General exam missed questions
The interest earned on policy dividends isa)Tax deductible.b)40% taxable, similar to a capital gain.c)Taxable.d)Nontaxable.
Taxable
All of the following would be different between qualified and nonqualified retirement plans EXCEPTa)IRS approval requirementsb)Taxation on accumulationc)Taxation of withdrawalsd)Taxation of contributions
Taxation on accumulation
Children's riders attached to whole life policies are usually issued as what type of insurance?a)Variable lifeb)Adjustable lifec)Whole lifed)Term
Term
If an insurance company wishes to order a consumer report on an applicant to assist in the underwriting process, and if a notice of insurance information practices has been provided, the report may contain all of the following information EXCEPT the applicant's a)Prior insurance.b)Ancestry.c)Credit history.d)Habits.
Ancestry
An individual has just borrowed $10,000 from his bank on a 5-year installment loan requiring monthly payments. What type of life insurance policy would be best suited to this situation? a)Variable lifeb)Universal lifec)Whole lifed)Decreasing term
Decreasing term
All of the following statements are true regarding tax-qualified annuities EXCEPTa)Employer contributions are not tax deductible.b)Annuity earnings are tax deferred.c)They must be approved by the IRS.d)Withdrawals are taxed.
Employer contributions are not tax deductible
Which of the following components must a life insurance policy have to allow policy loans?a)Cash valueb)Dividendsc)Flexible premiumsd)Face amount
Cash Value
Which nonforfeiture option has the highest amount of insurance protection?a)Conversionb)Decreasing Termc)Reduced Paid-upd)Extended Term
Extended term
Which policy component decreases in decreasing term insurance?a)Face amountb)Cash valuec)Dividendd)Premium
Face amount
Because an insurance policy is a legal contract, it must conform to the state laws governing contracts which require all of the following elements EXCEPTa)Consideration.b)Legal purpose.c)Offer and acceptance.d)Conditions.
Conditions
An insured pays an annual premium to his insurer. In return, the insurer promises to pay benefits in accordance with the terms of the contract. This is calleda)Consideration.b)Conditions.c)Utmost good faith.d)Acceptance.
Consideration
In order to qualify for conversion from a group life policy that has been terminated to an individual policy of the same coverage, a person must have been insured under the group plan for how many years?a)1 b 3 5 10
5
If a consumer requests additional information concerning an investigative consumer report, how long does the insurer or reporting agency have to comply?a)5 daysb)7 daysc)10 daysd)3 days
5 days
An individual has been diagnosed with Alzheimer's disease. He is insured under a life insurance policy with the accelerated benefits rider. Which of the following is true regarding taxation of the accelerated benefits?a)Principal is tax free, but interest is taxed.b)The entire benefit will be received tax free.c)The entire living benefit is considered taxable income.d)A portion of the benefit up to a limit is tax free; the rest is taxable income.
A portion of the benefit up to a limit is tax free; the rest is taxable income.
A Universal Life Insurance policy is best described as a/ana)Variable Life with a cash value account.b)Whole Life policy with two premiums: target and minimum.c)Flexible Premium Variable Life policy.d)Annually Renewable Term policy with a cash value account.
Annually Renewable Term policy with a cash value account.
The accelerated benefits provision will provide for an early payment of the death benefit when the insureda)Has earned enough credits.b)Becomes disabled.c)Becomes terminally ill.d)Needs to borrow money.
Becomes terminally ill
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 remains the same no matter how many children are added to the policy.c)It decreases when the oldest child reaches the age of 21.d)It increases when a newborn baby is added to the policy.
It remains the same no matter how many children are added to the policy
An insured receives an annual life insurance dividend check. What term best describes this arrangement?a)Cash optionb)Reduction of Premiumc)Annual Dividend Provisiond)Accumulation at Interest
Cash option
What type of insurance would be used for a Return of Premium rider?a)Annually Renewable Termb)Increasing Termc)Level Termd)Decreasing Term
Increasing Term
Which is true about a spouse term rider?a)The rider is decreasing term insurance.b)Coverage is allowed up to age 75.c)The rider is usually level term insurance.d)Coverage is allowed for an unlimited time.
The rider is usually level term insurance.
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?a)Automatic premium loanb)Extended termc)Reinstatementd)Reduced paid-up option
Automatic premium loan
Which of the following is a feature of a variable annuity? a)Securities license is not required. b)Benefit payment amounts are not guaranteed. c)Payments into the annuity are kept in the company's general account. d)Interest rate is guaranteed.
