Exam FX - MS Life Quiz Questions

An insured receives an annual life insurance dividend check. What term best describes this arrangement?

Cash option

What characteristic makes whole life permanent protection?

Coverage until death or age 100

The minimum rate of return that that an annuity earns in a deferred annuity is determined by the:

Guaranteed Interest Rate

If taken as a lump sum, life insurance proceeds to beneficiaries are passed

free of federal income taxation

What is the name of the insured who enters into a viatical settlement?

Viator

Which of the following policies will provide permanent protection?

Whole life

The insured under a $100,000 life insurance policy with a triple indemnity rider for accidental death was killed in a car accident. It was determined that the accident was his fault. The triple indemnity rider in the policy specifies that the death must not be contributed to by the insured in any manner. In this case, what will the policy beneficiary receive?

$100,000

An individual purchased a $100,000 Joint Life policy on himself and his wife. Eight years later, he died in an automobile accident. How much will his wife receive from the policy?

$100,000 - in JLP death benefit is paid upon the first death only

The insured is also the policyowner of a whole life policy. What agemust the insured attain in order to receive the policy's face amount?

100

If the owner of a whole life policy who is also the insured dies at age 80, and there are no outstanding loans on the policy, what portion of the death benefit will be paid to the beneficiary?

A full death benefit

An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?

A portion of the benefit is tax free; the rest is taxable income

If a person purchases a Flexible Premium Deferred Annuity, when is the soonest that income payouts will begin?

After 1 year

Which of the following best describes fixed-period settlement option?

Both the principal and interest will be liquidated over a selected period of time

Which of the following would describe a legal document which would dictate who can buy a deceased partner's share of a business and for what amount?

Buy-sell agreement

An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of insurance policy would be best suited to this situation?

Decreasing term

When twin brothers applied for life insurance from Company A, the company found that while neither of them smoked and both had a very similar lifestyle, one of the twins was in a much stronger financial position than the other. Because of this, the company charged him a higher rate for his insurance. This practice is considered

Discrimination - different rates for same class

Both Universal Life and Variable Universal Life have a

Flexible premium

Life insurance death proceeds are

Generally not taxed as income

Which of the following is another term for the accumulation period of an annuity?

Pay-in period

Which of the following has the right to convert the existing term coverage to permanent insurance?

Policyowner

Upon assuming office, the Commissioner must

Post a performance bond

Which of the following best describes target premium in a universal life policy?

The recommended amount to keep the policy in force throughout its lifetime

Which kind of policy allows withdrawals or partial surrenders?

Universal life

Which of the following types of policies allows the policyowner to skip premium payments, provided that there is enough cash value in the policy to cover the premium account?

Universal life

In an annuity, the accumulated money is converted into a stream of income during which time period?

Annuitization period

Partners in a business enter into a buy-sell agreement to purchase life insurance, which states that should one of them die prematurely, the other would be financially able to buy the interest of the deceased partner. What type of insurance policy may be used to fund this agreement?

Any form of life insurance may be used to fund a buy-sell agreement

When a fixed annuity owner pays his/her insurance company a monthly annuity premium, where is this money placed?

The insurance company's general account

Which statement best defines a Multiple Employer Welfare Arrangement? (MEWA)?

a joining together by the employers to provide health benefits for employees

All other factors being equal, the least expensive first-year premium payment is found in

annually renewable term

Which of the following protects the insured from an unintentional policy lapse due to nonpayment of a premium?

automatic premium loan provision

Which of the following is NOT a type of whole life insurance? A) Increasing B) Single Premium C) Straight life D) Limited Payment

ANSWER (A) Increasing term

All of the following are true regarding a decreasing term policy EXCEPT? A) The payable premium amount steadily declines throughout the duration of the contract B) The death benefit is $0 at the end of the policy term C) The contract pays only in the even of death during the term and there is no cash value D) The face amount steadily declines throughout the duration of the contract

ANSWER (A) The payable premium amount steadily declines throughout the duration of the contract

If a beneficiary wants a guarantee that benefits paid from principal and interest would be paid for a period of 10 years before being exhausted, what settlement option should the beneficiary select?

Fixed period

Which Universal Life option has a gradually increasing cash value and a level death benefit?

Option A

A rider attached to a life insurance policy that provides the coverage on the insured's family members is called the

Other-insured rider

Which of the following refers to the amount of retirement benefits a worker receives under Social Security based on the worker's earnings and retirement age?

PIA (Primary Insurance Amount) - formula used to determine the amount of benefits a worker will receive under Social Security

An insured committed suicide one year after his life insurance policy was issued. The insurer will

Refund the premiums paid

An insured will be allowed to reactivate her lapsed life insurance policy if action .is taken within a certain period of time, and proof of insurability is provided. Which policy provision is this?

