Exam practice test

Under which nonforfeiture option does the company pay the surrender value and have no further obligations to the policyowner? A.) Extended term B.) Cash surrender C.) Reduced paid-up D.) Paid-up options

Cash surrender

Which of the following must an insurer obtain in order to transact insurance within a given state? A.) Business entity license B.) Producer's certificate C.) Insurer's license D.) Certificate of authority

Certificate of authority

If an applicant for a life insurance policy is found to be a substandard risk, the insurance company is most likely to A.) Require a yearly medical examination. B.) Lower its insurability standards. C.) Charge a higher premium. D.) Refuse to issue the policy.

Charge a higher premium.

A long stretch of national economic hardship causes a 7% rate of inflation. A policyowner notices that the face value of her life insurance policy has been raised 7% as a result. Which policy rider caused this change? A.) Value Adjustment Rider B.) Inflation Rider C.) Return of Premium Rider D.) Cost of Living Rider

Cost of Living Rider

Which of the following is NOT allowed in credit life insurance? A.) Creditor having a collateral assignment on the policy B.) Creditor requiring that a debtor buys insurance from a certain insurer C.) Creditor requiring that a debtor has life insurance D.) Creditor becoming a policy beneficiary

Creditor requiring that a debtor buys insurance from a certain insurer

If taken as a lump sum, life insurance proceeds to beneficiaries are passed A.) Tax-deductible. B.) Free of federal income taxation. C.) Without interest. D.) Part tax-free and part taxable.

Free of federal income taxation.

An Arizona resident has a life insurance policy that has a grace period of 31 days. What kind of life insurance policy is it? A.) Term Life B.) Group Life C.) Individual Life D.) Whole Life

Group Life

A policy will pay the death benefit if the insured dies during the 20-year premium-paying period, and nothing if death occurs after the 20-year period. What type of policy is this? A.) Level term B.) Ordinary life policy C.) Limited pay whole life D.) Term to specified age

Level term

The premium of a survivorship life policy compared with that of a joint life policy would be A.) Lower. B.) Higher. C.) As high. D.) Half the amount.

Lower

Which of the following premium modes would result in the highest annual cost for an insurance policy? A.) Quarterly B.) Annual C.) Monthly D.) Semi-annual

Monthly

Which of the following is a qualification for an adjuster's license? A.) Must be at least 18 years old B.) Must have a college degree C.) Must be a resident of the county in which the adjuster is conducting business D.) Must have not committed any act that is grounds for denial

Must be at least 18 years old

Using a class designation for beneficiaries means A.) Naming each beneficiary by his or her name. B.) Naming an estate as the beneficiary. C.) Not naming beneficiaries. D) Naming beneficiaries as a group.

Naming beneficiaries as a group.

Which of the following best describes gross annual premium? A.) Expense premium B.) Net premium plus expenses C.) Basic insurance rate plus commissions D.) Annual loading

Net premium plus expenses

An insured has a continuous premium whole life policy. She would like to use the policy dividends to pay off her policy sooner than would have been possible otherwise. What dividend option could she use? A.) One-year term B.) Reduction of premium C.) Accumulation at interest D.) Paid-up option

Paid-up option

Which option is being utilized when the insurer accumulates dividends at interest and then uses the accumulated dividends, plus interest, and the policy cash value to pay the policy up early? A.) Paid-up option B.) Accumulation at Interest C.) Paid-up additions D.) Dividend Accumulation option

Paid-up option

An applicant wants to buy a policy that has a cash value element. Which type should she buy? A.) Term B.) Stock C.) Investment D.) Permanent

Permanent

All of the following are characteristics of group life insurance EXCEPT A.) Group life insurance is written as a master policy. B.) Certificate holders may convert coverage to an individual policy without evidence of insurability. C.) Individuals covered under the policy receive a certificate of insurance. D.) Premiums are determined by the age, sex and occupation of each individual certificate holder.

Premiums are determined by the age, sex and occupation of each individual certificate holder.

Which of the following factors is NOT considered by an underwriter when determining the premium rates for an individual seeking insurance? A.) Sex B.) Medical history C.) Age D.) Race

Race

The policyowner pays for her life insurance annually. Until now, she has collected a nontaxable dividend check each year. She has decided that she would rather use the dividends to help pay for her next premium. What option would allow her to do this? A.) Cash option B.) Accumulation at interest C.) Reduction of premium D.) paid-up addition

Reduction of premium

Insurance is the transfer of A.) Hazard. B.) Peril. C.) Loss. D.) Risk.

Risk

Adverse selection is a concept best described as A.) Poor choices of applicants to be covered. B.) Risks with higher probability of loss seeking insurance more often than other risks. C.) Underwriters slanting the odds in favor of the company. D.) Only offering coverage to good risks.

