Final Exam
All of the following are true regarding Keogh plans, EXCEPT:
Dividends are taxable in the year earned.
The conversion option is not a nonforfeiture option. All of the others are nonforfeiture options.
Flexible premium life insurance plan will provide someone with the flexibility to handle fluctuations in income.
According to the Fair Credit Reporting Act, which of the following is contained consumer reports?
Information concerning an individual's character
What are the prelicensing education course requirements for an insurance producer?
20 hr class
Securities licenses must be obtained through:
FINRA (Financial Industry Regulatory Authority) was formerly known as the NASD (National Association of Securities Dealers). Securities licenses are obtained through FINRA.
What type of qualified plan is a 408(k)?
Simplified Employee Pension (SEP) plans, or 408(k) plans, are qualified plans for small employers. SEPs are a mix of an IRA and a profit-sharing plan. The correct answer is: SEP
What rider can decrease the death benefit when utilized?
The correct answer is: Long-term care rider
Does a loan on the cash value of a life insurance policy accrue interest, and if so, how is the interest handled?
Yes, the loan does accrue interest. The interest can be paid annually, or added to the loan.
What are the advantages of purchasing a straight life policy?
. The face amount and the premiums are level, and payable over the life of the insured, up to 100 years of age. b. The cash value and death benefits are guaranteed by the insurer. c. The premium can be lower than limited payment and single premium polices.
Which of the following statements is true if revisions to the notice of replacement insurance are limited to the deletion of references not applicable to the product being sold or replaced?
: No approval of the Commissioner will be required.
All of the following can be definitions of policy replacement, EXCEPT:
As long as there is enough cash value in the policy to pay the cost of premiums, then a policy loan does not constitute replaced coverage. The correct answer is: Policy loan that is not repaid
Which of the following is a CODA plan?
Cash or Deferred Arrangement (CODA) plans are modified profit-sharing or pension plans. These are 401(k) and 403(b) plans. The correct answer is: 401(k)
Standard dividend options for a participating policy may be any of the following, EXCEPT:
Dividends do not provide guaranteed insurability options. The correct answer is: Provide guaranteed insurability
Underwriting a group insurance policy is different from an individual policy in that underwriters are concerned about:
For group policies, the insurance underwriter focuses on the group as a whole, rather than its singular members. The group underwriter typically is more concerned with the amount of turnover in the group. The correct answer is: The amount of turnover in the group
What is a life insurance policy that has a face amount that cannot be changed?
Graded premium whole life. In a graded premium whole life policy, premiums are lower for the first five years, and then jump to a higher level. The face amount of a graded premium whole life policy cannot be changed.
Which of the following is not required for advertising?
Having the TRADE NAME of the insurer included
Under Social Security requirements, what is required for a worker to be considered fully insured?
In order to be considered fully insured an employee must work 40 quarters. 65 yrs
Which of the following is usually sold as a cost-of-living rider to another policy?
Increasing term provides an increasing face amount. The premiums are level. It is often sold as a cost-of-living rider to another policy.
Benefits under a medical expense policy are provided through which of the following methods?
Indemnity means to restore a financial loss to the state prior to the occurrence of the loss. Insurance contracts held to the principle of indemnity state the insured is reimbursed for the amount of the financial loss, but cannot profit. Indemnity applies to health insurance. For example, a medical expense policy indemnifies the insured for the financial loss of having a broken arm fixed. Think of boy PR
Insurance policies are based on:
Insurance contracts are based on contract law, because they deal with legal agreements. Tort law deals with legal liability.
What feature of a life policy allows the insured to change premium payments, depending on the policy value and the current financial needs of the policyholder?
It is the flexible premium feature that allows the insured to change premium payments as their situation and financial need change.
What is a unique feature of modified life insurance?
Modified life insurance is distinguished from other permanent life insurance policies because premiums are lower in early years to accommodate younger people who cannot afford the high cost of ordinary whole life insurance. The correct answer is: Premiums are lower in early years
All of the following are non-forfeiture options, EXCEPT:
Paid up additions is a dividend option for a participating life policy. The correct answer is: Paid up additions
Which of the following is true about policy loans and cash withdrawals?
Partial withdrawals are not subject to interest. Usually a servvice fee
Which of the following is not a settlement option in a life insurance policy?
Participating and nonparticipating polices are not differences between permanent and term life insurance policies. The correct answer is: Permanent life insurance policies are nonparticipating, whereas term life insurance policies are participating.
Which of the following is one of the differences between permanent and term life insurance?
Permanent life insurance policies are nonparticipating, whereas term life insurance policies are participating.
What are answers called that clients write down on their app.
Representations
Which of the following does not fall in the private insurer category?
Self-insurers retain their own risk and are not considered private insurers.
What would be best for someone who received a large lump sum from their company retirement and wants to be sure their basic living needs are always covered?
Someone should buy an immediate annuity purchased with a lump sum that will produce enough income to cover their basic expenses. The correct answer is: An immediate annuity purchased with a lump sum
The Commissioner may withdraw approval of a continuing education provider, course, or instructor for: Select one:
The Commissioner may withdraw approval of a continuing education provider, course, or instructor for good and just cause. The correct answer is: Good and just cause
Which of the following is not true of the straight life income option for annuities?