Benefit payment amounts are not guaranteed.
According to the entire contract provision, what document must be made part of the insurance policy?a)Agent's reportb)Outline of coveragec)Copy of the original applicationd)Buyer's Guide
Copy of the original application
What is another name for interest-sensitive whole life insurance?a)Term lifeb)Adjustable lifec)Current assumption lifed)Variable life
Current assumption file
All of the following are dividend options EXCEPTa)Fixed-period installments.b)Accumulated at interestc)Reduction of premium.d)Paid-up additions.
Fixed-period installments.
All of the following are Nonforfeiture options EXCEPTa)Extended termb)Reduced paid-upc)Interest onlyd)Cash surrender
Interest only
Which of the following best describes annually renewable term insurance?a)It is level term insurance.b)It requires proof of insurability at each renewal.c)Neither the premium nor the death benefit is affected by the insured's age.d)It provides an annually increasing death benefit.
It is level term insurance.
Which of the following is NOT true regarding the accumulation period of an annuity?a)It is the period during which the annuity payments earn interest.b)It is the period over which the owner makes payments into an annuity.c)It is also known as the pay-in period.d)It would not occur in a deferred annuity.
It would not occur in a deferred annuity.
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?a)Survivorship Life Policyb)Second-to-Diec)Family Income Policyd)Joint Life Policy
Joint Life Policy
If a life insurance policy develops cash value faster than a seven-pay whole life contract, it becomes a/ana)Modified endowment contract.b)Accelerated benefit policy.c)Endowment.d)Nonqualified annuity.
Modified endowment contract
A prospective insured receives a conditional receipt but dies before the policy is issued. The insurer will a)Pay the policy proceeds up to an established limit.b)Not pay the policy proceeds under any circumstances.c)Automatically pay the policy proceeds.d)Pay the policy proceeds only if it would have issued the policy.
Pay the policy proceeds if it would have issued the policy
Equity indexed annuitiesa)Invest conservatively.b)Seek higher returns.c)Are more risky than variable annuities.d)Are security instruments.
Seek higher returns
A domestic insurer issuing variable contracts must establish one or more a)Annuity accounts.b)General accounts.c)Separate accounts.d)Liability accounts.
Separate accounts
Which of the following describes the tax advantage of a qualified retirement plan?a)The earnings in the plan accumulate tax deferred.b)Distributions prior to age 59½ are tax deductible.c)Employer contributions are deductible as a business expense when the employee receives benefits.d)Employer contributions are not taxed when paid out to the employee.
The earnings in the plan accumulate tax deferred
The insured had his wife named as the beneficiary of his life insurance policy. To ensure that his wife had income for life after the insured's death, he chose the life income settlement option. The amount of payments will be determined by taking into account all of the following EXCEPT a)Projected interest rates.b)Face amount of the policy.c)The insured's age at death.d)The beneficiary's life expectancy.
The insured's age at death
Under an extended term nonforfeiture option, the policy cash value is converted toa)The same face amount as in the whole life policy.b)The face amount equal to the cash value.c)A lower face amount than the whole life policy.d)A higher face amount than the whole life policy.
The same face amount as in the whole life policy
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?a)Nothingb)$50,000c)$100,000d)$200,000
$100,000
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?a)$0b)$100,000c)$200,000d)$100,000 plus the total of paid premiums
$200,000
An insured owns a $50,000 whole life policy. At age 47, the insured decides to cancel his policy and exercise the extended term option for the policy's cash value, which is currently $20,000. What would be the face amount of the new term policy?a)$20,000b)$25,000c)$50,000d)The face amount will be determined by the insurer.
$50,000
The full premium was submitted with the application for life insurance, and the policy was issued two weeks later as requested. When does the policy coverage become effective?a)As of the policy delivery dateb)As of the first of the month after the policy issuec)As of the policy issue dated)As of the application date
As of the application date
All of the following are TRUE of the federal tax advantages of a qualified plan EXCEPTa)Funds accumulate on a tax-deferred basis.b)Employee and employer contributions are not counted as income to the employee for income tax purposes.c)At distribution, all amounts received by the employee are tax free.d)Employer contributions are tax deductible as ordinary business expense.