Risks with higher probability of loss seeking insurance more often than other risks.

A domestic insurer issuing variable contracts must establish one or more A.) Separate accounts. B.) Liability accounts. C.) Annuity accounts. D.) General accounts.

Separate accounts

The Ownership provision entitles the policyowner to do all of the following EXCEPT A.) Assign the policy. B.) Designate a beneficiary. C.) Set premium rates. D.) Receive a policy loan.

Set premium rates.

Upon policy delivery, the producer may be required to obtain any of the following EXCEPT A.) Statement of good health. B.) Signed waiver of premium. C.) Delivery receipt. D.) Payment of premium.

Signed waiver of premium.

Which of the following determines the length of time that benefits will be received under the Fixed-Amount settlement option? A.) Predetermined length of time stated in the contract B.) Amount of interest C.) Size of each installment D.) Length of income period

Size of each installment

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? A.) Term B.) Annuity C.) Variable life D.) Whole Life

Term

Which of the following may NOT be included in an insurance company's advertisement? A.) An identification of a limited policy as a limited policy B.) That its policies are covered by a state Guaranty Association C.) The policies' limitations or exclusions D.) The name of a specific agent

That its policies are covered by a state Guaranty Association

If an insurer has overpaid the benefit on an annuity because the age of the insured was misstated, A.) The insured may be required to repay the insurer. B.) The amount will be written in as an additional charge on a new contract. C.) The insurer may sue for recovery of the overpaid funds. D.) The amount and an interest charge may be charged against the current or next payments.

The amount and an interest charge may be charged against the current or next payments.

Which of the following is an example of liquidity in a life insurance contract? A.) The cash value available to the policyowner B.) The money in a savings account C.) The flexible premium D.) The death benefit paid to the beneficiary

The cash value available to the policyowner

Which of the following is true regarding a waiver of a surrender charge on an annuity contract? A.) The charge can only be waived if the annuitant needs the funds for medical expenses. B.) The surrender charge will be applied to all premature surrenders. C.) The surrender charge waiver only applies to immediate annuity. D.) The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days.

The charge may be waived if the annuitant is confined to a long-term care facility for at least 30 days.

An individual applied for an insurance policy and paid the initial premium. The insurer issued a conditional receipt. Five days later the applicant had to submit to a medical exam. If the policy is issued, what would be the policy's effective date? A.) The date of application B.) The date of issue C.) The date of medical exam D.) The date of policy delivery

The date of medical exam

Which of the following would NOT fall into the category of costs associated with death? A.) Final medical expenses of the insured B.) Day to day expenses of maintaining the family C.) The expense of a vacation for surviving family members D.) Funeral expenses

The expense of a vacation for surviving family members

Who bears all of the investment risk in a fixed annuity? A.) The beneficiary B.) The insurance company C.) The annuitant D.) The owner

The insurance company

In Arizona, any item can be considered an illegal inducement if it is worth more than A.) $10. B.) $20. C.) $25. D.) $5.

$25.

If $100,000 of life insurance proceeds were used in a settlement option, which paid $13,000 per year for ten years, which of the following would be taxable annually? A.) $3,000 B.) $13,000 C.) $10,000 D.) $7,000

$3,000

An insured purchased an annuity contract in 2018. When did/will the contract become incontestable? A.) 2020 B.) 30 days after it was received C.) In 2019 D.) 2028

2020

Annuities or pure endowment contracts have a grace period of at least A.) 30 days. B.) 14 days. C.) 1 month. D.) 31 days.

30 days

Within how many days must an applicant for an annuity contract receive the disclosure document and the buyer's guide if the application was not taken in a face-to-face meeting? A.) 5 business days B.) 10 business days C.) 15 calendar days D.) 3 calendar days

5 business days

According to the NAIC Insurance Data Security Model Law, licensees are required to report cybersecurity events to the state insurance department within what time period of discovery? A.) 10 days B.) 5 days C.) 72 hours D.) 24 hours

72 hours

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.) A death benefit equal to the cash value of the policy B.) A full death benefit C.) 50% of the death benefit D.) The face amount minus the premiums that would have been collected until the insured reached the age of 100

A full death benefit

All of the following could own group life insurance EXCEPT A.) A group sponsored by an employer. B.) An alumni group. C.) A group needing low-cost life insurance. D.) A debtor group.

A group needing low-cost life insurance.

