Exam III

4. Agent

23.According to the Law of Agency, a principal is represented by a/an (Choose from the following options) 1. Insurer 2. Broker 3. Insured 4. Agent.

d)Apparent

#39. An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority?a)Express b)Implied c)Assumed d)Apparent An agent who accepts a premium after the end of the grace period appears to the client to have the authority to prevent the policy from lapsing. In fact, the agent has no such power.

c)Fraud

#40. An agent is trying to convince a potential insured to buy a policy from him, so he misrepresents the benefits of the policy. This is an example of a)Concealment b)Indemnity c)Fraud d)Defamation Fraud is the intentional misrepresentation used to induce another party to make or refrain from making a contract, or to deceive or cheat a party.

a)Adjustment in the amount of death benefit.

#43. An insured misstates her age at the time the life insurance application is taken. This misstatement may result in a)Adjustment in the amount of death benefit. b)No change whatsoever c)Automatic lapse d)Recession of the policy If the applicant has misstated his or her age or gender on the application, the insurer, in the event of a claim, is allowed under this provision to adjust the benefits to an amount that the premium at the correct age or gender would have otherwise purchased.

1. The period of time during which accumulated money is converted into income payments

1.Which of the following best describes what the "annuity period" is? (Choose from the following options) 1. The period of time during which accumulated money is converted into income payments 2. The period of time spanning from the accumulation period to the annuitization period 3. The period of time during which money is accumulated in an annuity 4. The period of time spanning from the effective date of the contract to the date of its termination

1. Specified

10.All of the following are beneficiary designations EXCEPT (Choose from the following options) 1. Specified 2. Tertiary 3. Contingent 4. Primary.

1. Twisting

11.Agents who induce insureds to drop a policy in favor of another policy when it might not be in the insured's best interest to do so are guilty of (Choose from the following options) 1. Twisting 2. Defamation 3. Misrepresentation 4. Rebating

3. It provides income the beneficiary cannot outlive

12.Which of the following is true regarding a single life settlement option? (Choose from the following options) 1. Proceeds are paid out in a lump sum 2. It provides income for a specified period of time 3. It provides income the beneficiary cannot outlive 4. Payments continue until the entire principal is exhausted.

3. Both a life insurance license and a securities license

13.What license or licenses are required to sell variable annuities? (Choose from the following options) 1. Only a securities license 2. No license is required 3. Both a life insurance license and a securities license 4. Only a life insurance license

4. Revocable beneficiary.

14.Bonnie wants to name her husband as the beneficiary of her life policy. She also wishes to retain all of the rights of ownership. Bonnie should have her husband named as the (Choose from the following options) 1. Secondary beneficiary 2. Tertiary beneficiary 3. Irrevocable beneficiary. 4. Revocable beneficiary.

1. A presentation of nonguaranteed elements of a policy

15.The term "illustration" in a life insurance policy refers to (Choose from the following options) 1. A presentation of nonguaranteed elements of a policy 2. A depiction of policy benefits and guarantees 3. Pictures accompanying a policy 4. Charts and graphs.

2. Option B

16.Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? (Choose from the following options) 1. Option A 2. Option B 3. Corridor option 4. Variable option

2. Warranty

17.Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? (Choose from the following options) 1. Representation 2. Warranty 3. Concealment 4. Indemnity

4. Apply and pay a fee to a nonresident state that reciprocates.

18.In order to get a nonresident license is this state, producers must (Choose from the following options) 1. Pass the non-resident state exam and satisfy their continuing education requirements 2. Represent an agency located in this state 3. Surrender their licenses in their state of residence 4. Apply and pay a fee to a nonresident state that reciprocates.

3. 12 months

19.Within what time period after completing prelicensing education must an applicant file a certificate of education completion with the Commissioner? (Choose from the following options) 1. 30 days 2. 90 days 3. 12 months 4. 2 years

4. An application on which the medical information is completed by the applicant and the agent only

2.Which of the following would be considered a nonmedical insurance application? (Choose from the following options) 1. An application that does not ask any questions about the applicant's medical history 2. An agent's report 3. An application for life insurance 4. An application on which the medical information is completed by the applicant and the agent only

4. Apparent

20.An agent accepts the premium payment 35 days after it is due, telling the insured that there will not be a problem keeping the policy in force. This is an example of what type of agent authority? (Choose from the following options) 1. Express 2. Implied 3. Assumed 4. Apparent

3. Cash value

21.What limits the amount that a policyowner may borrow from a whole life insurance policy? (Choose from the following options) 1. Amount stated in the policy 2. Face amount 3. Cash value 4. Premiums paid

4. Only the annuity owner

22.Which of the following can surrender a deferred annuity contract? (Choose from the following options) 1. Only the insurance company for nonpayment of premiums 2. The beneficiary after the owner's death 3. Deferred annuity cannot be surrendered. 4. Only the annuity owner

4. Increases annually

24.Annually renewable term policies provide a level death benefit for a premium that (Choose from the following options) 1. Decreases annually. 2. Remains level 3. Fluctuates 4. Increases annually.

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

25.An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries? (Choose from the following options)1. The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time.2. The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies.3. One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies.4. The surviving beneficiary will continue receiving this 2/3 of the benefit paid when both beneficiaries were alive.