At distribution, all amounts received by the employee are tax free
When must insurable interest exist in a life insurance policy? a)At the time of lossb)At the time of applicationc)At the time of policy deliveryd)When there is a change of the beneficiary
At the time of application
Which of the following protects the insured from an unintentional policy lapse due to a nonpayment of premium?a)Reinstatementb)Reduced paid-up optionc)Automatic premium loand)Extended term
Automatic premium loan
A tax-sheltered annuity is a special tax-favored retirement plan available toa)Certain groups depending on factors such as race, gender, and age.b)Certain groups of employees only.c)Anyone.d)Certain age groups only.
Certain groups of employees only
All of the following are duties and responsibilities of producers at the time of application EXCEPTa)Explain the nature and type of any receipt the producer is giving to the applicant.b)Probe beyond the stated questions if the producer feels the applicant is misrepresenting or concealing information.c)Check to make sure that there are no unanswered questions on the application.d)Change any incorrect statement on the application by personally initialing next to the corrected statement.
Change any incorrect statement on the application by personally initialing next to the corrected statement.
A business owner was trying to obtain a bank loan to fund the purchase of a new business facility, but the bank required proof of additional assets to secure the loan. The business owner then decided to use her $250,000 life insurance policy to secure the loan. Which provision makes this possible?a)Insurable interestb)Modification clausec)Ownership provisiond)Collateral assignment
Collateral Assignment
What is the clause that describes the method of paying the death benefit in the event that the insured and beneficiary are both killed in the same accident?a)Nonforfeiture Clauseb)Common Disaster Clausec)Spendthrift Claused)Settlement Clause
Common Disaster Clause
In forming an insurance contract, when does acceptance usually occur?a)When an insurer delivers the policyb)When an insurer receives an applicationc)When an insured submits an applicationd)When an insurer's underwriter approves coverage
When an insurer's underwriter approves coverage
Which is TRUE about the cash surrender nonforfeiture option?a)After the cash surrender, the insured is covered for a grace period of one month.b)The policy remains active for some time after the policyholder opts for cash surrender.c)The policyholder receives the original cash value of the policy.d)Funds exceeding the premium paid are taxable as ordinary income.
Funds exceeding the premium paid are taxable as ordinary income.
What type of insurance would be used for a Return of Premium rider?a)Level Termb)Decreasing Termc)Annually Renewable Termd)Increasing Term
Increasing term
Which of the following policy components contains the company's promise to pay?a)Premium modeb)Owner's rightsc)Entire contract provisiond)Insuring clause
Insuring clause
The policyowner wants to make sure that upon his death, the life policy will pay a portion of the proceeds annually to his spouse, but that the principal will be paid to their children when they reach a certain age. Which settlement option should the policyowner choose?a)Fixed amount optionb)Interest only optionc)Life income with period certaind)Joint and survivor
Interest only option
When a reduced-paid up nonforfeiture option is chosen, what happens to the face amount of the policy?a)It decreases over the term of the policy.b)It remains the same as the original policy, regardless of any differences in value.c)It is reduced to the amount of what the cash value would buy as a single premium.d)It is increased when extra premiums are paid.
It is reduced to the amount of what the cash value would buy as a single premium
Variable Whole Life insurance is based on what type of premium?a)Increasingb)Flexiblec)Gradedd)Level fixed
Level fixed
Your client wants both protection and savings from the insurance, and is willing to pay premiums until retirement at age 65. What would be the right policy for this client?a)Life annuity with period certainb)Increasing termc)Limited pay whole lifed)Interest-sensitive whole life
Limited pay whole life
Which of the following riders added to a life insurance policy can pay part of the death benefit to the insured to cover expenses incurred in a nursing or convalescent home?a)Guaranteed insurabilityb)Payor benefitc)Long-term cared)Accidental death
Long-term care
Which of the following statements is TRUE concerning whole life insurance?a)Lump-sum death benefits are not taxable.b)Dividend interest is not taxable.c)Premiums are tax deductible.d)Policy loans are tax deductible.
Lump-sum death benefits are not taxable
Under the Fair Credit Reporting Act, individuals rejected for insurance due to information contained in a consumer reporta)Are entitled to obtain a copy of the report from the party who ordered it.b)Must be advised that a copy of the report is available to anyone who requests it.c)May sue the reporting agency in order to get inaccurate data corrected.d)Must be informed of the source of the report.
Must be informed of the source of the report.
All of the following are requirements for life insurance illustrations EXCEPTa)They may only be used as approved.b)They must identify nonguaranteed values.c)They must differentiate between guaranteed and projected amounts.d)They must be part of the contract.