Which of the following type(s) of licenses is/are required to sell variable insurance products in this state? A.) A life insurance license and an annuities license B.) A life insurance license and a registered representative license C.) A life insurance producer license only D.) A registered representative license only

A life insurance license and a registered representative license

Which of the following is NOT a standard exclusion, included in most life insurance policies? A.) Suicide within 2 years of application B.) Death outside the continental US and Canada C.) A policy issued following a misstated age D.) A hazardous occupation or hobby

A policy issued following a misstated age

Which of the following documents delivered to the policyowner includes information about premium amounts, cash values, surrender values and death benefits for specific policy years? A.) A policy summary B.) A notice regarding replacement C.) A privacy notice D.) A buyer's guide

A policy summary

What documentation grants express authority to an agent? A.) State provisions B.) Agent's contract with the principal C.) Fiduciary contract D.) Agent's insurance license

Agent's contract with the principal

If an insurance company makes a statement that its policies are guaranteed by the existence of the Insurance Guaranty Association, that would be considered A.) A legal representation of the Association. B.) A required disclosure. C.) A misrepresentation. D.) An unfair trade practice.

An unfair trade practice.

The LEAST expensive first-year premium is found in which of the following policies? A.) Annually Renewable Term B.) Level Term C.) Decreasing Term D.) Increasing Term

Annually Renewable Term

A Universal Life Insurance policy is best described as a/an A.) Annually Renewable Term policy with a cash value account. B.) Flexible Premium Variable Life policy. C.) Variable Life with a cash value account. D.) Whole Life policy with two premiums: target and minimum.

Annually Renewable Term policy with a cash value account.

In classifying a risk, the Home Office underwriting department will look at all of the following EXCEPT A.) Applicant's past medical history. B.) Applicant's present physical condition. C.) Applicant's past income. D.) Applicant's present occupation.

Applicant's past income.

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

At the end of 20 years, the policy's cash value will equal $100,000.

An employee quits his job and converts his group policy to an individual policy; the premium for the individual policy will be based on his A.) Attained age. B.) Insurer's scheduled rate. C.) Experience Rating. D.) Group rate.

Attained age.

Which of the following is NOT fundable by annuities? A.) Estate liquidation B.) Death benefits C.) A person's retirement D.) Cash accumulation for any reason

Death benefits

Which of the following is NOT typically excluded from life policies? A.) Self-inflicted death B.) Death due to plane crash for a fare-paying passenger C.) Death that occurs while a person is committing a felony D.) Death due to war or military service

Death due to plane crash for a fare-paying passenger

Which of the following is NOT an example of a valid insurable interest? A.) Child in parents' lives B.) Business partners in each other's lives C.) Debtor in the life of the creditor D.) Employer in key employee's life

Debtor in the life of the creditor

Who requires that a prospective producer take and pass a written examination on the kinds of insurance business specified in the application? A.) No exam is needed B.) State legislature C.) Insurance company D.) Director

Director

In group life policies, individual certificates are given to A.) The insurance producer. B.) The Director. C.) Each insured person. D.) The policyholder to keep on file.

Each insured person.

Which of the following is used to determine the annuity amounts that are not taxable? A.) Pro rata ratio B.) Market-adjusted annuities index C.) Exclusion ratio D.) Exclusion index

Exclusion ratio

What does "level" refer to in level term insurance? A.) Interest rate B.) Face amount C.) Cash value D.) Premium

Face amount

What type of premium do both Universal Life and Variable Universal Life policies have? A.) Decreasing B.) Increasing C.) Flexible D.) Level fixed

Flexible

When an employee terminates coverage under a group insurance policy, coverage continues in force A.) For 60 days. B.) For 31 days. C.) Until the employee notifies the group insurance provider that coverage conversion policy is issued. D.) Until the employee can obtain coverage under a new group plan.

For 31 days

Courts will interpret any ambiguity in an insurance contract A.) Through arbitration. B.) Based on the prudent person rule. C.) In favor of the insurer. D.) In favor of the insured.

In favor of the insured

The life insurance policy clause that prevents an insurance company from denying payment of a death claim after a specified period of time is known as the A.) Reinstatement clause. B.) Insuring clause. C.) Misstatement of Age clause. 4.) Incontestability clause.

Incontestability clause.

Annually renewable term policies provide a level death benefit for a premium that A.) Decreases annually. B.) Remains level. C.) Fluctuates. D.) Increases annually.

Increases annually.

What do individuals use to transfer their risk of loss to a larger group? A.) Exposure B.) Insurable interest C.) Indemnity D.) Insurance

Insurance

The Medical Information Bureau (MIB) was created to protect A.) Medical examiners that perform insurance physical examinations. B.) Insureds from unreasonable underwriting requirements by the insurance companies. C.) Insurance departments from lawsuits by policyowners. D.) Insurance companies from adverse selection by high risk persons.

Insurance companies from adverse selection by high risk persons.