Reinstatement provision

`A domestic insurer issuing variable contracts must establish one or more:

Separate accounts

An insurance policy that only requires payment of premium at its inception, provides insurance protection for the life of the insured, and matures at the insured's age 100 is called

Single premium whole life

Which of the following applicants would NOT qualify for a Keogh Plan?

Someone who works 400 hours per year

Which of the following policies would be classified as a traditional level premium contract?

Straight Life

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT

The interest is not taxable since it remains inside the insurance policy

The interest earned on policy dividends is

taxable

What is the purpose of establishing the target premium for a universal life policy?

to keep the policy in force

All of the following statements about equity index annuities are correct EXCEPT A) The interest rate is tied to an index such as the Standard & Poor's 500 B) They invest on a more aggressive basis aiming for higher returns C)The annuitant receives a fixed amount of return D) They have a guaranteed minimum interest rate

ANSWER (C)The annuitant receives a fixed amount of return

Which of the following is NOT a term for the period of time during which the annuitant or the beneficiary receives income A) Pay-out period B) Liquidation period C) Depreciation period D) Annuitization period

ANSWER (C) Depreciation period

Which of the following is true regarding the annuity period? A) It is also referred to as the accumulation period B) It is the period of time during which the annuitant makes premium payments into the annuity C) It may last for the lifetime of the annuitant D) During this period of time the annuity payments grow interest tax deferred

ANSWER (C) It may last for the lifetime of the annuitant

A Return of Premium term life policy is written as what type of term coverage?

Increasing

What are the two components of a universal life policy?

Insurance and cash account

Which of the following policy components contains the company's promise to pay?

Insuring clause

An insured purchased a Life Insurance policy. The agent told him that depending upon the company's investments and expense factors, the cash values could change from those shown in in the policy at issue time. The policy is a/an

Interest-sensitive Whole Life

What would be an advantage to naming a contingent (or secondary) beneficiary in a life insurance policy?

It determines who receives policy benefits if the primary beneficiary is deceased.

Variable life insurance is based on what kind of premium?

Level fixed

Which of the following is an example of a limited-pay life policy?

Life Paid-up at Age 65

All other factors being equal, what would the premium be like in a survivorship life policy compared to the premium in a joint life policy?

Lower

Which of the following types of insurance policies would provide the greatest amount of protection for a temporary period during which an insured will have limited financial resources?

Term

An insured purchased a 10-year level term life policy that is guaranteed renewable and convertible. What happens at the end of the 10-year term?

The insured may renew the policy for another 10 years, but at a higher premium rate

Which of the following determines the cash value of a variable life policy?

The performance of the policy portfolio

Which of the following statements is correct regarding a whole life policy?

The policyowner is entitled to policy loans

An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?

The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive

Which of the following statements is TRUE concerning irrevocable beneficiaries?

They can be charged only with written consent of that beneficiary

Which of the following is TRUE for both equity indexed annuities and fixed annuities?

They have a guaranteed minimum interest rate

Which of the following insurance arrangements will be appropriate for a parent buying life insurance on a child where the parent is the poicyowner?

Third-party ownership

What is the purpose of key person insurance?

To lessen the risk of financial loss because of the death of a key employee

In a survivorship life policy, when does the insurer pay the death benefit?

Upon the last death

Which of the following requires a securities license?

Variable annuity

All of the following could own group life insurance EXCEPT

a group needing low-cost life insurance

A father purchases a life insurance policy on his teenage daughter and adds the Payor Benefit rider. In which of the following scenarios will the rider wave the payment f premium?

If the father is disabled for more than 6 months

Which of the following is an IRS qualified retirement program for the self-employed?

Keogh (also called HR-10)

Which statement is NOT true regarding a Straight Life policy? A) The face value of the policy is paid to the insured at age 100 B) It usually develops cash value by the end of the third policy year C) It has the lowest annual premium of the three type of Whole Life policies D) Its premium steadily decreases over time, in response to its growing cash value

ANSWER (D) Its premium steadily decreases over time, in response to its growing cash value

Which of the following is incorrect regarding a $100,0000 20-year level term policy? A) At the end of 20 years, the policy's cash value will equal $100,000 B) the policy premiums will remain level for 20 years C) if the insured dies before the policy expired, the beneficiary willl receive $100,000 D) the policy will expire at the end of the 20-year period

ANSWER: (A) At the end of 20 years, the policy's cash value will equal $100,000

Level term insurance provides a level death benefit and a level premium during the policy term. If the policy renews at the end of a specified period of time, the policy premium will be

Adjusted by the insured's age at the time of renewal

With a Single Premium Deferred Annuity (SPDA), when are the benefits paid?

After more than 1 year

Which of the following is TRUE regarding a policy issued to a labor union insuring members of the organization for the benefit of persons other than the union or organization?