4. Pays dividends to policyowners.

26.Which of the following is usually true of a participating life insurance policy? (Choose from the following options) 1. May be converted to a term life policy. 2. Pays dividends to stockholders.3. Assesses premiums against stockholders. 4. Pays dividends to policyowners.

3. It has a guaranteed minimum interest rate

28.Why is an equity indexed annuity considered to be a fixed annuity? (Choose from the following options) 1. It has a fixed rate of return 2. It is not tied to an index like the S&P 500 3. It has a guaranteed minimum interest rate 4. It has modest investment potential.

3. Increase medical requirements on existing members

29.If an employee wants to enter the group outside of the open enrollment period, to reduce adverse selection, the insurer may (Choose from the following options) 1. Require a higher premium 2. Prolong the open enrollment period 3. Increase medical requirements on existing members 4. Require evidence of insurability.

2. Investing in the stock market.

3.All of the following actions by a person could be described as risk avoidance EXCEPT (Choose from the following options) 1. Taking a flu shot each year 2. Investing in the stock market. 3. Refusing to scuba dive 4. Never flying in an airplane.

a)With a conditional receipt, the policy is in effect as of the date of application

37. An individual applied for an insurance policy. The payment for the first premium was included with the application. Which of the following statements is correct?a)With a conditional receipt, the policy is in effect as of the date of application. b)The underwriting process is complete and coverage is issued automatically. c)The coverage would be in effect for accidental death only. d)Coverage cannot be in effect until a policy is issued and the applicant accepts the policy. If the company acknowledges receipt of the premium with a conditional receipt, the policy is in effect on the date of the application or the date of the medical exam (whichever is later), provided that the applicant is found insurable at the rate applied for.

3. A mutual insurer

4.Insurance companies may be classified according to the legal form of their ownership. The type of company organized to return any surplus money to their policyholders is (Choose from the following options) 1. A fraternal insurer 2. A stock company 3. A mutual insurer 4. A reciprocal company.

b)Option B

44. Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? a)Option A b)Option B c)Corridor option d)Variable option Under Option B the death benefit includes the annual increase in cash value so that the death benefit gradually increases each year by the amount that the cash value increases. At any point in time, the total death benefit will always be equal to the face amount of the policy plus the current amount of cash value.

c)15 days

45. If an insurer wishes to appoint a producer, it must file a notice of appointment within how many days of the date that the contract is executed? a)45 days b)7 days c)15 days d)30 days The insurer has 15 days to file a notice of producer appointment.

a) It may last for the lifetime of the annuitant or for a shorter period of time.

46. Which of the following is true regarding the annuity period? a)It may last for the lifetime of the annuitant or for a shorter period of time. b)During this period of time the annuity payments grow interest tax deferred. c)It is also referred to as the accumulation period. d)It is the period of time during which the annuitant makes premium payments into the annuity. The "annuity period" is the time during which accumulated money is converted into an income stream. It may last for the lifetime of the annuitant or for a shorter specified period of time depending on the benefit payment option selected.

c)A copy of the original application for insurance.

47. To meet the Entire Contract provision, a policy must contain a)Buyer's guide to life insurance b)Listing of the insured's former insurer(s) for incontestability provisions c)A copy of the original application for insurance d)A declarations page with a summary of insureds. An insurance contract must contain a copy of the original application.

d)A new Commissioner or Director is put into office.

48. All of the following events will terminate a producer's certificate of appointment EXCEPT a)A producer's license expires and is not renewed. b)A termination issued by the appointing insurer. c)A producer's license is suspended or revoked by the Department of Insurance. d)A new Commissioner or Director is put into office. An appointment by an insurer is based upon the person maintaining a valid insurance license. Although the appointment is made by the head of the Insurance Department, that person leaving the office does not terminate existing appointments.

2. Option B

5.Which option for Universal life allows the beneficiary to collect both the death benefit and cash value upon the death of the insured? (Choose from the following options) 1. Option A 2. Option B 3. Corridor option 4. Variable option

3. 3%

6.An insurance company forwards fixed annuity premiums to their general account, where the money is invested. The guaranteed minimum interest is set at 3%. During an economic downswing, the investments only drew 2.5%. What interest rate will the insurer pay to its policyholders? (Choose from the following options) 1. 3% regardless of what the investment draws since that's the guaranteed rate 2. 2.5% 3. 3% 4. 3% this payment. The overpayment this time will be subtracted from the next time the rate exceeds 3%.

4. Reduction

7.Following a career change, an insured is no longer required to perform many physical activities, so he has implemented a program where he walks and jogs for 45 minutes each morning. The insured has also eliminated most fatty foods from his diet. Which method of dealing with risk does this scenario describe? (Choose from the following options) 1. Transfer 2. Avoidance 3. Retention 4. Reduction

3. It has a guaranteed minimum interest rate

8.Why is an equity indexed annuity considered to be a fixed annuity? (Choose from the following options) 1. It has a fixed rate of return. 2. It is not tied to an index like the S&P 500 3. It has a guaranteed minimum interest rate 4. It has modest investment potential.

2. Annually Renewable Term

9.All other factors being equal, the least expensive first-year premium payment is found in (Choose from the following options) 1. Level Term 2. Annually Renewable Term 3. Increasing Term 4. Decreasing Term.