Who makes up the Medical Information Bureau? A.) Physicians and paramedics B.) Former insured C.) Hospitals D.) Insurers

Insurers

Which of the following is TRUE regarding the accumulation period of an annuity? A.) It is a period of time during which the beneficiary receives income B.) It is limited to 10 years. C.) It is a period during which the payments into the annuity grow tax deferred. D.) It is also referred to as the annuity period.

It is a period during which the payments into the annuity grow tax deferred.

Which of the following is true regarding a single life settlement option? A.) Payments continue until the entire principal is exhausted. B.) Proceeds are paid out in a lump sum. C.) It provides income for a specified period of time. D.) It provides income the beneficiary cannot outlive.

It provides income the beneficiary cannot outlive.

Which of the following is true about the premium on the children's rider in a life insurance policy? A.) It decreases when an adopted child is added to the policy. B.) It increases when a newborn baby is added to the policy. C.) It remains the same no matter how many children are added to the policy. D.) It decreases when the oldest child reaches the age of 21.

It remains the same no matter how many children are added to the policy.

Which of the following is NOT true regarding the accumulation period of an annuity? A.)It is also known as the pay-in period. B.) It is the period over which the owner makes payments into an annuity. C.) It would not occur in a deferred annuity. D.) It is the period during which the annuity payments earn interest.

It would not occur in a deferred annuity.

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

Its premium steadily decreases over time, in response to its growing cash value.

A father owns a life insurance policy on his 15-year-old daughter. The policy contains the optional Payor Benefit rider. If the father becomes disabled, what will happen to the life insurance premiums? A.)The insured's premiums will be waived until she is 21. B.) Since it is the policyowner, and not the insured, who has become disabled, the life insurance policy will not be affected. C.)The insured will have to pay premiums for 6 months. If at the end of this period the father is still disabled, the insured will be refunded the premiums.

The insured's premiums will be waived until she is 21.

All of the following are TRUE statements regarding the accumulation at interest option EXCEPT A.) The interest is credited at a rate specified by the policy. B.) The interest is not taxable since it remains inside the insurance policy. C.) The policyholder has the right to withdraw the accumulations at any time. D.) The annual dividend is retained by the company.

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

In terms of parties to a contract, which of the following does NOT describe a competent party? A.) The person must be mentally competent to understand the contract. B.) The person must not be under the influence of drugs or alcohol. C.) The person must be of legal age. D.) The person must have at least completed secondary education.

The person must have at least completed secondary education.

If an insured continually uses the automatic premium loan option to pay the policy premium, A.) The policy will terminate when the cash value is reduced to nothing. B.) The insurer will increase the premium amount. C.) The face amount of the policy will be reduced by the automatic premium loan amount. D.) The cash value will continue to increase.

The policy will terminate when the cash value is reduced to nothing.

All of the following are characteristics of a group life insurance plan EXCEPT A.) There is a requirement to prove insurability on the part of the participants. B.) The participants receive a Certificate of Insurance as their proof of insurance. C.) The cost of the plan is determined by the average age of the group. D.) A minimum number of participants is required in order to underwrite the plan.

There is a requirement to prove insurability on the part of the participants.

The paid-up addition option uses the dividend A.) To purchase a one-year term insurance in the amount of the cash value. B.) To reduce the next year's premium. C.) To accumulate additional savings for retirement. D.) To purchase a smaller amount of the same type of insurance as the original policy.

To purchase a smaller amount of the same type of insurance as the original policy.

How long will the beneficiary receive payments under the single life settlement option? A.) Until the beneficiary's death B.) Until the insured's age 100 C.) For a specified period of time D.) Until the insured's death

Until the beneficiary's death

Which of the following is a key distinction between variable whole life and variable universal life products? A.) Variable universal life is regulated solely through FINRA. B.) Variable whole life has a guaranteed death benefit. C.) Variable universal life has a fixed premium. D.) Variable whole life allows policy loans from the cash value.

Variable whole life has a guaranteed death benefit.

Which of the following is a statement that is guaranteed to be true, and if untrue, may breach an insurance contract? A.) Warranty B.) Indemnity C.) Concealment D.) Representation

Warranty

When would a 20-pay whole life policy endow? A.) After 20 payments B.) In 20 years C.) At the insured's age 65 D.) When the insured reaches age 100

When the insured reaches age 100

Are insurance company underwriters allowed to discriminate? A.) Yes, but not unfairly B.) No, higher risks pay higher premium C.) No, discrimination is an unfair practice D.) Yes, but only for gender

Yes, but not unfairly

If an insured withdraws a portion of the face amount in the form of accelerated benefits because of a terminal illness, how will that affect the payable death benefit from the policy? A.)The death benefit will be the same as the original face amount. B.)The death benefit will be smaller. C.) The death benefit will be forfeited. D.) The death benefit will be larger.

the death benefit will be smaller