Must be part of the contract
Traditional IRA contributions are tax deductible based on which of the following?a)IRA limitb)Owner's incomec)How long the plan has been in forced)Owner's age
Owner's income
An insured has had a life insurance policy that he purchased 3 years ago when he was 40 years old. He is killed in an automobile accident, and it is discovered that he is actually 45 years old, and not 43, as stated on the application. What will the company do?a)Pay a reduced death benefitb)Pay the full death benefitc)Pay nothing; there was a misrepresentation on the applicationd)Pay the full death benefit and refund excess premium
Pay a reduced death benefit
Which of the following is another term for the accumulation period of an annuity?a)Premium periodb)Liquidation periodc)Annuity periodd)Pay-in period
Pay-in period
All of the following are true regarding insurance policy loans EXCEPTa)The policy will terminate if the loan plus interest equals or exceeds the cash value of the policy.b)Policyowners can borrow up to the full amount of their whole life policy's cash value.c)Policy loans can be made on policies that do not accumulate cash value.d)The amount of the outstanding loan and interest will be deducted from the policy proceeds when the insured dies.
Policy loans can be made on policies that do not accumulate cash value
Which of the following is TRUE regarding the premium in term policies?a)The premium in term policies is not based on the insured's age.b)Decreasing term policy will have a decreasing premium.c)The premium is level.d)Only level term policy has a level premium.
Premium is level
Which of the following is correct concerning the taxation of premiums in a key-person life insurance policy?a)Premiums are tax deductible by the key employee.b)Premiums are tax deductible as a business expense.c)Premiums are taxable to the employee.d)Premiums are not tax deductible as a business expense.
Premiums are not tax deductible as a business expense.
When a whole life policy lapses or is surrendered prior to maturity, the cash value can be used toa)Purchase a single premium policy for a reduced face amount.b)Purchase a term rider to attach to the policy.c)Pay back all premiums owed plus interest.d)Receive payments for a fixed amount.
Purchase a single premium policy for a reduced face amount.
Another name for a substandard risk classification isa)Declined.b)Elevated.c)Rated.d)Controlled.
Rated
An insured pays $1,200 annually for her life insurance premium. The insured applies this year's $300 worth of accumulated dividends to the next year's premium, thus reducing it to $900. What option does this describe?a)Accumulation at Interestb)Cash optionc)Flexible Premiumd)Reduction of Premium
Reduction of Premium
A producer is helping a married couple determine the financial needs of their children in the event one or both should die prematurely. This is a personal use of life insurance known as a)Juvenile protection provision.b)Survivor protection.c)Life planning.d)Survivorship insurance.
Survivor Protection
All of the following entities regulate variable life policies EXCEPTa)The Insurance Department.b)The Guaranty Association.c)Federal government.d)The SEC.
The Guaranty Association
Which of the following is TRUE regarding variable annuities?a)A person selling variable annuities is required to have only a life agent's license.b)The annuitant assumes the risks on investment.c)The funds are invested in the company's general account.d)The company guarantees a minimum interest rate.
The annuitant assumes the risk on investment
Which of the following is NOT the consideration in a policy? a)The promise to pay covered losses b)The application given to a prospective insured c)Something of value exchanged between parties d)The premium amount paid at the time of application
The application given to a prospective insured
Upon the death of the insured, the primary beneficiary discovers that the insured chose the interest only settlement option. What does this mean?a)The beneficiary will receive the lump sum, plus interest.b)The primary beneficiary will receive the death benefit and the secondary beneficiaries will share the interest payments.c)The beneficiary will only receive payments of the interest earned on the death benefit.d)The beneficiary must pay interest to the insurer.
The beneficiary will only receive payments of the interest earned on the death benefit.
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 policy deliveryb)The date of issuec)The date of applicationd)The date of medical exam
The date of the medical exam
When a life insurance policy was issued, the policyowner designated a primary and a contingent beneficiary. Several years later, both the insured and the primary beneficiary died in the same car accident, and it was impossible to determine who died first. Which of the following would receive the death benefit? a)The insured's contingent beneficiary b)The insurance company c)The insured's estate d)The primary beneficiary's estate
The insured's contingent beneficiary
All of the following are TRUE statements regarding the accumulation at interest option EXCEPTa)The policyholder has the right to withdraw the accumulations at any time.b)The interest is not taxable since it remains inside the insurance policy.c)The annual dividend is retained by the company.d)The interest is credited at a rate specified by the policy.
