insurance

Life insurance can provide which of the following? a) Survivor protection b) Protection against outliving one's assets c) Creation of future liability d) Liquidation of one's estate

a) Survivor protection Life insurance provides the dollars to protect the dependents (survivors) of a deceased insured.

S set up an individual retirement account that her employer is now contributing to. Her employer's contributions are not included in her gross income. What kind of retirement plan does S have? a) 401(k) b) HR-10 (Keogh) c) SIMPLE d) Simplified Employee Pension (SEP)

D) Simplified Employee Pension (SEP) A SEP is a type of qualified plan suited for the small employer. In a SEP, an employee establishes and maintains an individual retirement account to which the employer contributions are not included in the employee's gross income.

All of the following are true of a nonqualified deferred compensation plan except? a) It can be discretionary. b) Contributions are tax deductible c) It is contractual agreement whereby the employee agrees to defer receipt of a portion of his compensation until retirement, disability, or death. d) It does not require irs approval.

b) Contributions are tax deductible

Hazards are conditions or situations that? a) Decrease the likelihood of a loss occurring b) Determine the likelihood of a loss occurring c) Guarantee that a loss will occur d) Increase the likelihood of a loss occurring

D) Increase the likelihood of a loss occurring. Hazards are conditions or situations that increase the likelihood and severity of a loss occurring due to a peril. Hazards are classified as physical hazards, moral hazards, or morale hazards.

The human life value approach to determining life insurance needs is based upon which of the following ideas? a) Replacement of assets b) Specific needs for college education c) Retirement needs d) Loss of the breadwinner's income

d) Loss of the breadwinner's income. The human life value approach is based upon loss of income

Michael is an insurance producer who has a very successful business. Unexpectedly Michael dies. His wife Andrea realizes the need for her to continue to service his existing business. How long is she able to carry on business as usual without passing an insurance examination? a) 90 days b) 120 days c) 150 days d) 180 days

d) 180 days

An insured and his spouse recently had a child. Which of the following riders would allow the couple to insure the child for a limited period of time at a specified amount? a) Payor rider b) Guaranteed insurability rider c) Spouse term rider d) Children's term rider

d) Children's term rider. The children's term rider allows children to be added to coverage for a limited period of time for a specified amount.

Under which of the following conditions would life insurance proceeds be taxable by the federal government? a) If paid to the policyowner b) If there is a transfer for value. c) If collaterally assigned to a lender d) If taken as a lump sum

b) If there is a transfer for value. If life insurance proceeds are collected in a lump sum payment, they are generally not subject to federal taxation. If the benefit payment results in a transfer for value (if the policy is sold to another person) it may not be exempt from taxation. Transfer for value rules do not apply when a policy is collaterally assigned to a lender.

When the director of the states insurance department leaves office, which of the following may occur? a) All existing producers will need to reapply for license b) Insurance rates are subject to change c) Temporary licenses will automatically be renewed for 180 days d) All of the above may happen when a new director takes office

b) Insurance rates are subject to change. 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, the person leaving office does not terminate existing appointments. Temporary licenses are valid for 180 days and are not subject for renewal if a new director takes office. Since the director approves insurance rates, it is entirely possible that they change when a new director takes office.

An insured decides to surrender his whole life insurance policy. The cash value at surrender is higher than the premiums paid into the policy, due to interest. What part of the surrender value would be income taxable? a) The entire cash value amount b) The difference between the premiums paid and the cash value c) Nothing d) The amount equal to the premiums paid

b) The difference between the premiums paid and the cash value

Which statement best describes agreement as it relates to insurance contracts? a) All parties must be capable of entering into a contract b) Each party accepts the exact terms of the other party's offer c) One party accepts the exact terms of the other party's offer d) The intent of the contract must be legally acceptable to both parties

c) One party accepts the exact terms of the other party's offer. In insurance contracts, there must be a definite offer by one party, and this offer must be accepted in its exact terms by the other party. Agreement includes both an offer and its acceptance.

