Comprehensive Exam Questions

A partnership involving four equal partners is valued at $1,800,000. Under a Cross Purchase Plan, the amount of the policy on the life of each partner would be:

$150,000 4 partners each buy 3 policies (4 x 3 = 12) $1,800,000/12 = Each partner's ownership share equals $450,000, thus each partner would own a $150,000 policy on the life of each of the other three partners under a Cross Purchase Plan (3 x $150,000 = $450,000). There would be a total of 12 (4 x 3) policies (12 x $150,000 each = $1,800,000).

The LMC Partnership has 3 partners and is concerned about what would happen to their $300,000 business if one of the partners should die. If they consider a buy-sell agreement, then each partner would have to buy a policy in the amount of $__________ on the other partners.

$50,000 3 partners each buy 2 policies (3 x 2 = 6) $300,000/6 = If there are 3 partners in a company valued at $300,000, then each would have a $100,000 interest in the company. Each partner would purchase a policy on the other partners, providing for a total of 6 policies (3x2 = 6). Each policy would be valued at $50,000 (6 x $50,000 =$300,000).

What is the maximum duration a temporary license may be valid for? A) 3 months B) 12 months C) 15 months D) 6 months

15 6 months from original issue date, can be renewed for 3 months at a time, up to 15 months

If an insurer makes a payment for a claim but the insured is dissatisfied with it, the insured must wait _____ days after proof of loss before taking any legal action.

60

Reciprocal agreements, as defined in the Georgia Insurance Code, refers to: A) Agreement between the Insurance Commissioner and regulators of other states in order to facilitate licensing of nonresident adjusters in Georgia and other states B) An agency partnership C) Commission sharing agreements between licensees D) Agreements authorizing insurers to mechanically or electronically reproduce an agent's signature on insurance contract documents

A) Agreement between the Insurance Commissioner and regulators of other states in order to facilitate licensing of nonresident adjusters in Georgia and other states

An application for health insurance includes all of the following information, except: A) Attending physician's statement B) Medical status of immediate family members C) Past and present health conditions D) The applicant's age, gender, date of birth, and occupation

A) Attending physician's statement The application includes general questions relating to the applicant (date of birth, gender, residence, marital status, and occupation) and medical questions (past and present health conditions, recent medical visits, procedures, hospitalizations or surgeries, and medical status of immediate family members). The attending physician's statement is separate from the application and is requested by the underwriter if the applicant has a preexisting condition that needs further explanation.

Insurers include provisions in contracts to help reduce unnecessary claims and the overpayment of claims. Which of the following is not one of those provisions? A) Consideration Clause B) Concurrent Review C) Mandatory Second Surgical Option D) Emergency Services

A) Consideration Clause The other choices are Managed Care Provisions designed to contain costs. The Consideration Clause stipulates that the payment of the first premium and the statements in the application are the applicant's consideration, and the insurer's consideration is the promise to pay within the contract terms.

All of the following are Dividend Options, except: A) Extended term B) Cash C) One-year term D) Paid-up additions

A) Extended term

Which clause in a contract would state that Jim is covered by XYZ insurer for a monthly benefit of $2,000 in the event of disability? A) Insuring Clause B) Consideration Clause C) Free Look Provision D) Entire Contract

A) Insuring Clause The Insuring Clause states who is covered, by whom, for how much, for what period, and against what peril.

______________ is a form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates. A) Adjustable Life B) Current Assumption Whole Life C) Universal Life D) Traditional Whole Life

B) Current Assumption Whole Life Current Assumption or Interest-Sensitive Whole Life is a form of whole life in which the insurance company can change the premiums or interest rate being credited to the account based on current money market rates.

Advertisements must: A) Avoid any potential for confusion by either identifying the soliciting agent, or the insurance company, but not both B) Must inform prospective buyers of the issuing insurer's full name when advertising a specific policy C) Must include symbol or seal indicating the state has approved the policy for sale D) Not include form numbers but only use appropriate description

B) Must inform prospective buyers of the issuing insurer's full name when advertising a specific policy advertisements must identify both agent and insurer

An insured has a $25,000 annual renewable term life policy, originally purchased on her birthday, April 1st of last year. She forgot to pay the $250 renewal premium, and dies in an accident on April 15. The beneficiary will receive: A) $24,750 B) Nothing C) $25,000 less the earned premium due D) $25,250

C) $25,000 less the earned premium due If a death occurs during the grace period, only the earned premium may be deducted from the death benefit. The insurer cannot retain the entire annual premium, but is entitled to 15 days' premium (about $10.27 in this example). The beneficiary receives the balance of the death benefit.

What is the difference between a probationary license, a temporary insurance license, and a limited insurance license? A) A probationary license is only in effect while one is preparing to take a licensing exam B) A limited license only allows one to sell one type of life insurance, such as life insurance, health insurance, property insurance, or casualty insurance C) A temporary license does not grant the licensee the power to sell new policies D) A temporary license is granted for a period of between three months and 12 months

C) A temporary license does not grant the licensee the power to sell new policies - A temporary license allows a designated individual to maintain the existing business and service existing clients in cases where another producer dies, becomes disabled, and to his military service, or is in training to be a licensed agent. - A probationary license may be part of a disciplinary action and it is granted for a period of between 3 and 12 months. - A temporary license is granted for a period of 6 months, and may be renewed for up to 15 months. - Limited licenses do not allow an individual to sell major lines of insurance. Limited lines include such things as credit insurance and portable electronics insurance.

The Insuring Clause under an individual A&H policy would contain all the following, except: A) The length of the policy period B) What perils are covered C) Premium or rate calculations D) The name of the insured and insurer

C) Premium or rate calculations Premiums or rates would be part of the Consideration Clause. All of the other answers would be part of the Insuring Clause.

The nonforfeiture option that provides coverage for the longest period of time is: A) Cash surrender value B) Automatic Premium Loan C) Reduced Paid-Up D) Extended Term

C) Reduced Paid-Up Extended term provides the most amount of coverage for the least amount of time, whereas reduced paid-up provides the least amount of coverage for the longest period of time.

When would a life insurance policy loan be subject to income taxation? A) When the policy loan is greater than the premiums paid into the policy B) When the outstanding loan is in excess of $10,000 C) When any part of the policy loan is used to pay for the policy's premium D) If the policy lapses when there is a policy loan outstanding which is in excess of the policy's cost basis

D) If the policy lapses when there is a policy loan outstanding which is in excess of the policy's cost basis Only the portion of an outstanding policy loan in excess of the policy's cost basis will be subject to income taxation if the policy lapses.

All of the following are Optional Uniform Provisions, except: A) Change of Occupation B) Illegal Occupation C) Misstatement of Age D) Legal Actions

D) Legal Actions Legal actions is mandatory

A file with copies of all advertisements must be maintained:

For 4 years or until the next exam, whichever is longer

Mandatory uniform provisions found in health insurance policies are designed to protect the _________

insured