The interest is not taxable since it remains inside the insurance policy
All of the following are true of key person insurance EXCEPTa)The plan is funded by permanent insurance only.b)There is no limitation on the number of key employee plans in force at any one time.c)The employer is the owner, payor and beneficiary of the policy.d)The key employee is the insured.
The plan is funded by permanent insurance only
Which of the following statements is correct regarding a whole life policy? a)The policy premium is based on the attained age.b)The death benefit may increase or decrease during the policy period.c)The policyowner is entitled to policy loans.d)Cash values are not guaranteed
The policy owner is entitled to policy loans
If an insurer issued a policy based on the application that had unanswered questions, which of the following will be TRUE?a)The insurer may deny coverage later, because of the information missing on the application.b)The policy will be interpreted as if the insurer waived its right to have an answer on the application.c)The policy will be interpreted as if the insured did not have an answer to the question.d)The policy will be void.
The policy will be interpreted as if the insurer waived its right to have an answer on the application
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 face amount of the policy will be reduced by the automatic premium loan amount.c)The cash value will continue to increase.d)The insurer will increase the premium amount.
The policy will terminate when the cash value is reduced to nothing.
A group insurance policy was solicited by a limited insurance representative. Which of the following is true according to the disclosure regulation?a)Disclosure regulation does not apply to limited insurance representatives.b)Disclosure regulation does not apply to group insurance.c)The name of the representative must be displayed on each certificate of insurance.d)The representative's name and signature must appear on the master policy.
The representative's name and signature must appear on the master policy.
An insured has chosen joint and 2/3 survivor as the settlement option. What does this mean to the beneficiaries?a)The beneficiary will receive 2/3 of the total benefit, with the final 1/3 payable when the first beneficiary dies.b)One of the beneficiaries will receive 1/3 and the other 2/3 of the proceeds when the insured dies.c)The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.d)The beneficiary will receive 2/3 of the lump sum up front, and the remaining 1/3 will be paid over time.
The surviving beneficiary will continue receiving 2/3 of the benefit paid when both beneficiaries were alive.
How are contributions to a tax-sheltered annuity treated with regards to taxation?a)They are taxed as income for the employee, but are tax free upon withdrawal.b)They are not included as income for the employee, but are taxable upon distribution.c)They are never taxed.d)They are taxed as income for the employee.
They are not included as income for the employee, but are taxable upon distribution
Which of the following is TRUE about nonforfeiture values?a)They are required by state law to be included in the policy.b)They are optional provisions.c)A table showing nonforfeiture values for the next 10 years must be included in the policy.d)Policyowners do not have the authority to decide how to exercise nonforfeiture values.
They are required by state law to be included in the policy
Which of the following is NOT true regarding Equity Indexed Annuities?a)They have guaranteed minimum interest rates.b)They are less risky than variable annuities.c)They earn lower interest rates than fixed annuities.d)The insurance company keeps a percentage of the returns.
They earn lower interest rates than fixed annuities.
Which of the following employees insured under a group life plan would be allowed to convert to individual insurance of the same coverage once the plan is terminated?a)Those who have worked in the company for at least 3 yearsb)Those who have dependentsc)Those who have no history of claimsd)Those who have been insured under the plan for at least 5 years
Those who have been insured under the plan for at least 5 years
Which of the following policies would have an IRS required corridor or gap between the cash value and the death benefit?a)Equity Indexed Universal Lifeb)Variable Universal Lifec)Universal Life - Option Ad)Universal Life - Option B
Universal Life - Option A
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 amount?a)Variable lifeb)Adjustable lifec)Universal lifed)Flexible life
Universal life
Which of the following is a key distinction between variable whole life and variable universal life products?a)Variable whole life allows policy loans from the cash value.b)Variable universal life has a fixed premium.c)Variable whole life has a guaranteed death benefit.d)Variable universal life is regulated solely through FINRA.
Variable whole life has a guaranteed death benefit
If a policy includes a free-look period of at least 10 days, the Buyer's Guide may be delivered to the applicant no later thana)With the policy.b)Upon issuance of the policy.c)Within 30 days after the first premium payment was collected.d)Prior to filling out an application for insurance.
With the policy
Which of the following statements regarding the taxation of Modified Endowment Contracts is FALSE?a)Policy loans are taxable distributions.b)Accumulations are tax deferred.c)Withdrawals are not taxable.d)Distributions before age 59 1/2 incur a 10% penalty on policy gains.
Withdrawals are not taxable