The annuitant receives annuity payments for their entire life. Upon the annuitant's death, the annuity payments stop. The insurer retains any balance on the annuity.A beneficiary will receive any balance of the annuity upon the annuitant's death.
Which of the following is not a nonforfeiture option?
The conversion option is not a nonforfeiture option. All of the others are nonforfeiture options.
Bob is leaving his employer for another position. He has a health problem and wishes to continue his life insurance on an individual basis. What should Bob do to continue his coverage?
The conversion process is outlined in the group certificate. It usually requires that the participant notify the company in writing within in a set time frame, usually 31 days from termination. The correct answer is: Bob must make a written request within 31 days and the company will issue the policy outlined in the plan at his current age.
Replacement is not always the best option for the insured because:
The correct answer is: All of the above
Which of the following statements regarding the maintenance of records is false?
The correct answer is: Business entities licensed in Kentucky as its home state are not required to maintain a principal place of business in Kentucky.
Henry has just completed a life application on a prospective client. He should do which of the following before submitting the application to his company?
The correct answer is: Complete the agent's statement in full
Fraternal benefit societies are described by all of the following, EXCEPT:
The correct answer is: They include stock and mutual companies.
To fall under the common disaster provision, most policies specify that the death of the primary beneficiary must occur:
The correct answer is: Within 30 - 90 days of the accident
Which of the following is not a requirement of a group policy?
The group is underwritten as a whole, not each individual. Beneficiaries are covered under the master contract, and have conversion privileges.
The insuring clause on the face of a life insurance policy contains all the following, EXCEPT:
The insuring clause of a policy contains the amount of the coverage, the name of the insurance company, the name of the insured, but does not contain the name of the beneficiary to the policy. The correct answer is: Name of the beneficiary
Which of the following constitutes an entire life insurance policy between the parties?
The policy and the application, if a copy of the application is attached, will constitute the entire contract between the parties, and that all statements contained in the application will, in the absence of fraud, be deemed representations and not warranties. The correct answer is: The policy and the application
The major difference between an immediate annuity and a deferred annuity is:
The premium on a single premium annuity is paid up front. If it is an immediate annuity, the payout periods must begin within 12 months. The correct answer is: The benefits payout periods begin within 12 months.
Which of the following statements is true about the return of premium rider?
The return of premium rider is an increasing term rider that matches total premium input. Usually policies drop the rider when the insured reaches age 60.
What is the length of time that the suicide clause is in effect?
The suicide clause specifies that if death is by suicide during the first 2 years, no death benefit be paid. The correct answer is: 2 years
What is the length of time that the suicide clause is in effect?
The suicide clause specifies that if death is by suicide during the first 2 years, no death benefit be paid. The correct answer is: 2 yearsu
What is the waiting period under the waiver of premium rider before the first premium will be waived?
There is usually a waiting period of 3 or 6 months once the policy owner becomes disabled before the first premium will be waived. The waiver would then continue for the duration of the disability. The correct answer is: 3 or 6 months
Which type of law deals with legal liability for civil wrongs, such as negligence?
Tort law deals with legal liability for civil wrongs such as negligence. The correct answer is: Tort law
All of the following exchanges would qualify under Section 1035 of the Internal Revenue code, EXCEPT:
Vacant land for another piece of vacant land....Exchanging a piece of vacant land for another piece of vacant land does not qualify under the Section 1035 rule as an exchange that would not have tax implications for a gain or loss.
What is the term attributed to the third party that buys the death benefit from a life insurance policy?
Viatical settlement provider
Which of the following is not a settlement option in a life insurance policy?
Which of the following is not a settlement option in a life insurance policy?
Which of the following is not a way that annuities are like insurance?
Your answer is correct Because both annuities and insurance policies involve some risk, there is little if any guaranteed. The correct answer is: Annuities and insurance policies are guaranteed to provide retirement income.
What is issued making the insurance company liable from the date of the application?
binding reciept
Which life insurance dividend option does not increase a policy's cash value?
cash payment
Which of the following nonforfeiture options permits the policyowner to use the cash values to purchase paid-up term life insurance coverage?
er is correct The extended term option permits the policyowner to use the policy's cash values to buy paid-up term insurance. The correct answer is: Extended term
As the beneficiary of his dad's life insurance policy, Nick tried to collect benefits when his dad died 21 months after the policy inception. What is the most likely reason that the claim could be denied?
he contestable period is in effect for two years. It is most likely that the insurance company discovered facts were misrepresented when application was made, and denied the claim for that reason. The correct answer is: Nick's dad had failed to divulge a serious medical condition when he applied for the insurance.
