

A life insurance application requires the agent, proposed insured, and the policy owner if different from the insured to sign it.

Life insurance applications require a signature from

Accelerated benefits

Life insurance death benefits that can be accessed tax-free when the insured is still alive are called:

Pay the death benefit.

Mr. Jones, the insured, committed suicide after the expiration of the suicide clause in his life insurance policy. The insurer is obligated to:

Shares of stock

No insurance producer may make statements which misrepresent any insurance policy as being:

Gets written permission from the state

No insurer may require an applicant to submit to an HIV-related test unless the insurer does all the following, EXCEPT:

January 22, after the statement of good health is signed, and the initial premium is paid.

On January 3, an application is submitted without the initial premium. The insurer requires a medical exam, and it is completed on January 15. On January 20, the insurer issued the policy standard, and the producer delivers it on January 22. When is coverage effective?

November 7

On November 5, Zoe fills out an application for a life policy. On November 6, the agent accepts the premium for the policy. The policy is delivered on November 7. Which date does the Free Look period start?

MECs (Modified Endowment Contracts)

Over-funded life insurance policies where the proceeds are subject to taxation are called:

Survivorship life

Phil and Sarah bought a life policy in which both are insured. Sarah dies before Phil. If the policy pays the death benefit after Phil dies, it is a:

Assignment

Richard is thinking about transferring some of the ownership rights of his policy to his brother Randy. What term is used for this type of transfer?

Younger siblings of the policyholder

Riders covering additional insureds can be added to life policies and cover all but which of the following?

Key person insurance

The Beauty Shop Cosmetic Company purchases a life insurance policy on Anna, the company's leading salesperson. Which business continuation plan does this company have?

To lower the cost of insurance

The Colorado Insurance Fraud Statute designed to accomplish all of the following, EXCEPT:

Failing to pay federal income taxes

The Insurance Commissioner may place an insurance producer on probation, suspend, revoke, or refuse to issue or renew a license, order restitution to be paid, or order a civil penalty for all the following, EXCEPT:

Revocable

The beneficiary designation that allows the policy to be changed without the beneficiary's consent:

The entire contract

The fact that the application is part of the policy is stated in:

Return of premium

The life insurance rider that pays the face amount plus the total premiums paid into the policy is known as:

Settlement options

The manner in which the proceeds of a life policy are handled are specified in what provision?

Consideration Clause

The policyowner's obligation to pay the premium is the:

Tell the prospective client that a claim might be rejected later due to the omission.

The producer realizes that the prospective client omitted information about a prior illness. What should the producer do?

Guaranteed insurability

The rider that you would pick if you want to be able to add coverage in the future, without having to show proof of insurability:

Class 1 Misdemeanor

Unauthorized practice of insurance is a:

Needs

What approach calculates the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities?

Cost of death protection deducted and current interest rate credited

What are the two most common adjustments made during a month with a universal life insurance policy?

Fair Credit Reporting Act

What guarantees Jason the right to question the source and validity of consumer information used to rate a policy?

Waive an insured's premiums if he/she becomes disabled.

What is the advantage of a Waiver of Premium provision in a life policy?

It provides a temporary waiver of premium if the person paying the premium dies.

What is the advantage of a payor benefit rider?

Application

What is the biggest source of information used in underwriting?

Foreign or alien

What kind of company can the Commissioner file a complaint to enjoin and restrain from continuing violations of the insurance regulations of Colorado?

Life annuity

What kind of contract pays an income to an insured until the insured dies?

Buyer's Guide and disclosure document

What must the insurer provide the buyer with when procuring an application for life insurance?

Contributory

What type group plan requires 75% participation?

Group

What type of premiums payment can employers deduct as an ordinary business expense?

Joint life

What type policy would pay the death benefits after the first person dies, if it covers two or more lives?

Coercion

What unfair trade practice manipulates through the prospect of something desirable?

Representations

When Jason filled out his application his statements had to be ______________ to be considered legal.

Consumer's insurance needs and financial objectives

When an insurance producer recommends a suitable annuity product to a customer, on what should the producer base their recommendation?

Automatic premium loan

Which of the following could be used to prevent a lapse in the payment of life insurance premiums?

Sex

Which of the following factors does not influence the amount that an individual receives as monthly income under Social Security?

A group formed for the purpose of obtaining insurance

Which of the following groups is ineligible for group life insurance?

Asking for the insured's signature on claim documents

Which of the following is NOT an unfair claim settlement or compromise practice?

Examining applications and issuing certificates of authority to insurance companies to transact insurance business

Which of the following is a duty of the Commissioner?

A consent form must be signed by the applicant prior to the test.

Which of the following must happen before an HIV test is performed on an applicant?

Policy loans are taxable as income.

Which of the following statements is not true about the tax liabilities for individual life insurance policies?

Discrimination abased on occupation

Which of the following would NOT be considered unfair discrimination?

Accelerated benefit rider

Which rider on Diane's life policy will help her out when she is confined to a nursing home with a terminal illness?

Single premium whole life insurance

Which type of life policy would best suit someone who retires in good health with a large amount of cash, whose investment goals are conservative?

The policyowner

Who has the right to change the beneficiary on a life policy?