All of the following are general requirements of a qualified plan except a) The plan must have a vesting requirement b) The plans benefit cannot discriminate in favor of the prohibited group c) The plan must be temporary d) The plan must be approved by the IRS

c) The plan must be temporary. Qualified plans must be permanent. All the other characteristics above are also true

Variable life insurance is regulated by all of the following entities EXCEPT a) The department of insurance and/or financial services. b) The financial industry regulatory authority (FINRA) c) The U.S department of treasury d) The securities and exchange commission (SEC)

c) The U.S department of treasury Variable products are comprised of both insurance and securities. As a result, they are regulated by the SEC, FINRA, and the state department regulating insurance

All of the following are true of the survivorship life policy except a) The death benefit is not paid until the last death b) The premium would be lower than in a joint life policy c) It can insure more than 2 lives d) The premium is based on the age of each insured

d) The premium is based on the age of each insured Survivorship life (or second-to -die policy) is much the same as joint life in that it insures two or more lives for a premium that is based on a joint age

Which risk classification is representative of the majority of people in a certain age group and with similar lifestyles? a) Standard b) Substandard c) Declined d) Preferred

a) standard. Standard risks are representative of the majority of the people in their age and with similar lifestyles

Because of an injury, an insured has been unable to work for 7 months. When his life insurance premium came due, he was unable to pay, yet the policy remained in force. The policy includes? a) Nonforfeiture options b) Waiver of premium rider c) Guaranteed insurability benefits d) Facility of payment clause.

b) Waiver of premium rider. The waiver of premium rider causes the insurer to waive future premiums if the premium payor is disabled for a period beyond 6 months or more.

All of the following are true of group life insurance except a) Premium rates are based upon the average age, gender and purpose of the group b) When the insured terminates membership in the group the coverage can be converted to whole life. c) The insureds each own their own contract d) Evidence of insurability is usually not required Group contacts are owned by the group, not by the insureds.

c) The insureds each own their own contract

When an agent delivered an insurance policy to the insured, he collected the initial premium, as well as a document verifying that the insured had not had any injuries or illness since the application date. What is this document called? a) Statement of insurability b) Insuring agreement c) Insurability clause d) Statement of good health

D) Statement of good health. If the premium was not collected at the time of the application, the agent may also be required to get a statement from the applicant at the time of policy delivery that verifies that the insured has not suffered injury or illness since the application date. ( known as a statement of good health)

Which of the following is true regarding a joint life annuity? a) The payments stop at the last death b) The payments go to the beneficiary upon the last death c) The payments go to the surviving annuitant after the first death d) The payments stop at the first death.

d) The payments stop at the first death. Joint life is a settlement option where two or more annuitants receive payments until the first death among the annuitants, then the payments stop.

In whole life insurance, when is the policy cash value scheduled to equal the face amount? a) At the insured's age 100 b) By the policy's 10th year c) When the insured paid up all policy loans d) It depends on the type of whole life purchased

a) At the insured's age 100. The cash value, created by the accumulation of premium, is scheduled to equal the face amount of the policy when the insured reaches age 100 and is paid out to the policyowner

Which of the following is the primary source of information that an insurer uses to evaluate an insured's risk for life insurance? a) Insurance application b) Risk analysis c) The law of large numbers Agents report

a) Insurance application. Insurance application is the data-gathering tool utilized in evaluating an individual risk

All of the following are advantages of a qualified retirement plan except? a) The contribution is not taxable to the employee when made. b) The funds grow tax deferred c) The income at retirement is tax free d) The contribution is deductible to the employer

c) The income at retirement is tax free. In a qualified plan any amounts not previously taxed will be taxed when the funds are received.

Which of the following documents used in the underwriting process contains specific medical details about an applicant? a) Statement of good health b) Agents report c) Application d) Attending physician statement (APS)

d) Attending physician statement (APS) If an underwriter wants to obtain specific medical details about an applicant, it will request a statement from the applicant's physician. This is called an attending physicians statement (APS)

Which of the following is true of level term insurance? a) The premium will increase or decrease based on current interest rates b) The policy endows at age 100 c) The policy offers nonforfeiture vales It is temporary protection

d) It is temporary protection Level term insurance is temporary protection. It is likely renewable at certain intervals (5year,10 year etc.) the policy has a maximum renewal age (possibly 80).