All of the above: - eligible members for insurance under the policy must be union members - premiums paid either from union funds, or funds contributed by insured members, or both - insurer ma exclude or limit coverage on any person who provides unsatisfactory evidence of insurability to the insurer

When the Commissioner determines that a licensee has violated the regulations of the MS Insurance Code, the Commissioner's first response is likely to be

Issue a cease and desist order

An insured buys a 5-year level premium term policy with a face amount of $10,000. The policy also contains renewability and covertibility options. When the insured renews the policy in 5 years, what will happen to the premium?

It will increase because the insured will be 5 years older than when the policy was originally purchased.

A deferred annuity is surrendered prior to annuitization. Which of the following bet describes the nonforfeiture value of the annuity?

The surrender value should be equal to 100% of the premium paid, minus any prior withdrawals and surrender charges.

For an individual who is not covered by an employer-sponsored plan, IRA contributions are

tax deductible

When the owner of a $25,000 life insurance policy died, the beneficiary decided to leave the proceeds of the policy with the insurance company and selected the Interest Settlement Option. If at the time of withdrawal the interest paid was $11,000, the beneficiary would be required to pay income tax on

$11,000

An insured purchased a 15-year level term life insurance policy with a face amount of $100,000. The policy contained an accidental death rider, offering a double indemnity benefit. The insured was severely injured in an auto accident, and after 10 weeks of hospitalization, died from the injuries. What amount would his beneficiary receive as a settlement?

$200,000

An agent breaks an insurance law regulating how long records must be kept. However, a penalty for breaking this law hasn't been established. What penalty will the agent face?

$5,000

The requirement that agents not commingle insurance monies with their own funds is known as

Fiduciary responsibility

All of the following are TRUE regarding the covertibility option under a term life insurance policy

- most term policies contain a convertibility option - upon conversion, the premium for the permanent policy will be based upon the attained age - evidence of insurability is not required

What is the minimum age to apply for a resident license in this state?

18

An insurer just filed a premium rate with the Commissioner. Assuming the rate is denied, within how many days can the insurer begin using that premium rate?

31

A resident of another state that moves to MS has how many days after establishing residency to make application to MS for licensure without taking an examination or completing prelicensing?

90 days

When would a 20-pay whole life policy endow?

When the insured reaches age 100

All of the following entities regulate variable life policies EXCEPT A) The Insurance Department B) The Guaranty Association C) Federal government D) The SEC

ANSWER (B) The Guaranty Association

In which of the following cases will the insured be able to receive the full face amount from a whole life policy? A) at age 65 B) if he insured lives to age 100 C) as soon at the cash value exceeds the face amount D) if there are no named beneficiaries when the policy is paid up

ANSWER (B) if the insured lives to age 100

Twin brothers are starting a new business. They know it will take several years to build the business to the point they can pay off the debt incurred in starting the business. What type of insurance would be the most affordable and still provide a death benefit should one of them die?

Joint Life

A married couple owns a permanent policy which covers both of their lives and pays the death benefit only upon the death of the first insured. Which policy is that?

Joint Life Policy

Variable Life insurance is based on what kind of premium?

Level fixed

If the Commissioner has determined not to renew a producer's license, which of the following needs to happen?

The producer must be notified in writing

To which of the following situations does the Replacement Regulation apply?

Whole Life Insurance (Does not apply to (1) nonconvertible or nonrenewable term expires in 5 years or less, (2) group life insurance, (3) coverage with the same insurer, or (4) immediate annuities purchased with proceeds from an existing policy

In Mississippi, any person who acts as an agent without having the proper license may be found guilty of a misdemeanor and subject to a penalty of

a fine of up to $500 and up to 2 years in jail

What is the minimum required time period during which replacing insurers must keep records pertaining to a replacement transaction?

at lease 5 years of of termination or expiration of the policy

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

To sell variable life insurance policies, an agent must receive all of the following EXCEPT A) a FINRA registration B) a securities license C) a life insurance licenses D) a SEC registration

ANSWER: (D) a SEC registration

Which of the following would be deducted from the death benefit paid to a beneficiary, if a partial accelerated death benefit had been paid while the insured was still alive?

Amount paid with the accelerated benefit, plus the earnings lost by insurance company in interest income from the accelerated benefit

Which of the following terms is used to name the nontaxed return of unused premiums?

Dividend

Which of the following best describes an insurance company that has been formed under the laws of this state?

Domestic

For a retirement plan to be qualified, it must be designed for the benefit of

Employees

In the Executive Bonus plan, who is the owner of the policy, and who pays the premium?

Executive is the owner, and executive pays the premium

What does "level" refer to in level term insurance?

Face amount

Which policy component decreases in decreasing term insurance?

Face amount

Social security was created to protect against all of the following EXCEPT

bad investment choices

Which of the following allows the insurer to relieve a minor insured from premium payments if the minor's parents have died or become disabled?

payor benefit

If the policyowner, the insured, and the beneficiary under a life insurance policy are three different people, who has the ownership rights?

policyowner