Once an insurer has looked at the facts pertaining to a life insurance applicant, the insurer will categorize the risk and calculate premiums based on:
he correct answer is: The risk classification and mortality, interest earnings and expenses
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?
needs
What action will a life insurance company most likely take when an applicant for a life insurance policy is discovered to be substandard risk?
require the client to undergo a physical examination
what defines payment timing on insurance life policy?
the premium payment mode-annualy, semi-annually,mnthlly, etc
Which of the following is not an assignment whereby someone would transfer legal rights as the policyowner of a life contract?
total complete and unconditional assinment
When recommending a replacement policy, a producer should remember that:
The correct answer is: He/she has liabilities because of errors or omissions
Which of the following is not a requirement of a group policy?
The correct answer is: Each member of the group is underwritten individually.The correct answer is: Each member of the group is underwritten individually.
If an employee receives a certificate of coverage to show evidence of coverage, he is covered by:
A group policy
Which of the following is not an assignment whereby someone would transfer legal rights as the policyowner of a life contract?
A total, complete, unconditional assignment does not exist in the insurance world. The correct answer is: Total, complete, unconditional assignment
What type of life policy has premiums paid weekly to an agent who comes to your home to collect?
An industrial policy is characterized by premiums that can be paid as often as weekly. The correct answer is: An industrial policy
Which of the following is a true statement about the different private insurers?
An insurer that conducts business in states other than the state in which it was incorporated is a foreign insurer. An insurer that conducts business in countries that is was not incorporated in is an alien insurer. Conducting business in the state where it was incorporated is a domestic insurer. The correct answer is: An insurer that conducts business in the state is was incorporated in is a domestic insurer.
For the referral of a consumer to a licensed individual, an insurer may pay consideration
An insurer, financial institution, agent, surplus lines broker, adjuster, administrator, reinsurance intermediary broker or manager, specialty credit producer or managing employee, or consultant may pay any compensation, fee, or other consideration to an individual not licensed to sell insurance for the referral of a consumer to a licensed individual, only if the consideration is paid regardless of whether the insurance coverage is sold to the consumer. The correct answer is: To an individual not licensed to sell insurance
A 1035 exchange is allowed on any of the following transactions, EXCEPT:
Annuity funds are not eligible to be transferred to life insurance accounts on a tax free basis. The correct answer is: An annuity to a life insurance policy
Which of the following is not a way that annuities are like insurance? Select one:
Because both annuities and insurance policies involve some risk, there is little if any guaranteed. The correct answer is: Annuities and insurance policies are guaranteed to provide retirement income.
Who is a producer that represents the insured or purchaser of insurance?
Broker
An annuity contract provides for all of the following, EXCEPT:
Depending on the type of annuity, it usually provides a safe retirement income tool, acts as a forced savings account, and has payments for a lifetime of a fixed period of time. The correct answer is: A health plan
Underwriting considerations for group coverage employ which of the following considerations?
Groups usually do not have a requirement for medical exams.
What approach calculates the amount of money a person is expected to earn over their lifetime?
Human Life Value
What feature of a life policy allows the insured to change premium payments, depending on the policy value and the current financial needs of the policyholder?
It is the flexible premium feature that allows the insured to change premium payments as their situation and financial need change. The correct answer is: Flexible premium feature
Which of the following does not constitute policy replacement?
Life insurance coverage in which a loan is not repaid to the insurer
An insurance agent told a member of his church who had recently experienced several personal and financial losses that he could see that she got a more favorable rate on her insurance policies than her health and general circumstances would warrant. The woman had been his kindergarten teacher and was a pillar in the community's life. He wanted to help her. Which of the following is FALSE?
Obviously, the agent is compassionate. He is also engaged in unfair discrimination because he is offering special rates to one member of a general class of assureds. In making this offer he is also breaking the law, which expressly forbids unfair discrimination. No insurance producer may unfairly discriminate between individuals of the same class and equal expectation of life in the rates charged for the policy or between individuals of the same class and of the same hazard in the amount of premium rates, in any manner whatsoever. What he is NOT doing was twisting, which involves a misrepresentation of facts (twisting of reality) in order to secure a sale. The correct answer is: The agent was engaging in twisting.
Which of the following is true about policy loans and cash withdrawals?
Partial withdrawals are not subject to interest, and the insurer often charges a service fee. The correct answer is: Partial withdrawals are not subject to interest.
All of the following are false regarding the tax consequences of Roth IRAs, EXCEPT:
Roth IRAs have qualified tax-free distributions that may be made before the plan participant is 59 1/2, and all distributions made after the age of 59 are tax-free. The correct answer is: Contributions are made with taxed dollars; however, interest grows tax-free.
Which of the following is not a common classification underwriters use for risk?
Standard, preferred, substandard and declined are the common classification ratings. There is no rating called special.
A couple has created a large estate during their marriage. Their tax attorney has designed a plan that will have no impact when one of the partners dies, but there will be a substantial liability when the second partner dies. An economical solution for funding the estate tax liability with life insurance is:
Survivorship life or a second to die policy would most likely fit their needs best.
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?
The needs approach calculates the amount of money a family needs immediately upon the death of the insured to pay for their expenses and basic necessities. The correct answer is: Needs
Whoch of the following does nor qualify for the accelerated death benefit?
an illness that limits a lifespan, by defneition no hospital confinement is needed