Which of the following would be required to become licensed as an insurance producer? a) A customer service representative who solicits no more than one policy a year b) Agency supervisor whose actions do not include selling insurance c) A person whose activities are limited to insurance advertising d) An officer of an insurer who does not receive commissions

a) A customer service representative who solicits no more than one policy a year

Which of the following riders pays a beneficiary a death benefit that is double or triple the face amount if the insureds death was caused by an accident as defined in the policy? a) A double indemnity rider b) A guaranteed insurability rider c) A covered peril rider d) An accidental death rider.

d) An accidental death rider. The accidental death rider pays some multiple of the face amount if death is the result of an accident as defined in the policy

All of the following are true regarding the federal fair credit reporting act except a) The customer must be notified if adverse action is taken as a result of a report b) Reports may be sent to anyone who requests one. c) Insurers are not required to give customers a copy of the report d) It applies to credit reports ordered in connection with insurance, banking and employment

b) Reports may be sent to anyone who requests one. Credit reports may only be ordered by those involved in insurance underwriting, bank loans or employment, so they cannot be ordered by just anyone. If adverse action is taken, an insurer must tell the insured which credit reporting agency furnished the report, but the insurer does not have to furnish a copy of it. If a report is wrong there are procedures to get it corrected without the need of filing a lawsuit (litigation)

The owner of a whole life policy with an accidental death rider intentionally kills himself after having the policy for 18 month. What is the insurance company's course ofaction? a) Pay twice the face amount b) Deny any payment of the death benefit c) Deny only payment of the face amount but pay the rider since suicide is an accident Pay the face amount only because suicide is not an accident

a) Deny any payment of the death benefit. If the insured commits suicide within 2 years following the policy effective date, the insurer's liability is limited to a refund of premium. This provision protects the company from those individuals who purchase life insurance with the intention of committing sucide

What type of an interest rate is guaranteed in universal life policies? a) Adjustable interest rate b) Current interest rate c) Contract interest rate d) Nominal interest rate

a) Contract interest rate. The insurer guarantees a contract interest rate. A current interest rate is not guaranteed in the contract and may be higher because of current market conditions.

Which of the following individuals would be a likely candidate to purchase a deferred annuity? a) Someone who wants to grow retirement funds tax deferred b) Someone who needs to start receiving benefit payments within 6 months of the annuity purchase c) Someone who wants to leave the death benefit to the beneficiaries d) Someone who cannot afford life insurance

a) Someone who wants to grow retirement funds tax deferred. Deferred annuities are often used to accumulate retirement funds that grow tax deferred. Income payments, however, begin sometime after one year from the date of the annuity purchase.

If an annuity has a guaranteed minimum interest rate, this means? a) The interest rate will never rise above the guaranteed minimum b) The interest rate will not fluctuate c) There is no interest rate d) The interest rate will never drop below the guaranteed minimum

d) The interest rate will never drop below the guaranteed minimum With a guaranteed minimum interest rate, the insurer will not let the annuity's interest rate drop below the guaranteed minimum (usually 3%). If the company has higher interest rates, the annuity will utilize the higher rates.

What is the cost coverage based on for group life insurance? a) The average age b) The ratio of men to women c) The insured individual ages d) The average age and the ratio of men to women

d) The average age and the ratio of men to women One of the aspects of group underwriting that differs from individual insurance Is that the cost of the coverage is based on the average age of the group and ratio of men to women

All of the following statements are true regarding an ordinary an ordinary (straight) life policy except a) It does not have a guaranteed death benefit b) It is funded by level premium c) It builds cash value d) If the insured lives to age 100, the policy matures, and the face amount is paid to the insured

a) It does not have a guaranteed death benefit. Straight life (also called ordinary life or continuous premium whole life) charges a level annual premium for the lifetime of the insured and provides a level, guaranteed death benefit. If the insured lives to age 100, the policy endows (matures) and the face amount is paid to the insured at that time. During the insured's lifetime the straight life policy builds cash value. The insurer guarantees the cash value and death benefit under a straight life policy.

Which of the following statements is true regarding thrift plans? a) The employer is the sole contributor to the plan. b) The employer contributes up to 10% of each employee's salary c) The employer contributes a certain amount for each dollar contributed by the employee d) The employee is the sole contributor to the plan

c) The employer contributes a certain amount for each dollar contributed by the employee. Under the bonus or thrift plan, the employer will contribute certain amount or percentage for each dollar contributed by the employee. There is no specific rule as to how much the employer must contribute.